Madras High Court permits GST recovery from ex-director, partnership firm and related company under Section 88(3)

Background of the dispute

Three writ petitions came up before the Madras High Court concerning recovery of substantial GST dues payable by CBIGS Advertising Private Limited, a private company which had gone into liquidation. The arrears, amounting to ₹3,66,42,318 for the tax period 2017–2018, arose because the company had filed GSTR-1 but failed to file GSTR-3B returns and did not discharge the corresponding tax liability.

To recover these dues, the State GST authorities invoked Section 79(1)(c) of the GST enactments and issued recovery notices in FORM GST DRC-13, directing attachment of bank accounts not only of CBIGS Advertising Private Limited but also of:

  • CBIGS Apparels and Jewels (a partnership firm),
  • Mrs. N. Seetha (former director of the defaulting company), and
  • Yantur Manufacturing Private Limited (a later-incorporated company involving family members of Mrs. N. Seetha).

The writ petitions challenged these recovery actions and the resulting bank account attachments.

Liquidation proceedings of CBIGS Advertising Private Limited

CBIGS Advertising Private Limited had opted for voluntary winding up under Sections 271(e) and 272 of the Companies Act 2013. An application was presented before the National Company Law Tribunal (NCLT), Chennai Bench, on 07.11.2019, read with the Companies (Winding Up) Rules, 2020.

Key steps before the NCLT included:

  1. Order dated 20.03.2024 (admission and provisional liquidator)
    The NCLT:

    • Admitted the company petition.
    • Appointed Prabhu S as the Provisional Liquidator with registration No. IBBI/IPA-001/IP-P01275/2018-2019/11948.
    • Directed issuance of public advertisement in Form WIN 6.
    • Authorised the Provisional Liquidator to take control of the company and act under the Companies Act 2013.

  2. Intimation to statutory authorities
    On the same date, NCLT recorded that the company had issued statutory notices to all relevant authorities, including:

    • Regional Director,
    • Registrar of Companies,
    • Income Tax Authorities, and
    • GST Authorities.

  3. Appointment of Liquidator
    By subsequent order dated 29.10.2025, the Provisional Liquidator was confirmed as Liquidator of the company.

Despite liquidation, the Court held that GST arrears which had already crystallised remained recoverable, and the State could proceed in accordance with the GST law, including against directors in terms of Section 88(3).

Parties and their inter-relationship

Role of CBIGS Advertising Private Limited

  • Incorporated on 12.01.2009 as a private company.
  • Incurred GST liability of ₹3,66,42,318 for 2017–2018 by filing GSTR-1 but not filing GSTR-3B.
  • Entered voluntary liquidation before the NCLT under Sections 271(e) and 272.

Director’s role – Mrs. N. Seetha

  • Initially Director of CBIGS Advertising Private Limited, resigned on 31.10.2013.
  • Reappointed as Director on 26.07.2014.
  • Continued as Director until 20.09.2019.

Therefore, she was a Director during the default period (2017–2018) when GST dues arose. This fact was pivotal for the application of Section 88(3).

Partnership firm – CBIGS Apparels and Jewels

  • Partnership constituted on 13.11.2015.
  • Partners at inception:
    • Mrs. N. Seetha and her daughter Mrs. Preethika, each holding equal share.
  • Later, pursuant to a revised partnership deed dated 24.06.2019, Mrs. N. Seetha retired, and her son‑in‑law Mr. Kandarp Pandya was inducted as partner along with Mrs. Preethika.

The firm maintained several bank accounts (including overdraft and current accounts) across different banks. These accounts were subjected to lien/attachment as part of the recovery proceedings.

Yantur Manufacturing Private Limited

  • Incorporated on 25.11.2020.
  • Initial Directors: Ms. Preethika and Mr. Kandarp Pandya (daughter and son‑in‑law of Mrs. N. Seetha).
  • Subsequently, Mrs. N. Seetha was appointed as Director on 20.02.2021 and later designated as Additional Director.
  • She resigned on 28.03.2023; Form DIR-12 recording cessation was filed on 16.11.2023.

The GST Department viewed this company as closely connected to the family that promoted the defaulting entity and sought to proceed against its bank account through recovery notices.

Stand of the GST Department

The Department, through detailed counter affidavits, advanced the following contentions: