IMPORTANT POINT
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 and not on any independent account.

JUDGMENT

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