2005 Supreme(SC) 832

2005(4) Supreme 347
Supreme Court of India
(From Bombay High Court)
P. Venkatarama Reddi & P.P. Naolekar, JJ.
Shubh Shanti Services Ltd. —Appellant
versus
Manjula S. Agarwalla & Ors. —Respondents
Criminal Appeal No. 712 of 2005
(Arising out of SLP (Crl.) No. 4247 of 2004)
Decided on 11-5-2005
Counsel for the Parties :
For the Appellant : Arun Jaitely, Sr. Advocate, J.A. Rana, Levi Ruben, Madhup Singhal, Advocates for M/s. Gagrat & Co., Advocates.­
For the Respondents : Haresh M. Jagtiani, Sr. Advocate, Bhargava V. Desai, Curush Bilimoria, Sanjeev Kumar Singh and Pradeep Kumar Malik, Advocates.

Headnote:Companies Act, 1956—Section 630—Wrongful withholding of property of Company—An officer or employee of Company may have lawfully obtained possession of property during course of his employment, still it was offence if he wrongfully withheld it after termination of his employment—Provision did not make difference between movable and immovable property—Term “employee” would include legal heirs and representatives of employee continuing in occupation of property of Company after death of employee—Husband of respondent No. 1 and father of respondent No. 2 employed with appellant Company since 1971 till his death in November 1992—He was appointed as Managing Director and suit flat owned and possessed by appellant Company was allotted to him for his residence along with his family—After death of employee, Company demanded possession of flat and respondents resisted request on plea that Chairman of Company had permitted them to stay till sale deed in respect of another flat which Company had agreed to sell to respondent’s husband in 1978 was executed—Suit for specific performance filed by respondent and interim relief against dispossession from suit flat prayed—Defendant i.e. appellant Company conceded not to dispossess plaintiff-respondents from suit flat except by due process of law—Complaint under Section 630 of the Act—Magistrate dismissed complaint holding that respondents were under bonafide impression that they had right to continue in suit flat till they got possession of other flat—High Court dismissed appeal holding that respondents made out a bona fide, probable defence that they were allowed to occupy suit flat by Chairman till other flat was made available to them—Whether possession of respondents of suit flat after death of husband of respondent No. 1 was unlawful and unauthorised? Yes.

       Held : The proceedings taken up by the appellant in the Court under Section 630 of the Companies Act were held not to be the proceedings under due process of law. We have already seen that Section 630 of the Companies Act provides for summary legal remedy for seeking possession of the property of the company. Due process of law in the present context would ordinarily mean such an exercise of power by the parties as the settled principles of law permit and/or a course of legal proceedings, according to those rules and principles which have been established in our systems of jurisprudence for the enforcement and protection of private rights. Due process of law would in short mean a procedure established by law, which is a procedure fixed or laid down in law. When the High Court has passed an order of injunction, in the aforesaid terms, what is meant by the High Court is, that the Company shall not take forceable possession of Sonmarg flat during the pendency of the suit and Company was given liberty to take steps for possession as is permissible under law including the provisions of any Statute giving right to obtain possession to the company in the facts and circumstances of the case. The company can prove unlawful possession of the property by the employee or his or her legal representative after the demise of the employee or an officer of the company. The company has the remedy to initiate action under Section 630(1) and on conviction by the Competent Criminal Court it can approach the same Court for directing delivery of possession which sub-Section (2) of Section 630 of the Companies Act provides. The remedy is provided in the Statute itself and the High Court’s order by no stretch of imagination can be read to mean that the Company has to necessarily approach the civil court only for obtaining possession of the Sonmarg flat and that the remedy available under the Companies Act cannot be resorted. In our opinion the decision of the High Court that Section 630 of the Companies Act being penal in nature, the proceeding thereunder cannot be construed to be a proceeding taken in due process of law, cannot be sustained. Filing of civil suit for possession by the Company does not deprive the Company of the right to institute prosecution under the Companies Act and incidentally get an order for delivery of possession. It is stated that the civil suit was filed by way of abundant caution as well as to obtain reliefs which cannot be granted by a Criminal Court trying an offence under Section 630. (Para 18)

