HOOGHLY MILLS COMPANY LTD. versus THE STATE OF WEST BENGAL AND ANR. on 17 October 2019

SUPREME COURT REPORTS

[2019] 13 S.C.R.

HOOGHLY MILLS COMPANY LTD.

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v.

THE STATE OF WEST BENGAL AND ANR.

(Criminal Appeal No. 1571 of 2019)

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OCTOBER 17, 2019

[MOHAN M. SHANTANAGOUDAR AND

AJAY RASTOGI, JJ.]

Companies Act, 1956 :

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s.630(1) and (2) – Criminal complaint by complainantCompany – Against the accused alleging that he was not deliveringthe possession of the residential premises (which he was given inthe capacity of Director of the Company) even after ceasing to beDirector of the Company – Also filed application for dispossessingDthe accused – Plea of the accused was that there was oralunderstanding between him and the original owners of the propertythat the same would be transferred to him, when he would pay thesale consideration – Thereafter, accused filed a suit against thevendors praying for specific performance and for permanentinjunction – Temporary injunction was issued in the suit directingEstatus quo in respect of possession – Application u/s. 630(2) alloweddirecting dispossession of the accused – Revisional Court affirmedthe order passed in application u/s 630(2) – High Court in petitionu/s. 482 Cr.P.C. set aside the findings of the Court below – Appealto Supreme Court – Held : Pendency of civil suit would not barFcomplaint u/s 630 with respect to same property, even if betweensame parties, if there is no bona fide dispute regarding the company’sright over the property – In the present case, there is no bona fidedispute as the claim of the accused is based on oral understanding– Mere issuance of temporary injunction would not make the disputebona fide – Therefore, pendency of civil suit and interim reliefsGgranted therein would not bar criminal prosecution u/s 630 – Section630 has to be given liberal interpretation so as to facilitateexpeditious recovery of the Company’s property – There is no errorin allowing application u/s 630(2), during pendency of substantivecriminal 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 setaside 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 ownedand controlled by the vendors themselves, any orders issued inthe civil suit between 2[nd] respondent and the vendors would notbe binding upon the appellant company as it is not a party to thesuit. It is true that in some cases the Court may pierce the‘corporate veil’ and look at the reality behind the entity if it isfound that the device of incorporation has been used to perpetratesome illegality or fraud. However no such illegality or fraud hasbeen pleaded and proved in the present case. In any case, thependency of a civil suit in respect of a property, would not bar acomplaint under Section 630 of Companies Act, 1956 with respectto the same property, even if it is between the same parties, ifthere is no dispute or no bona fide dispute regarding thecompany’s right over the property. The mere fact that the accusedemployee has refuted the company’s claim to possession wouldnot make the dispute bona fide. [Para 8] [418-A-D]

1.2 In the present case, there is no bona fide dispute, in asmuch as the 2[nd] respondent’s entire claim to the disputed propertyis based on an oral agreement/‘understanding’, as to the termsof which no documentary evidence has been produced. Whereasthe appellant company has at least been put into symbolicpossession of the property by Clause 6 of the agreement for saledated 26.4.2008, which 2[nd] respondent has not disputed. [Para 8][418-E-F]

1.3 In a case such as the present complaint, where therewas only an oral agreement in favour of the accused employeefor purchase of the property, but the civil court has issued atemporary injunction directing status quo, the accused willnevertheless acquire the right to possess the disputed propertylawfully only if he is successful in obtaining a decree in his favour A

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Ain the civil suit. The mere issuance of a temporary injunction bythe civil court directing maintenance of status quo in respect ofthe disputed property does not make the dispute bona fide or barthe company’s right to recover the disputed property from theaccused employee under Section 630 of the 1956 Act. At best,such an injunction would only bar the company from creating anyBrights in favour of third parties pending disposal of the civil suit.This is because the cause of action in the civil suit is completelydifferent from the question of whether the employee is wrongfullywithholding the company’s property, which is the issue forconsideration in the present criminal proceedings. If prima facieCthe trial court finds that the company has the right to possess theproperty, the issuance of a temporary injunction by the civil courtcannot be used to defeat the company’s lawful right of possession.This is also evident from clauses (b) and (d) of Section 41 of theSpecific Relief Act, 1963. [Para 8] [418-G-H; 419-A-C]

