M. Madhusudan Reddy vs. The Union Of INDIA

Facts

The petitioner, M. Madhusudan Reddy, filed a writ petition challenging an attachment order (Form GST DRC-13) issued by the Assistant Commissioner (ST) under Section 79(1)(c) of the APGST/CST/VAT/GST Acts. This order led to the freezing of his savings bank account. The attachment was in connection with recovery proceedings against M/s. Maks Industries Limited, where the petitioner had previously served as a managing director. The petitioner contended that he resigned from the directorship of M/s. Maks Industries Limited on March 22, 2017, and his resignation was accepted by the Board of Directors on March 19, 2018, and ratified by the Registrar of Companies. He argued that recovery proceedings should be initiated against the company and its current directors, not him, as he had been detached from the company since March 19, 2018. The petitioner also stated that he made a representation to the Assistant Commissioner on July 6, 2023, highlighting these facts, but no action was taken, and his bank account remained frozen.

Held

The Court held that no fruitful purpose would be served by keeping the writ petition pending. It directed the respondent No. 2 (Assistant Commissioner) to immediately process the representation made by the petitioner. After due scrutiny of the representation, the respondent was to take appropriate steps in accordance with the law, particularly considering the petitioner's resignation from the directorship of M/s. Maks Industries Limited. The Court ordered that this exercise be concluded within two weeks from the date of receipt of the order. Concurrently, the bank account of the petitioner was to be immediately ordered to be defreezed. The Court disposed of the writ petition with these directions.

Key Issues

1. Whether the attachment order issued under Section 79(1)(c) of the APGST/CST/VAT/GST Acts against the petitioner's bank account is valid, considering his resignation from the directorship of the company against which recovery proceedings are initiated? Petitioner's arguments: The petitioner argued that the attachment order is invalid because he is no longer associated with M/s. Maks Industries Limited, having resigned as managing director on March 22, 2017, with his resignation accepted on March 19, 2018, and ratified by the Registrar of Companies. He contended that recovery proceedings should be directed against the company and its present directors. He also argued that the respondent authorities failed to act on his representation dated July 6, 2023, which provided details of his resignation and the company's current operational status. Revenue's arguments: The revenue's counsel submitted that, based on available instructions, the company was still operating with the petitioner's bank account, and the order was passed against the PAN number available with the department. They acknowledged that subsequent developments might not have been brought to the authorities' notice.