N.Ramkhuar Narasimhan Vs Assistant Commissioner (ST)
Date: January 20, 2026
Subject Matter
Directors Not Automatically Liable for Company's GST Dues if Liquidator Appointed
Summary
The Madras High Court disposed of the writ petition, vacating the attachment of the petitioners' (directors') bank accounts. This decision allows the directors to make a representation to the authorities, arguing they are not liable for the company's GST dues incurred during liquidation, as a liquidator had been appointed, aligning with the conditional liability under Section 88(3) of GST Enactments.
Summary of Facts and Dispute:
- Impugned Action: Recovery proceedings were initiated by attaching the personal bank accounts of the petitioners, who were directors of M/s. Infinitas Energy Solutions Pvt. Ltd., a company under liquidation. This action was taken for tax liability incurred by the company between April 2019 and March 2021, despite a liquidator being appointed on February 6, 2019.
- Petitioner's Argument: The petitioners contended that they were no longer associated with the company after the appointment of the Interim Resolution Professional on September 8, 2017, and subsequently the Liquidator on February 6, 2019. They argued that the company was under the charge of the Liquidator and their personal bank accounts could not be attached for the company's liabilities.
- Core Question of Law: Whether individual directors of a company under liquidation can be held jointly and severally liable for the company's unrecovered tax, interest, or penalty, or if Section 88(3) of the GST Enactments provides an avenue for them to prove non-recovery is not attributable to their gross neglect, misfeasance, or breach of duty.
Key Legal Issues & Findings:
Interpretation of Director's Liability under Section 88 of GST Enactments
The Court considered the provisions of Section 88 of the GST Enactments regarding the liability of a company in liquidation. No specific precedents were cited by the Court.
- Liquidator's Duty: Section 88(1) mandates a liquidator to inform the Commissioner of their appointment within thirty days.
- Commissioner's Inquiry: Section 88(2) requires the Commissioner to notify the liquidator of the amount sufficient to cover any existing or future tax, interest, or penalty payable by the company.
- Directors' Conditional Liability: Section 88(3) provides that directors of a private company that is wound up, and whose tax, interest, or penalty cannot be recovered, shall be jointly and severally liable for such payment, unless they prove to the Commissioner's satisfaction that such non-recovery is not attributable to their gross neglect, misfeasance, or breach of duty.
Ruling:
- Outcome: The attachment of the petitioners' bank accounts is vacated.
- Directions: The petitioners are granted liberty to file a suitable application before respondents 1 and 2 within 15 days to extricate themselves from liability. The respondents must then pass appropriate orders on merits, expeditiously, preferably within 15 days, after hearing the petitioners.
- Liberty: The Revenue is implicitly granted liberty to proceed against the directors based on the outcome of their application and the Commissioner's assessment under Section 88(3).
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
The petitioner appears to be the Directors of the Company under liquidation, viz., M/s. Infinitas Energy Solutions Pvt. Ltd. It appears that proceedings under IBC, 2016 came to be initiated against the said Company, and therefore, the fourth respondent herein was appointed as an Interim Resolution Professional (IRP) on 08.09.2017.
2. Subsequently, by an order dated 06.02.2019, in C.P.No.558/1B/CB/2017, the aforesaid Company was ordered to be liquidated and the fourth respondent herein was appointed as a Liquidator of the said Company.
3. It further appears that the business of the said Company was carried on thereafter even during the period of April, 2019 and March, 2021, in respect of which certain tax liability is said to have been incurred by the said Company under liquidation.
4. In respect of those tax liability incurred by the said Company under liquidation, impugned recovery proceedings has been initiated by attaching the Bank account of the petitioners maintained with the third respondent-Bank on the ground that the petitioner and the Directors as per the records maintained by the Corporate Affairs Department.
5. According to the petitioner, they are no longer associated with the said Company under liquidation, as, the said Company is in charge of the fourth respondent, who was initially appointed as Interim Resolution Professional by order dated 08.09.2017 and later on, appointed as a Liquidator of the said Company by order dated 06.02.2019.
6. The facts on records also reveal that tax amount has also been recovered from the credit ledger maintained by the said Company and that the said Company is in arrears of interest and penalty as confirmed by orders passed by the Assessing Officer. There is no justification on the part of the respondent-Income Tax Department to attach the respective petitioner’s Bank account, who are the individual Directors of the said Company under liquidation for the mandate of Section 88(3) of the respective GST Enactments.
7. For the sake of clarity, Section 88 of the respective GST enactment is reproduced below:
“88. Liability in case of company in liquidation
(1) When any company is being wound up whether under the orders of a court or Tribunal or otherwise, every person appointed as receiver of any assets of a company (hereafter in this section referred to as the “liquidator”), shall, within thirty days after his appointment, give intimation of his appointment to the Commissioner.
(2) The Commissioner shall, after making such inquiry or calling for such information as her may deem fit, notify the liquidator within three months from the date on which he receives intimation of the appointment of the liquidator, the amount which in the opinion of the Commissioner would be sufficient to provide for any tax, interest or penalty which is then, or is likely thereafter to become, payable by the company.
(3) When any private company is wound up and any tax, interest or penalty determined under this Act on the company for any period, whether before or in the course of or after its liquidation, cannot be recovered, then every person who was a director of such company at any time during the period for which the tax Writ Appeal due shall, jointly and severally, be liable for the payment of such tax, interest or penalty, unless he proves to the satisfaction of the Commissioner that such non-recovery cannot be attributed to any gross neglect, misfeasance or breach of duty on his part in relation to the affairs of the company.”
8. Therefore it is open for the petitioner to move suitable application before the respondents Nos.1 and 2 to extricate themselves from the liability in the impugned order. The petitioners are therefore given liberty to file suitable application within 15 days from the date of receipt of a copy of this order. The respondent shall thereafter pass appropriate orders on merits as expeditiously as possible preferably within a period of 15 days.
9. Needless to state the petitioner shall be heard before passing final order.
10. The attachment of the petitioner’s bank account(s) shall also stand vacated subject to the order to be passed.
11. This Writ Petition is disposed of with the above observations. No costs. Connected W.M.Ps are closed.