D1.4 Where the Magistrate has found that prima facie thecompany has a right to possession of the disputed property, hemay grant interlocutory relief under Section 630(2) prior toconclusion of the trial under Section 630(1). Section 630 has tobe given a liberal interpretation so as to facilitate expeditiousrecovery of the company’s property. The expression ‘officer orEemployee’ in Section 630, though it primarily applies to existingofficers and employees, may also take in past officers andemployees. Hence, given that the primary object of Section 630is to provide a speedy mechanism for restoration of wrongfullywithheld property to companies, the provision should beFconstrued as far as possible to facilitate a remedy in favour of theaggrieved company and to prevent the wrongful retention of theproperty 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 orderGfor delivery of wrongfully withheld property must be made onlyafter the accused has been convicted under Section 630(1).Rather, it says the Court ‘trying’ the offence may direct thedelivery of such property, which indicates that such an order maybe passed at any stage by the trial court. Therefore in the presentcase, the courts below have not committed any error in allowingH

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 theprovision, by strictly interpreting Section 630 to mean that theappellant company must have title by way of ownership to thedisputed property and that the accused should have been inpossession of the flat as a perquisite of his service. Section 630nowhere requires that the company should have title to theproperty. The emphasis is on whether the accused has obtainedwrongful possession of the property which defeats the company’slawful right of exclusive possession, even though the propertyas such may not belong to the company but to a third-partylandlord or licensor. The term ‘property of the company’ has tobe construed widely having regard to the beneficial object of theSection. [Para 10] [421-G-H; 422-A-B]

1.7 The 2[nd] respondent has admitted that after the death ofthe original owner, the disputed property was inherited by thevendors who subsequently transferred possession to theappellant company by the agreement dated 26.4.2008. The 2[nd]respondent also handed over the title deeds of the property tothe appellant company. Therefore, till the time that the 2[nd]respondent does not prove in the civil suit that the vendors wererequired to have sold the property to him, it is the company whichhas the exclusive right to possess the property at present.[Para 10] [422-C]

1.8 The 2[nd] respondent has failed to rebut the fact that as of26.4.2008 it is the company which has acquired the exclusiveright to possess the property, and the company handed overpossession to him w.e.f 1.5.2008 only in his capacity as theDirector of the company. Whatever may have been the situationprior to 26.4.2008, on and after that date the company becameentitled to recover possession of the disputed property.[Para 10] [422-F]

1.9 There is no substance in the 2[nd] respondent’s argumentthat he was misled into delivering the title documents of thedisputed property by his sister-in-law on the ground that they A

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Awere required for updation of records. The 2[nd] respondent, beingan office bearer in the company, could have got the recordsupdated on his own or could have delivered it to the vendors, if itwas on their insistence that he handed over the documents.However the letter dated 9.6.2008 shows that the title documentswere delivered to a representative of the appellant company. ThisBshows that the 2[nd] respondent acknowledged that title was to betransferred 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 propertyshould have been allotted by the company to the accused as aCperquisite of service. The purpose for which and the time at whichpossession was given, is irrelevant. What is sufficient is that theaccused was put into possession of the property in their capacityas an officer/employee of the company and continued to withholdsuch property without having any independent right, title orDinterest thereto even after cessation of his employment. Mereoral agreement or understanding would not be sufficient toestablish such an independent right. [Para 10] [423-B-D]

Delhi Development Authority v. Skipper ConstructionCompany (P) Ltd., (1996) 4 SCC 622 : [1996] 2 Suppl.ESCR 295 ;Damodar Das Jain v. Krishna CharanChakraborti (1989) 4 SCC 531 ;Atul Mathur v. AtulKalra (1989) 4 SCC 514 : [1989] 3 SCR 750 ; BaldevKrishna Sahi v. Shipping Corporation ofIndia Limited(1987) 4 SCC 361 : [1988] 1 SCR 168 - relied on.

FTata Tea Limited v. Fazlur Rahman(2001) 104 CompCas 718 Cal ; Jolly Durga Prasad v. Goodricks GroupLtd.(1999) 97 Comp Cas 698 (Cal) ;S. Palaniswamyv. Sree Janardhana Mills Ltd. (1993) 76 Com Cases323 (Mad).) ;Kannankandi Gopal Krishna Nair v.Prakash Chunder Juneja(1994) 81 Comp Cas 104 ;GPV George v. Jayems Engineering Co. (P) Ltd. (1990) 2Comp LJ 62 (Mad)) ;Metal Box India v. State of WestBengal (1997) 2 DHN 423 - referred to.

