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of <h1>Court sets aside attachment notice against ex-director for tax arrears, ruling recovery from directors only after company winding-up</h1> <h3>Smt. Radha Bai, Hyderabad Versus Dy. C.T.O. Hyderabad Another</h3> Smt. Radha Bai, Hyderabad Versus Dy. C.T.O. Hyderabad Another - TMI Issues:Challenge to notice of attachment under APGST Act, 1957 for recovery of tax arrears from a director of a private company after resignation.Analysis:The petitioner challenged a notice of attachment issued by the 1st respondent under the APGST Act, 1957, attaching her property for recovery of tax arrears from a private company where she was a director. The petitioner argued that the notice was illegal and contrary to the Act's provisions and principles of natural justice as it was issued after she had resigned from the company. The petitioner contended that the provision allowing recovery from directors can only be invoked when the company is wound-up, and recovery from directors is a last resort after failed attempts to recover from the company.The petitioner's counsel argued that the notice did not mention efforts made to recover arrears from the company and that the conditions for invoking the provision were not met since the company was still operational. They cited previous court decisions supporting their argument that recovery from directors is only permissible in specific circumstances, such as company liquidation. The respondent, in their counter affidavit, acknowledged the change in company management but proceeded with recovery against the petitioner, emphasizing the responsibility of directors to ensure tax payment.The court analyzed Section 16B of the Act, which imposes liability on directors of a private company only after the company is wound-up and recovery from the company fails. The court noted that recovery from directors is not automatic and requires proof of no gross neglect, misfeasance, or breach of duty on their part. The court found that since the company was not wound-up, recovery from the petitioner, an ex-director, was not justified. Consequently, the court allowed the writ petition, setting aside the notice of attachment against the petitioner and directing the respondent to pursue recovery proceedings against the company instead.
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