Companies Act Case Law Smt Abhilash Vinodkumar Jain Vs Cox And Kings – India Ltd Ors

PETITIONER:
SMT. ABHILASH VINODKUMAR JAIN

Vs.

RESPONDENT:
COX & KINGS (INDIA) LTD. ORS.

DATE OF JUDGMENT21/03/1995

BENCH:
ANAND, A.S. (J)
BENCH:
ANAND, A.S. (J)
PARIPOORNAN, K.S.(J)

CITATION:
1995 AIR 1592 1995 SCC (3) 732
JT 1995 (3) 528 1995 SCALE (2)323
ACT:

 

HEADNOTE:

 

JUDGMENT:
DR. ANAND, J.:
1. Leave granted
2. Both those appeals raise a common question of law and
are being disposed of by this common judgment.
3. The admitted facts, which alone are relevant for the
purpose of those appeals and are not in dispute are that the
appellants in both the cases arc the legal heirs of the
employee/officer who died in harness while serving with the
respective respondent company. The concerned employee in
both the cases had been allotted premises during their
service by the respective employer (respondent company) and
on the failure of the appellants to handover the vacant
possession of the allotted premises after the demise of the
employee/officer concerned, prosecutions were launched
against them (legal heirs) under section 630 of the
Companies Act, 1956 (hereinafter referred to as the Act’).
The appellants approached the High Court through petitions
under Section 482 Cr.P.C. seeking quashing of the proceed-
ings on the ground that the provisions of Section 630 of the
Act cannot be invoked against the legal heirs of deceased
employee, who had died in harness, and as such the complaint
against them under Section 630 of the Act was not
maintainable. The High Court dismissed their petitions
filed under Section 482 Cr. P.C. Hence, these appeals.
4. The meaningful question and as a matter of fact the
only question which has been canvassed before usis : whether
a petition tinder Section 630 of the Act is maintainable
against the legal heirs of deceased officer or an employee
for retrieval of the company’s property?
5. With a view to answer the question, it is desirable
that we may first notice the provisions of Section 630 of
the Act. The said Section reads:-
630. Penalty for wrongful withholding of any
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 one
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.
532
6. There was a divergence of opinion between various High
Courts regarding the interpretation of the expressions “any
officer or employee of a company” occurring in Clause (1) of
Section 630 of the Act. The Bombay High Court in Harkishan
Lakhimal Gidwani v. Achyut Kashinath Wagh ((1982) 52 Company
Cases 1)) gave a broader interpretation to the words and
held that the expression would include an ex-officer or an
ex-employee of the company also while the Calcutta High
Court in Amrit Lal Chum v. Devi Ranjan Jha {(1987) 61
Company Cases 21 1)) gave a narrow interpretation and opined
that an ex-officer or an ex-employee is not included in the
said expression and that the applicability of the provisions
is restricted to an existing employee or officer. The High
Court of Madhya Pradesh in Beharilal and Another v. Binod
Mills Company Limited [(1987) 3 Comp LJ 246 (NV)] following
the Calcutta High Court view held that the provisions
embodied in Section 630 (1) of the Act do not contemplate
criminal proceedings being launched against relatives of an
erstwhile employee or officer for recovering the possession
of the property of he company.
7.The Court while hearing an appeal against the judgment of
the Bombay High Court in Baldev Krishna Sahi v. Shipping
Corporation of India Limited & Anr. { 1988 (1) SCR 168)
resolved the conflict and set the controversy at rest. It
held that the expression “officer” or “employee” of a
company applies not only to existing officers or employees
but also includes past officers or employees, where such
officer or employee either (a) wrongfully obtains possession
of any property, or (b) having obtained possession of such
property during his employment, wrongfully withholds the
same after the termination of his employment. The Court
opined:
“The beneficient provision contained in s. 630
no doubt penal, has been purposely enacted by
the legislature with the object of providing
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 the
mischief and advance the remedy.
Section 630 of the Act which make the wrongful
withholding of any property of a company by an
officer or employee of the company a penal
offence is typical of economy of language
which is characteristic of the draughtsman of
the Act. The Section is in two parts. Sub-
s.(1) by clauses (a) and (b) creates two
distinct and separate offences. First of
these is the one contemplated by cl.(a),
namely, where an officer or employee of a
company wrongfully obtained possession of any
property of the company during the course of
his employment, to which he is not entitled.
Normally, it is only the present officers and
employees who can secure possession of any
property of a company. It is also possible
for such an officer or employee after
termination of his employment to wrongfully
take away possession of any such property.
This is the function of cl. (a) and although
it primarily refers to the existing officers
and employees, it may also take in past offic-
ers and employees. In contrast, cl.(b) con-
templates a case where an officer or em-
533
ployee of a company having any property of a
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 Act. It may
well be that an officer or employee may have
lawfully obtained possession of any such
property during the course of his employment
but wrongfully withholds it after the
termination of his employment. That appears
to be one of the functions of cl.(b). It would
be noticed that cl.(b) also makes it an
offence if any officer or employee of a
company in his possession knowingly applies it
to purposes other than those expressed or
directed in the articles and authorised by the
Act. That would primarily apply to the
present officers and employees and may also
include past officers and employees. There is
therefore no warrant to give a restrictive
meaning to the term ‘officer of employee’
appearing in subs, (1) of s. 630 of the Act.
It is quite evident that clauses (a) and (b)
are separated by the word ‘or’ and therefore