2.1 Section 397(2) Cr.P.C provides that the High Court’spowers of revision shall not be exercised in relation to anyH

interlocutory order passed in any appeal, inquiry, trial or otherproceeding. Whereas Section 482 of the Cr.P.C provides thatnothing in the Cr.P.C will limit the High Court’s inherent powersto prevent abuse of process or to secure the ends of justice.Hence the High Court may exercise its inherent powers underSection 482 to set aside an interlocutory order, notwithstandingthe bar under Section 397(2). However it is settled law that thiscan only be done in exceptional cases. This is, for example, wherea criminal proceeding has been initiated illegally, vexatiously orwithout jurisdiction. [Para 11] [423-D-F]

Madhu Limaye v. State of Maharashtra(1977) 4 SCC551 : [1978] 1 SCR 749 - relied on.

2.2. In the present case, the order of the Magistrate underSection 630(2) was an interlocutory relief based on a prima facieassessment of facts and did not conclusively decide the ongoingtrial under Section 630(1). If the Magistrate finds that theappellant company has been unable to prove that the 2[nd]respondent was wrongfully withholding possession of the property,such interlocutory relief shall stand vacated. Thus, it is clear thatthere was no exceptional case of illegality or lack of jurisdictionin the interlocutory order of the lower court calling for the exerciseof the inherent powers of the High Court under Section 482,Cr.P.C. [Para 11] [423-G-H; 424-A]

Case Law Reference

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CRIMINAL APPELLATE JURISDICTION : Criminal AppealBNo. 1571 of 2019.

From the Judgment and Order dated 24.08.2017 of the High Courtof 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),CAdvs. 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.Dfor the Respondents.

The Judgment of the Court was delivered by MOHAN M. SHANTANAGOUDAR, J.

1. Leave granted.

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2. This appeal by special leave arises out of judgement dated24.8.2017 of the Calcutta High Court allowing the 2[nd] Respondent’sCriminal Revision Petition against order dated 6.9.2010 of the JudicialMagistrate, Alipore and order dated 21.12.2012 of the Additional SessionsJudge, Alipore.

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3. The facts giving rise to this appeal are as follows: The appellantis an ‘existing’ company within the meaning of the Companies Act, 1956(for short ‘1956 Act’), which entered into agreement for sale dated26.4.2008 for purchase of a flat situated on the 3[rd] Floor, of Plot-D inSreekunj, 13, Gurusaday Road, Police Station-Karaya, Kolkata-700019G(hereinafter ‘disputed property’) with the legal heirs of one late Mr.Arun Kumar Bajoria (hereinafter ‘vendors’). Per the terms of theagreement, the vendors would execute and register the deed ofconveyance in favour of the appellant upon payment of the entire saleconsideration of Rs 2,02,26,000/-. However in the interim, under Clause6 of the agreement, the appellant company would be put into possession H

of the property subject to payment of monthly rent of Rs 84,275/-. Thisagreement is not disputed.

The appellant’s case is that the 2[nd] Respondent/accused Mr. BalBinode Bajoria was a director of the appellant company from 1988 to2008. He was allowed to use and occupy the disputed property on andfrom 1.5.2008 by virtue of holding the office of director. The 2[nd]Respondent was to retire by rotation from the Board of Directors in theAnnual General Meeting of the appellant company held on 22.11.2008;however he offered himself for re-election. The members present in themeeting voted against him and thereafter the 2[nd] Respondent ceased tobe a director of the appellant company. Consequently he was requiredto return the disputed property to the company; however he failed to doso.

The appellant company on 20.4.2009 asked the 2[nd] Respondentto vacate and deliver physical possession of the disputed property. Whenhe refused, the appellant sent a letter on 30.4.2009 to the 2[nd] Respondentrequesting delivery of possession. When the 2[nd] Respondent still failedto comply with the appellant’s request, criminal complaint was filed againsthim under Section 630(1) of the 1956 Act on 11.8.2009. During thependency of this complaint, the appellant company filed an applicationon 29.4.2010 under Section 630(2) of the 1956 Act for dispossessing the2[nd] 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, wrongfullywithholds it or knowingly applies it to purposes other than thoseexpressed or directed in the articles and authorised by this Act; he shall, on the complaint of the company or any creditor orcontributory thereof, be punishable with fine which may extend toone thousand rupees.

