HOOGHLY MILLS COMPANY LTD. versus THE STATE OF WEST BENGAL AND ANR.
[2019] 13 S.C.R. 406, Supreme Court of India, 2019
Outcome: Appeal(s) allowed (Granted)
Segment: Ratio
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HOOGHLY MILLS COMPANY LTD.
v.
THE STATE OF WEST BENGAL AND ANR.
(Criminal Appeal No. 1571 of 2019)
OCTOBER 17, 2019
[MOHAN M. SHANTANAGOUDAR AND
AJAY RASTOGI, JJ.]
Companies Act, 1956 :
s.630(1) and (2) – Criminal complaint by complainant
Company – Against the accused alleging that he was not delivering
the possession of the residential premises (which he was given in
the capacity of Director of the Company) even after ceasing to be
Director of the Company – Also filed application for dispossessing
the accused – Plea of the accused was that there was oral
understanding between him and the original owners of the property
that the same would be transferred to him, when he would pay the
sale consideration – Thereafter, accused filed a suit against the
vendors praying for specific performance and for permanent
injunction – Temporary injunction was issued in the suit directing
status quo in respect of possession – Application u/s. 630(2) allowed
directing dispossession of the accused – Revisional Court affirmed
the order passed in application u/s 630(2) – High Court in petition
u/s. 482 Cr.P.C. set aside the findings of the Court below – Appeal
to Supreme Court – Held : Pendency of civil suit would not bar
complaint u/s 630 with respect to same property, even if between
same parties, if there is no bona fide dispute regarding the company’s
right over the property – In the present case, there is no bona fide
dispute as the
claim of the accused is based on oral understanding
– Mere issuance of temporary injunction would not make the dispute
bona fide – Therefore, pendency of civil suit and interim reliefs
granted therein would not bar criminal prosecution u/s 630 – Section
630 has to be given liberal interpretation so as to facilitate
expeditious recovery of the Company’s property – There is no error
in allowing application u/s 630(2), during pendency of substantive
criminal proceedings – Specific Relief Act, 1963 – s. 41(b) and (d).
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Code of Criminal Procedure, 1973 :
s.482 – Inherent powers – Scope of, vis-a-vis s.397(2) – Held
: High Court in exercise of its inherent powers u/s 482, can set
aside an interlocutory order, notwithstanding the bar u/s 397(2).
Allowing the appeal, the Court
HELD : 1.1 A company has a separate legal personality.
Hence even if it is accepted that the appellant company is owned
and controlled by the vendors themselves, any orders issued in
the civil suit between 2nd respondent and the vendors would not
be binding upon the appellant company as it is not a party to the
suit. It is true that in some cases the Court may pierce the
‘corporate veil’ and look at the reality behind the entity if it is
found that the device of incorporation has been used to perpetrate
some illegality or fraud. However no such illegality or fraud has
been pleaded and proved in the present case. In any case, the
pendency of a civil suit in respect of a property, would not bar a
complaint under Section 630 of Companies Act, 1956 with respect
to the same property, even if it is between the same parties, if
there is no dispute or no bona fide dispute regarding the
company’s right over the property. The mere fact that the accused
employee has refuted the company’s claim to possession would
not make the dispute bona fide. [Para 8] [418-A-D]
1.2 In the present case, there is no bona fide dispute, in as
much as the 2nd respondent’s entire claim to the disputed property
is based on an oral
agreement/‘understanding’, as to the terms
of which no documentary evidence has been produced. Whereas
the appellant company has at least been put into symbolic
possession of the property by Clause 6 of the agreement for sale
dated 26.4.2008, which 2nd respondent has not disputed. [Para 8]
[418-E-F]
1.3 In a case such as the present complaint, where there
was only an oral agreement in favour of the accused employee
for purchase of the property, but the civil court has issued a
temporary injunction directing status quo, the accused will
nevertheless acquire the right to possess the disputed property
lawfully only if he is successful in obtaining a decree in his favour
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in the civil suit. The mere issuance of a temporary injunction by
the civil court directing maintenance of status quo in respect of
the disputed property does not make the dispute bona fide or bar
the company’s right to recover the disputed property from the
accused employee under Section 630 of the 1956 Act. At best,
such an injunction would only bar the company from creating any
rights in favour of third parties pending disposal of the civil suit.
This is because the cause of action in the civil suit is completely
different from the question of whether the employee is wrongfully
withholding the company’s property, which is the issue for
consideration in the present criminal proceedings. If prima facie
the trial court finds that the company has the right to possess the
property, the issuance of a temporary injunction by the civil court
cannot be used to defeat the company’s lawful right of possession.
This is also evident from clauses (b) and (d) of Section 41 of the
Specific Relief Act, 1963. [Para 8] [418-G-H; 419-A-C]
1.4 Where the Magistrate has found that prima facie the
company has a right to possession of the disputed property, he
may grant interlocutory relief under Section 630(2) prior to
conclusion of the trial under Section 630(1). Section 630 has to
be given a liberal interpretation so as to facilitate expeditious
recovery of the company’s property. The expression ‘officer or
employee’ in Section 630,
though it primarily applies to existing
officers and employees, may also take in past officers and
employees. Hence, given that the primary object of Section 630
is to provide a speedy mechanism for restoration of wrongfully
withheld property to companies, the provision should be
construed as far as possible to facilitate a remedy in favour of the
aggrieved company and to prevent the wrongful retention of the
property for an unduly long period by the accused. [Para 9]
[419-G-H; 420-A, D-E; 421-C]
1.5 There is no stipulation in Section 630(2) that an order
for delivery of wrongfully withheld property must be made only
after the accused has been convicted under Section 630(1).
Rather, it says the Court ‘trying’ the offence may direct the
delivery of such property, which indicates that such an order may
be passed at any stage by the trial court. Therefore in the present
case, the courts below have not committed any error in allowing
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the appellant company’s application under Section 630(2)
during pendency of substantive criminal proceedings. [Para 9]
[421-D-F]
1.6 The High Court has gone against the spirit of the
provision, by strictly interpreting Section 630 to mean that the
appellant company must have title by way of ownership to the
disputed property and that the accused should have been in
possession of the flat as a perquisite of his service. Section 630
nowhere requires that the company should have title to the
property. The emphasis is on whether the accused has obtained
wrongful possession of the property which defeats the company’s
lawful right of exclusive possession, even though the property
as such may not belong to the company but to a third-party
landlord or licensor. The term ‘property of the company’ has to
be construed widely having regard to the beneficial object of the
Section. [Para 10] [421-G-H; 422-A-B]
1.7 The 2nd respondent has admitted that after the death of
the original owner, the disputed property was inherited by the
vendors who subsequently transferred possession to the
appellant company by the agreement dated 26.4.2008. The 2nd
respondent also handed over the title deeds of the property to
the appellant company. Therefore, till the time that the 2nd
respondent does not prove in the civil suit that the vendors were
required to have sold the property to him, it is the company which
has the exclusive right to possess the property at present.
[Para 10]
[422-C]
1.8 The 2nd respondent has failed to rebut the fact that as of
26.4.2008 it is the company which has acquired the exclusive
right to possess the property, and the company handed over
possession to him w.e.f 1.5.2008 only in his capacity as the
Director of the company. Whatever may have been the situation
prior to 26.4.2008, on and after that date the company became
entitled to recover possession of the disputed property.
[Para 10] [422-F]
1.9 There is no substance in the 2nd respondent’s argument
that he was misled into delivering the title documents of the
disputed property by his sister-in-law on the ground that they
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were required for updation of records. The 2nd respondent, being
an office bearer in the company, could have got the records
updated on his own or could have delivered it to the vendors, if it
was on their insistence that he handed over the documents.
However the letter dated 9.6.2008 shows that the title documents
were delivered to a representative of the appellant company. This
shows that the 2nd  respondent acknowledged that title was to be
transferred to the company vide the agreement dated 26.4.2008.
[Para 10] [422-G-H; 423-A]
1.10 Section 630 nowhere stipulates that the property
should have been allotted by the company to the accused as a
perquisite of service. The purpose for which and the time at which
possession was given, is irrelevant. What is sufficient is that the
accused was put into possession of the property in their capacity
as an officer/employee of the company and continued to withhold
such property without having any independent right, title or
interest thereto even after cessation of his employment. Mere
oral agreement or understanding would not be sufficient to
establish such an independent right. [Para 10] [423-B-D]
Delhi Development Authority v. Skipper Construction
Company (P) Ltd., (1996) 4 SCC 622 : [1996] 2 Suppl.
