CAN THE GST DEPARTMENT FREEZE A DIRECTOR'S PERSONAL BANK ACCOUNT FOR A COMPANY'S TAX DUES?

CAN THE GST DEPARTMENT FREEZE A

 DIRECTOR'S PERSONAL BANK ACCOUNT

 FOR A COMPANY'S TAX DUES?

KHALID BUHARI VS. ASSISTANT COMMISSIONER OF CGST & C.EX (FEB 2026) DECIDED BY CHENNAI HIGH COURT

FACTS OF THE CASE

ISSUE:	Director’s personal bank account was frozen to recover company’s GST dues.
COURT’S DECISION:	Recovery proceedings against the director were quashed
PRINCIPLE:	Directors are not automatically liable for company tax dues; liability under Section 89 arises only when: •        The company’s tax dues are irrecoverable. •        The GST department conducts a proper inquiry and follows due procedure.
IMPACT:	Reinforces the doctrine of separate legal entity — a company’s debts are its own, not its directors’, unless statutory exceptions apply.

 

DIRECTORS ARE NOT LIABLE

The Madras High Court has clarified that under Section 89 of the CGST Act, directors are shielded unless specific statutory conditions are met — personal liability arises only if the company’s tax dues are irrecoverable and due process is followed.

SECTION 89 OF THE CGST ACT – EXPLAINED

PURPOSE:	Provides for recovery of tax dues from directors of private companies in certain cases.
CONDITIONS FOR LIABILITY:	·       The company has defaulted on GST dues. ·       Recovery from the company is not possible (e.g., company is insolvent). ·       The director is shown to be responsible for the default.
COURT’S INTERPRETATION:	•        This is a last resort mechanism, not a blanket power for authorities to bypass the company and target directors directly.

 

WHAT THIS MEANS FOR DIRECTORS OF THE INDIAN COMPANIES

If you are a director of a private company:

•        Your personal assets are protected unless the company’s dues are irrecoverable.

•        Authorities must justify any move to attach your personal bank account.

•        Legal recourse is available — directors can challenge recovery notices in court, as seen in this case.

YOUR COMPLIANCE PARTNER – R V SECKAR , FCS, LLB 79047 19295

EX COMPANY SECRETARY OF KALYANI STEELS LIMITED WAS FINED ₹95.55 LAKH (₹ 1 Crore)FOR RELATED PARTY VIOLATIONS BY SEBI

EX COMPANY SECRETARY OF KALYANI

 STEELS LIMITED WAS FINED ₹95.55 LAKH

 (₹ 1 Crore)FOR RELATED PARTY

 VIOLATIONS BY SEBI

RPT VIOLATIONS

Kalyani Steels Limited has settled a regulatory case with Securities and Exchange Board of India involving related-party transaction (RPT) violations by paying ₹4.12 crore under SEBI’s settlement mechanism.

WHAT TRIGGERED SEBI’S INVESTIGATION

A March 2023 examination report by the National Stock Exchange (NSE) flagged investments by Kalyani group entities into promoter-linked companies with weak financials, nil operations, and negative net worth.

Some investments were impaired shortly after being made, raising concerns about fund utilization and governance.

WHAT WAS THE CORE ISSUE?

SEBI examined whether:

·       Proper Audit Committee approvals were obtained

·       Required shareholder approvals were taken where applicable

·       Adequate disclosures were made under Listing Regulations

·       RPT norms were complied with consistently over multiple financial years

·       Without admitting or denying the findings, the entities opted for settlement under SEBI’s settlement mechanism — effectively closing the regulatory proceedings.

SEBI’S KEY FINDINGS

SEBI observed that:

·       Several related-party transactions were executed without prior approval of the audit committee or shareholders.

·       Required quarterly disclosures of material RPTs were not properly made to stock exchanges.

·       Summaries of RPTs were not placed before the audit committee as required under listing regulations

THE SETTLEMENT SNAPSHOT

Total Settlement Amount:	₹4.12 Crore
Kalyani Steels:	₹2.8 Crore
BF Utilities:	₹36.28 Lakh
Former CS & Compliance Officer:	₹95.55 Lakh

The case covered an extensive period — FY2010 to FY2022 — and revolved around alleged lapses in approvals and disclosures concerning Related Party Transactions (RPTs).

