Gopika Chandrabhushan
Saran & ANR. Vs. M/S XLO India Ltd.& ANR. [2009] INSC 320 (13 February
2009)
Judgment
CRIMINAL APPELLATE
JURISDICTION CRIMINAL APPEAL NO.295 OF 2009 (arising out of SLP (Crl.) No. 4685
of 2008) Gopika Chandrabhushan Saran & Anr. ...Appellants Versus M/s. XLO
India Ltd. & Anr. ...Respondents
Dr. Mukundakam
Sharma, J.
1.
Leave
Granted.
2.
The
issue that arises for our consideration in the present appeal is with regard to
the scope of and ambit of the provisions of Section 630 of the Companies Act,
1956 (hereinafter referred to as the "Act"), more specifically, as to
whether the proceedings under the said provision would cover within its purview
only the employee of the company or also the persons claiming a right through
him or under him.
3.
In
order to answer the aforesaid issue it would be necessary to set out the facts
leading to filing of the case in which the aforesaid issue was raised and came
to be considered:
Mr. Chandra Bhushan
Saran (since deceased) father of appellant no. 1 and maternal grandfather of
appellant no. 2 was allotted third floor residential premises of the building
"Devenshire House", Westfield Estate, at Bhulabhia Desai Road, Mumbai
(hereinafter referred to as "suit premises") since he was appointed
as a Director and Technical Advisor of one M/s Automobile Products of India
Ltd. (for short "API Ltd."). Subsequently he was appointed as
Managing Director of the said company. The suit premises was owned by Her
Highness Vijaya Raje Scindia Maharani of Gwalior and was taken on lease by the
API Ltd. for the residential needs of its employee.
However, Mr. C. B.
Saran resigned as Managing Director and later on also as its Director.
Subsequent to his resignation as Managing Director, he was appointed as the Managing
Director of Ex-Cello Ltd., respondent No. 1 herein. Mr. C. B. Saran made a
representation to the then Chairman of the API Ltd., that as a Managing
Director of the respondent No. 1 company he was entitled to rent free
accommodation and for the sake of convenience the API Ltd. may execute a
licence agreement in respect of the suit premises in favour of respondent no.
1, who in turn may permit him to occupy the suit premises.
The request of Mr.
C.B. Saran was considered favourably in the Board Meeting dated 12.06.1968 in
which Mr. Saran was also present as a Director. Accordingly, Mr. C. B. Saran
along with his family, which consisted of his wife, son and daughter, continued
to occupy the said premises.
Mr. C. B. Saran
expired in Germany on 16.07.1980 and on his demise his son Mr. Sanjay Saran,
who was Joint Managing Director became the Managing Director of the respondent
no. 1 company. By virtue of his employment with respondent No. 1 the suit
premises was allotted in his favour and the appellant no. 1 being sister of Mr.
Sanjay Saran and appellant no. 2 being his nephew continued to stay in the suit
premises.
4.
It
is pertinent to mention here that in the year 1976 API Ltd. filed a suit before
Ld. Small Causes Court against the respondent no. 1 and Mr. C. B. Saran being
suit no. 206/519 of 1976 disputing the tenancy right in relation to the suit
property. After the demise of Mr. C. B. Saran his legal heirs, including the
appellant No. 1, were substituted in the said suit.
5.
On
20.03.2002 the respondent no. 1 also issued a letter to Mr. Sanjay Saran
stating that they are in need of the premises and the suit premises should be
vacated. In terms of the said letter Mr.
Sanjay Saran vacated
the premises but however the appellants continued to hold the possession of the
said premises and refused to surrender the possession. On the other hand, the
present appellants along with Smt. Minal Saran (since deceased), mother of
appellant No.1 and Mr. Sanjay Saran challenged the right of respondent No. 1 -
company to demand possession of the suit premises.
6.
The
appellants also filed a suit before the Small Causes Court being R.A.D Suit No.
