Directors of a company cannot be held personally liable for the company's sales tax arrears under the Kerala General Sales Tax Act.

K. Narayana Kurup, J. Heard counsel on both sides.

2. Petitioners are Directors of a company by name Alliance Leathers (P) Ltd. which had availed a loan from K.S.I.D.C. and K.F.C. to set up a factory at Edayar for manufacture of dressed, tanned hides and skins from raw hides and skins. Exts. P2 to P6 are the pre-assessment notices issued by the Sid respondent against the company for the years 1990-91 to 1993-94 proposing to assess the company under the Kerala General Sales Tax Act. On receipt of Exts. P2 to P6, the first petitioner filed Ext. P7 reply in his capacity as a Director of the company. In Ext. P7, the first petitioner specifically requested the 3rd respondent to keep the assessment and penalty proceedings pending till final decision is taken by the 2nd respondent on the question of exemption as an S.S.I. Unit. However, no final assessment orders or penalty order pursuant to Exts. P2 to P6 have been served either on the company or on the petitioners till this date to the best of the knowledge of the petitioners. While so, on 30.3.1995, officers of the 5th respondent namely; the Special Tahsildar (RR), Kanayannur came to the house where the petitioners are residing and told the first petitioner that recovery proceedings for recovering sales tax due from the company are sought to be taken against the petitioners under S.23 of the Kerala General Sales Tax Act. Aggrieved by the aforesaid action of the respondent in making the petitioners liable for arrears of sales tax due from the company, they have approached this Court with the present writ petition for the issuance of a writ of certiorari to quash Exts. P2 to P6 and for quashing all proceedings taken by respondents 3 to 5 against the petitioners under S.23(2) of the Kerala General Sales Tax Act in respect of the sales tax allegedly due from M/s. Alliance Leathers (P) Ltd. and for other incidental reliefs.

2. When the petition came up for hearing, learned counsel for the petitioners submitted that coercive action taken by respondents 3 to 5 for recovery of sales tax arrears allegedly due from the company against the petitioner are totally without jurisdiction, illegal and unsustainable. Having heard learned counsel on both sides, I am of the view that the petitioners are not liable to be proceeded against for recovery of arrears of sales tax due from the company. It is admitted that the petitioners are only directors and as such they cannot be personally made liable to pay arrears of sales tax under the Kerala General Sales Tax Act. It is settled law that the company is a legal entity distinct from its shareholders as well as its Directors, and as such no proceedings can be taken against the directors of a company for recovery of any amounts whatsoever due from the company. In the present case what respondents 3 to 5 seek to recover is arrears of sales tax allegedly due from M/s. Alliance Leathers (P) Ltd. The petitioners are only the Directors of the said company as already noted. They have in their possession no assets of the company whatsoever. As such, they have no personal liability in respect of the dues allegedly due from the company. It is by now well settled that a Director of a company cannot be proceeded against for recovery of arrears of any amount due from the company as already noticed. Therefore, the present proceedings initiated against the petitioners for recovery of sales tax arrears allegedly due from the company is totally without jurisdiction. Moreover, the present proceedings of respondents 3 to 5 are violative of the principles of natural justice and the fundamental rights of the petitioners guaranteed under Arts.14 and 21 of the Constitution of India. No notice whatsoever has been issued to the, petitioners before coercive action was initiated which will result in arrest and detention of the petitioners under S.23(2)(b) of the Kerala General Sales Tax Act. As such, the said action of respondents 3 to 5 are totally unsustainable. That