KEY TAKEAWAY

·       This SEBI’s order highlights that liability can extend beyond the company and promoters to compliance officers if they fail to ensure regulatory compliance and disclosure obligations

·       RPTs must obtain prior Audit Committee approval, and in many cases shareholder approval.

·       Companies must ensure timely stock exchange disclosures and maintain proper internal oversight mechanisms.

·       For Company Secretaries and compliance professionals, this isn’t just a news item. It’s a reminder that RPT compliance is a boardroom priority — and a personal responsibilit

YOUR COMPLIANCE PARTNER – R V SECKAR , FCS, LLB 79047 19295

WHETHER ARBITRATION PROCEEDINGS REMAIN VALID EVEN IF A SECTION 21 NOTICE IS NOT SERVED?

 WHETHER ARBITRATION PROCEEDINGS

 REMAIN VALID EVEN IF A SECTION 21

 NOTICE IS NOT SERVED?

SUPREME COURT  IN "M/S BHAGHEERATHA ENGINEERING LTD. VERSUS STATE OF KERALA"

The Supreme Court in M/s Bhagheeratha Engineering Ltd. v. State of Kerala (2026) clarified that arbitration proceedings remain valid even if a Section 21 notice is not served, provided the dispute is otherwise arbitrable.

CASE CONTEXT: BHAGHEERATHA ENGINEERING LTD. V. STATE OF KERALA

BACKGROUND:	Bhagheeratha Engineering Ltd. was awarded road maintenance contracts under the Kerala State Transport Project. Disputes arose and were referred to arbitration.
KERALA HIGH COURT’S VIEW:	It set aside the arbitral award, holding that claims beyond those raised in the Section 21 notice could not be decided.
SUPREME COURT’S RULING (2026):	Reversed the High Court. Affirmed that Section 21 notice is not mandatory for raising claims or counterclaims. Emphasized arbitration’s flexibility and party autonomy

 

KEY POINTS ON SECTION 21

•        Section 21 states that arbitration proceedings commence when the respondent receives a request for arbitration, unless otherwise agreed.

•        Traditionally, courts debated whether this notice was a mandatory condition precedent.

•        The Supreme Court in Bhagheeratha Engineering Ltd. v. State of Kerala (2026) held:

•        Notice under Section 21 is procedural, not substantive.

•        Its absence does not invalidate arbitration if the parties have otherwise submitted disputes to the tribunal.

•        The arbitral tribunal has wide jurisdiction to decide disputes beyond those specifically referred in the Section 21 notice.

 

EVOLUTION OF SECTION 21 INTERPRETATION

1.   STATE OF GOA V. PRAVEEN ENTERPRISES (2011)

The Supreme Court in State of Goa v. Praveen Enterprises (2011) held that Section 21 of the Arbitration and Conciliation Act is not a rigid prerequisite—arbitration can proceed even if claims or counterclaims were not explicitly mentioned in the initial notice.

This case laid the foundation for later rulings like Bhagheeratha Engineering Ltd. v. State of Kerala (2026), which further clarified that absence of a Section 21 notice is not fatal to arbitration.

CONCLUDING REMARKS

The Supreme Court has settled the issue: Section 21 notice is not a mandatory prerequisite, and its absence is not fatal to arbitrate

Aon proceedings. However, as a matter of best practice, parties should still issue such notice to avoid unnecessary procedural disputes.

YOUR COMPLIANCE PARTNER – R V SECKAR , FCS, LLB 79047 19295

DOES SPIC TOILET CLEANER BOTTLE RESEMBLES HARPIC TOILET CLEANER BOTTLE- CALCUTTA HIGH COURT’S DIVISION BENCH SET ASIDE THE INTERIM INJUNCTION TO USE SPIC CLEANER BOTTLE

 DOES SPIC TOILET CLEANER BOTTLE

 RESEMBLES HARPIC TOILET CLEANER

 BOTTLE-  CALCUTTA HIGH COURT’S

 DIVISION BENCH SET ASIDE THE

 INTERIM INJUNCTION TO USE SPIC 

CLEANER BOTTLE

RECKITT BENCKISER (INDIA) PVT. LTD VS GODREJ CONSUMER PRODUCTS LTD.

