Personal Liability of Directors

Dear All.

In the recent time, India has witnessed various corporate scandals, Shardha, Purti; Satyam etc. are to name a few. Somehow all the cases has pointed wrongdoing on the part of directors and created much attention and debate on the role of Company's Directors. Even, in The Company's Bill 2012 (2013), there has been a lots of focus on the role and selection of independent Directors.

Directors are expected to act honestly and with due diligence. As per proposal, Directors are liable for misdoing in the conduct of the business even though no specific act of dishonesty is proved personally against him. Director can be held personally liable to any party who has an interest in the affairs of the Company like shareholders, government, regulators, creditors, liquidators, etc. these liability are well established and with increasing statutory duties and in increasing litigious environment, the number of actions against Director are expected to increase.

As per section 2(13) of the Companies Act 1956, Directors is any person who is in-charge of an activity, department, or organisation or a member of the board of people that manages or oversees the affairs of a business whether or not occupying the position of Directors by whatever name called. This definition of Director is inclusive definition and includes every one sitting at the top of any functional area.

Usually directors are appointed by the Company through Articles of Association or in general meeting and control the business of the Company.

He has to exercise strategic oversight over business operations while directly measuring and rewarding management's performance. Simultaneously he has to ensure compliance with the legal framework, integrity of financial accounting and reporting systems and credibility in the eyes of the stakeholder through proper and timely disclosures.

The Companies Act does not define the actual position of Directors liabilities however the Director are expected to act as an agent or trustee owner/shareholders.

In agency term, the Director acts on behalf of the Company. So the Company is liable for contracts in which Director enter into. He stands in a fiduciary position towards the company in respect of his powers and capital under his control. The directors have been held trustees of the assets of the Company and in many cases the courts have directed them to reimburse the loss to the Company, where it was found that directors have applied the Company's money for personal purpose or taken undue advantage.

The ministry of Company Affairs has issued one circular no. 08/2011 relating to "Prosecution of Director" on 25th March 2011. Independent Director, Director appoint under section 408 by central government, nominee director on PSU appoint by government shall be held liable for any act of omission or commission by the company or by any officers of the company which constitute a breach or violation of any provision of the Companies Act, 1956, and which occurred with his knowledge attributable through Board process and with his consent or connivance or where he has acted diligently in the Board process. Also, this circular stated that the director shall be liable, if they are in default to comply the specific responsibility which assign under section 209(5), 209(6), 211 and 212 of the Companies Act 1956. As per section 5 of the Companies Act 1956, if the Director who is in default to comply with specific responsibility, shall be treated as "officer in default". In given case, all directors were aware about the fact and also they approved the annual statement without considering their reliability. They unable to comply with provision of the Companies act 1956. Therefore they found to be guilty as a "officer in default"

The Directors enjoys the vast power of management and acts as a decision making body. The Director can be held personally liable in following cases-

1)    If he contracts in his own name

2)    If he use the companies name incorrectly

3)    If he exceeds his authority

4)    If he sign the contract in such way that it is not clear whether it is company or agent who is signing.

He must display care in performance of work assigned to him.

Director's are required to use fair and reasonable diligence while discharging their duties and shall act honestly, with such care as may be reasonably expected from person with equivalent knowledge and experience. It is duty of director to follow laws applicable to the Company. If not, then he is liable for breach of fiduciary duties. Also, the Directors can be made liable for acts of misconduct or willful misuse of powers. If they fail to exercise reasonable care, skill and diligence, they shall be liable for any loss or damage resulting there from.

The similar type of responsibility lies on Independent Directors, they cannot take stand that they have relied on the representations made to them during meeting. It is responsibility of Independent Director to ensure due diligence on the matter on hand and the decision taken is not prejudices to the company or its stakeholder.

The liabilities of Director depend on his role which he plays in the Company. Directors found to be guilty cannot take shelter under the stand that verification made by professional experts.

In nutshell, Directors have both collectively and individually, a continuing duty to acquire and maintain a sufficient knowledge and understanding of company business to enable them properly to discharge of their duties as director. The duty, care, diligence, verification of critical points cannot be abdicated by directors.

