2020 (12) TMI 784 - HC - VAT and Sales Tax

Legality and validity of the impugned prohibitory order - validity of Attachment Order - petitioner is a non-executive director and M/s. Twilight Mercantiles Limited is a public limited company - petitioner contended that such prohibitory order, demand notice and attachment order cannot be issued against a non-executive director of a public limited company - Section 44(6) of the MVAT Act - HELD THAT - The present case is squarely covered by our decision in Shri. Girdhari Lal Lath 2020 (10) TMI 202 - BOMBAY HIGH COURT where it was held that It is an admitted position, at least no dispute has been raised, that M/s. Birla Electricals Limited is a public company. If that be so, the fact that Petitioner was a director of the said company for the relevant period, though in a nonexecutive character and stated to have resigned, would have no bearing on fastening of liability on the Petitioner for the alleged default of M/s. Birla Electricals Limited. In such circumstances, attachment of the bank account of the Petitioner does not appear to be justified and is without any legal sanction. The impugned prohibitory order dated 12.02.2018, the demand notice dated 18.12.2018 as well as the attachment order dated 10.06.2019 cannot be sustained qua the petitioner - Petition allowed.

Summary

Issues:
Challenge to legality and validity of prohibitory order, demand notice, and attachment order under MVAT Act against a non-executive director of a public limited company.

Analysis:
The petitioner challenged the legality and validity of the impugned prohibitory order, demand notice, and attachment order issued under the Maharashtra Value Added Tax Act, 2002. The petitioner, a non-executive director of a public limited company, was directed not to create any charge on assets owned by the company due to outstanding dues. The petitioner contended that the relevant provision, Section 44(6) of the MVAT Act, is applicable to private companies and cannot be enforced against public limited companies like the one in question.

The court referred to a previous decision and highlighted the provision of Section 44(6) of the MVAT Act, which makes directors of private companies jointly and severally liable for dues. However, the court emphasized that this provision is subject to the Companies Act, 2013, and the distinction between public and private companies is crucial. Since the company in question was a public limited company, the liability of the petitioner as a non-executive director was questioned. The court ruled that the attachment of the petitioner's assets was not justified and lacked legal sanction.

Based on the interpretation of the relevant provisions and the previous judgment, the court concluded that the prohibitory order, demand notice, and attachment order against the petitioner, a non-executive director of a public limited company, could not be sustained. Therefore, the court set aside and quashed the impugned orders, directing the release of the petitioner's attached flats. The writ petition was allowed with no order as to costs, ensuring the petitioner's relief in the matter.