Smt. Abhilash
Vinod Kumar Jain Vs. Cox & Kings (India) Ltd. Ors [1995] INSC 184 (21 March 1995)
Anand,
A.S. (J) Anand, A.S. (J) Paripoornan, K.S.(J) Dr. Anand, J.:
CITATION:
1995 AIR 1592 1995 SCC (3) 732 JT 1995 (3) 528 1995 SCALE (2)323
ACT:
HEAD NOTE:
1.
Leave granted
2.
Both those appeals raise a common question of law and are being disposed of by
this common judgment.
3. The
admitted facts, which alone are relevant for the purpose of those appeals and
are not in dispute are that the appellants in both the cases arc the legal
heirs of the employee/officer who died in harness while serving with the
respective respondent company. The concerned employee in both the cases had
been allotted premises during their service by the respective employer (respondent
company) and on the failure of the appellants to handover the vacant possession
of the allotted premises after the demise of the employee/officer concerned,
prosecutions were launched against them (legal heirs) under section 630 of the
Companies Act, 1956 (hereinafter referred to as the Act').
The
appellants approached the High Court through petitions under Section 482 Cr.P.C.
seeking quashing of the proceed- ings on the ground that the provisions of
Section 630 of the Act cannot be invoked against the legal heirs of deceased
employee, who had died in harness, and as such the complaint against them under
Section 630 of the Act was not maintainable. The High Court dismissed their
petitions filed under Section 482 Cr. P.C. Hence, these appeals.
4. The
meaningful question and as a matter of fact the only question which has been
canvassed before usis : whether a petition tinder Section 630 of the Act is
maintainable against the legal heirs of deceased officer or an employee for
retrieval of the company's property?
5.
With a view to answer the question, it is desirable that we may first notice
the provisions of Section 630 of the Act. The said Section reads:- 630. Penalty
for wrongful withholding of any property. –
(1) If
any officer or employee of a company –
(a) wrongfully
obtains possession of any property of a company; or
(b) having
any such property in his possession, wrongfully withholds it or knowingly
applies it to purposes other than those expressed or directed in the articles
and authorised by this Act; he shall, on the complaint of the company or any
creditor or contributory thereof, be punishable with fine which may extend to
one thousand rupees.
(2)
The Court trying the offence may also order such officer or employee to deliver
up or refund, within a time to be fixed by the Court, any such property
wrongfully obtained or wrongfully withheld or knowingly misapplied, or in
default, to suffer imprisonment for a term which may extend to two years.
532
6.
There was a divergence of opinion between various High Courts regarding the
interpretation of the expressions "any officer or employee of a
company" occurring in Clause (1) of Section 630 of the Act. The Bombay
High Court in Harkishan Lakhimal Gidwani v. Achyut Kashinath Wagh ((1982) 52
Company Cases 1)) gave a broader interpretation to the words and held that the
expression would include an ex-officer or an ex-employee of the company also
while the Calcutta High Court in Amrit Lal Chum v. Devi Ranjan Jha {(1987) 61
Company Cases 21 1)) gave a narrow interpretation and opined that an ex-officer
or an ex-employee is not included in the said expression and that the
applicability of the provisions is restricted to an existing employee or
officer. The High Court of Madhya Pradesh in Beharilal and Another v. Binod
Mills Company Limited [(1987) 3 Comp LJ 246 (NV)] following the Calcutta High
Court view held that the provisions embodied in Section 630 (1) of the Act do
not contemplate criminal proceedings being launched against relatives of an
erstwhile employee or officer for recovering the possession of the property of
he company.
7.The
Court while hearing an appeal against the judgment of the Bombay High Court in Baldev
Krishna Sahi v. Shipping Corporation of India Limited & Anr. { 1988 (1) SCR
168) resolved the conflict and set the controversy at rest. It held that the
expression "officer" or "employee" of a company applies not
only to existing officers or employees but also includes past officers or
employees, where such officer or employee either (a) wrongfully obtains
possession of any property, or (b) having obtained possession of such property
during his employment, wrongfully withholds the same after the termination of
his employment. The Court opined:
"The
beneficient provision contained in s. 630 no doubt penal, has been purposely
enacted by the legislature with the object of providing summary procedure for
retrieving the property of the company (a) where an officer or employee of a
company wrongfully obtains possession of property of the company, or (b) where
having been placed in possession of any such property during the course of his
employment, wrongfully withholds possession of it after the termination of his
employment.
It is
the duty of the Court to place a broad and liberal construction on the
provision in furtherance of the object and purpose of the legislation which
would suppress the mischief and advance the remedy.