502/2004. Another suit was filed by the appellants before the Small Causes
Court being R.A.D. Suit No. 1495/2007 against API Ltd. and Her Highness Vijaya
Raje Scindia, Maharani of Gwalior, alleging that Mr. C. B. Saran had executed a
sub-tenancy in favour of her mother and Mr. C. B. Saran was inducted in the
suit premises as a tenant by API Ltd. in or about June, 1968 on a monthly
rental of Rs. 1400/-. In the later suit status quo order was passed which was
extended subsequently.
7.
The
respondent no. 1 instituted a proceeding on 04.03.2004 under section 630 of the
Act which was numbered as CC No. 74/SS/2005 against the present appellants and
mother of appellant no. 1. The Additional Chief Metropolitan Magistrate vide
order dated 26.06.2007 found the appellants guilty under Section 630 of the Act
and a sentence of Rs. 5,000/- was imposed on each of the accused- appellant
with default stipulation of simple imprisonment for 15 days.
The appellants were
directed to vacate the suit premises within 4 months from the date of said
order and in default to suffer simple imprisonment for 4 months.
8.
Being
aggrieved by the said order the appellants filed a criminal appeal before the
Sessions Judge which was dismissed. As the mother of appellant No. 1 died on
29.11.2007 her appeal stood abated. Against the said dismissal the two
appellants preferred a criminal revision application before the High Court of
Bombay. The learned Single Judge heard the parties on merits and dismissed the
appeal. The learned Single Judge while upholding the order of the courts below
held that the appellants were liable to be convicted under Section 630 of the
Act as they withhold the delivery of the property of respondent No. 1 -
company. In terms of the prayer made by the learned counsel appearing for the
appellants, the learned Single Judge granted stay of eight weeks to approach
the higher court, subject to an undertaking that in the event of their failing
before the higher court, they shall vacate and hand over vacant and peaceful
possession of the suit premises to respondent no. 1.
9.
It
is against the said order that the appellants have approached this Court. We
have heard the leaned senior counsel appearing for the parties and also
scrutinised the documents on record.
10.
Mr.
Colin Gonsalves, learned senior counsel appearing for the appellants mainly contented
before us that no proceeding could have been initiated under section 630 of the
Act, as the provision of the said section is applicable only to the employee or
officer of the company and no action could have been initiated under said
section against any other person other than the said employee or officer.
He, however, also
made an averment to the effect that the mother of the appellant No. 1 was a
sub-tenant in the suit premises, in respect to which a suit is pending before
the Small Causes Court in which status quo order has been granted, and
therefore, this Court should Page 6 of 19 await the decision in the aforesaid
suit pending before the Small Causes Court.
11.
Mr.
Dushyant Dave, learned senior counsel appearing for the respondent company on
the other hand submitted that the judgments passed by the courts below need no
interference. He strenuously relied on the decision of this court in Lalita
Jalan and Another v. Bombay Gas Co. Ltd. and others reported in (2003) 6 SCC
107. He also submitted that the appellants illegally continued to occupy the
said premises, and therefore, they are liable to vacate the suit premises
immediately.
12.
In
order to examine the contentions raised by learned counsel for the parties, it
will be convenient to set out the provisions of Section 630 of the Companies
Act, 1956, which read as under:
"630. Penalty
for wrongful withholding of 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 ten 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."
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
The
main purpose to make action an offence under Section 630 is to provide a speedy
and summary procedure for retrieving the property of the company where it has
been wrongly obtained by the employee or officer of the company or where the
property has been lawfully obtained but unlawfully retained after termination
of the employment of the employee or the officer. From the bare reading of the
section, it is apparent that sub-section (1) is in two parts. Clauses (a) and
(b) of sub-section (1) create two different and separate offences. Clause (a)
contemplates a situation wherein an officer or employee of the company
wrongfully obtains possession of any property of the company during the course
of his employment to which he is not entitled whereas clause (b) contemplates a
case where an officer or employee of the company having any property of the
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 company. Under this provision, it may be that an Page 8 of 19 officer
or an employee may have lawfully obtained possession of any property during the
course of his employment, still it is an offence if he wrongfully withholds it
after the termination of his employment.
