IMPORTANT POINT
In a case of wrongful withholding of property of a company, 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 Companies Act.

Headnote:Companies Act, 1956-Section 630-Wrongful withholding of property of company-Allotment of flat taken by Company on lease, to one of its Directors-Death of the Director in 1967-Criminal complaint filed against his son, daughter-in-law and grandson occupying the flat-Whether maintainable under Section 630 of the Act?-(Yes)-Whether family members of the employee of the Company continuing in occupation of property, after death of the employee, could be prosecuted?-(Yes).
Held : 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 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. (supra), in our opinion is not correct and the view expressed in Abhilash Vinodkumar Jain (supra) is justified and should be accepted in interpreting the provision of Section 630 of the Act. 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. (Paras 22 and 23)

Judgement Key Points

The legal document discusses the application of Section 630 of the Companies Act, 1956, which pertains to the wrongful withholding of property of a company. The key points are as follows:

Scope of Section 630: The section targets officers or employees of a company who wrongfully obtain, withhold, or misapply the company's property. It is a penal provision aimed at facilitating the recovery of property and penalizing wrongful withholding (!) (!) (!) .
Applicability to Past and Present Employees: The provision primarily applies to current officers or employees who wrongfully withhold property during or after their employment. However, it also extends to their legal heirs or persons claiming through them if they continue to possess or withhold property after the employee's employment has ended or upon the employee's death (!) (!) (!) .
Family Members and Heirs: Family members living with a former or deceased employee who have come into possession with their consent and have not vacated the premises can be held liable under Section 630. The liability is based on their continued possession and withholding of the company's property, which impedes the company's rights (!) (!) .
Strict Construction of Penal Provisions: Although Section 630 involves penalties, it is not a typical criminal statute. Its primary purpose is the recovery of property, and it should be interpreted strictly, especially regarding the inclusion of family members or heirs

JUDGMENT

G.P. Mathur, J.-Leave granted.

2. This appeal has been preferred against the judgment and order dated January 18, 2002 of High Court of Bombay by which the petition preferred by the appellants under Section 482 Cr.P.C. and Article 227 of the Constitution was dismissed. The matter has been referred to a three-Judge Bench in view of the apparent conflict in the two decisions of this Court in Abhilash Vinodkumar Jain v. Cox & Kings (India) Ltd. & Ors., 1995 (3) SCC 732 and J.K. (Bombay) Ltd. v. Bharti Matha Mishra & Ors., 2001 (2) SCC 700.

3. Bombay Gas Co. Ltd., respondent No.1, had taken on lease a flat in a building known as "Hari Bhavan", 64, Pedder Road, Bombay. Shri N.K. Jalan, in his capacity as Director of the Company, was allotted the said flat. Ashok Kumar Jalan (accused No.1 and respondent No.2 in the present appeal) is son of Shri N.K. Jalan. Appellant No. 1, Smt. Lalita Jalan (accused No.2) is wife of Ashok Kumar Jalan and appellant No.2, Siddharth Jalan (accused No.3) is his son. Shri N.K. Jalan died in 1967. The company purchased the flat and became owner thereof in April, 1991. It filed a criminal complaint under Section 630 of the Companies Act, 1956 (hereinafter referred to as the Act ) against Ashok Kumar Jalan, Smt. Lalita Jalan and Siddharth Jalan on March 16, 1994. The proceedings of the complaint case were stayed in a company petition and finally sometime in the year 2001, the learned Magistrate issued process against the accused. The appellants moved an application for recall of the process issued against them and for their discharge, which was rejected by the Metropolitan Magistrate, 14th Court, Girgaum, Mumbai by order dated December 1, 2001. Thereafter, the appellants preferred a petition under Section 482 Cr.P.C. and Article 227 of the Constitution in the High Court of Bombay, which was dismissed by the impugned order dated January 18, 2002.

4. Shri Ashok Desai, learned senior counsel for the appellants, has submitted that in view of the plain language used in Section 630 of the Act, the said provision can apply only to an officer or employee of the company. The flat was given to Shri N.K. Jalan for his residence but he died when he was still functioning as Director of the company. The appellants, are neither officers nor employees of the company and, therefore, they cannot be prosecuted under the aforesaid provision and the complaint filed against them is an abuse of the process of the Court which is liable to be quashed. Shri Abhishek Singhvi, learned senior counsel for the respondent, Bombay Gas Company Ltd., has submitted that the appellants are family members of Late Shri N.K. Jalan and it is they who are wrongfully withholding the property of the company. In these circumstances they are fully liable to be prosecuted under Section 630 of the Act and there is absolutely no ground for either quashing the complaint or the process issued against them.

5. 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."

6. The question which requires

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2003 Supreme(SC) 467

Cases Referred (12)