Can GST liability be recovered from the former Director (who resigned) from the Company?


Can GST liability be recovered from the former Director (who resigned) from the Company?



The Bombay HC HELD that –

1. Recovery sought to be made under the impugned order dated 27th November 2020 is for the period 1st April 2018 to 31st March 2019. However, from March 2018, the former Director had not taken any active part in the day-to-day affairs of the company. Thus, for the period in question, the former Director never acted as a director of the company


2. All such factual issues were required to be verified before the impugned attachment orders were passed by the designated officer, by issuing a show cause notice to the petitioner but such exercise was undertaken.


3. The former Director was neither issued a show cause notice nor was he heard, before such orders were passed – Further, the principal liability is not on the “petitioner” who is not a registered person within the meaning of Section 79(1) of the MGST Act, 2017.


4. Further Section 89 of the Act clearly provides that before taking any action of recovery against the directors of the company, a subjective satisfaction is required to be achieved by the concerned officer in regard to whether a person concerned against whom recovery is sought to be made was a director of a Private Limited Company for the concerned period.


5. It is only after such satisfaction to the effect that such person was the director of the company, the liability could be fastened against such director – as to on what basis the respondents have proceeded to make the attachment of the petitioner’s property, is not known. No reasons are attributed whatsoever except for the impugned order


The impugned order is in breach of the rights guaranteed to the petitioner under Art. 14, read with Art. 300A, of the Constitution