SCR 295 ; Damodar Das Jain v. Krishna Charan
Chakraborti (1989) 4 SCC 531 ; Atul Mathur v. Atul
Kalra (1989) 4 SCC 514 : [1989] 3 SCR 750 ; Baldev
Krishna Sahi v. Shipping
Corporation of India Limited
(1987) 4 SCC 361 : [1988] 1 SCR 168 - relied on.
Tata Tea Limited v. Fazlur Rahman (2001) 104 Comp
Cas 718 Cal ; Jolly Durga Prasad v. Goodricks Group
Ltd. (1999) 97 Comp Cas 698 (Cal) ; S. Palaniswamy
v. Sree Janardhana Mills Ltd. (1993) 76 Com Cases
323 (Mad).) ; Kannankandi Gopal Krishna Nair v.
Prakash Chunder Juneja (1994) 81 Comp Cas 104 ;
PV George v. Jayems Engineering Co. (P) Ltd. (1990) 2
Comp LJ 62 (Mad)) ; Metal Box India v. State of West
Bengal (1997) 2 DHN 423 - referred to.
2.1 Section 397(2) Cr.P.C provides that the High Court’s
powers of revision shall not be exercised in relation to any
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interlocutory order passed in any appeal, inquiry, trial or other
proceeding. Whereas Section 482 of the Cr.P.C provides that
nothing in the Cr.P.C will limit the High Court’s inherent powers
to prevent abuse of process or to secure the ends of justice.
Hence the High Court may exercise its inherent powers under
Section 482 to set aside an interlocutory order, notwithstanding
the bar under Section 397(2). However it is settled law that this
can only be done in exceptional cases. This is, for example, where
a criminal proceeding has been initiated illegally, vexatiously or
without jurisdiction. [Para 11] [423-D-F]
Madhu Limaye v. State of Maharashtra (1977) 4 SCC
551 : [1978] 1 SCR 749 - relied on.
2.2. In the present case, the order of the Magistrate under
Section 630(2) was an interlocutory relief based on a prima facie
assessment of facts and did not conclusively decide the ongoing
trial under Section 630(1). If the Magistrate finds that the
appellant company has been unable to prove that the 2nd
respondent was wrongfully withholding possession of the property,
such interlocutory relief shall stand vacated. Thus, it is clear that
there was no exceptional case of illegality or lack of jurisdiction
in the interlocutory order of the lower court calling for the exercise
of the inherent powers of the High Court under Section 482,
Cr.P.C. [Para 11] [423-G-H; 424-A]
Case Law Reference
[1989] 3 SCR 750
relied on
Para 4
(2001) 104 Comp Cas 718 Cal.
referred to
Para 4
[1988] 1 SCR 168
referred to
Para 4
(1997) 2 CHN 423
referred to
Para 4
[1996] 2 Suppl. SCR 295
relied on
Para 8
(1989) 4 SCC 531
relied on
Para 8
(1999) 97 Comp Cas 698 (Cal)
referred to
Para 8
(1993) 76 Com Cases 323 (Mad)
referred to
Para 8
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(1994) 81 Comp Cas 104
referred to
Para 9
(1990) 2 Comp LJ 62 (Mad))
referred to
Para 10
[1978] 1 SCR 749
relied on
Para 11
CRIMINAL APPELLATE JURISDICTION : Criminal Appeal
No. 1571 of 2019.
From the Judgment and Order dated 24.08.2017 of the High Court
of Calcutta in Criminal Revision Petition being C.R.R. No. 1004 of 2013.
Shyam Divan, Siddharth Bhatnagar, Sr. Advs., S. Chakraborty,
Ms. Kanchan Yadav, Ms. Harshita Verma (for M/S. Legal Options),
Advs. for the Appellant.
S. B. Upadhyay, Sr. Adv., Suhaan Mukerji, Ms. Astha Sharma,
Amit Verma, Abhishek Manchanda, Ms. Kajal Dalal, Prastut Dalvi,
Naveen Kumar (for M/S. Plr Chambers And Co.), Rana S. Biswas,
Sunil Kumar Sharma, Nishant Kumar, Ms. Sharmila Upadhyay,  Advs.
for the Respondents.
The Judgment of the Court was delivered by
MOHAN M. SHANTANAGOUDAR, J.
1. Leave granted.
2. This appeal by special leave arises out of judgement dated
24.8.2017 of the Calcutta High Court allowing the 2nd Respondent’s
Criminal Revision Petition against order dated 6.9.2010 of the Judicial
Magistrate, Alipore and order dated 21.12.2012 of the Additional Sessions
Judge, Alipore.
