1. The petitioner, by way of present petition, has challenged the legality, validity and propriety of an order dated 31.3.2016 issued under Section 179 of the Income-tax Act,1961 (for short ‘the Act’) whereby, the corporate veil of a company is lifted and the directors are held to be defaulters within the meaning of Section 179 of the Act and it is this order which is made the subject matter of present petition.
2. Brief facts are as under :
2.1 The company named as Hirak Biotech Limited was incorporated under the provisions of the Companies Act,1956 on 25.1.2005 initially with main directors, namely, Mr.Pranav Amratlal, Mr.Pratik P. Shah and Mrs.Niketa B. Bhatt. Within a short span, on 20.3.2005 the petitioner was introduced as director of this company and the petitioner continued as such upto 5.9.2005. The petitioner presented the petition on the premise that though he was appointed as a director, in reality had not acted as such; neither he had made any signature in any affairs of the company nor on any financial statements, banks, income tax documents and except remaining as a director he was not in charge of the affairs of the company. He asserted in the petition that one Mr.Pratik R. Shah was managing the affairs of the company and he merely brought the capital in the form of shares. Except remaining as a director on the board of the company, he in reality had not acted as such and also contended that he had put the resignation on 5.9.2005.
2.2 The petitioner further contended that though the petitioner had resigned from the company, he served with a notice on 11.10.2013 issued under Section 179 of the Act whereby, an attempt was made to saddle with liability of the company. To the said notice, the petitioner gave reply on 17.10.2013 and thereafter, for a pretty long time for almost a period of one year, no response in that regard was received by the petitioner. Later on, on 4.9.20 14 he received a communication in the form of show cause notice to explain as to why he should not be held responsible to pay the dues of the company and against that show cause notice, through consultant the petitioner requested the authority on 10.9.2014 to grant some time to enable him to take some steps and as such, upto 15.9.20 14 time was granted. However, by that time, the petitioner instead of responding to notice has filed the petition before this Court being SCA No.12861 of 2014 challenging the legality and validity of the said notice dated 4.9.2014. This Court, while taking up the plea of the petitioner, found that while initiating such action, no adequate opportunity was given to the petitioner nor any proper procedure was followed and therefore, the action in purported exercise of power under Section 179 of the Act came to be quashed and the petition was partly allowed by an order dated 12.2.20 15 and consequently, directed to take steps in accordance with the provisions of law by keeping the rights and contentions of both the sides open and the petition came to be disposed of.
2.3 Subsequently, the respondent authority observed the order of this Court and thereafter, after observing the statutory provisions, issued a fresh show cause notice on 19.6.20 15 in detailed by giving all particulars and called upon the petitioner to explain as to why steps should not be taken as contemplated under Section 179 of the Act. To this notice, the petitioner appears to have replied on 24.7.2015 trying to explain his position as narrated above in brief and to this reply, an affidavit of Mr.Pratik R. Shah, one of the directors also came to be attached. An attempt is made by the petitioner to indicate that said Mr.Pratik R. Shah is the responsible person to the affairs of the company and not the petitioner. Along with the said reply to the show cause notice, a statement also came to be given with respect to allotment of shares, holding of the shares of each of the directors and also given the particulars with respect to Form No.32 in which an indication is given that the petitioner has resigned as a director w.e.f. 5.9.2005. In furtherance of this, in the meantime on 10.7.2015 and also on 10.10.2015, specific replies have been given that he is not the sole responsible person for conduct of a company. After such explanation, it appears from the record that on 14.12.2015 as well as on 18.12.2015, correspondence took place between the petitioner and the department and on 21.12.2015, last reply appears to have been given through tax consultant by the petitioner and clarified his position that there is no question of liability of the petitioner with respect to affairs of the company.
2.4 Said documents appear to have been examined by the authority and the authority on 31.3.2016, was pleased to pass an order in exercise of power under Section 179 of the Act and came to the conclusion that petitioner has failed to prove his gross negligence, misfeasance or breach of duty in relation to the affairs of the company and by lifting the corporate veil of the public limited company in question, all the three directors including the petitioner are held to be defaulters within the meaning of Section 179 of the Act.
2.5 It is against this order which has been passed finally on 31.3.2016 by the authority, the petitioner has filed the petition by invoking extraordinary jurisdiction of this Court.