Section
630 of the Act which make the wrongful withholding of any property of a company
by an officer or employee of the company a penal offence is typical of economy
of language which is characteristic of the draughtsman of the Act. The Section
is in two parts. Sub- s.(1) by clauses (a) and (b) creates two distinct and
separate offences. First of these is the one contemplated by cl.(a), namely,
where an officer or employee of a company wrongfully obtained possession of any
property of the company during the course of his employment, to which he is not
entitled.
Normally,
it is only the present officers and employees who can secure possession of any
property of a company. It is also possible for such an officer or employee
after termination of his employment to wrongfully take away possession of any
such property.
This
is the function of cl. (a) and although it primarily refers to the existing
officers and employees, it may also take in past offic- ers and employees. In
contrast, cl.(b) con- templates a case where an officer or em- 533 ployee of a
company having any property of a company in his possession wrongfully withholds
it or knowingly applies it to purposes other than those expressed or directed
in the articles and authorised by the Act. It may well be that an officer or
employee may have lawfully obtained possession of any such property during the
course of his employment but wrongfully withholds it after the termination of
his employment. That appears to be one of the functions of cl.(b). It would be
noticed that cl.(b) also makes it an offence if any officer or employee of a
company in his possession knowingly applies it to purposes other than those
expressed or directed in the articles and authorised by the Act. That would
primarily apply to the present officers and employees and may also include past
officers and employees. There is therefore no warrant to give a restrictive
meaning to the term 'officer of employee' appearing in subs, (1) of s. 630 of
the Act.
It is
quite evident that clauses (a) and (b) are separated by the word 'or' and
therefore are clearly disjunctive". (Emphasis supplied)
8.
This Court then held that decision of the Calcutta High Court in Amrit Lal
Chum's (supra) as erroneous and overruled the same. It was opined that the
restrictive meaning to the term 'officer or employee' which must take its colour
from the context in which it appears would defeat the object of the provisions
of Section 630 of the Act viz., preservation of the property of company by the
creation of two distinct offences by clauses (a) and (b) which arise under
different set of circumstances. The Bench noticed with approval the judgment of
the Bombay High Court in Harkishan Lakhimal Gidwani v. Achyut Kashinath Wagh
& Anr. (supra) and Govind T. Jagtiani v. Sirajuddin S.KazI & Anr. {[1984]
56 Company Cases 329)}. 9. A three Judge Bench later on in Amrit Lal Chum v. Devoprasad
Dutta Roy & Anr. etc. (1988 (2) SCR 733), while hearing an appeal from the
judgment of the Calcutta High Court in Amrit Lal Chum's case (supra) held that
Section 630 of the Act plainly makes it an offence if an officer or employee of
a company who was permitted to use the property of the company during his
employment wrongfully retains or occupies the same after the termination of his
employment.
It was
opined that it is the wrongful holding of the prop- erty of the company after
the termination of the employment which is an offence under Section 630 (1) of
the Act and that there is no warrant to give a restrictive meaning to the term
'officer or employee' appearing in sub-section (1) of Section 630 of the Act as
meaning only an existing officer or in existing employee and not those whose
employment had been terminated or had otherwise come to an end. The Bench
approved the law laid down by this Court in Baldev Krishna Sahi's case (supra)
10. In
Atul Mathur v. Atul Kalra and Another ((1989) 4 SCC, 514) this Court once again
emphasised that the object of the provisions of Section 630 of the Act is to
retrieve the property of the company and that even though the provisions are
penal in nature, the object of the provision is required to be given a
purposive interpretation so as not to choke the beneficient provision. The
Division Bench once again followed the judgment in Baldev Krishna Sahi's case
(supra).
11. In
Gokak Patel Volkart Ltd. v. Dundayya Gurushiddaiah Hiremath And Others {(1991)
2 SCC, 141 )}, the Division 534 rendered by this Court and relying upon the law
laid down in Baldev Krishna Sahi's case (supra) and Amrit Lal Chum's case
(supra) held that the offence under Section 630 of the Act is not such as-can
be said to have consummated once for all and that the offence continues until
the officer or employee delivers up or refunds the property of the company when
ordered by the Court to do so within a time fixed by the Court and in default
to suffer the term of imprisonment as may be imposed by the Court. It was held
that 'officer or employee' under Section 630 of the Act includes present and
past officers and employees.
12.Thus,
it would be seen that this Court has consistently taken the view and repeatedly
emphasised that the provisions of Section 630 of the Act have to be given
purposive and wider interpretation and not restrictive interpretation. In the
four cases referred to above, this Court was not re- quired to directly
consider and deal with the question whether the provisions of Section 630 of the
Act can be invoked against the legal heirs, for wrongfully withholding the
property of the company, on the death in harness of an employee or officer of
the company to whom the property was allotted. In these two appeals that
precisely is the issue which invites our attention.