(2) The Court trying the offence may also order such officeror employee to deliver up or refund, within a time to be fixed bythe Court, any such property wrongfully obtained or wrongfully A

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Awithheld or knowingly misapplied, or in default, to sufferimprisonment for a term which may extend to two years.”

Contrary to the appellant’s allegations, the 2[nd] Respondent contendsthat he had a mutual understanding/oral agreement with the deceasedMr. Arun Kumar Bajoria, who was his cousin brother, under which theBdeceased had paid consideration of Rs 9,10,170/- for construction of thedisputed property. It was agreed between the 2[nd] Respondent and ArunKumar Bajoria that the latter would transfer the disputed property to the2[nd] Respondent and his nominee upon payment of the purchase price,once the 2[nd] Respondent was in a position to pay such amount. In otherwords, according to the 2[nd] Respondent, he was permitted to purchaseCthe disputed property based on his oral understanding with the deceasedArun Kumar Bajoria on and after the date on which he tendered saleconsideration to Arun Kumar Bajoria.

However, after Arun Kumar Bajoria expired, relations betweenthe 2[nd] Respondent and Arun Kumar Bajoria’s family became strained.DHence the vendors failed to execute a deed of conveyance as agreedupon between the 2[nd] Respondent and their predecessor-in-interest, andalso wrongfully removed him from Directorship of the appellant company.

Thereafter the 2[nd] Respondent filed Suit No. 2126/2009 beforethe Civil Judge (Senior Division) at Alipore against the vendors, prayingEfor specific performance and a permanent injunction restraining thevendors from disturbing his possession, based upon the supposed oralagreement/understanding of sale he had with Arun Kumar Bajoria. TheCivil Judge (Senior Division) by order dated 6.7.2009 issued a temporaryinjunction directing the parties to maintain status quo in respect ofFpossession of the disputed property. This suit is still pending adjudication.

4. The learned Judicial Magistrate at Alipore by order dated6.9.2010 allowed the appellant’s application under Section 630(2). TheMagistrate relied upon this Court’s decision in Atul Mathur v. AtulKalra, (1989) 4 SCC 514, and the Calcutta High Court’s decision inGTata 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 acriminal complaint in respect of the disputed property under Section 630,and that an application under Section 630(2) could be allowed even beforefinal disposal of the complaint under Section 630(1) of the 1956 Act.

The Magistrate further held that in view of this Court’s decisioninBaldev Krishna Sahi v. Shipping Corporation of India Limited,(1987) 4 SCC 361, and the Calcutta High Court’s decision in Metal BoxIndia v. State of West Bengal, (1997) 2 CHN 423, the term ‘officer oremployee’ in Section 630 would include erstwhile officers of the companywho have wrongfully retained possession of the company’s propertysubsequent to cessation of their employment. Therefore the Magistrate,taking into account the fact that the accused/2[nd] Respondent had notdenied that the disputed property belonged to the appellant company andthat he was given possession of the flat by the company for hisaccommodation, directed the 2[nd] Respondent to vacate and hand overpossession of the disputed property to the appellant company.

The learned Sessions Judge at Alipore by order dated 21.12.2012dismissed the 2[nd] Respondent’s revisional application under Section 397read with Section 399 of the Criminal Procedure Code, 1973 (‘Cr.P.C’),and affirmed the Magistrate’s order, noting that since the appellantcompany was not a party to the civil Suit No. 2126/2009 between the 2[nd]Respondent and the vendors, the pendency of the suit would not barcriminal proceedings against him.

However the High Court in the impugned judgement allowedthe 2[nd] Respondent’s petition under Section 482, Cr.P.C and set asidethe findings of the Magistrate and the Sessions Judge on the ground thatthere was no evidence to prove that the disputed property was given tothe 2[nd] Respondent by the appellant company as a perquisite for hisservice as director, either at the time of his induction into the Board ofDirectors, or after execution of the agreement for sale dated 26.4.2008.Rather, the 2[nd] Respondent had been a director of the company since1988, and the disputed property had been in his possession at least since2001, long before the appellant company and the vendors entered intoan agreement for sale. Hence the decisions in Baldev Krishna Sahi(supra), Metal Box India (supra) and Tata Tea Limited (supra) wouldnot be applicable to the present case as in those decisions; property hadbeen allotted by the company to the accused officers/employees as aperquisite of their service.