3. Learned Senior Counsel, Mr.Saurabh Soparkar with learned advocate, Mr.J.R.Parikh for the petitioner has contended that the action initiated by the respondent authority is not just and proper, without authority of law and on this count alone, same be quashed and set aside. It was also contended by the learned counsel for the petitioner that Section 179 of the Act ex-facie is not applicable to a public limited company and undisputedly, the petitioner company is a public limited company and therefore, from the initial step itself, invocation of Section 179 of the Act is impermissible and therefore, the action tantamount to be without authority of law. It was also contended by learned counsel that though the petitioner came to be appointed as a director on 20.3.2005, he has not acted as such as the director and has not participated in transaction related to the company, has not signed any documents related to financial transactions, has also not signed any paper related to income-tax department and has not taken any decision nor has participated in the affairs of the company. It was further contended by the learned counsel that on 5.9.2005, the petitioner has resigned from the company and therefore, no liability can be fastened upon the petitioner. It was also contended by the learned counsel that the petitioner is not guilty of any misuse of power nor any allegation pertaining to any misuse of his position as a director nor has grossly neglected nor has committed any breach of duty in any manner is alleged and since the affairs of the company were not looked after by the petitioner, the authority ought not to have saddled the petitioner with liability of company. Learned counsel for the petitioner has further contended that simply because at the relevant point of time, the petitioner was holding a maximum share capital to the extent of 98% would not sufficient enough to attract the provisions of Section 179 of the Act. It was also contended that none of the conditions which are to be established for invoking the provisions of Section 179 of the Act are establishing in case of the petitioner and therefore, in absence of any such condition precedent having been satisfied, it is not open for the respondent authority to impose upon any liability of the company. Learned counsel has further contended that there was adequate material available on the file of the authority to indicate that it was Mr.Pratik R. Shah, who was one of the directors, who was dealing with the company and not the petitioner. It was contended that though adequate material qua that is produced even by the petitioner, the authority has assumed the jurisdiction to fix the liability of petitioner which action is bad in law, not permissible and therefore, same is required to be set aside. Learned counsel has further contended that though the lifting of corporate veil principle is vogue but, at the same time, the situation for that must be appearing on the record which is completely missing in the present case and therefore, it was not open for the authority to lift the corporate veil and pass an order. It was also contended that though the company was registered and incorporated as a public limited company, the authority has erroneously assumed as if it is akin to a private limited company and thereby, applied Section 179 of the Act. Ex-facie a bare reading of this statutory provision is meant for the private limited company and therefore, the action itself is beyond the scope of authority and therefore, deserves to be quashed and set aside.
3.1 Learned counsel for the petitioner has further contended that concept of vicarious liability cannot be inferred by the authority more particularly when the petitioner has never participated as a director. Unless a fraud is practiced or the petitioner is beneficiary out of it then only, it can be said that corporate veil deserves to be lifted or pierced. On the case on hand, according to learned counsel for the petitioner, no such circumstances appearing qua the petitioner and therefore, in absence of any contingency, resort to Section 179 of the Act is impermissible. Learned counsel further contended that even on facts also, the authority has not established even remotely that the petitioner is responsible for the affairs of the company. It was pointed out by the learned counsel that corporate veil can be lifted or pierced if either statute permits the same or any extraordinary circumstances prevailing and compelling the authority to lift the veil. By referring to the averments contained in the petition, learned counsel has submitted that no such situation is reflecting which would permit the authority to pass such kind of order insofar as petitioner is concerned and therefore, learned counsel has submitted that in the absence of any guilt on the part of petitioner in relation to affairs of the company, no action can be initiated against the petitioner and thereby, learned counsel submitted that no such step could have been taken. Learned counsel further submitted that even in case of Pravinbhai M. Khemi V/s. Assistant Commissioner of Income-tax Central Circle-2 and Ors., reported in 353 ITR 585, the principle of lifting of corporate veil is analyzed but, the same was in altogether different set of circumstance in which there was a huge demand of more than 150 crores which was the subject matter of controversy and the Court found that the company was as such structurally akin to private limited company but intentionally not registered as such with a view to escape the responsibility under Section 179 of the Act and therefore, learned counsel submitted that said decision can never be applied by the authority as a straitjacket formula and therefore, learned counsel submitted that action qua the petitioner be quashed and set aside. Learned counsel for the petitioner by resorting to some of the documents attached to the petition compilation ultimately contended that the petitioner is not responsible for affairs of the company and therefore, by taking aid to the provision of Section 179 of the Act, no liability can be fastened upon the petitioner and thereby, has requested the Court to grant the relief as prayed for in the petition.
