N.Ramkhuar Narasimhan Vs Assistant Commissioner (ST) (Madras High Court)
The Madras High Court examined the legality of recovery proceedings initiated against individual directors of a private company that was already under liquidation. Insolvency proceedings under the Insolvency and Bankruptcy Code, 2016 had been initiated against the company, following which an Interim Resolution Professional was appointed and later designated as the Liquidator. Despite liquidation, the company’s business was carried on during the period from April 2019 to March 2021, during which certain GST liabilities were stated to have arisen. For recovery of these dues, the tax authorities initiated proceedings by attaching the personal bank accounts of the petitioners, who were directors of the company, on the basis that they continued to be reflected as directors in official records.
The petitioners contended that once the company entered liquidation, its management vested with the Liquidator and they were no longer in control of its affairs. The Court noted that part of the tax liability had already been recovered from the company’s credit ledger and that the remaining dues related to interest and penalty. Referring to Section 88 of the GST enactments, the Court observed that directors of a private company can be made jointly and severally liable for tax dues only if such dues cannot be recovered from the company and only if non-recovery is attributable to gross neglect, misfeasance, or breach of duty on their part.
