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TMI Blog2014 (3) TMI 1137X X X X Extracts X X X X X X X X Extracts X X X X ..... e above elements of the Section would show that though this provision was introduced w.e.f. 1.4.1999, it applies for recovery of the liabilities incurred by the company prior to 1.4.1999 also. Section 26C of the K.G.S.T. Act cannot be taken advantage of by the State to recover amounts due to it for the periods prior to 1.4.1999. Appeal allowed. - W.P. (C) No. 6599 and 2005 and connected cases - - - Dated:- 7-3-2014 - Antony Dominic and Anil K. Narendran, JJ. For Appellant: Mohammed Rafiq and Shaiju Antony For Respondents: S. Sudheesh Kumar, Government Pleader JUDGMENT Antony Dominic, 1. The petitioners in these Writ Petitions, the appellants in W.A. No. 1995/12 and the party respondents in W.A. No. 956/2013 were Directors of Private Limited Companies incorporated under the provisions of the Companies Act, 1956. Such companies were assessees under the K.G.S.T. Act and were being assessed accordingly. By S. 3 of the Kerala Finance Act 1999 (Act 23 of 1999), S. 26C was introduced to the Kerala General Sales Tax Act with effect from 1.4.1999. This Section reads thus: 26C. Liability of Directors of a Private Company.-Subject to the provisions of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by taking recourse to this provision. Though it is true that the said contention has been accepted in Kassim's case (supra), having regard to the fact that the said judgment has been doubted and the matter is referred for reconsideration, examination of the issue of retrospectivity of section should start from the language in which the Legislature has chosen to frame S. 26C. 6. We have already extracted S. 26C in the earlier part of this judgment and it is the admitted case of all parties that S. 26C came into the statute with effect from 1.4.1999. 7. Reading of this provision shows that the Section comprises of the following parts; 1. that it is subject to the provisions of the Companies Act, 1956. 2. that tax or other amount recoverable under the K.G.S.T. Act is due from a Private Company. 3. that such company may be existing, wound up or is under liquidation. 4. that the tax or other amount cannot be recovered for any reason whatsoever. 8. This Section further provides that, if all the above conditions are satisfied, every person who was a director of such company at any time during the period for which the tax or other amount is due under the K.G.S.T. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not retrospective was considered by the Apex Court in paragraph 16 and 17 where it was held thus; 16. The learned counsel for the appellant submitted that sub-section (2-A) of S. 15 of Karnataka Sales Tax Act could not be given a retrospective operation. This submission is misconceived. A legislation may be made to commence from a back date, i.e. from a date previous to the date of its enactment. To make a law governing a past period on a subject is retrospectivity. A Legislature is competent to enact such a law. The ordinary rule is that a legislative enactment comes into operation only on its enactment. Retrospectivity is not to be inferred unless expressed or necessarily implied in the legislation, specially those dealing with substantive rights and obligations. It is a misnomer to say that sub-section (2-A) of S. 15 of the Karnataka Sales Tax Act is being given retrospective operation. Determining the obligation of the partners to pay the tax assessed against the firm by making them personally liable is not the same thing as giving the amendment a retrospective operation. In Principles of Statutory Interpretation (by Justice G.P. Singh, Seventh Edition, 1999, at page 369), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the law as laid down by this Court in Commissioner of Sales Tax, M.P. v. Radhakrishan (AIR 1979 SC 1588) (supra). However, still in the facts and circumstances of the case, the appellant Bank cannot be allowed any relief. S. 15(2-A) of Karnataka Sales Tax Act had come into force on 18.12.1983 while the decree in favour of the Bank was passed on 3.8.1992 and is yet to be executed. The claim of the appellant Bank is still outstanding. Even if we were to set aside the sale held by the State, it will merely revive the arrears outstanding on account of sales tax to which further interest and penalty shall have to be added. The amended S. 15(2-A) of the Karnataka Sales Tax Act shall apply. The State shall have a preferential right to recover its dues over the rights of the appellant-Bank and the property of the partners shall also be liable to be proceeded against. No useful purpose would therefore, be served by allowing the appeal which will only further complicate the controversy. 13. Still later, in its judgment in State of Madhya Pradesh Anr. v. State Bank of Indore Ors. (2002) 10 SCC 441), the applicability of S. 33C of the M.P. General Sales Tax Act, 1958, which was introdu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt and several liability for tax or other amounts that may be due under the Act for any period after the insertion of S. 26C into the Act, that is, on or after 1.4.1999. 16. A reading of the above paragraph shows that the learned Judge concluded the issue without adverting to the language used by the Legislature, which, in our view, expressly clarifies its intention that it applies to transactions prior to 01.04.1999 also. The relevant binding precedents, including those referred to above also have not been referred or relied on in this judgment. Therefore, we are constrained to hold that the judgment does not lay down the correct principle of law. 17. Learned counsel for the parties also relied on the judgment of a Division Bench of this Court in Ratanlall Murarka Ors. v. Income Tax Officer (130 ITR 797). That was a case where the Division Bench of this Court had considered the impact of S. 179 of the Income Tax Act, which read thus: Notwithstanding anything contained in the Companies Act, 1956 (1 of 1956), when any private company is wound up after the commencement of this Act, and any tax assessed on the company, whether before or in the course of or after its liquida ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rivate company and that itself is a good ground to hold that the Section is prospective in nature and that obligations thereunder are also in relation to assessment years subsequent to 1.4.99. In support of this principle, learned counsel relied on the judgment in Plewa v. Chief Adjudication Officer (1995 (1) Appeal Cases 249). Although it is true that a reading of the judgment relied on by the counsel would indicate that the contention similar to the one urged was accepted in that case, still, this Court cannot brush aside the binding precedents laid down by the Apex Court and prefer precedents from abroad. As we have already indicated, if the principles laid down by the Apex Court in Dena Bank's case (supra) and State of Madhya Pradesh's case (supra) are followed, the inevitable conclusion that is possible is that though the Section by itself is not retrospective, any liability for tax or other amount due under the K.G.S.T. Act remaining outstanding as on 1.4.99 is liable to be recovered taking recourse to S. 26C of the Act. The legal effect of S. 26C being as above, we cannot import the principles laid down in Plewa's case (supra) and conclude the issue in favour of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 26C, it is always open to the Director concerned to contest the matter in the objections to be filed by them. Therefore, we clarify the position as above and leave the issue at that, with liberty to the party concerned to agitate the matter at the appropriate stage. 22. In the light of the above discussions, W.P.(C) No. 6599/05, 13634/05 and 1282/07 are disposed of. W.A. No. 956/13 filed by the State against the judgment in W.P.(C) No. 14565/12 will stand allowed. In so far as W.A. No. 1995/12 is concerned, that is filed by the petitioner in W.P.(C) No. 4403/07. Being the Director of a Private Company by name Raghul and Constructions Private Limited, Calcutta, an assessee under the K.G.S.T. Act, proceedings under S. 26C were initiated against the appellant. Such proceedings were challenged and on the dismissal of the Writ Petition, the Writ Appeal was filed. A reading of the judgment itself shows that the reason for the dismissal of the Writ Petition was that in view of the previous conduct of the appellant, the learned Judge found that it was not a fit case for the exercise of discretionary jurisdiction and to intercept the sale proceedings held on 19.9.07 and confirmed on 21. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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