4. To oppose this stand of the petitioner, learned Senior Counsel, Mr.M.R.Bhatt for the revenue has contended that there is a systematic design adopted by the petitioner and the company’s name has been utilized which is for the purpose of seeking accommodation entries. Learned counsel for the revenue has submitted that simply because the petitioner is not a signatory to the documents of the company, is not sufficient enough to absolve him from responsibility and therefore, the order passed by the authority is just and proper. Learned counsel further submitted that the petitioner has joined the company in March,2005 and has remained upto September,2005 and in between, the holding of the share capital of the company in the hands of the petitioner was to the extent of 98.33% during the relevant year. It was submitted by the learned counsel that the record has sufficiently established that Hirak Biotech Company was formed with a view to provide accommodation entries in the form of bogus share capital and share premium and therefore, when such a situation of extraordinary nature is prevailing or emerging from the record, the authority is thoroughly justified in passing the order. Learned counsel has further drawn the attention of the Court that as on 30.3.2005, the share capital of the Hirak Biotech Ltd. was only Rs.5 lacs and thereafter, upon induction of petitioner as a director, the share capital strength has increased to Rs.7 crores and mostly the equity shares were held by him. It was also pointed out that total equity shares of the company was of Rs.30 lacs at the relevant time, out of which in the hands of the petitioner such shares to the extent of Rs.29.50 lacs and therefore, the petitioner’s holding at the relevant point of time was to the extent of more than 98%. Learned counsel for the revenue has further drawn the attention of the Court that though the company in question is incorporated as public limited company, the company has not involved public in any substantive form and the characteristic of the affairs of the company are found to be akin to the private limited company and therefore, the authority has rightly come to the conclusion that company in question was treated as defacto private limited company and therefore, the petitioner is rightly held to be responsible. Learned counsel for the revenue has submitted that normally when such kind of huge share capital is in the hands of the petitioner, as a natural consequence he would be active in the affairs of the company. But unnatural conduct shown by the petitioner that though he was major shareholder, had never raised any voice against functioning of either company or of Mr.Pratik R. Shah in any manner as contended and rather provided full support to Mr.Pratik R. Shah and therefore also, there appears to be a serious dereliction of duty on the part of petitioner being the director holding a major share capital. Learned counsel for the revenue has further submitted that ample opportunities were given and all possible efforts were made by the department to realize the huge tax demand of the company but have failed to realize any money. It was also pointed out that for the Assessment Year 2006-07 relevant to FY 2005-06, the company had fixed asset of Rs.3,14,19,402/-, sundry debtors of Rs.46,72,380/- and cash and bank balances to the extent of Rs.1,06,02,103/- and loans and advances were Rs.6,23,56,433/-. But upon attachment through proceedings under Section 226(3) of the Act, it has been reported that balances of the company with respect to debtors or bank had zero balance and during the course of time, the property in question have been sold in the month of February,2009. There was a huge demand of other financial institutions as well and therefore, learned counsel for the revenue has submitted that entire affairs of the company was allowed by the petitioner in such a manner to be operated which may ultimately lead to huge scam and out of that affairs of the company, the total liability accrued to tax dues only of the company upon regular assessment to the extent of Rs.240.08 lacs including penalty and subject to chargeability of interest under Section 220(2) of the Act and therefore, when such a huge claim of the department has remained outstanding for the relevant year in which the petitioner was a director, though silent is equally responsible for the ultimate outcome of the company and therefore, the authority has rightly passed an order under Section 179 of the Act and therefore, in this view of the matter, learned counsel for the revenue contended that no extraordinary jurisdiction be exercised in favour of the petitioner.
4.1 It was also contended by the learned counsel that conduct on the part of the petitioner is such which smacks a clear doubt about the version which has been projected and also pointed out that maximum number of cash flow which has come in the bank accounts of the company has been during the tenure of the petitioner and therefore, huge accommodation entries have been executed during the course of time when the petitioner was director and therefore, simply because the petitioner has walked away from the company in September,2005, he cannot be absolved from responsibilities which accrued to the company over the period of time and therefore, the learned counsel for the revenue has submitted to dismiss the petition. Learned counsel further submitted that series of decisions have taken the view that if such kind of extraordinary circumstances are prevailing, it is always open for the authority as well as to this Court to lift the corporate veil of the company and therefore, the authority has rightly passed the order which is impugned in the petition. Learned counsel has further pointed out that none of the directors, though steps have been taken against them, have responded. However, it is the petitioner, who is bringing the affidavit of Mr.Pratik R. Shah, who is trying to take entire burden upon him just with a view to accommodate the petitioner as it seems and therefore, such kind of attempt inter-se between the directors and the person of close nexus, cannot be allowed to be encouraged any further and therefore, requested the Court that authority has rightly exercised the jurisdiction and such detailed order with cogent reasons passed in exercise of statutory powers may not be interfered with in extraordinary equitable jurisdiction of this Court and therefore, ultimately learned counsel submitted to dismiss the petition by granting no relief in favour of the petitioner.