Service tax not payable on Electricity charges

The applicant Econ Hinjewadi Infrastructure (P.) Ltd is the owner of premises which have several units and were given on rent to various persons. The applicant has been  paying service tax on the rent received from their tenants. The applicant is also involved in the activity of maintaining and repairing of the buildings and is paying service-tax on this activity also.

Apart from these, the applicant is under an obligation to supply electricity to its tenants and (for that) a common electricity connection has been taken by it  from MSEB and separate meters installed in each premise and on the basis of reading in the meter the applicant is charging electricity charges from the tenants. When electricity is not being supplied by MSEB, the same is supplied through DG set to the tenants and on that also they are charging electricity charges from the tenants.

The Revenue is of the view that electricity charges recovered from their tenants is to be part of theservice of 'Renting of Immovable Property Service' and, therefore, a notice was issued and demand for service tax was confirmed against the applicant along with interest, apart from penalty of equivalent amount under section 78 of the Finance Act, 1994.

The contention of the applicant that electricity is 'goods' and the same shall not form part of taxableservice is clarified by the Notification no. 12/2003. Therefore, on this basis the Commissioner of Central Excise, Pune III opined that the applicant had made out a prima facie case for 100% waiver of the service tax levied and confirmed and penalty imposed thereon.

Econ Hinjewadi Infrastructure (P.) Ltd. v. Commissioner of Central Excise, Pune-III

Currently only stay order is issued. However,  there are multiple properties where charging of DG supplied electricity is done separately and service- tax recovered on them.

Restoration of Service Specific Accounting Codes for Payment of Tax and Service Tax Registration

Dear Friends,

After the introduction of Negative List, department has prescribed single accounting code for payment of service tax vide Circular 161/12/2012 dated 6^th July, 2012. In Service Tax Registration also only one description of service is available. However after examination of suggestions from field formation, department vide Circular No. 165/16/2012-ST dated 20^th November, 2012 has issued a list of 120 descriptions of services for the purpose of registration and accounting codes corresponding to each description of service for payment of tax is provided (for list please refer Annexure A). It has been also clarified that descriptions of taxable services given in the annexure are solely for the purpose of statistical analysis.

Registrations obtained under the positive list approach continue to be valid. Where registrations have been obtained under the description 'All Taxable Services', the taxpayer should file amendment application online in ACES and opt for relevant description/s from the list of 120 descriptions of services given in the Annexure- A.

Hope the information will assist you in your Professional endeavours.

No Service Tax Return Filing Till Modification in ST 3 Form

Ø     FILING OF ST-3 ONLY FOR THE PERIOD 1^st APRIL ,2012 TO 30^th JUNE ,2012

(NOTIFICATION NO.47/2012-ST, DATED 28-09-2012)

·           In terms of sub-rules (1) and (2) of Rule 7 of the Service Tax Rules, 1994, the half yearly return for the period 1^st April to 30^thSeptember 2012, is to be filed by 25^thOctober, 2012. In the current financial year, an assessee would have had to give data with respect to specific services and the corresponding legal provisions for the period 1-4-2012 to 30-6-2012. (and not upto 30-09-2012)

·           It has been decided that assessees have to provide data only for the period 1-4-2012 to  30-6-2012 in the first half yearly return which is due on 25-10-2012.

·           The data for the period from 1-7-2012 to 30-9-2012 should not be filed. Modifications will be made in the ACES so that any data filed for this period is rejected. Till such time as the modifications are made, ACES will not be accepting returns.

·           Data for the period 1-7-2012 to 30-9-2012 will have to be furnished in a return in a revised format. The revised format of the return and the last date for filing it will be indicated separately.

·           Please find copy of Notification No. 47/2012 dated 28-9-2012 issued as under.

NOTIFICATION NO.47/2012 - Service Tax, Dated: September 28, 2012

In exercise of the powers conferred by sub-section(1) read with sub-section (2) of section 94 of the Finance Act 1994 (32 of 1994), the Central Government hereby makes the following rules further to amend the Service Tax Rules, 1994, namely:-

1. (1) These rules may be called the Service Tax (Fourth Amendment) Rules, 2012.

