Indian Hotels Co. Ltd. . vs Bhaskar Moreshwar Karve and another

Judicial Analysis Court Copy Headnote Facts Arguments Court observation

1993 Supreme(Bom) 232

IN THE HIGH COURT OF BOMBAY
M.F. Saldanha, J.
The Indian Hotels Co. Ltd, .... Petitioner
Versus
Bhaskar Moreshwar Karve and another .... Respondent.
Criminal Revision Application No. 33 of 1993, decided on 6-7-1998.
Advocates appeared :
Rafique Dada with V.P. Vashi and J.V. Vashi , for the petitioner.
Sudhir Shah, for respondent No. 1.
R.F. Lambay, A.P.P., for respondent No. 2- State

Headnote:Section 640-Evidence Act, 1872, Section 115-Company property - Alienation of-Officers under Section 630-Power of.
       In matters of alienation of property any officer cannot commit to sell plot in at book value-It if only Board in whom powers vest-Promissory estoppel has no application in such a matter in absence of any promise.
       Section 630-Evidence Act, 1872, Section 115-Company property - Retired employee cannot bold premises on ground that it was promised to sell flat to him at a low price because such a transaction a fraud on company and against interest of share holders-Doctrine of promissory estoppel not applicable -Court can ignore any promise regarding not matters.
       Section 630-ProsecDtion under-Plea of accused that matter belongs to civil Court- Whether criminal Court not be competent forum.
       A complicated question of title such as a case in which there is a substantial dispute on facts supported by evidence as to whether at all the character of the property is such that it conforms to the legal definition of Company property and where, for instance, the person in occupation has already asked for a declaration from the competent Civil Court that heirs, in fact, the de facto and de jure owner of the premises; the question of title could best be adjudicated by a Magistrate in a proceeding under Section 630 of the Companies Act. Another instance could perhaps arise where there is substantial material to support a bona fide plea of tenancy. What is contemplated is a genuine case where the Court of Small Causes may be the only competent forum to finally decide the status of the party in which case a Criminal Court may not the competent forum. In the present case, no such plea has been convassed. On the present record, High Court find nothing that would justify the arguments that the Magistrate is precluded from deciding any aspect of the matter or that he is not competent to do so. This submission, therefore, is devoid of substance and must be rejected. Shri Shah was alluding to the fact that hi. clients civil suit is pending, but he again overlooks the all important angle that the proceeding in between the same parties, the issues are common, i. e. promissory estoppel, the material relied on in the civil suit is the very same evidence that has been evaluated in this proceeding, this is only an attempt to litigate and delay, both of which are characteristics of Section 630 proceedings in the city of Bombay.
       Section 115-See, Companies Act, 1956, Section 630.

JUDGMENT - M.F. SALDANHA, J.:---This proceeding in reminiscent of the allegoric reference to the proverbial serpent that attempted to cutting the hand that was feeding it milk. Harsh as this may seem , a narration of the facts would indicate how appropriate the analogy is. The central issue canvassed in the case being one that is customarily pleaded as a defence in prosecutions under section 630 of the Companies Act, 1956, the law on the point requires to be settled. It has almost become routine in this class of litigation, for a contention to be adopted by the defence , that a promise was made to the accused ex-employees by or on behalf of the company that the premises in question would be sold to the employee at book value or, in the words , for a fraction of other real market value or , in the case of rented premises , that the tenancy would be surrendered in favour of the occupant. This contention is pleaded in all seriousness and it is contended that the accused is entitled to enforce his rights by insisting on specific performance by the company and that , consequently, the ingredient of wrongful retention or withholding of the premises is absent. Litigations are commenced in the Civil Courts for a declaration that the accused should be declared tenant or that he is entitled to enforce the sale at book value to himself for totally unreal consideration on the ground that he is an intending purchaser, apart from other parallel proceedings in various courts, and the criminal prosecution instituted by the company is sought to be stayed on the ground that the accused has raised issues which are within the exclusive jurisdiction of a Civil Court where the accused can confidently assure himself that the first round of litigation will not be over for at least two decades if the requisite dilatory tactics are resorted to .

2. The courts in this country, and in particular the apex Court , have held with consistent regularity that section 630 of Companies Act is a penal provision and that it is intended to provide an expedient and sure-fire remedy for recovery of company property that is wrongfully with held, the term "property" being inclusive of residential premises retained by employees or ex-employees , who undoubtedly would use every available means to retain the property for as long as possible and to even appropriate it wherever the situation permits. The application of the law against such wrong - doers is not to be in a weak, long -drawn out insipid action which would have the effect of encouraging dishonesty, but the approach has to be strong ,vigorous and efficient if there is to be respect for the rule of law. The courts have hitherto interpreted section 630 of the Companies Act and have crystallised the position. That the remedy prescribed by the section is required to be speedy, that it is required to be effective and that , consequently, it must necessarily yield the desired result is how the section has been interpreted. What is, in fact, happening in the proceedings is exactly the reverse and it is, therefore, necessary to ensure that the law is affect to and not into cold -storage.

3. To state the central point in this proceeding , which briefly is that the accused was allotted and is in occupation of residential flat No. 32 on the third floor of Mehr -Dad building ,Cuffe-Parade, Bombay 400 005, along with a garage in the same building since about the year 1978 , in his capacity as an officer of the Indian Hotels Co. Ltd. (hereinafter referred to as "the Company" ). At the time of the purchase , the Company had paid Rs. 1,70,000/- for the property . The accused conveyed a request in the year 1978 to the Managing Director of the Company that he should be permitted to purchase the flat in question at book value. The Managing Director, Mr. Kerkar, intimated to him that he viewed the proposal favourably, but that the same was subject to the sanction of the Board of Directors. The accused contends that he is enti

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