Director liability under sales tax recovery arises only after failed recovery from the company and remains subject to Companies Act protections.

Section 26C of the Kerala General Sales Tax Act, 1963 was treated as constitutionally valid, following binding precedent, so the challenge to its validity failed. The provision permits recovery from a director of a private limited company only when the amount cannot be recovered from the company, so the revenue must first establish inability to recover from the company before proceeding against the director. The provision also operates subject to the Companies Act, allowing the director to raise any protection available under that Act. On the existing record, recovery against the director could not be sustained, and the recovery proceedings were set aside.

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Issues: (i) Whether Section 26C of the Kerala General Sales Tax Act, 1963 is unconstitutional. (ii) Whether revenue recovery could be initiated against the director of a private limited company before first proceeding against the company and whether the director could invoke protections available under the Companies Act.

Issue (i): Whether Section 26C of the Kerala General Sales Tax Act, 1963 is unconstitutional.

Analysis: The question was treated as covered by prior binding authority of the Court, which had upheld the provision.

Conclusion: The challenge to constitutional validity failed and was against the petitioner.

Issue (ii): Whether revenue recovery could be initiated against the director of a private limited company before first proceeding against the company and whether the director could invoke protections available under the Companies Act.

Analysis: Section 26C contemplates joint and several liability of a director only when the amount recoverable cannot be recovered from the private company for any reason. Recovery must therefore be pursued first against the company, and the record must show inability to recover from the company before proceeding against the director. The provision is also expressly subject to the Companies Act, so any statutory protection available to the director under that Act may be raised as a defence.

Conclusion: The recovery proceedings against the director could not be sustained on the existing record and were against the petitioner.

Final Conclusion: The writ petition succeeded, the recovery proceedings were set aside, and the State was left free to proceed in accordance with law.

Ratio Decidendi: Under Section 26C, recovery against a director of a private limited company can arise only after recovery from the company has failed, and the provision operates subject to protections available under the Companies Act.

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