THE CALCUTTA HIGH COURT

On February 27, 2026, the Calcutta High Court’s Division Bench set aside an ad-interim injunction that had restrained Godrej Consumer Products Ltd. from selling its “Spic” toilet cleaner.

BACKGROUND OF THE CASE:

Reckitt Benckiser (India) Pvt. Ltd., the maker of Harpic, filed a suit alleging that Godrej’s Spic toilet cleaner infringed its trademark rights by using a similar bottle shape.

RECKITT ALLEGED THAT THE GODREJ’S ADVERTISEMENT AMOUNTED TO:

·       Disparagement of its product

·       Misleading comparative advertising

·       Trademark infringement / dilution

·       Unfair trade practice

INITIAL INJUNCTION:

 A single judge had granted an ad-interim injunction on February 25, 2026, preventing Godrej from selling Spic in the contested packaging.

DIVISION BENCH RULING:

The Bench lifted the restraint, holding that the injunction was improperly granted at the interim stage. They questioned the urgency and rejected the idea that exclusive trademark rights could be claimed over the bottle shape alone, especially since Reckitt’s design rights had expired.

EARLIER CASE LAWS ON THE SUBJECT

·       Pepsi Co. Inc. vs Hindustan Coca Cola Ltd. (comparative advertising principles)

·       Colgate Palmolive (India) Ltd. vs Hindustan Unilever Ltd. (toothpaste comparative ads)

OUTCOME:

Godrej is now free to market and sell its Spic toilet cleaner in the disputed packaging.

This ruling highlights the tension between design rights and trademark protection in product packaging disputes.

YOUR COMPLIANCE PARTNER – R V SECKAR , FCS, LLB, 79047 19295

 

SMALLER TRADE UNIONS LOSES ITS BARGAINING POWER UNDER THE INDUSTRIAL RELATIONS CODE- NEW LABOUR CODE

 SMALLER TRADE UNIONS LOSES ITS BARGAINING POWER UNDER THE INDUSTRIAL RELATIONS CODE- NEW LABOUR CODE

KEY CHANGES IN BARGAINING POWER

RECOGNITION OF TRADE UNIONS

•        The Industrial Relations Code introduces the concept of a “negotiating union” or “negotiating council.”

•        A union with 51% membership in an establishment is recognized as the sole negotiating union.

•        If no single union has majority membership, a negotiating council is formed with representatives from unions having at least 20% membership.

•        This centralizes bargaining but may weaken smaller unions’ influence.

MANDATORY 14 DAYS NOTICE FOR STRIKES AND LOCKOUTS

•        Stricter conditions for strikes: workers in all sectors (not just public utility services) must give 14 days’ notice before striking.

•        This reduces the spontaneity of collective action and strengthens employer control.

MANDATORY STANDING ORDERS

•        Mandatory standing orders (rules of conduct for workers) now apply only to establishments with 300 or more workers (earlier 100).

•        This gives employers more flexibility in smaller units, limiting union leverage in such workplaces. 

WEAKENING COLLECTIVE BARGAINING SCOPE

•        While the codes aim to streamline negotiations, critics argue they restrict collective bargaining rights compared to international labour standards.

•        Issues like minimum wages, gender equity, and social security remain inadequately addressed, weakening unions’ ability to push for broader worker protections.

MORE ADVANTAGEOUS TO EMPLOYERS

•        For Large Unions: Stronger bargaining position if they can secure majority membership.

•        For Smaller Unions: Reduced influence, as fragmented representation is less effective under the new rules.

•        For Employers: Greater flexibility and predictability in industrial relations, but potentially at the cost of worker voice.

•        For Workers: More formalized negotiation channels, but limited ability to mobilize quickly or challenge management decisions.

COMPARISON OF OLD LABOUR LAWS WITH NEW LABOUR CODES

SUBJECT	OLD FRAMEWORK	MEW LABOUR CODE
Union Recognition	Multiple unions could bargain	Single majority union or council
Strike Notice	Required mainly in public utilities	Mandatory 14-day notice in all sectors
Standing Orders Threshold	100 workers	300 workers
Bargaining Scope	Broader, though fragmented	Streamlined but narrower

 In short, the new labour codes consolidate bargaining power in majority unions but simultaneously impose restrictions that dilute overall union strength, especially for smaller groups.