3. The facts giving rise to this appeal are as follows: The appellant
is an ‘existing’ company within the meaning of the Companies Act, 1956
(for short ‘1956 Act’), which entered into agreement for sale dated
26.4.2008 for purchase of a flat situated on the 3rd Floor, of Plot-D in
Sreekunj, 13, Gurusaday
Road, Police Station-Karaya, Kolkata-700019
(hereinafter ‘disputed property’) with the legal heirs of one late Mr.
Arun Kumar Bajoria (hereinafter ‘vendors’). Per the terms of the
agreement, the vendors would execute and register the deed of
conveyance in favour of the appellant upon payment of the entire sale
consideration of Rs 2,02,26,000/-. However in the interim, under Clause
6 of the agreement, the appellant company would be put into possession
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of the property subject to payment of monthly rent of Rs 84,275/-. This
agreement is not disputed.
The appellant’s case is that the 2nd Respondent/accused Mr. Bal
Binode Bajoria was a director of the appellant company from 1988 to
2008. He was allowed to use and occupy the disputed property on and
from 1.5.2008 by virtue of holding the office of director. The 2nd
Respondent was to retire by rotation from the Board of Directors in the
Annual General Meeting of the appellant company held on 22.11.2008;
however he offered himself for re-election. The members present in the
meeting voted against him and thereafter the 2nd Respondent ceased to
be a director of the appellant company. Consequently he was required
to return the disputed property to the company; however he failed to do
so.
The appellant company on 20.4.2009 asked the 2nd Respondent
to vacate and deliver physical possession of the disputed property. When
he refused, the appellant sent a letter on 30.4.2009 to the 2nd Respondent
requesting delivery of possession. When the 2nd Respondent still failed
to comply with the appellant’s request, criminal complaint was filed against
him under Section 630(1) of the 1956 Act on 11.8.2009. During the
pendency of this complaint, the appellant company filed an application
on 29.4.2010 under Section 630(2) of the 1956 Act for dispossessing the
2nd Respondent from the disputed property. Section 630 reads as follows:
“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
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
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withheld or knowingly misapplied, or in default, to suffer
imprisonment for a term which may extend to two years.”
Contrary to the appellant’s allegations, the 2nd Respondent contends
that he had a mutual understanding/oral agreement with the deceased
Mr. Arun Kumar Bajoria, who was his cousin brother, under which the
deceased had paid consideration of Rs 9,10,170/- for construction of the
disputed property. It was agreed between the 2nd Respondent and Arun
Kumar Bajoria that the latter would transfer the disputed property to the
2nd Respondent and his nominee upon payment of the purchase price,
once the 2nd Respondent was in a position to pay such amount. In other
words, according to the 2nd Respondent, he was permitted to purchase
the disputed property based on his oral understanding with the deceased
Arun Kumar Bajoria on and after the date on which he tendered sale
consideration to Arun Kumar Bajoria.
However, after Arun Kumar Bajoria expired, relations between
the 2nd Respondent and Arun Kumar Bajoria’s family became strained.
Hence the vendors failed to execute a deed of conveyance as agreed
upon between the 2nd Respondent and their predecessor-in-interest, and
also wrongfully removed him from Directorship of the appellant company.
Thereafter the 2nd Respondent filed Suit No. 2126/2009 before
the Civil Judge (Senior Division) at Alipore against the vendors, praying
for specific performance and a permanent
injunction restraining the
vendors from disturbing his possession, based upon the supposed oral
agreement/understanding of sale he had with Arun Kumar Bajoria. The
Civil Judge (Senior Division) by order dated 6.7.2009 issued a temporary
injunction directing the parties to maintain status quo in respect of
possession of the disputed property. This suit is still pending adjudication.
4. The learned Judicial Magistrate at Alipore by order dated
6.9.2010 allowed the appellant’s application under Section 630(2). The
Magistrate relied upon this Court’s decision in Atul Mathur v. Atul
Kalra, (1989) 4 SCC 514, and the Calcutta High Court’s decision in
Tata Tea Limited v. Fazlur Rahman, (2001) 104 Comp Cas 718 Cal.
to hold that the pendency of a civil suit would not bar the filing of a
criminal complaint in respect of the disputed property under Section 630,
and that an application under Section 630(2) could be allowed even before
final disposal of the complaint under Section 630(1) of the 1956 Act.