13.The
logical deduction of the analysis of Section 630 of the Act in the light of the
law laid down by this Court is that :
(i)Clause
(a) of the Section is self-contained and independent of Clause (b) with the
capacity of creating penal liability embracing the case of an existing employee
or officer of the company and includes a past officer or a past employee of the
company;
(ii)Clause
(b) is equally independent and distinct from Clause (a) as regards penal
consequences and it squarely applies to the case of past employees or officers;
(iii)the
entitlement of the officer or employee to the allotted property of the company
is contingent upon the right and capacity of the officer or the employee by
virtue of his employment to continue in possession of the property belonging to
the company, under authority of the company and the duration of such right is
coterminous with his/her employment.
14.Thus,
inescapably it follows that the capacity, right. to possession and the duration
of occupation are all features, which are integrally blended with the
employment and the capacity and the corresponding rights are extinguished with
the cessation of employment and an obligation arises to handover the allotted
property back to the company. Where the property of the company is held back
whether by the employee, past employee or any one claiming under them, the
retained, possession would amount to wrongful withholding of the property of
the company, actionable under Section 630 of the Act. The argument of the
learned counsel for the appellants that since the provisions of Section 630 of
the Act are penal in nature the same must be strictly construed and, the
parties which have not been expressly included by the legislature in Section
630 (1) of the Act, cannot by any interpretive extension be included in the
said provision, ignores the situation that by a deeming fiction, the legal
representatives or heirs of a past employee or officer, in occupation of the
prop- 535 erty of the company, would continue to enjoy the personality and
status of the employee or the officer only, An argument quite similar in nature
was raised in Baldev Krishna Sahi's case (supra) also while resisting the
extension of the provisions of Sections 630 of the Act to the past employee or
past officer and rejecting the same. this Court opined :
"The
first and foremost argument of learned counsel for the petitioner is that the
provision contained in Section 630 of the Act is a penal provision and
therefore must be subject to the strict construction and there is no room for
intendment. It is submitted that on a true construction, the scope and effect
of the section was limited to such property of the company which was wrongfully
obtained by an officer or employee of the company. Emphasis was placed upon the
words 'any property' in cl. (b) of sub-s.(1) for the contention that cl. (b)
does not stand by itself but is interconnected with cl. (a) and therefore both
clauses (a) and (b) must be read together. In essence, the submission is that
sub-s. (1) of s.630 of the Act makes it an offence where any officer or
employee of a company wrongfully withholds possession of such property of the
company. Secondly, it is contended that the legislature never intended to
include past officers and employees of a company within the ambit of s.630 of
the Act which provides for prosecution of an officer or employee of a company
for wrongfully withholding the property of the company inasmuch as it has used
different languages where it was so intended, namely, in ss. 538 and 545. The
entire argument of the learned counsel is based upon the judgment of the High
Court of Calcutta in Amritlal Chum's case. We are afraid, we find it difficult
to subscribe to the narrow construction placed by the High Court of Calcutta on
the provision contained in sub-s. (1) of s. 630 of the Act which defeats the
very purpose and object with which it had been introduced." We are in
respectful agreement with the above view and are of the opinion that the legal
representatives or the heirs of the deceased employee or officer would squarely
fall within the ambit of Section 630 of the Act. To exclude them, by giving a
restrictive interpretation to the provisions would defeat the very object of
the provision which declares the wrongful withholding of the property of the
company to be an offence. It Is immaterial whether the wrongful withholding is
done by the employee or the officer or the past employee or the past officer or
the heirs of the deceased employee or the officer or anyone claiming their
right of occupancy under such an employee or an officer. It cannot be ignored
that the legal heirs or representatives in possession of the property had
acquired the right of occupancy in the property of the company, by virtue of
being family members of the employee or the officer during the employment of
the officer or the employee and not on any independent account. They,
therefore, derive their colour and content from the employee or the officer
only and have no independent or personal right to hold on to the property of
the company. Once the right of the employee or the officer to retain the
possession of the property, either on account of termination of services,
retirement, resignation or death, gets extinguished, they (persons in occupation)
are under an obligation to return the property back to the company and on their
failure to do so, they render themselves liable to be dealt with under Section
630 of the Act for retrieval of the possession of the property.
536
15.Even though Section 630 of the Act falls in Part XIII of the Companies Act
and provides for penal consequences for wrongful withholding of the property of
the company, the provisions strictly speaking are not penal in the sense as
understood under the penal law. The provisions are quasi- criminal. They have
been enacted with the main object of providing speedy relief to a company when
its property is wrongfully obtained or wrongfully withheld by an employee or
officer or an ex-employee or officer or anyone claiming under them. In our
opinion, a proper construction of the Section would be that the term
"officer or employee" of a company in Section 630 of the Act would by
a deeming fiction include the legal heirs and representatives of the employee
or the officer concerned continuing in occupation of the property of the
company after the death of the employee or the officer.