       The question really is whether the Chairman of the Board of Directors of the Company has the authority to give such an assurance to Respondents 1 and 2 when he met them at the condolence meeting after the demise of Shri S.C. Agarwalla, which could bind the company and thereby could it be taken as a permission given by the company to respondents 1 and 2 to reside in Sonmarg flat and thereby their possession could be said to be a lawful possession. In the matter of company affairs, Directors act as a body and collectively as a Board. Any Director acting individually has no power to act on behalf of the company in respect of any matter except to the extent to which any power or powers of the Board have been delegated to him by the Board within the limit permitted by the Companies Act or any other law. The position of the Chairman of the Board of Directors is not substantially different from an individual Director. Under the Companies Act, Chairman of the company does not have any special or extraordinary rights to be exercised by him without being authorized by the Board of Directors. The Board of Directors of course have an authority to delegate the power or authority to act for and on behalf of the company to the Chairman of the Board of Directors. (Para 21)

       It is the specific case of the respondents which has been found correct by the Courts that they are holding possession of the company’s flat at Sonmarg on the oral assurance given by Shri Goenka, Chairman of the Board of Directors that they can continue to reside in the said flat until the possession of the flat at Blue Heaven Cooperative Society is given to them. Admittedly the flat at Sonmarg belongs to the Company. Shri S.C. Aggarwalla, husband of Respondent No. 1 and father of Respondent No. 2 was the ex employee of the Company. He expired when he was in the employment of the company and respondents 1 and 2 were residing in the flat after the demise of Shri Aggarwalla as his heirs. Thus it is for Respondents 1 and 2 to show the autho­rity of Shri Goenka to bind the company on the basis of the oral assurance given to them by him to retain the possession of the flat. The High Court has not referred to any evidence to that effect led by the respondents, nor there is any finding that the Board of Directors have authorized the Chairman Shri Goenka to give such an assurance for and on behalf of the company. (Para 22)

       The assurance given to respondents 1 and 2 by the chairman of the company has more of a gratuitous and compassionate flavour and less to do with the interest of the company in mind. Moreover, it is difficult to comprehend how the chairman could promise on behalf of the Company that the respondents will be permitted to remain in flat till delivery of flat of Blue Heaven, when he himself was not sure of the time the ­company would get the possession of the Blue Heaven flat. That apart, the act of the Chairman cannot be construed to be one done incidental to the business of the Company or as a matter of necessity. After the death of Shri Agarwalla on 2.11.1992, the respondents 1 and 2 remained in possession of the company’s Sonmarg flat. Admittedly they were not in employment of the company nor company has authorized them to remain in possession of the same particularly after notice dated 9.11.1994 to vacate the premises and handover the possession to the company. The possession of the company’s flat by the Respondents, after the service of notice to vacate the premises by the company, is wrongful withholding of the property of the company. The respondents by having wrongfully withheld the possession of the company’s flat and not delivering the property to the company, have committed an offence. The interim order of the High Court dated 16.11.1998 in the civil suit filed by the appellant-Company does not wipe out the offence committed already for which criminal complaint was filed. Subsequent to that order, the possession may not be wrongful, but on the date of complaint and till the date of that order, the Respondents did wrongfully withhold that property, attracting the offence under Section 630(1). Having regard to the factual position of the case, we think that imposition of fine of Rupees One thousand each would be a proper punishment for wrongful withholding the Sonmarg flat. Accordingly, respondents 1 and 2 are sentenced to pay fine of Rupees one thousand each. We would like to make it clear that so long as order of the High Court dated 16.11.1998 in Civil Suit No. 2391 of 1997 - M/s. Herdillia Chemicals Ltd. versus Smt. Manjula Agarwala and others, appointing the Court Receiver and delivering him symbolic possession, and actual possession as agent of Receiver to Respondent No. 1 stands, no direction can be given under Section 630(2) for delivery of actual possession of Sonmarg flat to appellant. It is of course open to the petitioner to approach the Civil Court for suitable orders. The High Court may dispose of both the suits viz., Suit No. 7/95 and 2391/97 expeditiously, as far as possible within one year. (Paras 23 & 24)