5. Having heard the learned counsel appearing for the respective parties and having gone through the materials on record, following facts, which are prevailing on record, cannot be unnoticed which led us to think about lifting the corporate veil:
(1) The Company i.e. Hirak Biotech Ltd. is faced with evasion of tax demand against regular assessment and penalties to the extent of Rs.240.08 lakhs and that too, subject to chargeability of interest under section 220(2) of Income Tax Act.
(2) When the Company came to be incorporated, shareholding was only to the extent of Rs.5.00 lakhs i.e. 50,000 shares of Rs.10/- each as on 31/3/2005. Suddenly in the meantime, within 2 and 1/2 months, one of the Directors, Mr. Ajay S. Patel, came to be introduced in the Company who brought sizable amount of shareholding. The Company had three Directors namely, Mr. Pratik R. Shah with a shareholding of 44,000 shares, Mr. Niketa Dave with only 1000 shares and Mr. Ajay Patel with a shareholding of 29,50,000 shares in the Company, which practically comes to 98.33%.
(3) It is further emerging from the record that within a short span only, the petitioner came to be introduced as an additional director of the company and upon his induction, the share capital of the company shoot-up to 7 crores and out of said share capital holding, the petitioner has been inducted with a substantial holding to the extent of 98.3 3% and to that extent, the petitioner is the sole holder of this substantial chunk of capital of the company.
(4) Another feature also appearing is that no public issue was advertised and no shares were issued to the public and there was no remote involvement of public in the Company though the Company appeared to be a Limited Company.
(5) It is also emerging from the record that during the FY 2005-06, the company had a fixed asset of Rs.3,14,19,402/-, sundry debtors of Rs.46,72,380/- and the bank balance to the extent of Rs.1,06,02,103/- and the loans and advances were Rs.6,23,56,433/-. This is the affairs of the company at the relevant point of time when the petitioner was additional director. However, in a gradual process of time when the attachment proceedings were initiated, it has been found by the department that the value of aforesaid assets and structure of the company has become practically zero. So practically everything was vanished.
(6) The record indicates that though there is a plea of petitioner that he has nothing to do with the company except remaining as an additional director, he is not party to the transaction, he is not connected with affairs of the company internally but, record reveals that though the company is incorporated on 20.3.2005, the actual business and the commencement appears to have taken place from 13.4.2005. Meaning thereby that the commencement of business has taken place only after the petitioner came to be introduced as an additional director on 20.3.2005. The certificate of commencement of business issued under Section 149(3) of the Companies Act which reflects this position which is a part of petition compilation on Page-29 and therefore, substantially appears that it is the petitioner, who upon holding capital to the extent of 98% shares in the company, has engineered the business, though it is claimed by the petitioner that other directors were looking after the affairs of the company. It appears from the record further that this huge demand which has been crystallized by the department is for the relevant financial year during which the petitioner was the director.
(7) It is further emerged from the record that upon taking steps against the Company for recovery by the department in a gradual process, the land held by the Company came to be sold on 25/2/2009, balance came to be withdrawn from the bank accounts and thereafter, the bank accounts have also been closed down and surprising feature is that on 5/9/2005, said Mr. Ajay Patel resigned from the Company as Director. So, everything appeared to be substantially during the period of one of the Directors, Mr. Ajay Patel from 20/3/2005 to 5/9/2005.
(8) Practically, the Company though named as Hirak Biotech Limited has acted practically as a Private Limited Company altogether and the Directors appeared to have acted in such a detrimental way which falls within the purview of section 179 of the Income Tax Act. There were huge financial transactions, serious default, total non-cooperation in the Company and the Company appears to have been spearheaded by one of the Directors only. There were serious defaults in financial transactions with Jammu and Kashmir Bank as also with Ahmedabad People’s Co-Op. Bank of huge amounts and therefore, all these combination of circumstances led us to believe that this is a fit case to resort to a principle of lifting of corporate veil.