16.Under
sub-Section (1) of Section 630 for the wrongful obtaining of the possession of
the property of the company or wrongfully withholding it or knowingly applying
it to a purpose other than that authorised by the company, the employee or the
officer concerned is "punishable with fine which may extend to one
thousand rupees." The "fine" under this subsection is to be
understood in the nature of "compensation" for wrongful withholding
of the property of the company. Under sub-section (2) what is made punishable
is the disobedience of the order the Court, directing the person, continuing in
occupation, after the right of the employee or the officer to occupation has
extinguished, to deliver up or refund within a time to be fixed by the Court,
the property of the company obtained or wrongfully withheld or knowingly
misapplied. Thus, it is in the event of the disobedience of the order of the
Court, that imprisonment for a term which may extend to two years has been
prescribed. The provision makes the defaulter, whether an employee or a past
employee or the legal heir of the employee, who disobeys the order of the Court
to hand back the property to the company within the prescribed time liable for
punishment.
17.The
object of the Companies Act inter alia is to regulate the affairs of the
companies including the control of the management and protection of the
property of the company.
The
object of Section 630 of the Act has, thus, a direct nexus with the object of
the Act. It is precisely for this reason that in Gokak Patel Volkart case
(supra) this court held the offence under Section 630 of the Act to be "a
continuing offence." 18.Section 630 of the Act provides speedy relief to
the company where its property is wrongfully obtained or wrongfully withheld by
an "employee or an officer" or a "past employee or an
officer" or "legal heirs and representatives" driving their colour
and content from such an employee or officer" in so far as the occupation
and possession of the property belonging to the company is concerned. The
failure to deliver property back to the employer on the termination,
resignation, superannuation or death of an employee, would render the
"holding" of that property wrongful and actionable under Section 630
of the Act. To hold that the "legal heirs" would not be covered by
the provisions of Section 630 of the Act would be unrealis- tic and illogical.
It would defeat the "beneficient" provision and ignore the factual
realities that the legal heirs or family 537 members who are continuing in
possession of the allotted property, had obtained the right of occupancy with
the concerned employee in the property of the employer only by virtue of their
relationship with the employee/officer and had not obtained or acquired the
right to possession of the property in any other capacity, status or right. The
legislature, which is supposed to know and appreciate the needs of the people,
by enacting Section 630 of the Act manifested that it was conscious of the
position that today in the corporate sector - private or public enterprise -
the employees officers arc often provided residential accommodation by employer
for the 'use and occupation' of the concerned employee during the course of his
employment.
More
often than not, it is a part of the service conditions of the employee that the
employer shall provide him residential accommodation during the course of his em-
ployment. If an employee or a past employee or anyone claiming the right of
occupancy under them, were to continue to 'hold' the property belonging to the
company, after the right to be in occupation has ceased for one reason or the
other, it would not only create difficulties for the company, which shall not
be able to allot that property to its other employees, but would also cause
hardship for the employee awaiting allotment and defeat the intention of the
legislature. The courts are therefore obliged to place a broader, liberal and
purposeful construction on the provisions of Section 630 of the Act in
furtherance of the object and purpose of the legislation of construe it in a
wider sense to effectuate the intendment of the provision. The "heirs and
legal representatives" of the deceased employee have no independent
capacity or status to continue in occupation and possession of the property,
which stood allotted to the employee or the officer concerned or resist the
return of the property to the employer, in the absence of any express agreement
to the contrary entered with them by the employer. The Court, when approached
by the employer for taking action under Section 630 of the Act, can examine the
basis on which the petition/complaint is filed and if it is found that the
company's right to retrieve its prop" is quite explicit and the stand of
the employee, or any one claiming through him, to continue in possession is
baseless, it shall proceed to act under section 630 of the Act and pass
appropriate orders. Only an independent valid right, not only to occupation but
also to possession of the property belonging to the company, unconnected with
the employment of the deceased employee can defeat an action under Section 630
of the Act if it can be established that the concerned deceased employee had not
wrongfully nor knowingly applied it for purposes other than those authorised by
the employer. In interpreting a beneficient provision, the Court must be for
ever alive to the principle that it is the duty of the court to defend the law
from clever evasion and defeat and prevent perpetration of legal fraud.
19.Thus,
our answer to the question posed in the earlier part of this judgment is in the
affirmative and we hold that a petition under Section 630 of the Act is
maintainable against the legal heirs of the deceased officer/employee for
retrieval of the company's property wrongfully withheld by them after the
demise of the employee concerned. The High Court was, therefore, right in
dismissing the petitions filed by the appellants under Section 482 Cr. P.C. and
declining to quash the proceed- 538 ings initiated by the employer of the
deceased employee for retrieval of the company's property under Section 630 of
the Act. These appeals consequently fall and are dismissed. No costs.
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