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The Magistrate further held that in view of this Court’s decision
in Baldev Krishna Sahi v. Shipping Corporation of India Limited,
(1987) 4 SCC 361, and the Calcutta High Court’s decision in Metal Box
India v. State of West Bengal, (1997) 2 CHN 423, the term ‘officer or
employee’ in Section 630 would include erstwhile officers of the company
who have wrongfully retained possession of the company’s property
subsequent to cessation of their employment. Therefore the Magistrate,
taking into account the fact that the accused/2nd Respondent had not
denied that the disputed property belonged to the appellant company and
that he was given possession of the flat by the company for his
accommodation, directed the 2nd Respondent to vacate and hand over
possession of the disputed property to the appellant company.
The learned Sessions Judge at Alipore by order dated 21.12.2012
dismissed the 2nd Respondent’s revisional application under Section 397
read with Section 399 of the Criminal Procedure Code, 1973 (‘Cr.P.C’),
and affirmed the Magistrate’s order, noting that since the appellant
company was not a party to the civil Suit No. 2126/2009 between the 2nd
Respondent and the vendors, the pendency of the suit would not bar
criminal proceedings against him.
However the High Court in the impugned judgement allowed
the 2nd Respondent’s petition under Section 482, Cr.P.C and set aside
the findings of the Magistrate and the Sessions Judge on the ground that
there was no
evidence to prove that the disputed property was given to
the 2nd Respondent by the appellant company as a perquisite for his
service as director, either at the time of his induction into the Board of
Directors, or after execution of the agreement for sale dated 26.4.2008.
Rather, the 2nd Respondent had been a director of the company since
1988, and the disputed property had been in his possession at least since
2001, long before the appellant company and the vendors entered into
an agreement for sale. Hence the decisions in Baldev Krishna Sahi
(supra), Metal Box India (supra) and Tata Tea Limited (supra) would
not be applicable to the present case as in those decisions; property had
been allotted by the company to the accused officers/employees as a
perquisite of their service.
The High Court further held that since there was no evidence
that any deed of conveyance was registered with respect to the
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agreement for sale dated 26.4.2008 (supra), and the company had not
paid any consideration or advance rent at the time of the agreement, it
could not be said that the company had any title to the disputed property.
Hence the High Court held that the lower court finding that the disputed
property had been given to the 2nd Respondent by the company was
patently incorrect, and that Section 630(2) of the 1956 Act would not
apply to the present case; and consequently set aside the lower courts’
orders.
5. Learned senior counsel for the appellant, Mr. Shyam Divan,
emphatically argued that the High Court’s finding was erroneous in as
much as it found that the appellant company had no right to claim recovery
of possession of the disputed property merely because no sale deed was
executed. The 2nd Respondent himself has admitted in his counter-
affidavit that he had delivered the original title documents of the disputed
property to the appellant company by letter dated 9.6.2008.
Further, that in Atul Mathur (supra), this Court had granted
relief to the complainant company even though the property was taken
on a leave-and-license basis. In the present case, Clause 6 of the
agreement for sale dated 26.4.2008 has created a monthly tenancy in
favour of the appellant; hence the appellant has gained the right to
possession of the property on that basis.  To support this contention, he
placed on record a certificate of LB Jha & Co
Chartered Accountants
dated 16.1.2018 showing that the appellant company has paid rent of Rs
91,01,700/- in respect of the disputed property from 1.1.2009 to
31.12.2017; as well as TDS (Tax deducted at source) certificates showing
that the appellant company had deducted tax on the rent income while
making payments to the vendors.
He further argued that since the appellant company was not a
party to the civil suit between the 2nd Respondent and the vendors, the
order in the civil suit would not be binding on the appellant company; and
that it was not required that the officer/employee accused under Section
630 should be in possession of the disputed property as a perquisite of
his service. Therefore the High Court had erred in exercising its powers
under Section 482 of the Cr.P.C.
6. Per contra, learned senior counsel for the respondent Mr.
S.B. Upadhyay contended that the complaint is nothing but a scheme of
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the appellant company, which is composed of the 2nd Respondent’s own
relatives, to oust him from possession of the disputed property. The
company is owned and controlled by the vendors themselves, and the
criminal complaint is nothing but an alternate mechanism to oust the 2nd
Respondent from the disputed property since the civil court had directed
maintenance of status quo; that the 2nd  Respondent was wrongfully
made to believe by his relatives, i.e. the vendors, that the title documents
of the disputed property were to be sent for updation of records, hence
he had handed them over to the vendors’ custody, and it was only later
that he came to know that the documents had been wrongfully handed
over to the appellant company.