are clearly disjunctive”. (Emphasis supplied)
8. This Court then held that decision of the Calcutta High
Court in Amrit Lal Chum’s (supra) as erroneous and overruled
the same. It was opined that the restrictive meaning to the
term ‘officer or employee’ which must take its colour from
the context in which it appears would defeat the object of
the provisions of Section 630 of the Act viz., preservation
of the property of company by the creation of two distinct
offences by clauses (a) and (b) which arise under different
set of circumstances. The Bench noticed with approval the
judgment of the Bombay High Court in Harkishan Lakhimal
Gidwani v. Achyut Kashinath Wagh & Anr. (supra) and Govind
T. Jagtiani v. Sirajuddin S.KazI & Anr. {[1984] 56 Company
Cases 329)}.
9. A three Judge Bench later on in Amrit Lal Chum v.
Devoprasad Dutta Roy & Anr. etc. (1988 (2) SCR 733), while
hearing an appeal from the judgment of the Calcutta High
Court in Amrit Lal Chum’s case (supra) held that Section 630
of the Act plainly makes it an offence if an officer or
employee of a company who was permitted to use the property
of the company during his employment wrongfully retains or
occupies the same after the termination of his employment.
It was opined that it is the wrongful holding of the prop-
erty of the company after the termination of the employment
which is an offence under Section 630 (1) of the Act and
that there is no warrant to give a restrictive meaning to
the term ‘officer or employee’ appearing in sub-section (1)
of Section 630 of the Act as meaning only an existing
officer or in existing employee and not those whose
employment had been terminated or had otherwise come to an
end. The Bench approved the law laid down by this Court in
Baldev Krishna Sahi’s case (supra)
10. In Atul Mathur v. Atul Kalra and Another ((1989) 4 SCC,
514) this Court once again emphasised that the object of the
provisions of Section 630 of the Act is to retrieve the
property of the company and that even though the provisions
are penal in nature, the object of the provision is required
to be given a purposive interpretation so as not to choke
the beneficient provision. The Division Bench once again
followed the judgment in Baldev Krishna Sahi’s case (supra).
11. In Gokak Patel Volkart Ltd. v. Dundayya Gurushiddaiah
Hiremath And Others {(1991) 2 SCC, 141 )}, the Division
534
rendered by this Court and relying upon the law laid down in
Baldev Krishna Sahi’s case (supra) and Amrit Lal Chum’s case
(supra) held that the offence under Section 630 of the Act
is not such as-can be said to have consummated once for all
and that the offence continues until the officer or employee
delivers up or refunds the property of the company when
ordered by the Court to do so within a time fixed by the
Court and in default to suffer the term of imprisonment as
may be imposed by the Court. It was held that ‘officer or
employee’ under Section 630 of the Act includes present and
past officers and employees.
12.Thus, it would be seen that this Court has consistently
taken the view and repeatedly emphasised that the provisions
of Section 630 of the Act have to be given purposive and
wider interpretation and not restrictive interpretation. In
the four cases referred to above, this Court was not re-
quired to directly consider and deal with the question
whether the provisions of Section 630 of the Act can be
invoked against the legal heirs, for wrongfully withholding
the property of the company, on the death in harness of an
employee or officer of the company to whom the property was
allotted. In these two appeals that precisely is the issue
which invites our attention.
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
penal liability embracing the case of an existing employee
or 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 case 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.
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
handover the allotted property back to the company. Where
the property of the company is held back whether by the
employee, past employee or any one 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
interpretive 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 prop-
535
erty 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’s
case (supra) also while resisting the extension of the
provisions of Sections 630 of the Act to the past employee
or past officer and rejecting the same. this Court opined :
“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 the 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 property’ in cl. (b) of sub-s.(1) for the
contention that cl. (b) does not stand by
itself but is interconnected with cl. (a) and
therefore both clauses (a) and (b) must be
read together. In essence, the submission is
that sub-s. (1) of s.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 s.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 ss. 538
and 545. The entire argument of the learned
counsel is based upon the judgment of the High
Court of Calcutta in Amritlal Chum’s case. 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-s. (1) of s. 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 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.
536
15.Even though Section 630 of the Act falls in Part XIII of
the Companies Act and provides for penal consequences for
wrongful withholding of the property of the company, the
provisions strictly speaking are not penal in the sense as
understood under the penal law. The provisions are quasi-
criminal. They have been enacted with the main object of
providing speedy relief to a company when its property is
wrongfully obtained or wrongfully withheld by an employee or
officer or an ex-employee or officer or anyone claiming
under them. In our opinion, a proper construction of the
Section would be that the term “officer or employee” of a
company in Section 630 of the Act would by a deeming fiction
include the legal heirs and representatives of the employee
or the officer concerned continuing in occupation of the
property of the company after the death of the employee or
the officer.
16.Under sub-Section (1) of Section 630 for the wrongful
obtaining of the possession of the property of the company
