- (1.) PALOK Basu, J. This couple of writ petitions practically raises only one question. When M/s Kavita Steels Pvt. Ltd. , Meerut entered into an agreement with U. P. State Electricity Board (for short the Board) through one of its Directors as "consumer" and defaulted in making payment of the electricity bills, can realisation from the personal assets of the Directors of that Company be made?
(2.) THE petitioners Chandra Bhan Khanna and Madan Lal Bhatia admittedly resigned from the Directorship of the Company and therefore the respondents' Counsel has made a statement that the Board would not proceed against them. THEir petitions therefore has to succeed on this ground alone. Petitioners Adesh Kumar Jain and Naresh Kumar Garg admittedly continued to be the Directors of the Company and recovery proceedings have been directed by the Revenue Authorities at the behest of the Board against the personal assets of these two Directors which is under challenge in this petition. It is again admitted that recovery proceedings have already been initiated against the property/assets of the Company namely, M/s Kavita Steels Private Limited. The learned judgment prepared by my esteemed brother Hon'ble M. L. Singhal, J. has to be respectfully concurred with but some reasons of this Court have to be specifically mentioned.
(3.) UNDER the Indian Companies Act a Company is an independent legal entity and can enter into transactions independently of the Directors. While it is true that the decisions regulating the working of the company may be taken by the Directors but as the law stands today the liability or responsibility of a contract entered into by the company shall have to be honoured and borne by the company itself. In this connection it has to be mentioned that while there cannot be any doubt that the Director of a company may be an agent of the company the Director's asset will not automatically become assets of the company unless provisions are made to exist in the Act to that effect. It is true that the word consumer would include its executors and successors etc. there is no provision in the Company's Act which will make it permissible to call a Director at point of time of the company to be executor or successor of the Company. The very basis on which the Board has decided not to proceed against retired Directors will render it impossible for the Board to proceed against some of the existing Directors. It is just possible that due to passage of time and exigencies which may arise a Director today may cease tomorrow and therefore on the same logic proceedings against a Director who ceases to be so tomorrow, shall have to be abandoned. Consequently, the question of applicability of the doctrine "lifting of the whale of the corporate body' shall have to be examined in detail. The Hon'ble Supreme Court has in three decisions applied those principles. The cases are: (1) New Horizons, 1995 (1) SCC 478. (2) Renusagar Power Company, A. I. R. 1988sc1737and (3) Mis Kanoria Chemicals, JT 1997 (3) SC 545. In all the three cases no Director was being proceeded against in lieu of the Company making default. It was strongly canvassed by Shri Sudhir Agarwal that the two petitioners are personally responsible for having played fraud not only on the company but on the share holders also in as much as they have removed the induction furnaces and other machinery from the company premises and have in a planned manner disseminated the company's assets. It was therefore said that this is a fit case where by lifting the veil of the corporate body the Director's personal property should be permitted to be proceeded with in these recovery proceedings. Shri Ravi Kiran Jain has on the other hand said that the Board was already proceeding with the property/assets of the Company and so long as there is no legal provisions to equate the Director with the Company itself the recovery proceedings are wholly bad. He has successfully distinguished the Hon'ble Supreme Court's decision in Nat-war Textile, JT 1995 (2) SC 31 and Mis Gem Cap, JT 1993 (2) SC 226. The attempt of Shri Sudhir Agarwal to find out some observations of the Hon'ble Supreme Court in Mis Isha Marbles, JT 1995 (2) SC 626, 1995 (1) JCLR 792 (SC) has been also successfully defended by Shri Jain.;