That he has been in possession of the disputed property since
1994; and even the appellant has admitted that he has been in possession
at least since 2001; whereas the appellant company entered into an
agreement for sale with the vendors only in 2008, that too via an
unregistered sale deed. Consequently it cannot be said that the appellant
had any title to the disputed property, and that the company gave the 2nd
Respondent possession of the property in his capacity as an officer of
the company. Hence Section 630 is not attracted to the present case.
7. Therefore the following issues arise for consideration in the
present appeal:
First, whether an application under Section 630(2) of the 1956
Act was maintainable, in spite of pendency
of the civil suit and issue of
temporary injunction in respect of the disputed property?
Second, whether an order could be made under Section 630(2)
prior to final disposal of the complaint under Section 630(1)?
Third, if the first and second issues are answered in the
affirmative, whether the company is entitled to pray for dispossession of
2nd Respondent from the property?
Fourth, whether it is required that 2nd Respondent should have
been in possession of the disputed property as a perquisite of his service?
Finally, whether in light of the answers to the aforementioned
issues, the High Court was justified in exercising its inherent powers
under Section 482 of the Cr.P.C?
HOOGHLY MILLS COMPANY LTD. v. THE STATE OF WEST
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8. With respect to the first issue, it is undisputed that a company
has a separate legal personality. Hence even if we accept the respondents’
contention that the appellant company is owned and controlled by the
vendors themselves, any orders issued in the civil suit between 2nd
Respondent and the vendors would not be binding upon the appellant
company as it is not a party to the suit. It is true that in some cases the
Court may pierce the ‘corporate veil’ and look at the reality behind the
entity if it is found that the device of incorporation has been used to
perpetrate some illegality or fraud (See Delhi Development Authority
v. Skipper Construction Company (P) Ltd., (1996) 4 SCC 622).
However no such illegality or fraud has been pleaded and proved in the
present case.
In any case, it has been settled by this Court in Damodar Das
Jain v. Krishna Charan Chakraborti, (1989) 4 SCC 531, and Atul
Mathur (supra) that the pendency of a civil suit in respect of a property,
would not bar a complaint under Section 630 with respect to the same
property, even if it is between the same parties, if there is no dispute or
no bona fide dispute regarding the company’s right over the property.
The mere fact that the accused employee has refuted the company’s
claim to possession would not make the dispute bona fide.
In the present case, we find that there is no bona fide dispute in
as much as the 2nd Respondent’s entire claim to the
disputed property is
based on an oral agreement/‘understanding’, as to the terms of which
no documentary evidence has been produced. Whereas the appellant
company has at least been put into symbolic possession of the property
by Clause 6 of the agreement for sale dated 26.4.2008, which 2nd
Respondent has not disputed.
The question is then whether the ratio in Atul Mathur (supra)
allows for co-extensive criminal proceedings under Section 630 of the
1956 Act even where the civil court has directed maintenance of status
quo with respect to the property. We are of the considered opinion that
in a case such as the present complaint, where there was only an oral
agreement in favour of the accused employee for purchase of the
property, but the civil court has issued a temporary injunction directing
status quo, the accused will nevertheless acquire the right to possess the
disputed property lawfully only if he is successful in obtaining a decree
in his favour in the civil suit.
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The mere issuance of a temporary injunction by the civil court
directing maintenance of status quo in respect of the disputed property
does not make the dispute bona fide or bar the company’s right to recover
the disputed property from the accused employee under Section 630 of
the 1956 Act. At best, such an injunction would only bar the company
from creating any rights in favour of third parties pending disposal of the
civil suit. This is because the cause of action in the civil suit is completely
different from the question of whether the employee is wrongfully
withholding the company’s property, which is the issue for consideration
in the present criminal proceedings. If prima facie the trial court finds
that the company has the right to possess the property, the issuance of a
temporary injunction by the civil court cannot be used to defeat the
company’s lawful right of possession. This is also reflected in the
following relevant clauses of Section 41 of the Specific Relief Act, 1963.
