Directors cannot be held personally liable for the company's dues, and recovery of dues can only be made against the defaulter, which in this case was the company.

1. Heard Mr. S. Rahunathan, learned counsel appearing for the petitioner and Mr. K. Mohana Murali, learned Senior Panel counsel appearing for the respondents.

2. The Petitioners have challenged a notice of attachment issued under Rule 9 and 10 of the Customs (Attachment of Property of Defaulters for recovery of Government Dues), Rules, 1995, dated 05.10.2015. The first petitioner is the husband of the second petitioner and they are co-owners of the property which is subject matter of the impugned attachment. The impugned notice states that the first petitioner is liable to pay a sum of Rs.5,44,291/- along with interest as applicable being the amount of Government dues payable as per the terms of the order-in-original No.15014/2011, dated 07.03.2011, passed by the second respondent under Section 28(1) and 28AB of the Customs Act, 1962.

3. The facts, which are necessary for disposal of the Writ Petition, are that the petitioners are Directors of M/s. Tapan Preci Tek Ltd., a company incorporated under the Companies Act, 1956. The said company was issued a EPCG licence by the Joint Director General of Foreign Trade for import of capital goods under the EPCG scheme vide Customs Notification No.160/92. The company imported the capital goods by availing the exemption on the condition to fulfil the export obligation within the time prescribed by the Licensing Authority. A bond was executed by the first petitioner in the capacity of Managing Director of the company undertaking to fulfil the export obligation as per the exemption notification. Consequent upon the failure to fulfil the export obligation, show cause notice dated 08.01.1998 was issued to which there was no response and ultimately, an order was passed by the adjudicating authority, dated 07.03.2011. The amount ordered to be paid under the said order, is now sought to be recovered as Government dues by attaching and bringing for sale, the properties owned by the petitioners.

4. The contention raised by the petitioner is that the bond was executed by the company, however, due to torrential rains in 2003, water entered the petitioners' factory premises, all the records documents were completely destroyed and the petitioners have no documents relating to the subject transaction. On account of financial crisis faced by the company, they had to sell the factory on outright sale during March 2006 to clear the loans payable to various institutions. It is submitted that the impugned proceedings is in violation of principles of natural justice, as no notice of proceedings was issued to the petitioner prior to serving impugned notice of attachment. Further, it is submitted that the impugned notice of attachment attaching the personal properties of the petitioners is wholly without jurisdiction and the petitioners cannot be made personally liable for the alleged dues of the company. The respondent ignored the fact that the company is a separate legal entity and the liability of the company cannot be fastened on the petitioners.

5. The learned counsel for the petitioner after reiterating the above grounds referred to the definition of defaulter under the 1995 Rules as defined under Rule 2(6), which means any person from whom Government dues are recoverable under the Customs Act, 1962 and the petitioner is not a defaulter. Further, it is submitted that even against the defaulter the procedure for attachment as stipulated under Chapter 2 of the Rules have to be followed, which includes issuance of notice in terms of Rule 4, which has not been complied with. Further, it is submitted the bond which has been referred to by the Department, has been signed by the first petitioner in the capacity of Managing Director of the company and the respondents cannot proceed against the petitioners' personal capacity for the alleged dues payable by the company. Further, an affidavit has been sworn to by the first respondent, dated 27.11.2015, stating that the company has not been wound up till