A.V. John v. State of Kerala and Others

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** ## **THE HONOURABLE MRS. JUSTICE SHOBA ANNAMMA EAPEN FRIDAY, THE 11[TH] DAY OF AUGUST 2023 / 20TH SRAVANA, 1945 WP(C) NO. 7378 OF 2016** ## **PETITIONER/S:** MR.A.V.JOHN, AGED 69 YEARS, ACHANRIL HOUSE, MARAPPALAM, PATTOM, THIRUVANNTHAPURAM - 695 004. BY ADVS. SRI.M.GOPIKRISHNAN NAMBIAR SRI.P.BENNY THOMAS SRI.P.GOPINATH SRI.K.JOHN MATHAI SRI.JOSON MANAVALAN SRI.KURYAN THOMAS ## **RESPONDENT/S:** 1 STATE OF KERALA REPRESENTED BY ITS SECRETARY TO GOVERNMENT, TAXES DEPARTMENT, SECRETARIAT, THIRUVANANTHAPURAM-695 001. 2 THE COMMERCIAL TAX OFFICER OFFICE OF THE COMMERCIAL TAX OFFICER, IST CIRCLE, CHANGANACHERY, KOTTAYAM - 686 101. 3 THE DISTRICT COLLECTOR, OFFICE OF HE DISTRICT COLLECTOR, COLLECTORATE P.O., KOTTAYAM- 686 002. 4 THE TAHSILDAR (RR), NEAR KSRTC BUS STATION, T.B. ROAD, KOTTAYAM - 686 001. ## **OTHER PRESENT:** SRI. V.K. SHAMSUDHEEN -SR.GP THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 11.08.2023, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: WP(C) NO. 7378 OF 2016 ..2.. ## **JUDGMENT** The writ petition is filed seeking for a direction to quash Ext.P7 notice issued by the fourth respondent – Tahsildar (RR), Kottayam. 2. The petitioner is one of the Directors of a Public Limited Company, viz., M/s.Eagle Petroleum Company Limited, Nattakom, Kottayam (for short, “the Company”). The assessment of the Company for the years 2012-13 and 2013-14 was completed by the second respondent under the Kerala Value Added Tax Act, 2003 (for short, “the Act”) vide Exts.P3 and P4 assessment orders. The said orders were challenged by the Company before the appellate authority. It is alleged that during the pendency of the said appeals, the officials attached to the office of the fourth respondent proceeded against the immovable property of the petitioner at Kottayam in relation to the recovery of the KVAT arrears of WP(C) NO. 7378 OF 2016 **==> picture [31 x 8] intentionally omitted <==** the Company. Receiving information on the same, the petitioner submitted Ext.P5 letter dated 13.10.2015 before the fourth respondent, informing that the Company being a Public Limited Company, no proceedings could be validly initiated against the property of the petitioner for realization of the arrears of the Company. In spite of Ext.P5 letter, the respondents are proceeding against the petitioner under Section 36 of the Kerala Revenue Recovery Act as per Ext.P7. It is in this context, the petitioner has approached this Court. 3. Heard the learned counsel for the petitioner and the learned Senior Government Pleader. 4. The learned counsel for the petitioner submits that the petitioner, being the Director of a Public Limited Company, cannot be proceeded against under Section 65 of the Revenue Recovery Act for realizing the arrears of the Company. It WP(C) NO. 7378 OF 2016 **==> picture [31 x 8] intentionally omitted <==** is submitted that Section 39 of the Act is applicable only in the case of a Director of a Private Limited Company and is not attracted when the Company is a Public Limited Company and hence, the revenue officials have no authority to issue Ext.P7 revenue recovery notice. To substantiate the said contention, the learned counsel relied on a decision of this Court in **Pocker Ullattil Jasmin Villa** v. **State of Kerala** [2015 SCC OnLine Ker 27207]. 5. The learned Government Pleader, on instructions, submits that the liability of the Company is not disputed and the petitioner, being the Director of the Company at the relevant time, is liable for the dues of the Company. 6. Section 39 of the Act reads as follows: **“39. Liability of Directors of a Private Company:-** Where any tax or other amount recoverable under this Act from any private company, whether existing or wound up or under liquidation, cannot be recovered for any reason whatsoever, 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 this Act shall be jointly and WP(C) NO. 7378 OF 2016 **==> picture [31 x 8] intentionally omitted <==** severally liable for the payment of such tax or other amount unless he proves that the nonrecovery cannot be attributed to any negligence, misfeasance or breach of duty on his part in relation to the affairs of the company.” On going through the above provision, it is clear that the said provision is applicable only in the case of a Director of a Private Limited Company and not applicable to the Director of a Public Limited Company. The contention of the petitioner that he is one of the Directors of the Company is not disputed by the respondents. 