The petitioner, the Director of a private limited company is before this Court challenging the revenue recovery proceedings. The petitioner had two contentions; one that the provisions of Section 26C of the Kerala General Sales Tax Act, 1963 is unconstitutional and the next that there could be no proceedings taken against the Director of a private limited company and if at all such a proceeding is taken then it has to be subject to the provisions of the Companies Act.
2. We find both issues covered by two judgments of two different Division Benches of this Court. The first question on constitutionality is against the assessee and the next against the revenue.
3. In Jose Kurian v. The Deputy Tahsildar (RR) (Writ Appeal No.2314/2008) it was found that from the words employed in Section 26C, without first proceeding against the assessee company, there could be no proceedings taken against the Directors. There can also be no simultaneous proceedings against the Director. Section 26C specifically speaks of joint and several liability of every person who was a Director of a private limited company only if the tax or other amounts recoverable under the Act cannot be recovered for any reason from the private company. Hence the proceedings has to be taken first against the company and there should also be sufficient material to show that the recovering authorities were not able to recover the amounts from the assessee company. There is no such averments made by the Government in the counter affidavit also.
4. On the issue, we also notice Section 26C is subject to the provisions of Companies Act, 1956. The learned Counsel for the petitioner Sri.A Kumar would submit that if at all a proceeding is taken against the Director after finding the recovery against the company to be futile, then the Director would be entitled to raise all available contentions as per the Companies Act. We find sufficient support for the above submission from the decision of another Division Bench in Mohammed Harid, v. District Collector [(2014) 2 KLT 102]. This Court had declared that since Section 26C contains a specific clause that it would be subject to the Companies Act, if any statutory right or protection is available to the Director under the Companies Act contravention of the same could be taken as a defense against the recovery.
5. We hence follow the judgment of the Division Benches as noticed hereinabove and allow the writ petition. We set aside the recovery against the petitioner, leaving it open to the State to proceed in accordance with law. There is no order as to costs.