(9) Another surprising feature is that though persistently summons came to be issued to Directors, none of the Directors of the Company appeared on the date of hearing and another Director, Mr. Pratik R. Shah, who is said to have acted on behalf of the Company has also neither appeared nor filed any submissions and it appeared that by filing an affidavit, he appears to have shielded one of the Directors, Mr. Ajay S.Patel. All these circumstances cannot be said to be normal circumstances and therefore, it appears that the Income Tax Authorities have rightly exercised the powers by way of detailed order which came to be passed on 31/3/2006 which is sought to be challenged in the present proceedings.
(10) Further it appears that the case of the department is that substantial accommodation entries have been made during the course of time when the petitioner was a director. There is a sizable amount of entries which reveal that substantial cash deposit took place in Kalupur Commercial Bank account to the extent of Rs.48 lacs which is reflecting from the assessment order dated 20.12.2008 with respect to Assessment Year 2006-07. The assessment order during the course of hearing of the petition is presented for perusal by the learned counsel for the petitioner.
(11) Further it appears from the record that though the petitioner claimed to have not participated in the affairs of the company, a reasonable contrary inference which has been drawn appears to be sound to some extent as the commencement certificate of the company is after the induction of the petitioner as additional director.
(12) Further it also appears that Memorandum of Association of the company is the vital key to get the knowhow about the company’s affairs. In law, Memorandum of Association is charter which contains the fundamental conditions upon which alone a company can be incorporated and any action outside the scope of Memorandum of Association will be ultra vires, beyond the powers of the company and hence, void. Now in the context of this position, if a bare look to the Memorandum of Association is to be viewed, it would reflect that the main object of the company is to carry on the business of floriculture, agriculture, horticulture etc. and for immediate perusal, same is reproduced hereinafter :
“To carry on the business of floriculture, agriculture, horticulture, sericulture, tissue culture, apiculture, and to deal in all type of foretellers, plant food pesticides, insecticides, fungicides and all type of plant protection chemicals, micro nutrients and as nursery owners, cultivation and farming on land, water or in special chambers and to plant, grow, cultivate, produce rise, develop, purchase, sell, import, export, protect, store and commercialize.”
Now, in the context of this main object of the company for which it has been set up, what is reflecting from the record is that the company has executed its business that of trading and distribution of ice-cream quite de-hors from the main object for which the company appears to have been set up and this trading and distribution business of ice-cream is the case of company itself as is reflecting from the assessment order as referred to above. Therefore, under the circumstances it appears that the company is set up for different purpose than which is posed before the authority at the time of incorporation. Therefore, the inference which has been raised by the department that company is set up essentially for the purpose of accommodation entries might not be ignored, though attempt is made to establish contrary.
6. The Memorandum of Association contains various clauses. Clause 13 thereof deals with the issue of debentures or debenture-stock etc. But correspondingly if we look at the Articles of Association which governs the affairs of the company and its working. Some of the clauses contained in Articles of Association are worth to be considered which are also very relevant incidentally to the finding arrived at by the authority. Clause (4) onwards of Articles of Association deals with share capital affair of the company which indicates that the increase or decrease and the shares being consolidated or sub-divided in accordance with the regulation of the company and the legislative provisions for time being in that behalf. Clause (5) of the said Articles of Association deals with power to increase capital. Now, this if to be looked into, initial share capital structure of the company was only Rs.5 lacs as on 31.3.2005. But the moment the petitioner came to be inducted as director, it has rocketed capital to the extent of Rs.7 crores and therefore, that substantial increase in the share capital requires certain procedure which has been stipulated in clause (5) which reads as under :
“Power to increase Capital
5(a) The Company in general meeting may, from time to time increase the capital by the creation of new shares, such increase to be of such aggregate amount and of such classes and to be divided into shares of such respective amounts as the resolution shall prescribe.
(b) Subject to the provisions of the Act, the new shares shall be issued upon such terms and conditions and with such rights and privileges annexed thereto as the Company in general meeting shall prescribe, and in particular such shares may be issued with a preferential or qualified right to dividends and in the distribution of assets of the Company, and with a right of voting at general meeting of the Company in conformity with Sections 87 and 88 of the Act. Whenever the capital of the Company is increased under the provisions of this Article, the Directors shall comply with the provisions of Section 97 of the Act.”