7. Modes of recovery of tax are as prescribed under Sub-Section (4) of Section 31 of the Act, which reads as follows: “ **31. Payment and recovery of tax** : - xxxxx (4) Any tax or any other amount due under this Act from a dealer or any other person may, without prejudice to any other mode of recovery, be recovered, (a) as if it were an arrear of land revenue: (b) on application to any Magistrate, by such Magistrate as if it were a fine imposed by him: Provided that no proceedings for such recovery shall be taken or continued as long as such dealer or other person has, in regard to the payment of such tax or other amount, as the case may becomplied with an order by any of the authorities to whom he has appealed or applied WP(C) NO. 7378 OF 2016 **==> picture [31 x 8] intentionally omitted <==** for revision, under the provisions of this Act.” 8. As per the afore provision, the revenue authorities can initiate proceedings under the Revenue Recovery Act for recovery of the amount due under the Act from a dealer or any other person as if it were an arrear of the land revenue. In order to proceed under Section 31 of the Act, there must be an amount due under the Act from a dealer. Here, the amount due is from a Public Limited Company and admittedly, the petitioner is one of the Directors of the said Company. In **Punalur Paper Mills Ltd. & Another v. District Collector & Others** [1985 60 STC 193 Ker] _,_ this Court held that, to be a defaulter under the Sales Tax Act, a dealer, who has been assessed to tax, should have failed to pay the said tax within the time stipulated in the notice of demand. In other words, until an assessee (dealer) is declared a defaulter, recovery proceedings cannot be initiated against the said WP(C) NO. 7378 OF 2016 **==> picture [31 x 8] intentionally omitted <==** person. Since no liability has been finalized against the petitioner, who is one of the Directors of a Public Limited Company, the revenue authorities cannot proceed against the petitioner for realizing the arrears of the Company in question. In the absence of expressed provisions, which entitle the respondents to recover the amounts due from the Directors of a Public Limited Company, the liability of the Company cannot be fastened on the Directors. 9. Hence, on a consideration of the entire facts and circumstances of the case, I am of the opinion that the petitioner being one of the Directors of a Public Limited Company, the respondents cannot proceed against, for the dues recoverable from the Company and hence, Ext.P7 revenue recovery notice deserves to be set aside. Accordingly, the writ petition is disposed of, as follows; a)Ext.P7 revenue recovery notice is set aside. WP(C) NO. 7378 OF 2016 **==> picture [31 x 8] intentionally omitted <==** b)The petitioner cannot be proceeded against for recovery of the dues of the Company in question. - c)Respondents 1 to 3 are free to proceed against the Company for recovery of the dues of the Company from its assets as permissible under the relevant provisions of law. d)If the petitioner has executed any personal surety bond in favour of the respondents, they are free to proceed against, to the extent of the amount shown in the bond. ## **Sd/-** ## **SHOBA ANNAMMA EAPEN** ## **JUDGE** bka/- WP(C) NO. 7378 OF 2016 ..9.. ## **APPENDIX OF WP(C) 7378/2016** PETITIONER EXHIBITS P1-TRUE COPY OF THE CERTIFICATE OF INCORPORATION OF THE COMPANY DATED 30/09/2004 P2-TRUE COPY OF THE DECLARTION IN FROM 32 FILED BY THE PETITIONER BEFORE THE REGISTRAR OF COMPANIES (ROC) AS REGARDS HIS APPOINTMENT AS A NON EXECUTIVE DIRECTOR OF THE COMPANY, EAGLE PETROLEUM COMPANY LIMITED P3-TRUE COPY OF THE ASSESSMENT ORDER NO. 32050707625/2012-13 DATED 25/05/2015 PASSED BY THE 2ND RESPONDENT FOR THE YEAR 2012-13 P4-TRUE COPY OF THE ASSESSMENT ORDER NO. 32050707625/2013-14 DATED 25/05/2015 PASSED BY THE 2ND RESPONDENT FOR THE YEAR 2013-14 P5-TRUE COPY OF THE LETTER DATED 13/10/2015 SUBMITTED BY THE PETITIONER BEFORE THE 4TH RESPONDENT P6-TRUE COPY OF THE LETTER DATED 01/02/2016 ISSUED BY THE 4TH RESPONDENT P7-TRUE COPY OF THE NOTICE DATED 01/02/2016 ISSUED BY THE 4TH RESPONDENT U/S 36 OF THE KERALA REVENUE RECOVERY ACT, 1968 P8-TRUE COPY OF THE LETTER DATED 10/02/2016 SUBMITTED BY THE PETITIONER BEFORE THE 2ND RESPONDENT WP(C) NO. 7378 OF 2016 ..10.. P9-TRUE COPY OF THE LETTER DATED 10/02/2016 SUBMITTED BY THE PETITIONER BEFORE THE 3RD RESPONDENT P10-TRUE COPY OF THE LETTER DATED 10/02/2016 SUBMITTED BY THE PETITIONER BEFORE THE 4TH RESPONDENT