Clause (b) also makes
it an offence, if any officer or employee of the company having any property of
the company in his possession knowingly applies it to purposes other than those
expressed or directed in the articles and authorised by the Act. In terms of
sub- section (2) the court is empowered to impose a fine on the officer or
employee of the company if found in breach of the provision of Section 630 of
the Companies Act and further to issue direction if the court feels it just and
appropriate for delivery of the possession of the property of the company and
to impose a sentence of imprisonment when there is non-compliance with the
order of the court regarding delivery or refund of the property of the company.
14.
In
Abhilash Vinodkumar Jain v. Cox & Kings (India) Ltd., (1995) 3 SCC 732 this
Court had occasion to deal with scope and ambit of the provisions of Section
630 of the Act. This Court analyzed Section 630 and drew a logical deduction in
para 13, which is as follows:
"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 Page 9 of 19 penal liability embracing the case of an existing
employee or an 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 cases 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.
In para 14 this Court
further laid down the Scope and ambit of Section 630:
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 hand over the allotted
property back to the company. Where the property of the company is held back
whether by the employee, past employee or anyone 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 interpretative 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 property 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 case (1987) 4 SCC 361 also while resisting the extension of the
provisions of Section 630 of the Act to the past employee or past officer and
rejecting the same, this Court opined: (SCC pp. 365- 66, para 6) "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 a 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 such property' in clause (b) of sub- section (1) for the contention
that clause (b) does not stand by itself but is interconnected with clause (b)
(sic) and therefore both clauses (a) and (b) must be read together. In essence,
the submission is that sub- section (1) of Section 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 Section 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 Sections 538 and 545. The entire argument of the learned counsel is
based upon the judgment of the High Court of Calcutta in Amritlal Chum case
[(1987) 61 Comp Cas 211 (Cal)]. 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-section (1) of Section 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 Page 11 of
19 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.
15.
The
ratio of Abhilash Vinodkumar Jain (supra) was reiterated by another larger
bench in Lalita Jalan (supra), wherein it laid down the main ingredients of
Section 630 in para 6 and 7, the same are extracted hereunder:
"6. The question
which requires consideration is whether the appellants, having not vacated the
flat after the death of Shri N.K. Jalan to whom it was allotted in his capacity
as director of the company, come within the ambit of Section 630 of the Act.
The main ingredient of the section is wrongful withholding of the property of
the company or knowingly applying it to purposes other than those expressed or
directed in the articles and authorised by the Act. The dictionary meaning of
the word "withholding" is to hold back; to keep back; to restrain or
decline to grant. The holding back or keeping back is not an isolated act but
is a continuous process by which the property is not returned or restored to
the company and the company is deprived of its possession. If the officer or
employee of the company does any such act by which the property given to him is
wrongfully withheld and is not restored back to the company, it will clearly
amount to an offence within the meaning of Section 630 of the Act. The object
of enacting the section is that the property of the company is preserved and is
not used for purposes other than those expressed or directed in the articles of
association of the company or as authorised by the provisions of the Act. On a
literal interpretation of Section 630 of the Act the wrongful withholding of
the property of the company by a person who has ceased to be an officer or
employee thereof may not come within the ambit of the provision as he is no
longer an officer or employee of the company. In Baldev Krishna Sahi v.
Shipping Corpn. of India Ltd. (1987) 4 SCC 361 the Court was called upon to
consider the question whether the words "officer or employee"
existing in sub-section (1) of Section 630 should be interpreted to mean not
only the present officers and employees of the company but also to include past
officers and employees of the company. It was held that a narrow construction
should not be placed upon sub- section (1) of Section 630, which would defeat
the very purpose and object with which it had been introduced but should be so
construed so as to make it effective and operative. The Court held as under in
para 7 of the Report:
(SCC p. 366) "7.