The High Court further held that since there was no evidencethat any deed of conveyance was registered with respect to the A

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Aagreement for sale dated 26.4.2008 (supra), and the company had notpaid any consideration or advance rent at the time of the agreement, itcould 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 disputedproperty had been given to the 2[nd] Respondent by the company waspatently incorrect, and that Section 630(2) of the 1956 Act would notBapply 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 asmuch as it found that the appellant company had no right to claim recoveryCof possession of the disputed property merely because no sale deed wasexecuted. The 2[nd] Respondent himself has admitted in his counter-affidavit that he had delivered the original title documents of the disputedproperty to the appellant company by letter dated 9.6.2008.

Further, that in Atul Mathur (supra), this Court had grantedDrelief to the complainant company even though the property was takenon a leave-and-license basis. In the present case, Clause 6 of theagreement for sale dated 26.4.2008 has created a monthly tenancy infavour of the appellant; hence the appellant has gained the right topossession of the property on that basis. To support this contention, heEplaced on record a certificate of LB Jha & Co Chartered Accountantsdated 16.1.2018 showing that the appellant company has paid rent of Rs91,01,700/- in respect of the disputed property from 1.1.2009 to31.12.2017; as well as TDS (Tax deducted at source) certificates showingthat the appellant company had deducted tax on the rent income whilemaking payments to the vendors.F

He further argued that since the appellant company was not aparty to the civil suit between the 2[nd] Respondent and the vendors, theorder in the civil suit would not be binding on the appellant company; andthat it was not required that the officer/employee accused under Section630 should be in possession of the disputed property as a perquisite ofGhis service. Therefore the High Court had erred in exercising its powersunder 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 H

the appellant company, which is composed of the 2[nd] Respondent’s ownrelatives, to oust him from possession of the disputed property. Thecompany is owned and controlled by the vendors themselves, and thecriminal complaint is nothing but an alternate mechanism to oust the 2[nd]Respondent from the disputed property since the civil court had directedmaintenance of status quo; that the 2[nd] Respondent was wrongfullymade to believe by his relatives, i.e. the vendors, that the title documentsof the disputed property were to be sent for updation of records, hencehe had handed them over to the vendors’ custody, and it was only laterthat he came to know that the documents had been wrongfully handedover to the appellant company.

That he has been in possession of the disputed property since1994; and even the appellant has admitted that he has been in possessionat least since 2001; whereas the appellant company entered into anagreement for sale with the vendors only in 2008, that too via anunregistered sale deed. Consequently it cannot be said that the appellanthad any title to the disputed property, and that the company gave the 2[nd]Respondent possession of the property in his capacity as an officer ofthe company. Hence Section 630 is not attracted to the present case.

7. Therefore the following issues arise for consideration in thepresent appeal:

First, whether an application under Section 630(2) of the 1956Act was maintainable, in spite of pendency of the civil suit and issue oftemporary 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 theaffirmative, whether the company is entitled to pray for dispossession of2nd Respondent from the property?

Fourth, whether it is required that 2nd Respondent should havebeen in possession of the disputed property as a perquisite of his service?

Finally, whether in light of the answers to the aforementionedissues, the High Court was justified in exercising its inherent powersunder Section 482 of the Cr.P.C?

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A8. With respect to the first issue, it is undisputed that a companyhas a separate legal personality. Hence even if we accept the respondents’contention that the appellant company is owned and controlled by thevendors themselves, any orders issued in the civil suit between 2[nd]Respondent and the vendors would not be binding upon the appellantcompany as it is not a party to the suit. It is true that in some cases theBCourt may pierce the ‘corporate veil’ and look at the reality behind theentity if it is found that the device of incorporation has been used toperpetrate some illegality or fraud (See Delhi Development Authorityv. Skipper Construction Company (P) Ltd., (1996) 4 SCC 622).However no such illegality or fraud has been pleaded and proved in theCpresent case.

