A personal liability cannot be fastened upon a director of a company in respect of taxes payable by the company.

P. CHANDRA REDDY, J.

( 1 ) THE petitioner is a Managing Director of a Company called Messra, Uplands Trading Company Limited, Brodlepet, Guntur. A complaint was filed before the Additional First Class Magistrate No. 1, Guntur, by the Assistant Commercial Tax Officer, Guntur, against the petitioner and other directors of the said company for failure to pay sales tax for the year 1948-49, an offence punishable under S. 15 (b), Madras General Sales Tax Act. The case against them was that the company exported groundnut oil through Messra. Raleigh Brothers, and in respect of that transaction, sales tax to the tune of Rs. 3285-6-3 was payable, that notice in form B demanding payment of the tax was served upon the petitioner, the Managing Director, on 16. 3. 1950, and that in spite of it, this amount was not paid within the time allowed.

( 2 ) ONE of the defence put forward on behalf of the petitioner was that the company was not liable to pay the demanded as it was already collected from their agents, Messrs. Raleigh Brothers. The pleas raised on behalf of other accused are not material in this inquiry, as they have all been acquitted. This defence has been rejected as S. 16-A, Madras General Sales Tax Act, precluded an assessee from questioning the validity of the assessment in any criminal Court in any prosecution. In this view of the matter, he found the petitioner guilty of the offence charged and convicted and sentenced him to a find of Rs. 100. 00, with two months simple imprisonment in default. Besides, there was a direction that the arrears of tax of Rs. 3285-6-3 should be recovered from him as if it were a fine. The other directors were acquitted as no notice of demand was served on them.

( 3 ) THE petitioner has not questioned his conviction under S. 1 (b), Madras General Sales Tax Act, though the Andhra State Legislature while adopting this Act omitted S. 16-A. But he challenges the validity of the direction as regards the recovery of arrears of tax, as if it were a fine from him personally.

( 4 ) IN support of the contention that a personal liability cannot be imposed upon a Director of a Company, reliance is placed on two decisions of the Madras High Court -- Public Prosecutor v. Jacob Nadar, AIR 1951 Mad 886 (1) (A) and -- Behara Latchanna Patnaick v. State, AIR 1953 Mad 332 (B ). In the first case, Subba Rao J. (as he then was) held that under the Madras General Sales Tax Act, a firm is a person for purposes of assessment and prosecution, and in default of payment of tax, was liable to be prosecuted and a partner who was not served with notice of demand of tax could not be prosecuted for default of the firm. That ruling is not apposite for the reason that in this case, it is the company that is prosecuted and not aprticular individuals alone. Further, the learned Judge has not decided the question whether an individual partner is personally liable for payment of taxes.

( 5 ) TO the same effect is the rulling in -- AIR 1953 Mad 332 (B ). Somasundaram J. relied on -- AIR 1951 Mad 886 (1) (A) in support of his conclusion that some of the partners alone cannot be prosecuted for failure to pay taxes assessed on a firm. So these rulings do not in any way help the petitioner. On the other hand, there is an incidental remark in the judgment of Mr. Justice Somasundaram, that every partner is individually liable to pay the Tax. But these observations cannot apply to the present case for the reason that the position of Directors of a Company with limited liability is different from the partner of a firm. It must be mentioned and that the company in this case is one with limited liability. In the case of a partner of a firm, he is liable personally for the debts of the partnership. But different consideration arise in the case of the members of limited liability company which is a legal entity.

( 6 ) UNDER S. 6 (iv), Companies Act, the liability of the members is limited to the amount payable on the shares. There can, therefore, b

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