or wrongfully withholding it or knowingly applying it to a
purpose other than that authorised by the company, the
employee or the officer concerned is “punishable with fine
which may extend to one thousand rupees.” The “fine” under
this subsection is to be understood in the nature of
“compensation” for wrongful withholding of the property of
the company. Under sub-section (2) what is made punishable
is the disobedience of the order the Court, directing the
person, continuing in occupation, after the right of the
employee or the officer to occupation has extinguished, to
deliver up or refund within a time to be fixed by the Court,
the property of the company obtained or wrongfully withheld
or knowingly misapplied. Thus, it is in the event of the
disobedience of the order of the Court, that imprisonment
for a term which may extend to two years has been
prescribed. The provision makes the defaulter, whether an
employee or a past employee or the legal heir of the
employee, who disobeys the order of the Court to hand back
the property to the company within the prescribed time
liable for punishment.
17.The object of the Companies Act inter alia is to regulate
the affairs of the companies including the control of the
management and protection of the property of the company.
The object of Section 630 of the Act has, thus, a direct
nexus with the object of the Act. It is precisely for this
reason that in Gokak Patel Volkart case (supra) this court
held the offence under Section 630 of the Act to be “a
continuing offence.”
18.Section 630 of the Act provides speedy relief to the
company where its property is wrongfully obtained or
wrongfully withheld by an “employee or an officer” or a
“past employee or an officer” or “legal heirs and
representatives” driving their colour and content from such
an employee or officer” in so far as the occupation
and possession of the property belonging to the company is
concerned. The failure to deliver property back to the
employer on the termination, resignation, superannuation or
death of an employee, would render the “holding” of that
property wrongful and actionable under Section 630 of the
Act. To hold that the “legal heirs” would not be covered by
the provisions of Section 630 of the Act would be unrealis-
tic and illogical. It would defeat the “beneficient”
provision and ignore the factual realities that the legal
heirs or family
537
members who are continuing in possession of the allotted
property, had obtained the right of occupancy with the
concerned employee in the property of the employer only by
virtue of their relationship with the employee/officer and
had not obtained or acquired the right to possession of the
property in any other capacity, status or right. The
legislature, which is supposed to know and appreciate the
needs of the people, by enacting Section 630 of the Act
manifested that it was conscious of the position that today
in the corporate sector – private or public enterprise – the
employees officers arc often provided residential
accommodation by employer for the ‘use and occupation’ of
the concerned employee during the course of his employment.
More often than not, it is a part of the service conditions
of the employee that the employer shall provide him
residential accommodation during the course of his em-
ployment. If an employee or a past employee or anyone
claiming the right of occupancy under them, were to
continue to ‘hold’ the property belonging to the company,
after the right to be in occupation has ceased for one
reason or the other, it would not only create difficulties
for the company, which shall not be able to allot that
property to its other employees, but would also cause
hardship for the employee awaiting allotment and defeat the
intention of the legislature. The courts are therefore
obliged to place a broader, liberal and purposeful
construction on the provisions of Section 630 of the Act in
furtherance of the object and purpose of the legislation of
construe it in a wider sense to effectuate the intendment of
the provision. The “heirs and legal representatives” of the
deceased employee have no independent capacity or status to
continue in occupation and possession of the property, which
stood allotted to the employee or the officer concerned or
resist the return of the property to the employer, in the
absence of any express agreement to the contrary entered
with them by the employer. The Court, when approached by
the employer for taking action under Section 630 of the Act,
can examine the basis on which the petition/complaint is
filed and if it is found that the company’s right to
retrieve its prop” is quite explicit and the stand of the
employee, or any one claiming through him, to continue in
possession is baseless, it shall proceed to act under
section 630 of the Act and pass appropriate orders. Only an
independent valid right, not only to occupation but also to
possession of the property belonging to the company,
unconnected with the employment of the deceased employee can
defeat an action under Section 630 of the Act if it can be
established that the concerned deceased employee had not
wrongfully nor knowingly applied it for purposes other than
those authorised by the employer. In interpreting a
beneficient provision, the Court must be for ever alive to
the principle that it is the duty of the court to defend the
law from clever evasion and defeat and prevent perpetration
of legal fraud.
19.Thus, our answer to the question posed in the earlier
part of this judgment is in the affirmative and we hold that
a petition under Section 630 of the Act is maintainable
against the legal heirs of the deceased officer/employee for
retrieval of the company’s property wrongfully withheld by
them after the demise of the employee concerned. The High
Court was, therefore, right in dismissing the petitions
filed by the appellants under Section 482 Cr. P.C. and
declining to quash the proceed-
538
ings initiated by the employer of the deceased employee for
retrieval of the company’s property under Section 630 of the
Act. These appeals consequently fall and are dismissed. No
costs.
541

 

 

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