The beneficent provision contained in Section 630 no doubt penal, has been
purposely enacted by the legislature with the object of providing a 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."
7. The Court went on
to observe that it is only the present officers and employees who can secure
possession of any property of a company and it is possible for such an officer
or employee to wrongfully take away possession of Page 13 of 19 any such
property after termination of his employment.
Therefore, the
function of clause (a) though it primarily refers to the existing officers and
employees, is to take within its fold an officer or employee who may have
wrongfully obtained possession of any such property during the course of his
employment, but wrongfully withholds it after the termination of his
employment. It was further held that Section 630 plainly makes it an offence if
an officer or employee of the company who was permitted to use any property of
the company during his employment, wrongfully retains or occupies the same
after the termination of his employment and that it is the wrongful withholding
of the property of the company after the termination of the employment, which
is an offence under Section 630(1)(b) of the Act".
This Court further
laid down in paras 22 and 23 as follows:
"22. The view
expressed in J.K. (Bombay) Ltd. (2001) 2 SCC 700 runs counter to the view
expressed in Abhilash Vinodkumar Jain (1995) 3 SCC 732 wherein it has been
clearly held that the object of Section 630 of the Act is to retrieve the
property of the company where wrongful holding of the property is done by an
employee, present or past, or heirs of the deceased employee or officer or
anyone claiming the occupancy through such employee or officer.
The view expressed in
Abhilash Vinodkumar Jain (1995) 3 SCC 732 clearly subserves the object of the
Act which is to the effect of recovering the possession of the property
belonging to the company. If it is held that other members of the family of the
employee or officer or any person not connected with the family who came into
possession through such employee would not be covered by Section 630 of the
Act, such a view will defeat the quick and expeditious remedy provided therein.
The basic objection to this view is that the aforesaid provision contained in
Section 630 of the Act is penal in nature and must be strictly construed and
therefore the actual words used should not be given any expansive meaning. A
provision of this nature is for the purpose of recovery of the property and if,
in spite of demand or subsequent order of the court, the possession of the
property is not returned to the company, the question of imposing penalty will
arise. Similar provisions are available even under the Code of Civil Procedure.
In execution of a decree for recovery of money or enforcement of an injunction,
the judgment-debtor can be committed to a prison. Such a provision by itself
will not convert the civil proceeding into a criminal one. Even assuming that
the said provision is criminal in nature, the penalty will be attracted in the
event of not complying with the demand of the recovery of the possession or
pursuant to an order made thereof. The possession of the property by an
employee or Page 14 of 19 anyone claiming through him of such property is
unlawful and recovery of the same on the pain of being committed to a prison or
payment of fine cannot be stated to be unreasonable or irrational or unfair so
as to attract the rigour of Article 21 of the Constitution. If the object of
the provision of Section 630 of the Act is borne in mind, the expansive meaning
given to the expression "employee or anyone claiming through him"
will not be unrelated to the object of the provision nor is it so far fetched
as to become unconstitutional. Therefore, with profound respects the view
expressed in J.K. (Bombay) Ltd. (2001) 2 SCC 700 in our opinion is not correct
and the view expressed in Abhilash Vinodkumar Jain (1995) 3 SCC 732 is
justified and should be accepted in interpreting the provision of Section 630
of the Act.
23. If an erstwhile
or former employee is prosecuted under Section 630 of the Act on account of the
fact that he has not vacated the premises and continues to remain in occupation
of the same even after termination of his employment, in normal circumstances
it may not be very proper to prosecute his wife and dependent children also as
they are bound to stay with him in the same premises. The position will be
different where the erstwhile or former employee is himself not in occupation
of the premises either on account of the fact that he is dead or he is living
elsewhere. In such cases all those who have come in possession of the premises
with the express or implied consent of the employee and have not vacated the
premises would be withholding the delivery of the property to the company and,
therefore, they are liable to be prosecuted under Section 630 of the Act. This
will include anyone else who has been inducted in possession of the property by
such persons who continue to withhold the possession of the premises as such
person is equally responsible for withholding and non- delivery of the property
of the company".
