Full Judgment Text
REPORTABLE
IN THE SUPREME COURT OF INDIA
CRIMINAL APPELLATE JURISDICTION
CRIMINAL APPEAL NO. 1571 OF 2019
[Arising out of SLP (Crl.) No. 9527 of 2017]
Hooghly Mills Company Ltd. .....Appellant
Versus
The State of West Bengal and Anr. .....Respondents
J U D G M E N T
MOHAN M. SHANTANAGOUDAR, J.
1. Leave granted.
2. This appeal by special leave arises out of judgement dated
nd
24.8.2017 of the Calcutta High Court allowing the 2
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
Signature Not Verified
Digitally signed by
GULSHAN KUMAR
ARORA
Date: 2019.10.18
10:20:17 IST
Reason:
appellant is an ‘existing’ company within the meaning of the
1
Companies Act, 1956 (for short ‘1956 Act’), which entered into
agreement for sale dated 26.4.2008 for purchase of a flat situated
rd
on the 3 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 of the property subject to payment of monthly
rent of Rs 84,275/-. This agreement is not disputed.
nd
The appellant’s case is that the 2 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
nd
director. The 2 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
nd
and thereafter the 2 Respondent ceased to be a director of the
2
appellant company. Consequently he was required to return the
disputed property to the company; however he failed to do so.
nd
The appellant company on 20.4.2009 asked the 2
Respondent to vacate and deliver physical possession of the
disputed property. When he refused, the appellant sent a letter on
nd
30.4.2009 to the 2 Respondent requesting delivery of
nd
possession. When the 2 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
nd
dispossessing the 2 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
3
wrongfully obtained or wrongfully withheld or knowingly
misapplied, or in default, to suffer imprisonment for a
term which may extend to two years.”
nd
Contrary to the appellant’s allegations, the 2 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
nd
between the 2 Respondent and Arun Kumar Bajoria that the
nd
latter would transfer the disputed property to the 2 Respondent
and his nominee upon payment of the purchase price, once the
nd
2 Respondent was in a position to pay such amount. In other
nd
words, according to the 2 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
nd
between the 2 Respondent and Arun Kumar Bajoria’s family
became strained. Hence the vendors failed to execute a deed of
nd
conveyance as agreed upon between the 2 Respondent and
their predecessor-in-interest, and also wrongfully removed him
from Directorship of the appellant company.
4
nd
Thereafter the 2 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.
The Magistrate further held that in view of this Court’s
decision in Baldev Krishna Sahi v. Shipping Corporation of
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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
nd
into account the fact that the accused/2 Respondent had not
denied that the disputed property belonged to the appellant
company and that he was given possession of the flat by the
nd
company for his accommodation, directed the 2 Respondent to
vacate and hand over possession of the disputed property to the
appellant company.
The learned Sessions Judge at Alipore by order dated
nd
21.12.2012 dismissed the 2 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
nd
the civil Suit No. 2126/2009 between the 2 Respondent and the
vendors, the pendency of the suit would not bar criminal
proceedings against him.
6
However the High Court in the impugned judgement allowed
nd
the 2 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
nd
property was given to the 2 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
nd
2 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
agreement for sale dated 26.4.2008 (supra), and the company
had not paid any consideration or advance rent at the time of the
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agreement, it could not be said that the company had any title to
the disputed property. Hence the High Court held that the lower
nd
court finding that the disputed property had been given to the 2
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
nd
because no sale deed was executed. The 2 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
8
& 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
nd
a party to the civil suit between the 2 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
nd
scheme of the appellant company, which is composed of the 2
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
nd
alternate mechanism to oust the 2 Respondent from the
9
disputed property since the civil court had directed maintenance
nd
of status quo; that the 2 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
nd
the disputed property, and that the company gave the 2
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
10
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?
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
nd
issued in the civil suit between 2 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
11
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
nd
dispute in as much as the 2 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
12
nd
agreement for sale dated 26.4.2008, which 2 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.
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
13
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
14
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 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)
15
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 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.”
16
(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.
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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 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)).
nd
The 2 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
nd
appellant company by the agreement dated 26.4.2008. The 2
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Respondent also handed over the title deeds of the property to
nd
the appellant company. Therefore, till the time that the 2
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
nd
the first instance itself. In the present case, the 2 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,
nd
the 2 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
19
prior to 26.4.2008, on and after that date the company became
entitled to recover possession of the disputed property.
nd
We find no substance in the 2 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
nd
required for updation of records. The 2 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
nd
shows that the 2 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
20
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
21
assessment of facts and did not conclusively decide the ongoing
trial under Section 630(1). If the Magistrate finds that the
nd
appellant company has been unable to prove that the 2
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 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
nd
passes a decree in favour of the 2 Respondent in Suit No.
2126/2009, such decree must be honoured and possession of the
disputed property may be restored to him accordingly.
12. Hence the appeal is allowed and the impugned judgement is
set aside, in the above terms.
...........................................J.
(Mohan M. Shantanagoudar)
New Delhi; ...........................................J.
22
October 17, 2019. (Ajay Rastogi)
23