Corporate veil protection bars recovery of company tax arrears from directors absent fraud or statutory authority.

A company's tax arrears cannot automatically be recovered from the personal assets of its directors because the company remains a separate juristic person. The corporate veil may be lifted only where proper pleadings and positive material show that the company form was used as a cloak for fraud, misrepresentation, diversion of assets, or other unlawful purpose, or where a statute expressly authorises personal recovery. Mere non-payment of public dues by the company is insufficient to fasten liability on directors. On the facts, no adequate pleading or material justified piercing the corporate veil, so the recovery notice against the directors was unsustainable.

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Issues: Whether tax arrears due from a company could be recovered from the personal assets of its directors.

Analysis: A company has a separate juristic personality and its liabilities do not automatically become the personal liabilities of its directors or shareholders. The corporate veil may be lifted only on proper pleadings and positive material showing that the corporate form was used as a cloak or mask for fraud, misrepresentation, diversion of assets, or other unlawful purpose, or where a statute specifically permits personal recovery. Mere failure of the company to pay public dues is not enough to ignore its corporate identity and proceed against directors personally. On the facts, no such pleading or material was brought on record to justify piercing the corporate veil.

Conclusion: The tax arrears of the company could not be recovered from the personal assets of the petitioners as directors; the recovery notice against them was unsustainable and liable to be quashed.

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