In any case, it has been settled by this Court in Damodar DasJain v. Krishna Charan Chakraborti, (1989) 4 SCC 531, and AtulMathur (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 sameDproperty, even if it is between the same parties, if there is no dispute orno bona fide dispute regarding the company’s right over the property.The mere fact that the accused employee has refuted the company’sclaim to possession would not make the dispute bona fide.

In the present case, we find that there is no bona fide dispute inEas much as the 2[nd] Respondent’s entire claim to the disputed property isbased on an oral agreement/‘understanding’, as to the terms of whichno documentary evidence has been produced. Whereas the appellantcompany has at least been put into symbolic possession of the propertyby Clause 6 of the agreement for sale dated 26.4.2008, which 2[nd]Respondent has not disputed.F

The question is then whether the ratio in Atul Mathur (supra)allows for co-extensive criminal proceedings under Section 630 of the1956 Act even where the civil court has directed maintenance of statusquo with respect to the property. We are of the considered opinion thatin a case such as the present complaint, where there was only an oralGagreement in favour of the accused employee for purchase of theproperty, but the civil court has issued a temporary injunction directingstatus quo, the accused will nevertheless acquire the right to possess thedisputed property lawfully only if he is successful in obtaining a decreein his favour in the civil suit.

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The mere issuance of a temporary injunction by the civil courtdirecting maintenance of status quo in respect of the disputed propertydoes not make the dispute bona fide or bar the company’s right to recoverthe disputed property from the accused employee under Section 630 ofthe 1956 Act. At best, such an injunction would only bar the companyfrom creating any rights in favour of third parties pending disposal of thecivil suit. This is because the cause of action in the civil suit is completelydifferent from the question of whether the employee is wrongfullywithholding the company’s property, which is the issue for considerationin the present criminal proceedings. If prima facie the trial court findsthat the company has the right to possess the property, the issuance of atemporary injunction by the civil court cannot be used to defeat thecompany’s lawful right of possession. This is also reflected in thefollowing relevant clauses of Section 41 of the Specific Relief Act, 1963.

“41. Injunction when refused.—An injunction cannot begranted—

“41. Injunction when refused.—An injunction cannot begranted—

…(b) to restrain any person from instituting or prosecuting anyproceeding in a court not subordinate to that from which theinjunction is sought;…

(d) to restrain any person from instituting or prosecuting anyproceeding in a criminal matter…”

(See Jolly Durga Prasad v. Goodricks GroupLtd., (1999) 97Comp 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 thatthe principle laid down in Atul Mathur (supra) would also extend tocases under Section 630 where a civil court has, in spite of there beingno bona fide dispute, issued an order of temporary injunction in respectof the disputed property. In such a case, the pendency of the civil suitand any interim reliefs granted therein would not bar criminal prosecutionunder Section 630.

9. Similarly, with respect to the second issue, we are of theconsidered opinion that where the Magistrate has found that prima faciethe company has a right to possession of the disputed property, he maygrant interlocutory relief under Section 630(2) prior to conclusion of the A

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Atrial under Section 630(1). Courts have time and again observed thatSection 630 has to be given a liberal interpretation so as to facilitateexpeditious recovery of the company’s property. The followingobservations of this Court in Baldev Krishna Sahi (supra) are useful inthis regard:

B“7. The beneficent provision contained in Section 630 no doubtpenal, has been purposely enacted by the legislature with the objectof providing a summary procedure for retrieving the property ofthe company(a) where an officer or employee of a companywrongfully obtains possession of property of the company, or (b)where having been placed in possession of any such propertyCduring the course of his employment wrongfully withholdspossession of it after the termination of his employment. It is theduty of the Court to place a broad and liberal construction on theprovision in furtherance of the object and purpose of the legislation”which would suppress the mischief and advance the remedy.

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Therefore this Court in Baldev Krishna Sahi held that theexpression ‘officer or employee’ in Section 630, though it primarily appliesto existing officers and employees, may also take in past officers andemployees. We may also refer to the following relevant observations ofEthe 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 bycompanies under section 630 of the Companies Act and it hasbeen demonstrated that this provision of law has almost been-rendered impotent by employees and exemployees who hold onto company property by litigating for decades together. At the endof this long exercise, if the accused loses, the company is expectedto consider itself fortunate if the premises are restored and theoffence, if any, is to be treated as, to use a common parlanceexpression, “forgiven and forgotten”. Another ploy that has beensuccessfully employed in these cases is to take advantage of thedesperation of the poor landlord who, in the midst of these legalskirmishes, genuinely feels that it is better to make the best of thebad bargain by selling out to the party in possession. The accused F

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who, on the one hand, has frustrated the law as far as section 630of the Companies Act is concerned thereafter contends that hecannot be ordered to restore possession of his own flat. In otherwords, through such a devious procedure, the accused is permittedto take advantage of his own wrongwhich is anathema to acceptedcanons 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.

