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of <h1>Court rules in favor of non-executive director in bank account attachment dispute under MVAT Act</h1> The Court ruled in favor of the Petitioner, a non-executive director of a public company, in a dispute over the attachment of his bank account under MVAT ... Release of attached bank accounts of petitioner - dishonor of Cheque - HELD THAT:- Since Respondent No.3 in his email dated 02.03.2020 has relied upon Section 44(6) of MVAT Act and which is the basis for attachment of the bank account of the Petitioner, it would be apposite to advert to the said provision at the outset - Sub Section (6) of Section 44 of MVAT Act is subject to the provisions of Companies Act, 2013. When a provision is made subject to another provision or another statute, it would mean that the other provision or the other statute would prevail over the provision in question, in case of any conflict or inconsistency between the two. When the draftsman uses the expression “subject to” in a statute in contradistinction to the expression “notwithstanding”, it means that the other provision or the other statute would have an overriding effect over the provision under consideration. Also, there is a clear distinction between public company and private company in law. Companies Act, 2013 makes this distinction explicit - Since Sub Section (6) of Section 44 of the MVAT Act is subject to the Companies Act, 2013 the definitions and distinctions laid down in the Companies Act, 2013 vis-a-vis public company and private company would be applicable to Section 44(6) of the MVAT Act as if by way of incorporation. It is an admitted position, at least no dispute has been raised, that M/s. Birla Electricals Limited is a public company. If that be so, the fact that Petitioner was a director of the said company for the relevant period, though in a non-executive character and stated to have resigned, would have no bearing on fastening of liability on the Petitioner for the alleged default of M/s. Birla Electricals Limited. In such circumstances, attachment of the bank account of the Petitioner does not appear to be justified and is without any legal sanction. Respondent Nos.5 and 6 are directed to unfreeze the bank account of the Petitioner in HDFC Bank, Goregaon (E), Mumbai forthwith - petition allowed. Issues:Petitioner seeks direction to unfreeze bank account due to attachment by Respondents under MVAT Act Section 44(6) claiming joint liability of director for company dues. Dispute arises over applicability of MVAT Act provision to public company and director's liability after resignation.Analysis:1. Petitioner's Claim and Background:- Petitioner, a non-executive director of a public company, resigned in 2014 and held a bank account with HDFC Bank. A cheque issued by Petitioner was dishonored due to account attachment by Respondents without prior notice.2. Respondents' Allegations and Legal Basis:- Respondent No.3 relied on MVAT Act Section 44(6) to justify the bank account attachment, claiming Petitioner's joint liability for company dues. Respondents argued that Petitioner's resignation was not informed, making him liable as an authorized signatory.3. Interpretation of MVAT Act Section 44(6):- The Court analyzed Section 44(6) of the MVAT Act, emphasizing that it is subject to the Companies Act, 2013. The provision holds directors liable for company dues but is limited to private companies under the Companies Act, 2013.4. Applicability of Companies Act Definitions:- The Court clarified the definitions of public and private companies under the Companies Act, 2013, highlighting the distinction between the two. As the company in question was a public company, the liability of a non-executive director is not automatically extended under Section 44(6) of the MVAT Act.5. Court's Decision and Direction:- Considering the legal framework and the nature of the company, the Court ruled in favor of the Petitioner. It directed Respondents to unfreeze the Petitioner's bank account, stating that the attachment lacked legal justification. The Court allowed the Writ Petition without costs.6. Conclusion:- The judgment clarified the limited scope of Section 44(6) of the MVAT Act concerning directorial liability, particularly in the context of public companies. It upheld the Petitioner's claim, emphasizing the importance of legal compliance and proper notification in matters of financial liability and account attachment.
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