- (1.) AGGRIEVED by the notice dated 23. 5. 2003 (Annexure-7 to the writ petition) issued by the Assistant Collector (Collection) Trade Tax, Kanpur to the petitioner No. 2, the present writ petition has been filed by the petitioners seeking a writ of certiorari for quashing the said notice. Further a writ of manda mus has been sought directing the respondents not to realise any amount of trade tax from the petitioners till finalization of winding up proceedings pending before the respondents authorities.
(2.) THE petitioner No. 1, M/s. Meekin Transmission Ltd. (hereinafter referred to as the "company") is a company registered under the Indian Companies Act, 1956 (in short the "act") and engaged in the business of manufacturi n State Trading Corporation of India Ltd. v. Commercial Tax Officer and others, AIR 1963 SC 1811 REFERRED TO g of Auto motive Gears. Initially it was incorporated as a Private Limited Company on 31. 3. 1983 and was converted in a Public Limited Company subsequently. In 1991 it became a sick unit and made a reference under Section 15 (1) of the Sick Industrial Companies (Special Provisions) Act, 1985 (hereinafter referred to as the "1985 Act") to the Board for Industrial and Financial Reconstruction (hereinafter referred to as "bifr") which was registered as Case No. 109 of 1991. THE Industrial Development Bank of India (hereinafter referred to as the "idbi") was ap pointed as operating agency for submitting rehabilitation scheme vide order dated 2. 6. 1992. However, it appears that during the period rehabilitation matter was pending before BIFR, the petitioner-Company continued with the business but did not pay sales tax (now termed as trade tax) for the period of 1993-94 to 1997-98 which comes to about Rs. 42. 88 lacs. THE aforesaid tax was allowed to be paid in instalments. THE petitioner No. 1 deposited first instalment of Rs. 5. 36 lacs on 30. 4. 1998 but thereafter no subsequent instalment was paid. However, on its request, the respondent-State of U. P, vide letter dated 1. 11. 1999, rescheduled instalments commencing from 30. 10. 1999 and onwards, and, the petitioner No. 1 was required to pay the entire balance amount in five annual approximately equal instalments. THE petitioner No. 1 still failed to deposit any of such instalment. Consequently, a recovery certificate was issued against the petitioner No. 1 on 24. 2. 2003. THE respondent No. 5 also sent a letter dated 24. 2. 2003 to the peti tioner No. 2 stating that he is the Director of the Company and in view of the law laid down by this Court in Writ Petition No. 138 of 1994, M/s. Haghunath Talwarv. State of U. P. , decided on 4. 3. 1998, the dues of the Company can be recovered from the Directors therefore, the petitioner No. 2 should pay the entire amount failing which recovery proceeding shall be initiated against him. THE petitioner No. 2 sent reply dated 10. 3. 2003 stating that the recovery from the Directors of the Company is not permissible in law, therefore, notice dated 24. 2. 2003 be revoked. However, the respondent No. 5 issued another notice dated 23. 5. 2003 referring to this Court's judgment dated 13. 3. 2003 in Writ Petition No. 382 of 2003, Naresh Chancier Gupta v. District Magistrate and others, 2003 (22) NTN 358, stating that the recovery can be made from the Directors of the Company, therefore, the petitioner No. 2 is liable to pay entire trade tax dues of the Company. Aggrieved of the said notice, the present writ petition has been filed. Learned Counsel for the petitioners vehemently contended that the peti tioner No. 2 is only a Director of the Company and as such, is not personally liable for the payment of dues of the Company, As shareholder his liability is limited to the extent of shares which he held and, therefore, no recovery of dues of the Company can be made from the personal assets of the petitioner No. 2. Placing reliance on Division Bench decisions of this Court in Bhikhu Ram Jain, Delhi v. State of U. P and others, 2001 U. P. T. C. 364 and GC. Mehrotra v. Dy. Collector (Collection), Sales Tax, 1997 U. P. T. C. 1217, he contended that the dues of the Company cannot be recovered from the personal assets of the Direc tors of the Company. He further contended that since the petitioner No. 1 was a sick Company under the provisions of 1985 Act and, therefore, during the pen dency of the matter before BIFR recovery cannot be made against him in view of Section 22 of 1985 Act and placed reliance on the decision of the Apex Court in Tata Davy Ltd. v. State of Orissa and others, AIR 1998 SC 2928. Per contra, learned Standing Counsel placing reliance on the Division Bench decision of this Court in Naresh Chander Gupta (supra) and Sri Ram Gupta v, Assistant Collector, 2003 (23) NTN 995, contended that in respect to the tax dues outstanding against a Company, recovery can be made from the personal assets of the Directors of the Company by applying the doctrine of 'piercing the veil1 i. e. 'lifting of veil of the corporate personality' and, therefore, the demand made by the respondents from the petitioner No. 2 is valid. He further contended that proceedings before BIFR came to an end on 14. 3. 2003. Having failed reha bilitation, the BIFR vide order dated 14. 3. 2003 held that the Company should be recommended for winding up, therefore, on and after 14. 3. 2003 it cannot be said that any matter is pending before BIFR. He further contended that in any case, at the instance of the petitioner No. 1, payment of tax dues in instalments was allowed and he had also paid first instalment on 13. 4. 1998, therefore, having agreed to pay the entire dues in instalments, the petitioner No. 1 now cannot be permitted to wriggle out of his undertaking of paying the entire trade tax dues by taking recourse to Section 22 of 1985 Act. He also contended that the recovery proceedings have been initiated in 2003 and on that date there was no legal obstruction or hurdle in respect to recovery proceedings against petitioner No. 1, therefore, no relief can be granted to the petitioner No. 1 against the recovery proceeding initiated by the respondents. Lastly, he said that having admitted the trade tax dues and also despite of repeated indulgence granted by the respon dents permitting the petitioner No. 1 to pay tax dues in instalments, the petitioner No. 1 having defaulted in payment thereof is neither in equity nor otherwise en titled to invoke extraordinary equitable jurisdiction of this Court under Article 226 of the Constitution and, therefore, the writ petition is liable to be dismissed.
(3.) WE have heard learned Counsel for the parties and perused the record. First of ail we propose to deal with the correctness of recovery proceedings against the petitioner No. 1. It is not in dispute that the petitioner Company was liable to pay the aforesaid tax dues but defaulted in payment thereof. Admitting the liability, it requested the trade tax authorities to allow payment in rescheduled instalments which was also allowed vide Government's letter dated 1. 11. 1999. Even thereafter it failed to comply the same. It is true that the Company, claiming to have become sick, made reference to BIFR in 1992 but the said matter has come to an end on 14. 3. 2003 when the BIFR recorded a finding that rehabilitation of the Company is not possible and, therefore, it should be wound up. It is not the case of the petitioner No. 1 that any winding up matter is pending before the High Court. Therefore, on and after 14. 3. 2003 there was no hurdle before the respon dent-authorities from taking coercive steps for recovery of the outstanding tax dues from the petitioner No. 1 and, therefore, writ petition, so far as the petitioner No. 1 is concerned, has no force and is liable to be dismissed.;