Petitioner entitled to Sabka Vishwas Scheme benefits despite wrong category filing, recovery from directors' accounts quashed

The HC held that the petitioner incorrectly filed under litigation category instead of Amount in Arrears category under the Sabka Vishwas Scheme 2019, as no appeal was pending on 30.06.2019. While the Designated Authority could revoke the discharge certificate due to misdeclaration, the petitioner remained entitled to scheme benefits upon paying the correct higher amount. The court quashed the recovery notice against directors' bank accounts, finding no provision under Finance Act 1994 to recover company dues from directors personally. The petition was disposed with directions for proper categorization and payment adjustment.

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ISSUES PRESENTED and CONSIDERED

The primary issues considered by the Court were:

1. Whether the petitioner was eligible for the benefits under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019, given the alleged mis-declaration regarding the pendency of an appeal.

2. Whether the revocation of the Discharge Certificate issued under the Scheme was justified.

3. The legality of the recovery proceedings initiated against the Director of the petitioner company under Section 87 of the Finance Act, 1994.

ISSUE-WISE DETAILED ANALYSIS

1. Eligibility under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019

The legal framework involved the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019, particularly Sections 121, 124, and 129, which outline the conditions for eligibility and the relief available under the Scheme.

The Court noted that the petitioner filed a declaration under the "litigation category" claiming an appeal was pending as of June 30, 2019. However, the appeal was filed on July 25, 2019, and dismissed on November 7, 2019, indicating no pending appeal on the cut-off date.

The Court determined that the petitioner was not entitled to relief under Section 124(1)(a)(ii) as no appeal was pending. Instead, relief should have been sought under Section 124(1)(c)(ii) for "amounts in arrears."

The Court found that the petitioner made an incorrect declaration, which affected the relief calculation under the Scheme.

2. Revocation of the Discharge Certificate

The Court examined whether the revocation of the Discharge Certificate issued in Form SVLDRS-4 was justified under the Scheme's provisions.

It was argued by the respondents that the power to grant a Discharge Certificate inherently includes the power to revoke it if the declaration was based on false information.

The Court referred to Section 129 of the Scheme, which allows for revocation in cases of "voluntary disclosure" if false particulars are found. However, the petitioner's declaration was not under "voluntary disclosure," and thus, Section 129(2)(c) could not apply.

The Court concluded that while the revocation was not strictly in consonance with Section 129(2)(c), the Designated Authority could correct the mistake if misled by an improper declaration.

3. Legality of Recovery Proceedings

The legal framework involved Section 87 of the Finance Act, 1994, concerning the recovery of dues.

The Court found no provision under the Finance Act, 1994, to recover dues from the Directors of a company in arrears. Thus, the attachment of the Director's bank accounts was without jurisdiction.

SIGNIFICANT HOLDINGS

The Court held:

1. The petitioner was entitled to relief under Section 124(1)(c)(ii) and not under Section 124(1)(a)(ii) due to the absence of a pending appeal as of June 30, 2019.

2. The petitioner must pay 60% of the admitted tax liability, amounting to Rs. 1,79,66,833.20, less any pre-deposit, resulting in a deficit of Rs. 29,94,472.20.

3. The revocation of the Discharge Certificate was not strictly justified under Section 129(2)(c) but could be corrected by the Designated Authority if the declaration was improper.

4. The recovery proceedings against the Director were without jurisdiction, and the attachment of bank accounts was quashed.

5. The petitioner was directed to pay the deficit amount within 30 days, with interest, to have the case settled under the Scheme.

6. The respondents were instructed to issue a fresh Discharge Certificate upon compliance with the payment directive.

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