7. Clause 5(b) of the Articles of Association indicates that when share capital is to be increased which shall be in general meeting after properly considering the relevant provisions of the Act and subject to compliance of Section 97 of the Act. Now, though the case is tried to be made out that the petitioner was a dormant director in the company had nothing to do with the affairs of the company but, the commencement of business initiated after the induction of the petitioner as director and that increased share capital is brought by the petitioner.
8. Further, in this context if we peruse clause (13) of the Articles of Association which governs the working of the company which relates to further issue of share wherein, it has been mentioned that where at the time after the expiry of two years from formation of the company or at any time after expiry of one year from allotment of shares in the company made for the first time after its formation, whichever is earlier, it is proposed to increase the subscribed capital of the company by allotment of further shares whether out of the unissued capital or out of the increases share capital then, certain steps to be contemplated which reads as under :
“Further issue of shares
13.1) Where at the time after the expiry of two years from the formation of the company or at any time after the expiry of one year from the allotment of shares in the company made for the first time after its formation, whichever is earlier, it is proposed to increase the subscribed capital of the company by allotment of further shares whether out of the unissued capital or out of the increased share capital then :
(a) Such further shares shall be offered to the persons who at the date of the offer, the holders of the equity shares of the company, in proportion, as near as circumstances admit, to the capital paid up on those shares at the date.
(b) Such offer shall be made by a notice specifying the number of shares offered and limiting a time not less than thirty days from the date of the offer and the offer if not accepted, will be deemed to have been declined.
(c) The offer aforesaid shall be deemed to include a right exercisable by the person concerned to renounce the shares offered to them in favour of any other person and the notice referred to in sub clause (b) hereof shall contain a statement of this right. PROVIDED THAT the Directors may decline, without assigning any reason to allot any shares to any person in whose favour any member may renounce the shares offered to him.
(d) After expiry of the time specified in the aforesaid notice or on receipt of earlier intimation from the person to whom such notice is give that he declines to accept the shares offered, the Board of Directors may dispose off them in such manner and to such person(s) as they may think, in their sole discretion, fit.
(2) Notwithstanding anything contained in sub-clause
(1) thereof, the further shares, aforesaid may be offered to any persons (whether or not those persons include the persons referred to in clause (a) of sub-clause 91) hereof in any manner whatsoever.
(a) If a special resolution to that effect is passed by the company in General Meeting, or
(b) Where no such special resolution is passed, if the votes cast (whether on a show of hands or on a poll as the case may be ) in favour of the proposal contained in the resolution moved in the general meeting (including the casting vote, if any,of the Chairman) by the members who, being entitled to do so, vote in person,or where proxies are allowed, by proxy, exceed the votes, if any, cast against the proposal by members so entitled and voting and the Central Government is satisfied, on an application made by the Board of Directors in this behalf, that the proposal is most beneficial to the company.
(3) Nothing in sub-clause (c) of (1) hereof shall be deemed:
(a) To extend the time within which the offer should be accepted; or
(b) To authorized any person to exercise the right of remuneration for a second time on the ground that the person in whose favour the remuneration was first made has declined to take the shares comprised in the renunciation.
(4) Nothing in this Article shall apply to the increase of the subscribed capital of the company caused by the exercise of an option attached to the debenture issued or loans raised by the company;
(i) To convert such debentures or loans into shares in the company; or
(ii) To subscribe for shares in the company (whether such option is conferred in these Articles or otherwise).
PROVIDED THAT the terms of issue of such debentures or the terms of such loans include a term providing for such option and such term :
(a) Either has been approved by the Central Government before the issue of the debentures or the raising of the loans or is in conformity with the Rules, if any, made by the Government in this behalf; and
(b) In the case of debentures or loans or other than debentures issued to or loans obtained from Government or any institution specified by the Central Government in this behalf, has also been approved by a special resolution passed by the company in General Meeting before the issue of the debentures or raising of the ”
And this clause if we peruse would indicate that facts on hand have not clarified whether the same is complied with or not because the company has with the aid and assistance of petitioner has increased its share capital within two and half months only. This issue appears to have not been dealt with by the authority which circumstances is appearing from the record itself.
9. Further, while taking step against the petitioner vigorously, it appears that the department has initiated action and made all possible efforts to recover huge revenue demand as crystallized from the company but, all efforts have been in vain and most surprising factor which is revealing from the record is that none of the Directors have cooperated with the department nor have presented themselves in the course of this recovery proceedings. It further reveals that this demand substantially is related to the period in which the petitioner may for a short time but was a Director. These steps are very much reflected from the order which has been considered by the authority and this sequence of steps for realizing demand deserves reproduction hereinafter:
