Allahabad High Court
Nand Auto Hire Purchase Pvt. Ltd. vs Regional Transport Officer/Licensing ... on 6 April, 2004
Equivalent citations: AIR2004ALL404, AIR 2004 ALLAHABAD 404, 2004 ALL. L. J. 3652, 2004 ALL CJ 1046, 2004 (5) ALL WC 3993
Bench: M. Katju, R.S. Tripathi
ORDER
1. Heard learned counsel for the parties.
2. The petitioner is challenging the demand of road tax in respect of truck No. U. P. 78-N/8638 by order dated 3-6-2003 (vide Annexure 2 to the writ petition).
3. There was an earlier litigation being writ No. 5806/2002 which had been decided by a Division Bench of this Court, on 8-5-2003. The facts are given in the judgment, copy of which is Annexure I to this petition. In that decision a direction was given that M/s. Nav Instalments will be treated as the financer of the truck.
4. In para 4 of the petition it is stated that the petitioner has handed over the truck in question to M/s. Nav Instalments, and has now nothing to do with the truck, and is not liable to pay the taxes in respect of the truck.
5. Learned counsel for the petitioner has submitted that the road tax should be realized from M/s. Nav Instalments, and not the petitioner, which is a different legal entity.
6. The petitioner M/s. Nand Auto Hire Purchase Private Ltd. is a private limited company whose Managing Director is Sri Vishnu Bhagwan Agrawal. The same Sri Vishnu Bhagwan Agrawal is also the managing partner of a firm called M/s. Nav Instalments.
7. Learned counsel for the petitioner urged that the petitioner M/s. Nand Auto Hire Purchase Pvt. Ltd. is a different legal entity from the firm M/s. Nav Instalments. He has relied on the Division Bench decision of this Court in Writ Petition No. 5806 of 2002, M/s. Nand Auto Hire Purchase Pvt. Ltd. Badaun v. Regional Transport Officer. Kanpur decided on 8-5-2003, reported in 2003 (52) All LR 52) copy of which is Annexure 1 to the writ petition.
8. In our opinion the aforesaid decision is distinguishable because that case was not in connection with a tax matter. In the present petition we are concerned with the demand of road tax. It is admitted by the learned counsel for the petitioner that the truck in question is in the custody of M/s. Nav Instalments. In our opinion the doctrine of piercing the veil of corporate personality should be applied in this case as held by a Division Bench decision of this Court in Writ Petition No. 1039 of 2003, Sri Ram Gupta v. The Assistant Collector decided on 5-9-2003.
9. The legal principle that a company is a distinct legal entity separate from its directors and shareholders (vide Solomon v. Soloman and Co. Ltd., 1897 AC 22 HL) was evolved to encourage business and Industry since many businessmen feared to start a new business or venture because if the said business/venture failed (due to competition, recession etc.),even their personal assets could be attached and sold for the recovery in respect of the dues against the company. Hence this principle was created so as to encourage businessmen to take risks and set up industries and business, and it has played a historical role in helping industrialization. However, this principle was not made to help tax evaders. As observed by the Supreme Court In Delhi Development Authority v. Skipper Construction Co. (P.) Ltd., AIR 1996 SC 2005 (vide para 28);-
"The concept of corporate entity was evolved to encourage and promote trade and commerce, but not to commit illegalities or to defraud people, Where, therefore, the corporate character is employed for the purpose of committing illegality or for defrauding others, the Court would ignore the corporate character and will look at the reality behind the corporate veil,"
10. The principle of Sifting the veil of corporate personality has been discussed in Subhra Mukherjee v. Bharat Cooking Coal Ltd., 2003 (3) SCC 312; (AIR 2000 SC 1203), Calcutta Chromotype Ltd. v. Collector of Central Excise, AIR 1998 SC, New Horizons Ltd. v. Union of India, '1995 (1) SCC 478 ; (1995 AIR SCW 275), CIT v. Meenakshi Mills, AIR 1967 SC 819, Telco v. State of Bihar, AIR 1965 SC 40, Juggilal Kamlapat v. CIT, AIR 1969 SC 932.
11. in State of U. P. v. Renusagar Power Co., 1988 (4) SCC 59 : (AIR 1988 SC 1737) the Supreme Court observed at Page 1757; of AIR:-
"It is high time to reiterate that in the expanding horizon of modern jurisprudence, lifting of corporate veil is permissible. Its frontiers are unlimited. It must however, depend primarily on the realities of the situation. The horizon of the doctrine of lifting of corporate veil is expanding."
12. In Tata Engineering's case supra the Supreme Court observed that the doctrine of the lifting of the veil thus marks a change in the attitude that the law had originally adopted towards the concept of separate entity or personality of the Corporation. As a result of the impact of the complexity of economic factors, Judicial decisions have sometimes recognized exceptions to the rule about the juristic personality of the corporation. It may be that in course of time these exceptions may grow in number and to meet the requirements of different economic problems the theory about the personality of the corporation may be confined more and more.
13. Thus the Supreme Court itself has stated that with the passage of time the exceptions to the rule of corporate personality can grow in number to meet the new requirements, and these exceptions have an expanding horizon.
14. The aforesaid decisions have been followed by this Court in a Division Bench decision in Civil Misc. Writ Petition No. 37833 of 2002, Sanjay Kumar Gupta v. District Magistrate, Fatehpur decided on 24-9-2002(reported in 2002 (2) All CJ 1520).
15. The doctrine of piercing or lifting of the veil of corporate personality marks a change in the attitude that the law had originally adopted towards the concept of, the separate entity or personality of the Corporation as held by a Division Bench of this Court In Naresh Chandra Gupta v. The District Magistrate Etah in Writ Petition No. 382 of 2003 decided on 13-3-2003. A large number of decisions of the Supreme Court on the point have been elaborately discussed In the aforesaid decision arid hence we are not repeating the same. We fully agree with the reasoning in that decision.
In the present case we find that Vishnu Bhagwan Agarwal is really controlling both the, petitioner as well as in M/s. Nav Instalments.
16. Moreover, writ is a discretionary remedy and we are not inclined to exercise our discretion in this case under Article 226. Petition is dismissed.