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Case Law Details

Case Name : Badal Bhupatrai Shah V/s. State of Gujarat (Gujarat High Court)
Appeal Number : R/Criminal Misc. Application No. 3738/2022
Date of Judgement/Order : 06/03/2023
Related Assessment Year :

Badal Bhupatrai Shah Vs. State of Gujarat (Gujarat High Court)

The Hon’ble High Court of Gujarat allows anticipatory bail application, accepting the contention that: (i) directors of the company cannot be prosecuted in absence of a statutory provision; (ii) company has been wound up under section 433 and 434 of the companies act and hence, FIR is belated

The Sales Tax Department filed FIR with Valsad Police Station against directors of the company for failure to pay VAT dues. FIR was lodged under section 406,420 of Indian Penal Code read with section 85(1)(d), 85(1)(g) and Section 86(1) and (2) of the Gujarat Value Added Tax Act. The applicant filed anticipatory bail application which was rejected by the sessions court on the ground that: (i) it is an economic offence; (ii) sales tax dues of over Rs.180 crores are due to the State Government; (iii) applicant is not Co-operating with the investigation.

Hence, application before the Hon’ble High Court. The Hon’ble High Court of Gujarat allows anticipatory bail application, accepting the contention that: (i) directors of the company cannot be prosecuted in absence of a statutory provision; (ii) company has been wound up under section 433 and 434 of the companies act and hence, FIR is belated; (iii) FIR cannot be lodged for recovery of taxes; and (iv) the applicant has co-operated with the investigation and statement has been recorded.

GVAT Directors of company cannot be prosecuted in absence of statutory provision

FULL TEXT OF THE JUDGMENT/ORDER OF GUJARAT HIGH COURT

[1.0] This application is filed under Section 438 of the Code of Criminal Procedure, 1973 praying for an order in the nature of anticipatory bail in connection with an offence registered as C.R.No.I-11200011210293 of 2021 with Valsad Rural Police Station, Valsad, for the offence punishable under Sections 406 and 420 of the Indian Penal Code as also under Sections 85(1)(d), 85(1)(g), 86(1) and 86(2) of the Gujarat Value Added Tax Act, 2003 (hereinafter referred to as “the Act, 2003”).

[2.0] Heard Mr. Bharat Raichandani, learned advocate assisted by Mr. Love Sharma, learned advocate for the applicant. According to his submission, no offence either under “the Act, 2003” or under the provisions of Indian Penal Code can be said to have been committed by the applicant as Director of the Company. At the same time, he has submitted that for non-payment of tax, company may be liable but not its Directors unless specific provision is made under “the Act, 2003”. He has further submitted that the company which defaulted according to the case of the prosecution for payment of tax, where the applicant is a Director came to be wound up under the provisions of the Companies Act, 1956 on 11.02.2021, whereas the present FIR has come to be filed on 05.02.2022 just prior to the order of winding up passed by the competent Court. He has further submitted while passing an interim order, this Court has examined in detail the provisions of “the Act, 2003” as also the authority of the officer concerned. He has further submitted that though while Sessions Court directed the applicant to remain present before the I.O. and granted protection from arrest, he reported to him. Not only that, pursuant to an order dated 17.02.2022, this Court directed the applicant to report to the I.O. again on 02.03.2023, which was also done by the applicant and on both the occasions, he was interrogated by the I.O. Therefore, he has submitted that since he is protected from 17.02.2022 and as no offence under the provisions of “the Act, 2003” can be said to have been committed by the Directors of the Company whose tax is due, according to the case of the prosecution, the applicant be enlarged on anticipatory bail, more particularly, when co-accused of the case i.e. another Director, maybe a lady accused and mother of the applicant, is already granted anticipatory bail, who is also similarly situated, the application may also be allowed.

[3.0] As against that, Mr. K.M.Antani, learned Additional Public Prosecutor submitted that without entering into the validity of the prosecution for the offence under “the Act, 2003” as also IPC, once the company has evaded huge tax liability, the applicant being its Director may not be granted an order of anticipatory bail. He has further submitted that the order in the case of co-accused, being lady accused and as recorded in an order dated 06.10.2021, she had claimed that the present applicant is administering the affairs of the company and therefore, the said order cannot be pressed into service for claiming parity. Therefore, he has submitted that this application may be rejected.

[4.0] Having heard the learned advocate for the applicant as also learned Additional Public Prosecutor and going through the FIR as also the papers of investigation and the documents annexed with the application, without entering into the discussion in detail about invoking provisions of “the Act, 2003” or the Penal Code, suffice it to say that its invocation in such set of facts, as stated hereinabove, that too, against the Directors in absence of any specific provisions under “the Act, 2003” and there is no provisions under the IPC, when coaccused is already considered by this Court and while admitting the present application detail reasons are assigned, on those reasons also, I deem it fit to grant an order in the nature of anticipatory bail, which was continued since 17.02.2022.

[5.0] In the result, the present application is allowed by directing that in the event of applicant herein being arrested pursuant to FIR registered as C.R.No.I-11200011210293 of 2021 with Valsad Rural Police Station, Valsad, on his executing a personal bond of Rs.10,000/- (Rupees Ten Thousand Only) with one surety of like amount on the following conditions:

(a) shall cooperate with the investigation and make himself available for interrogation whenever required;

(b) shall remain present at concerned Police Station on 20.03.2023 between 11.00 a.m. and 2.00 p.m.;

(c) shall not directly or indirectly make any inducement, threat or promise to any person acquainted with the fact of the case so as to dissuade him from disclosing such facts to the court or to any police officer;

(d) shall not obstruct or hamper the police investigation and not to play mischief with the evidence collected or yet to be collected by the police;

(e) shall at the time of execution of bond, furnish the address to the investigating officer and the court concerned and shall not change his residence till the final disposal of the case till further orders;

(f) shall not leave India without the permission of the concerned trial court and if having passport shall deposit the same before the concerned trial court within a week; and

(g) it would be open to the Investigating Officer to file an application for remand if he considers it proper and just and the learned Magistrate would decide it on merits;

[6.0] Despite this order, it would be open for the Investigating Agency to apply to the competent Magistrate, for police remand of the applicant. The applicant shall remain present before the learned Magistrate on the first date of hearing of such application and on all subsequent occasions, as may be directed by the learned Magistrate. This would be sufficient to treat the accused in the judicial custody for the purpose of entertaining application of the prosecution for police remand. This is, however, without prejudice to the right of the accused to seek stay against an order of remand, if, ultimately, granted, and the power of the learned Magistrate to consider such a request in accordance with law. It is clarified that the applicant, even if, remanded to the police custody, upon completion of such period of police remand, shall be set free immediately, subject to other conditions of this anticipatory bail order.

[7.0] At the trial, the concerned trial court shall not be influenced by the prima facie observations made by this Court in the present order. Rule is made absolute to the aforesaid extent. Direct service is permitt

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