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2021 (10) TMI 809 - HC - VAT and Sales TaxRecovery of sales tax dues under The Gujarat Value Added Tax Act and Gujarat Sales Tax Act - Attachment of personal property - outstanding dues of the Company - section 135D of the Bombay Land Revenue Code - whether for the purpose of recovery of sales tax dues under The Gujarat Value Added Tax Act and Gujarat Sales Tax Act against Gujarat against a private limited company, the personal property belonging to the Managing Director of such company can be attached? - HELD THAT - The Co-ordinate Bench while considering the similar issue, relying upon the decision of Division Bench of this Court rendered in Special Civil Application No.243 of 1991 with Special Civil Application No.3103 of 1991 and Special Civil Application No.7578 of 1991 in the case of Mr.Choksi Vs. State of Gujarat , 2012 (3) TMI 392 - GUJARAT HIGH COURT has allowed the said petition and quashed and set aside the impugned notification by holding that the auction of the residential property in question as illegal and bad in law and restrained the respondents from attaching or selling any private property of the Managing Director of the Company for realization of the aforesaid dues. Petition allowed.
Issues:
Challenge to order attaching personal property for outstanding dues of a company under Article 226 of the Constitution of India. Analysis: The petitioner challenged an order attaching personal property for outstanding dues of a company. The petitioner, a director of the company, argued that the property could not be attached for the company's dues. The respondent authorities cited non-recovery of sales tax from the company as the reason for attaching the property. The petitioner contended that the property belonged solely to him and could not be attached for the company's liabilities. The petitioner also highlighted that the company was a private limited company, and the petitioner was a director, not a partner. The petitioner submitted objections, citing judgments where directors were not personally liable for company debts. The respondent argued that the property was attached as the director had to pay government dues due to non-payment by the company. The Court considered whether personal property of a managing director could be attached for recovery of sales tax dues against a private limited company. Referring to previous judgments, the Court noted that the law did not provide for personal liability of directors for company dues. The Court emphasized that the corporate veil should not be lifted lightly and required a strong factual foundation. As no specific order held the director personally liable, the doctrine of lifting the corporate veil was not applicable. The Court relied on previous decisions and allowed the petition, quashing the impugned orders of attachment. In conclusion, the Court ruled in favor of the petitioner, setting aside the orders attaching the personal property. The Court emphasized that the law did not allow for personal liability of directors for company dues and rejected the respondent's argument based on Section 78 of the Gujarat Sales Tax Act. The Court's decision was based on established legal principles and previous judgments, ensuring that personal property of a managing director could not be attached for the company's liabilities.
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