2024 (5) TMI 965 - HC - GST

GST registration cancellation petition dismissed as company failed to prove director fraud through proper proceedings under Companies Act

M/s Bata Steels Pvt. Ltd. Versus State of Punjab and others

The HC dismissed a petition seeking cancellation of GST registration based on alleged fraud by an authorized director. The court held that inter se ... Cancellation of GST registration of petitioner - registration has been obtained by means of fraud, willful misrepresentation and suppression or not - unauthorised and illegal leasing by authorized Director of the petitioner company - Section 188 of Companies Act - related party transaction - relief in case of oppression u/s 241 of the Companies Act, 2013 - HELD THAT:- If there is an inter se dispute between the Directors of a company, the appropriate proceedings under Section 188 (3), 188 (4) and 188 (5) of the Act of 2013 could have been initiated by taking umbrage of Section 241 of the Act of 2013. However, in the present case no such action has been taken by the company. A presumption therefore cannot be drawn by this Court that there is a prima facie dispute between the Directors especially so when respondent No. 4 is admittedly an authorized Director of the company. Secondly, this Court also finds itself unable to enter into the dispute raised herein with regard to direction to be given to the Registering Authority as the cancellation of registration as noticed above, can be only in two circumstances. Where the concerned Registering Authority suo moto on its own motion reaches to a conclusion that the registration has been obtained by means of fraud, willful misrepresentation or suppression of facts. Section 29 (2) of the Act of 2017 empowers the officer for the said purpose and for reaching to such conclusion, it has to be either on his own motion. Section 29 (2) (e) of the Act of 2017 would come into picture where the registration was obtained by means of fraud, willful misrepresentation or suppression of facts while willful mis-statement or suppression of facts is a bundle of facts which have to be proved, in separate proceedings this Court would not presume only on the statement made by the petitioner that such an action has actually been taken place as noticed above since the petitioner company has not taken any steps either before the concerned competent company Court nor it has taken any such resolution in the Board, nor it has initiated any criminal or civil proceedings, it cannot be presumed that such fraud or mis-statement of facts has been committed by respondent No. 4. The prayer made for issuing mandamus to respondent No. 2 fails - the petition is dismissed. Issues Involved:1. Fraudulent registration under GST Act.2. Unauthorized leasing of company property.3. Legal implications under Section 188 of the Companies Act, 2013.4. Applicability of Section 241 of the Companies Act, 2013.5. Conditions for cancellation of GST registration u/s 29 of the GST Act, 2017.Summary:Issue 1: Fraudulent registration under GST ActThe petitioner company sought a directive for the cancellation of GST registration obtained by respondent No. 3, M/s Asian Packaging, on grounds of fraud, willful misrepresentation, and suppression of facts as per Section 29 (2) of the GST Act, 2017.Issue 2: Unauthorized leasing of company propertyThe petitioner argued that respondent No. 4, an authorized Director of the petitioner company, formed a partnership and leased out the company's property to M/s Asian Packaging without proper authorization or a formal resolution from the company.Issue 3: Legal implications under Section 188 of the Companies Act, 2013The petitioner contended that the actions of respondent No. 4 violated Section 188 of the Companies Act, 2013, making the rent deed unauthorized and illegal, thereby constituting fraud and willful misrepresentation.Issue 4: Applicability of Section 241 of the Companies Act, 2013The court noted that disputes between directors should be addressed under Section 188 (3), 188 (4), and 188 (5) of the Companies Act, 2013, through proceedings u/s 241. However, no such action was taken by the petitioner company.Issue 5: Conditions for cancellation of GST registration u/s 29 of the GST Act, 2017The court highlighted that cancellation of GST registration can occur if the proper officer, either suo moto or on application, concludes that the registration was obtained by fraud, willful misrepresentation, or suppression of facts. The court found no evidence of such actions by respondent No. 4 and noted that the petitioner had not initiated any relevant proceedings or resolutions.Conclusion:The court dismissed the writ petition, stating that it could not presume fraud or misrepresentation based solely on the petitioner's statements without any supporting actions or evidence. The prayer for issuing mandamus to respondent No. 2 was denied. Pending applications were also disposed of.