16.
The
capacity, right to possession and the duration of occupation are all features
which are integrally blended with the employment. 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 Page 15 of 19 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.
17.
The
ratio laid down in the above said two cases makes it explicitly clear that
Section 630 of the Act will cover within its ambit not only the employee or
officer but also the past employee or the past officer or the heirs of the
deceased employee or anyone claiming under them in possession of the property.
The legal heirs or representatives in possession of the property acquire 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 employee or
the officer 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.
18.
The
case in hand is the one which falls under the first part of clause (b) of
sub-section (1) of Section 630. The suit premises was allotted to Mr. C. B.
Saran, the predecessor-in-interest of the appellants, in his capacity as a
Managing Director of the respondent company. The Page 16 of 19 appellants
herein had no direct relationship with the respondent company. Both of them
came in possession of the suit premises through the original allottee of the
said premises, namely, Mr. C. B. Saran, who has since died. The company has
every right and jurisdiction to preserve its property and to see that the same
is not used for purposes other than the one expressed or directed in the
articles of association of the company. On a careful reading of the ratio of
the decisions in Abhilash Vinodkumar Jain (supra) and Lalita Jalan (supra), it
is explicitly clear that they are squarely applicable to facts of the present
case. When the legal representatives of the original allottee withhold the
property wrongfully the company is entitled to invoke the provisions of Section
630 of the Act so as to retrieve the property being withheld wrongfully. The
above quoted decisions have also laid down that all those who have come in
possession of the premises with the express or implied consent of the employee
and have not vacated the premises would be withholding the delivery of the
property to the company and, therefore, they are liable to be prosecuted under
Section 630 of the Act as is done in the present case.
19.
We
may also mention that the averment of the learned senior counsel appearing for
the appellants that the proceedings under Page 17 of 19 Section 630 should
have been stayed as the civil suit was pending, is without any merit in the
light of the decision of this Court in Atul Mathur v. Atul Kalra, reported in
(1989) 4 SCC 514, wherein it was held that stay of proceedings by the criminal
court under Section 630 of the Act, whenever a suit has been filed would not
only lead to miscarriage of justice but also render ineffective the salutary
provisions of Section 630. the said observations are extracted herein below:
"16....................Merely
because Respondent 1 had schemingly filed a suit before tendering his
resignation, it can never be said that the civil court was in seisin of a bona
fide dispute between the parties and as such the criminal court should have
stayed its hands when the company filed a complaint under Section 630. If a
view is mechanically taken that whenever a suit has been filed before a
complaint is laid under Section 630, the criminal court should not proceed with
the complaint, it would not only lead to miscarriage of justice but also render
ineffective the salutary provisions of Section 630."
20.
Considering
the facts and circumstances of the present case, we hold that the respondent
company was within its jurisdiction to get the suit premises vacated under the
provisions of Section 630 of the Act.
We also hold that the
learned courts below were justified in arriving at a finding that the
provisions of Section 630 of the Act are applicable to the facts and
circumstances of the present case.
Consequently the
courts below also acted within their power and Page 18 of 19 jurisdiction in
directing for vacation of the suit premises by the appellants. While upholding
the said order of the courts below, we however observe that the proceedings
were initiated in the Small Causes Court by filing a suit which is pending as
of now. There was an interim order passed in the said suit directing for
maintenance of status quo. Since we have held that the provisions of Section
630 of the Act are applicable to the present case, we hold that the directions
of the court below in this case would be implemented subject to the condition
that if the aforesaid suit is decided in favour of the appellants, the
appellants shall be entitled to a order of restitution, if so directed, in
accordance with law and that such an order shall be given effect to in
accordance with law.
21.
21.In
terms of the aforesaid observations and directions, the present appeal is
dismissed.
.............................J.
[S.B. Sinha]
..............................J.
Back
Pages: 1 2 3