TMI Blog2011 (7) TMI 1036X X X X Extracts X X X X X X X X Extracts X X X X ..... , would have required investigation into the affairs of the company. In the aforesaid facts, the writ petition is allowed. The impugned notice dated March 28, 2004 for the assessment year 1999-2000 for recovery of trade tax dues is quashed to the extent that recovery be not forced against the assets of the directors of the company. It will be open to the Department to proceed against the assets of the company, or apply before the BIFR where the proceedings are still pending. It will also be open to the Department to carry out investigation to find out if the directors of company have played any fraud, and the circumstances necessary for lifting of corporate veil are available, before proceeding to recover the trade tax dues for them. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igh Court. The company filed an appeal before the Appellate Authority for Industrial and Financial Reconstructions (AAIFR). We are informed that the AAIFR registered the appeal as Case No. 216 of 2004, and remanded the matter back to the BIFR. It is stated in para 3 of the writ petition that the matter of rehabilitation of the company is pending before the BIFR, and the next date fixed by the BIFR was March 24, 2011. The counsel appearing for the petitioners is not aware about the current status of the proceedings. It is submitted that the trade tax dues against a public limited company cannot be recovered from its directors, unless and until there are allegations of playing fraud or taking advantage of the corporate personality for immo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... strate [2003] 22 NTN 358, relates to a society registered under the Societies Registration Act. We do not find that any investigation was carried out by the Trade Tax Department, in arriving at a conclusion that the petitioners, as directors of a public limited company, are liable to pay dues of the company. The directors of a public limited company, as member of the Board of Directors of the company are running and managing the company for the shareholders, who are the ultimate owners of the company. The shareholders are protected from the liability of the company under which the company was formed as public limited company. The Supreme Court in Purshottam Das Beriwal, Kanpur v. Deputy Collector (Collections) Sales Tax [1989] UPTC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Paras 77 and 78 in 36 NTN 107 (paras 80, 81 in 58 VST 201) of the judgment in Meekin Transmission Ltd. [2013] 58 VST 201 (All) ; [2008] 36 NTN 107, relevant for the purposes, are quoted as under (pages 234 235 in 58 VST) : 77. In the nutshell, the doctrine of lifting of veil or piercing the veil is now a well established principle which has been applied from time to time by the courts in India also. There is no doubt about the proposition that whenever the circumstances so warrant, the corporate veil of the company can be lifted to look into the fact as to whose face is behind the corporate veil, who is trying to play fraud or taking advantage of the corporate personality for immoral, illegal or other purpose which are against pub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shown akin to fraud or misrepresentation. The legal personality of the corporate body thus can be ignored in such cases since it is well-settled that fraud vitiates everything and, therefore, the benefit of legal personality obtained by someone for purposes other than those which are lawful or even if lawful but not otherwise permissible, the corporate personality being the result of such fraudulent activity would have to be discarded but not otherwise. These are the things based on positive factual material and cannot be presumed in the absence of proper pleadings and material to be placed by the person who is pleading to invoke the doctrine of piercing the veil and to ignore the juristic personality of the corporate body. Once relevant ma ..... X X X X Extracts X X X X X X X X Extracts X X X X
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