Director not personally liable for company's dues under Sales Tax laws without specific legal provisions

The court held that a director of a company cannot be held personally liable for the company's dues under State and Central Sales Tax laws unless specific legal provisions exist to establish such liability. The lower courts' denial of an interim injunction against the director was found to be based on a misconception of the law, leading to the reversal of the decision and the granting of the injunction in favor of the director.

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Issues Involved:
The issue involved in this case is the liability of a director in a company for the dues of the company under State and Central Sales Tax laws.

Liability of Director for Company Dues:
The petitioner, a director in M/s. Swadesh Rubber Industries (P.) Ltd., filed a suit against the respondents to prevent them from enforcing the company's liability against him for State and Central Sales Tax. The respondents argued that as a director during the relevant period, the amount could be recovered from him. Both lower courts upheld this defense and denied the interim injunction.

Legal Provisions and Precedents:
The respondents' counsel failed to identify any legal provision in the Companies Act or Sales Tax Act that held the director personally liable for the company's dues. The petitioner's counsel cited a judgment by D. S. Tewatia J. in a previous case, where it was established that there is no provision in company law making the managing director personally liable for the company's debts. The courts below were found to have acted illegally due to a misconception of the law, leading to the reversal of the impugned order and granting of the ad interim injunction in favor of the petitioner.

This judgment clarifies that directors are not automatically personally liable for the debts of a company, unless specific legal provisions exist to establish such liability.

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