YOUR COMPLIANCE PARTNER – R V SECKAR , FCS, LLB, 79047 19295

CAN BALANCE SHEET ENTRIES OF A CLAIM AMOUNT TO ACKNOWLEDGMENT OF LIABILITY WHICH WILL EXTEND LIMITATION OF A CLAIM WHICH IS BEYOND 3 YEARS?

 CAN BALANCE SHEET ENTRIES OF A

 CLAIM AMOUNT TO ACKNOWLEDGMENT

 OF LIABILITY WHICH WILL EXTEND

 LIMITATION OF A CLAIM WHICH IS

 BEYOND 3 YEARS?

THE DELHI HIGH COURT IN SNG DEVELOPERS LIMITED V. LORD VARDHMAN BUILDTECH PRIVATE LIMITED

CORE LEGAL ISSUE

Whether disclosure of a claim or outstanding amount in the balance sheet of a company constitutes an acknowledgment of liability under Section 18 of the Limitation Act, 1963, thereby extending the limitation period beyond three years.

LEGAL FRAMEWORK

Section 18, Limitation Act, 1963
An acknowledgment of liability:

• Must be in writing
• Signed by the party against whom the right is claimed
• Made before expiry of the limitation period
• Must indicate a conscious admission of subsisting liability

KEY JUDICIAL QUESTION

Does a balance sheet entry:?

• Merely reflect statutory compliance?
• Or amount to a voluntary acknowledgment extending limitation?

THE FACTS

• ₹7.5 Crores paid under an Agreement to Sell.

• Deal did not go through.

• Email in 2013 offering refund.

• Arbitration invoked later.

• Refund claim challenged as time barred.

PETITIONER ARGUED:

⛔ Claim is beyond 3 years.

⛔ Balance sheets cannot extend limitation.

⛔ Agreement was unregistered.

DELHI HIGH COURT’S APPROACH

In SNG Developers Limited v. Lord Vardhman Buildtech Private Limited, the Delhi High Court examined:

✔ WHETHER:

·       The amount was shown as a clear, admitted payable

·       There were qualifications, notes, disputes, or contingent tagging

·       The entry reflected an unqualified admission of debt

✘ NOT AUTOMATICALLY:

·       Every balance sheet entry extends limitation

·       Mere compliance under the Companies Act equals acknowledgment

WHAT THE DELHI HIGH COURT HELD?

 Balance sheet entries CAN amount to acknowledgment of liability.

·       If a company consistently reflects an amount as “Advance against sale”

·       in its financial statements, that is a written acknowledgment.

·       And under Section 18, that gives a fresh period of limitation.

EARLIER PRECEDENT

The Delhi High Court relied on the Supreme Court view in Asset Reconstruction Company (India) Ltd. v. Bishal Jaiswal.

WHEN LIMITATION EXTENDS

·       Debt shown as “Payable”

·       No dispute mentioned

·       No conditional language

WHEN LIMITATION DOES NOT EXTEND

·       Shown as “Contingent Liability”

·       Marked “Disputed”

·       Qualified in Notes to Accounts

·       Entry after limitation expired

IMPORTANT:

Mere statutory compulsion to prepare balance sheets does NOT dilute acknowledgment.

If it is shown as a liability, it counts.

ACKNOWLEDGEMENT DURING CROSS EXAMINATION

But during cross examination, the witness admitted:

✔ He signed the financial statements.

✔ They were uploaded with the ROC.

TAKEAWAYS FOR COMPANIES

·       What you show in your balance sheet matters.

·       Accounting entries can legally extend limitation.

·       Evasive denials in arbitration can backfire.

·       Section 34 is not an appeal. Courts will not reappreciate evidence.

THIS RULING REINFORCES THAT:

·       Balance sheet entries can extend limitation only if they amount to conscious admission

·       Courts apply a substance over form test

·       The burden lies on the party invoking Section 18

YOUR COMPLIANCE PARTNER – R V SECKAR , FCS, LLB, 79047 19295