    (2) They shall come into force on the date of their publication in the Official Gazette.

2. In the Service Tax Rules,1994, in rule 7, in sub-rule(2), the following proviso shall be     inserted, namely:-

"Provided that the Form 'ST-3' required to be submitted by the 25 th day of October, 2012 shall cover the period between 1 st April to 30 th June, 2012 only."

F.No 341/21/2012-TRU

(Rajkumar Digvijay)

Under Secretary to the Government of India

Note: The principal rules were published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i) vide notification No. 2/94-ST, dated 28 th June, 1994 vide number G.S.R 546(E), dated the 28th June, 1994 and were last amended by notification No 46/2012- Service Tax, dated the 7th August 2012 , vide GSR 622 (E) dated the 7 th August 2012.

How To Build Trust in Relationships

         How to Build Trust in Relationship

Firstly let us understand what Trust is.

Trust is the permanent certainty and confident expectation from someone for something. Lack of trust might lead to shattered relations so Trust is the most critical ingredient for strong relationship; the relation which can either be between Husband-Wife, Boss-Employee, Father-Son, Brother-Sister, Supplier-Customer and so on.

Here are some recommended 'behaviors' which you need to demonstrate in order to develop trust.

1- Being Responsible: ensure you are performing your day-to-day responsibilities and meeting the short-term and long term expectations by your dependants.

2- Listen, Listen, Listen, Listen: God has given you two ears and one tongue so you listen more and speak less. Effective Listening is a skill; develop this habit. Google it today and learn.

3- Being Truthful: Be honest and fair. Don't deceive someone. Remember the fact that building trust is tough but it takes seconds to have scratches-in-the-jewel which usually is very hard to recover.

4- Keeping Promises: your promise is your commitment with someone to do something, so don't break at any cost. In case you couldn't meet your promise, there is always a door for dialogue for re-consideration of things. In case of dialogues be fair, be truthful and be open. Confess the short comings on your end.

5- Consistent Behavior: the ever changing attitude is an indication of your non-predictive personality which is an anti-trust drive. So be consistent in what you speak and what you do.

6- Apologizing Behavior: Sorry is the best medicine in healing relationship complications.

In fact, Sorry and Thanks are the two golden words 

Use them often and you will see massive improvements in your daily life.

Finding a Fulfilling Happy Relationship

Finding someone to be in a relationship is actually quite easy. Finding someone to be in a relationship that actually fulfills you, however, is a different story. So how do you find a relationship that truly fulfills your needs and desires? Setting your priorities straight and having realistic expectations will help guide you into the right direction in finding the relationship you have always wanted. Before you can do that though, you need to make sure that you feel fulfilled on your own first.

So many people end up in relationships that do not fulfill them because they are entering the relationship with the wrong expectations and for the wrong reasons. A big example of this is someone entering a relationship as a way to feel complete. Many people feel unsatisfied with themselves and their lives, and believe that someone else will be able to fill in that gap for them. Placing the responsibility for your happiness on someone else is unrealistic and will only result in disappointments in the relationship. You also need to acknowledge and accept the fact that there is no such thing as the perfect relationship and that there will be issues that will require teamwork and compromise.

Most people have the idea that if a relationship is truly happy and meant to be, then there never will be any problems and should not require so much work- it should just be happy. Well, if this is how you view relationships, then it is time to change your way of thinking before you set yourself up for more painful reality checks. If you are interested in finding a person to build a strong romantic relationship with, the best thing to do would be to start by focusing on yourself first- and make sure that you are have your life sorted out, before deciding to share it with someone else. Majority of people would read this say of course, it's common sense and while this may true, people still enter relationship with unrealistic expectation, wrong reasons or before making sure they are fulfilled on their own first.

So if you feel you are ready to be in a serious, committed relationship, do your self a favor and take it one step at a time. Reviews the relationships you have with yourself first and make sure that you are truly happy with you are and where you stand currently in your life. Ask yourself why you feel the need to be in a relationship, what you are prepared to invest into it, as well as what you are expecting from your partner. Sorting this out will help you understand your relationship goals and will help you understand what it is you need to look for in a person when trying to find a romantic partner to share your life with.