Preeti Rajendra Barbhaya Legal Heir of Late Rajendra Nartothamdas Barbhaya Vs State of Gujarat & Ors. (Gujarat High Court)
Summary: In the case of Preeti Rajendra Barbhaya vs. State of Gujarat & Ors., the Gujarat High Court addressed a petition filed by the legal heir of a deceased director challenging recovery proceedings for tax dues under the Gujarat Value Added Tax (VAT) Act, 2003, and the Central Sales Tax (CST) Act, 1956. The petitioner’s husband, a former director of a company, had resigned in 2013 and passed away in 2017. However, the tax authorities initiated recovery actions in 2018, targeting the deceased director’s property for outstanding tax liabilities of the company. The petitioner contended that the company’s liabilities could not be recovered from her late husband’s estate, arguing that the company and its directors are separate legal entities. She also cited judicial precedents establishing that personal assets of directors cannot be attached for company dues unless negligence or breach of trust is proven.
The court examined the provisions of Section 53(3) of the VAT Act and Section 18 of the CST Act, which impose liability on directors only in cases of proven gross negligence or misfeasance. It noted that the tax recovery was initiated after the director’s death, rendering the proceedings invalid. Moreover, the court found no evidence of negligence or breach by the deceased. The High Court emphasized that recovery actions against personal assets must align with statutory requirements and quashed the recovery certificate and property attachment. This ruling reinforces the principle that corporate liabilities should not unfairly burden directors or their heirs without substantial evidence.
