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TMI Blog2018 (1) TMI 908X X X X Extracts X X X X X X X X Extracts X X X X ..... e Rajiv Sharma, J M/s Sunshine Industries Ltd. Rudrapur is a limited company. It was incorporated under the Companies Act, 1956 on 08.12.1995. Its registered office is at National Capital Territory of Delhi. It was incorporated to do the business in manufacturing and sale of MS Ingots and alloys. 2. Petitioners were appointed as Directors of the company for a period of one year, as per Clause 80 of Article of Association. 3. The assets of the company were assessed to ₹ 3,57,47,354.55/- as on 01.04.2006. Petitioners have placed on record the balance-sheet of the company as on 31.03.2007. The company was assessed under the Uttarakhand VAT Tax, 2005 for the assessment year 2007- 08. The liability was created against the company. Petitioners have placed on record a copy of assessment order for the year 2007-08 under Section 25(7) of the Vat Act as well as Section 9(2) of Central Sales Tax Act. 4. Respondent no.2, on 12.12.2011, issued a recovery certificate to the District Magistrate/Collector of District U.S. Nagar for recovering the tax dues and penalty imposed upon the company for the assessment year 2007- 08. 5. The case of the petitioners, in a nutshell, is th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cond aspect needs to be adjudicated in this matter is whether outstanding tax dues of petitioner No. 1 can be recovered from the personal assets of the petitioner No. 2 who is Director of the petitioner- Company. 8. This question has to be considered in the light of the status of Company vis a vis its share holders, directors and other employees, their inter-relationship and the extent to which one or the other is liable in respect to the matter of the Company. 67. On the contrary, in the absence of any statutory provisions, this Court has repeatedly held that the dues of a company cannot be recovered from personal assets of the Directors (See Malik Products India, Ghaziabad v. Sales Tax Officer, Ghaziabad 1989 U.P.T.C. 458; Satish Chand Singhal, Kanpur and Ors. v. Assistant Commissioner (Assessment) Sales Tax Kanpur and Ors. 1987 U.P.T.C. 473; Chhedi Lal Gupta v. Additional Commissioner of Trade Tax, Varanasi and Ors. 2002 (20) NTN 20, G.C. Mehrotra, Allahabad (Supra); Sudershan Kumar Gulati, Kanpur and Ors. v. Deputy Collector (Collection, Sales Tax, Kanpur and Ors. 1994 U.P.T.C. 717; Purshottam Das Beriwal, Kanpur v. Deputy Collector (Collections), Sales Tax, Kanpur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o identified are made responsible. However, this doctrine is not to be applied as a matter of course, in a routine manner and as a day to day affair so as to recover the dues of a company, whenever and for whatever reason they are unrecoverable, from the personal assets of the Directors. If such a course is permitted, it would lead to not only disastrous results but would also destroy completely the concept of juristic personality conferred by various statutes like the Act in the present case and would make several enactments and their effect to be redundant and illusory. Moreover, the shallowness of arguments in favour of making Directors personally responsible can be considered from another angle. In every case the Director may not be a shareholder of the company. He may have been appointed as Director for taking advantage of his expertise in his field of vocation or profession, and for achieving goals for which the company is incorporated. Such Director is paid remuneration, if any, for the services he rendered. Otherwise he is not at all a beneficiary of the business or trade etc., as the case may be, in which the company is engaged. Such benefit would be available only to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hell be not made a ground of defence. A personality conferred by the statute cannot be overlooked or ignored lightly and in a routine manner or on a mere asking. In fact whenever the veil is to be pierced, it would mean that somebody, individual or group of individuals, have obtained the shell of corporate personality as a pretext or mask to cover up a transaction or intention of those individual/individuals is neither legal nor otherwise in public interest. In effect the attempt of those individuals have to be shown akin to fraud or misrepresentation. The legal personality of the corporate body thus can be ignored in such cases since it is well settled that fraud vitiates everything and, therefore, the benefit of legal personality obtained by someone for purposes other than those which are lawful or even if lawful but not otherwise permissible, the corporate personality being the result of such fraudulent activity would have to be discarded but not otherwise. These are the things based on positive factual material and cannot be presumed in the absence of proper pleadings and material to be placed by the person who is pleading to invoke the doctrine of piercing the veil and to igno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e proceedings is covered by a judgment of a Division Bench of this Court in M/s. Meekin Transmission Ltd., Kanpur Nagar v. State of U.P. and others 2008 (4) ADJ 360 (DB)) : (2008) (4) ALJ 789 where the Division Bench held that a Company, following the well settled principles of law, has a separate juristic personality and there is no provision in the U.P. Trade Tax Act (which was the legislation in that case) under which the dues of the dealer Company could be recovered from the personal assets of a Director. 4. Learned Standing Counsel appearing on behalf of the respondents does not dispute the legal position but submits that the recovery citation has been issued only against the Company. 5. Section 2(h) of the U.P. Value Added Tax Act, 2008 defines the expression 'dealer' to mean any person who carries on in Uttar Pradesh the business of buying, selling, supplying or distributing goods directly or indirectly, for cash or deferred payment or for commission, remuneration or other valuable consideration. The definition also includes a company or body corporate. 6. In the present case, it is not in dispute that the Company is the dealer registered under the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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