2016 (4) TMI 178 - HC - VAT and Sales Tax

Attachment of personal property - Petitioner is one of the director of Company and Company did not paid certain tax, interest and penalty dues - Held that - there is nothing on record to suggest that the petitioners are debtor of the company in default. Under the circumstances, reference to Section 44 of the Gujarat Value Added Tax Act would be of no consequence. Further, it is not even the case of the Department that the properties of the petitioner under attachment and sale were acquired by her through any of the investments made by the company. Since the source of acquisition of property cannot be traced to the funds of the company and since the dues are of a Private Limited company, independent properties of the Director cannot be attached as held by this Court in case of CV Cherian Versus CA Patel 2012 (3) TMI 372 - GUJARAT HIGH COURT . - Decided in favour of petitioner

Summary

Issues:
1. Attachment of personal property of a director of a Private Limited company for outstanding dues of the company.

Analysis:
The judgment of the Gujarat High Court in this case revolves around the challenge posed by the petitioner against an order passed by the Commercial Tax Officer for the attachment and sale of personal property of the petitioner to recover tax and penalties owed by a Private Limited company. The key contention raised by the petitioner was that the private properties of a director of a Private Limited company cannot be attached for the company's outstanding dues. The court examined the provisions of Section 44(1) of the Gujarat Value Added Tax Act, 2003, cited by the Department to justify the recovery. However, the court noted that there was no evidence to establish the petitioner as a debtor of the company in default. Additionally, the court emphasized that since the properties under attachment were not acquired through company funds and the dues belonged to the Private Limited company, the independent properties of the director cannot be attached. This position was supported by a previous judgment of the court in the case of C.V.Cherian.

In conclusion, the High Court held that the impugned order for the attachment and sale of the petitioner's personal property was not valid. The court ruled that in the absence of a connection between the director's personal properties and the company's funds, such properties cannot be attached for the company's dues. The judgment reaffirmed the principle that the personal assets of a director of a Private Limited company are distinct and cannot be targeted for the liabilities of the company, especially when there is no evidence of the director being a debtor of the company in default.