2016 (9) TMI 1647 - HC - Indian Laws

Recovery of electricity dues outstanding against M/s Aishwarya Ispat Pvt. Ltd.-Respondent-6 - can liability against Respondent-6 be executed against personal assets of petitioner? - HELD THAT - It is not the case of respondents that petitioner was a guarantor or furnished personal security for discharge of dues of Respondent-6 in case of any default. It is also not in dispute that recovery certificate has been issued against Respondent-6. The dues are in respect of electricity consumed by Respondent-6. There is also no provision under which Director of a Company is personally responsible for discharging outstanding dues of Company if Company commits any default. In these facts and circumstances, dues outstanding against Respondent-6 cannot be recovered from petitioner from personal assets of petitioner. Petition allowed.

Summary

Issues:
Recovery of electricity dues against a company and its directors' personal assets.

Analysis:
The judgment by the Allahabad High Court pertained to the recovery of electricity dues outstanding against a company, M/s Aishwarya Ispat Pvt. Ltd., specifically focusing on the issue of whether the recovery could be made from the personal assets of the directors of the company. The court noted that a recovery certificate had been issued against the company for a substantial amount. However, the authorities chose to proceed with the recovery from the personal assets of the directors. The petitioner, who was not a director of the company, challenged this action on the grounds that there was no statutory provision or agreement making them a guarantor for the company's dues. The court emphasized that there was no provision holding a director personally responsible for the company's outstanding dues in case of default. The judgment cited various precedents to support the view that recovery of dues against the company cannot be executed from the personal assets of individuals who are not directors or guarantors.

The court concluded that the recovery of outstanding dues of the company from the personal assets of the petitioner, who was not a director or guarantor, was not legally permissible. The judgment highlighted that the recovery authorities had no basis to proceed against the personal assets of an individual who was not directly responsible for the company's debts. The court allowed the writ petition, quashed the impugned citation, and directed that the recovery of outstanding dues of electricity against the company should proceed as per the recovery certificate issued against the company. The judgment did not impose any costs on the parties involved, maintaining a clear stance on the legal principles governing the recovery of dues in such cases.