“41. Injunction when refused.—An injunction cannot be
granted—
…(b) to restrain any person from instituting or prosecuting any
proceeding in a court not subordinate to that from which the
injunction is sought;…
 (d) to restrain any person from instituting or prosecuting any
proceeding in a criminal matter…”
(See Jolly Durga Prasad v. Goodricks Group Ltd., (1999) 97
Comp Cas 698 (Cal); S. Palaniswamy v. Sree Janardhana Mills Ltd,
(1993) 76 Com Cases 323 (Mad).)
Based on the
aforementioned discussion, it can be concluded that
the principle laid down in Atul Mathur (supra) would also extend to
cases under Section 630 where a civil court has, in spite of there being
no bona fide dispute, issued an order of temporary injunction in respect
of the disputed property. In such a case, the pendency of the civil suit
and any interim reliefs granted therein would not bar criminal prosecution
under Section 630.
9. Similarly, with respect to the second issue, we are of the
considered opinion that where the Magistrate has found that prima facie
the company has a right to possession of the disputed property, he may
grant interlocutory relief under Section 630(2) prior to conclusion of the
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trial under Section 630(1). Courts have time and again observed that
Section 630 has to be given a liberal interpretation so as to facilitate
expeditious recovery of the company’s property. The following
observations of this Court in Baldev Krishna Sahi (supra) are useful in
this regard:
“7. The beneficent provision contained in Section 630 no doubt
penal, has been purposely enacted by the legislature with the object
of providing a 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 mischief and advance the remedy.”
(emphasis supplied)
Therefore this Court in Baldev Krishna Sahi held that the
expression ‘officer or employee’ in Section 630, though it primarily applies
to existing officers and employees, may also take in past officers and
employees. We may also refer to the following relevant observations of
the Bombay High Court in Kannankandi Gopal Krishna Nair v.
Prakash Chunder Juneja, (1994) 81 Comp Cas 104,:
“4. The courts have been flooded with
prosecutions instituted by
companies under section 630 of the Companies Act and it has
been demonstrated that this provision of law has almost been
rendered impotent by employees and ex-employees who hold on
to company property by litigating for decades together. At the end
of this long exercise, if the accused loses, the company is expected
to consider itself fortunate if the premises are restored and the
offence, if any, is to be treated as, to use a common parlance
expression, “forgiven and forgotten”. Another ploy that has been
successfully employed in these cases is to take advantage of the
desperation of the poor landlord who, in the midst of these legal
skirmishes, genuinely feels that it is better to make the best of the
bad bargain by selling out to the party in possession. The accused
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who, on the one hand, has frustrated the law as far as section 630
of the Companies Act is concerned thereafter contends that he
cannot be ordered to restore possession of his own flat. In other
words, through such a devious procedure, the accused is permitted
to take advantage of his own wrong which is anathema to accepted
canons of criminal jurisprudence. Such gymnastics, if permitted,
will have the effect of nullifying the rule of law and the courts,
with some clear thinking, will, therefore, have to adopt a no-
nonsense policy in the event of such mischief.”
 (emphasis supplied)
Hence, given that the primary object of Section 630 is to provide
a speedy mechanism for restoration of wrongfully withheld property to
companies, we find that the provision should be construed as far as
possible to facilitate a remedy in favour of the aggrieved company and
to prevent the wrongful retention of the property for an unduly long
period by the accused.
There is no stipulation in Section 630(2) that an order for delivery
of wrongfully withheld property must be made only after the accused
has been convicted under Section 630(1). Rather, it says the Court ‘trying’
the offence may direct the delivery of such property, which indicates
that such an order may be passed at any stage by the trial court. This
Court in Baldev Krishna Sahi (supra) upon finding that a case under
Section 630(1) was prima facie made out directed the petitioner therein
to vacate the disputed
premises during pendency of the substantive
complaint under Section 630(1). Therefore in the present case, the courts
below have not committed any error in allowing the appellant company’s
application under Section 630(2) during pendency of substantive criminal
proceedings.
10. With respect to the third and fourth issues, we find that the
High Court has gone against the spirit of the provision, as enunciated by
this Court in Baldev Krishna Sahi (supra), by strictly interpreting Section
630 to mean that the appellant company must have title by way of
ownership to the disputed property and that the accused should have
been in possession of the flat as a perquisite of his service.
Section 630 nowhere requires that the company should have title
to the property. The emphasis is on whether the accused has obtained
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wrongful possession of the property which defeats the company’s lawful
right of exclusive possession, even though the property as such may not
belong to the company but to a third-party landlord or licensor, as was
the case in Atul Mathur (supra). The term ‘property of the company’
has to be construed widely having regard to the beneficial object of the
Section (See Kannankandi Gopal Krishna Nair (supra); PV George
v. Jayems Engineering Co. (P) Ltd, (1990) 2 Comp LJ 62 (Mad)).
