Court rules directors not personally liable for company debts, setting aside attachment orders.

The Court ruled in favor of the petitioner, setting aside the orders attaching personal property for outstanding dues of a private limited company. The Court emphasized that directors are not personally liable for company debts and rejected the argument that the managing director should pay government dues due to non-payment by the company. The decision was based on established legal principles, highlighting that the corporate veil should not be lifted without a strong factual foundation.

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Issues:
Challenge to order attaching personal property for outstanding dues of a company under Article 226 of the Constitution of India.

Analysis:
The petitioner challenged an order attaching personal property for outstanding dues of a company. The petitioner, a director of the company, argued that the property could not be attached for the company's dues. The respondent authorities cited non-recovery of sales tax from the company as the reason for attaching the property. The petitioner contended that the property belonged solely to him and could not be attached for the company's liabilities. The petitioner also highlighted that the company was a private limited company, and the petitioner was a director, not a partner. The petitioner submitted objections, citing judgments where directors were not personally liable for company debts. The respondent argued that the property was attached as the director had to pay government dues due to non-payment by the company.

The Court considered whether personal property of a managing director could be attached for recovery of sales tax dues against a private limited company. Referring to previous judgments, the Court noted that the law did not provide for personal liability of directors for company dues. The Court emphasized that the corporate veil should not be lifted lightly and required a strong factual foundation. As no specific order held the director personally liable, the doctrine of lifting the corporate veil was not applicable. The Court relied on previous decisions and allowed the petition, quashing the impugned orders of attachment.

In conclusion, the Court ruled in favor of the petitioner, setting aside the orders attaching the personal property. The Court emphasized that the law did not allow for personal liability of directors for company dues and rejected the respondent's argument based on Section 78 of the Gujarat Sales Tax Act. The Court's decision was based on established legal principles and previous judgments, ensuring that personal property of a managing director could not be attached for the company's liabilities.

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