The 2nd Respondent has admitted that after the death of Arun
Kumar Bajoria, the disputed property was inherited by the vendors who
subsequently transferred possession to the appellant company by the
agreement dated 26.4.2008. The 2nd Respondent also handed over the
title deeds of the property to the appellant company. Therefore, till the
time that the 2nd Respondent does not prove in the civil suit that the
vendors were required to have sold the property to him, it is the company
which has the exclusive right to possess the property at present.
Further, it is true that in the majority of cases falling under the
ambit of Section 630, it has been that property possessed by the company
was allotted to an employee for the purposes of residential
accommodation, etc. as an incidence of his service, at the first instance
itself. In the present case, the 2nd Respondent has been a director of the
company since 1988, and claims to be in permissive
possession of the
disputed property as per the alleged understanding between him and his
relative, the deceased Arun Kumar Bajoria, since 1994. However the
company acquired the disputed property only in 2008.  Be that as it may,
the 2nd Respondent has failed to rebut the fact that as of 26.4.2008 it is
the company which has acquired the exclusive right to possess the
property, and the company handed over possession to him w.e.f 1.5.2008
only in his capacity as the director of the company. Whatever may have
been the situation prior to 26.4.2008, on and after that date the company
became entitled to recover possession of the disputed property.
We find no substance in the 2nd Respondent’s argument that he
was misled into delivering the title documents of the disputed property
by his sister-in-law on the ground that they were required for updation
of records. The 2nd Respondent, being an office bearer in the company,
could have got the records updated on his own or could have delivered it
to the vendors, if it was on their insistence that he handed over the
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documents. However the letter dated 9.6.2008 shows that the title
documents were delivered to a representative of the appellant company.
This shows that the 2nd  Respondent acknowledged that title was to be
transferred to the company vide the agreement dated 26.4.2008.
Section 630 nowhere stipulates that the property should have
been allotted by the company to the accused as a perquisite of service.
There may be a number of purposes for which the accused may be
given lawful possession of the company’s property during the course of
employment for example, for safe custody of the property or for
maintenance thereof. The purpose for which and the time at which
possession was given is irrelevant. What is sufficient is that the accused
was put into possession of the property in their capacity as an officer/
employee of the company and continued to withhold such property without
having any independent right, title or interest thereto even after cessation
of his employment. As we have found in the discussion supra, mere oral
agreement or understanding would not be sufficient to establish such an
independent right.
11. Coming to the final issue, Section 397(2) of the Cr.P.C provides
that the High Court’s powers of revision shall not be exercised in relation
to any interlocutory order passed in any appeal, inquiry, trial or other
proceeding. Whereas Section 482 of the Cr.P.C provides that nothing in
the Cr.P.C will limit the High Court’s inherent powers to prevent
abuse
of process or to secure the ends of justice. Hence the High Court may
exercise its inherent powers under Section 482 to set aside an interlocutory
order, notwithstanding the bar under Section 397(2). However it is settled
law that this can only be done in exceptional cases. This is, for example,
where a criminal proceeding has been initiated illegally, vexatiously or
without jurisdiction (See Madhu Limaye v. State of Maharashtra,
(1977) 4 SCC 551).
In the present case, the order of the Magistrate under Section
630(2) was an interlocutory relief based on a prima facie assessment
of facts and did not conclusively decide the ongoing trial under Section
630(1). If the Magistrate finds that the appellant company has been
unable to prove that the 2nd Respondent was wrongfully withholding
possession of the property, such interlocutory relief shall stand vacated.
In light of the above discussion, it is clear that there was no exceptional
case of illegality or lack of jurisdiction in the interlocutory order of the
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lower court calling for the exercise of the inherent powers of the High
Court under Section 482, Cr.P.C.
However we are in agreement with the High Court’s direction
that the trial under Section 630(1) ought to be completed as soon as
possible. Further, it is needless to say that if the civil court passes a
decree in favour of the 2nd Respondent in Suit No. 2126/2009, such
decree must be honoured and possession of the disputed property may
be restored to him accordingly.
Hence the appeal is allowed and the impugned judgement is set
aside, in the above terms.
Kalpana K. Tripathy
Appeal allowed.