Hence, given that the primary object of Section 630 is to providea speedy mechanism for restoration of wrongfully withheld property tocompanies, we find that the provision should be construed as far aspossible to facilitate a remedy in favour of the aggrieved company andto prevent the wrongful retention of the property for an unduly longperiod by the accused.

There is no stipulation in Section 630(2) that an order for deliveryof wrongfully withheld property must be made only after the accusedhas been convicted under Section 630(1). Rather, it says the Court ‘trying’the offence may direct the delivery of such property, which indicatesthat such an order may be passed at any stage by the trial court. ThisCourt in Baldev Krishna Sahi (supra) upon finding that a case underSection 630(1) was prima facie made out directed the petitioner thereinto vacate the disputed premises during pendency of the substantivecomplaint under Section 630(1). Therefore in the present case, the courtsbelow have not committed any error in allowing the appellant company’sapplication under Section 630(2) during pendency of substantive criminalproceedings.

10. With respect to the third and fourth issues, we find that theHigh Court has gone against the spirit of the provision, as enunciated bythis Court in Baldev Krishna Sahi (supra), by strictly interpreting Section630 to mean that the appellant company must have title by way ofownership to the disputed property and that the accused should havebeen in possession of the flat as a perquisite of his service.

Section 630 nowhere requires that the company should have titleto the property. The emphasis is on whether the accused has obtained

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Awrongful possession of the property which defeats the company’s lawfulright of exclusive possession, even though the property as such may notbelong to the company but to a third-party landlord or licensor, as wasthe case in Atul Mathur (supra). The term ‘property of the company’has to be construed widely having regard to the beneficial object of theSection (See Kannankandi Gopal Krishna Nair (supra); PV GeorgeBv. Jayems Engineering Co. (P) Ltd, (1990) 2 Comp LJ 62 (Mad)).

The 2[nd] Respondent has admitted that after the death of ArunKumar Bajoria, the disputed property was inherited by the vendors whosubsequently transferred possession to the appellant company by theagreement dated 26.4.2008. The 2[nd] Respondent also handed over theCtitle deeds of the property to the appellant company. Therefore, till thetime that the 2[nd] Respondent does not prove in the civil suit that thevendors were required to have sold the property to him, it is the companywhich has the exclusive right to possess the property at present.

Further, it is true that in the majority of cases falling under theDambit of Section 630, it has been that property possessed by the companywas allotted to an employee for the purposes of residentialaccommodation, etc. as an incidence of his service, at the first instanceitself. In the present case, the 2[nd] Respondent has been a director of thecompany since 1988, and claims to be in permissive possession of theEdisputed property as per the alleged understanding between him and hisrelative, the deceased Arun Kumar Bajoria, since 1994. However thecompany acquired the disputed property only in 2008. Be that as it may,the 2[nd] Respondent has failed to rebut the fact that as of 26.4.2008 it isthe company which has acquired the exclusive right to possess theproperty, and the company handed over possession to him w.e.f 1.5.2008Fonly in his capacity as the director of the company. Whatever may havebeen the situation prior to 26.4.2008, on and after that date the companybecame entitled to recover possession of the disputed property.

We find no substance in the 2[nd] Respondent’s argument that hewas misled into delivering the title documents of the disputed propertyGby his sister-in-law on the ground that they were required for updationof records. The 2[nd] Respondent, being an office bearer in the company,could have got the records updated on his own or could have delivered itto the vendors, if it was on their insistence that he handed over the documents. However the letter dated 9.6.2008 shows that the titledocuments were delivered to a representative of the appellant company.This shows that the 2[nd] Respondent acknowledged that title was to betransferred to the company vide the agreement dated 26.4.2008.

Section 630 nowhere stipulates that the property should havebeen allotted by the company to the accused as a perquisite of service.There may be a number of purposes for which the accused may begiven lawful possession of the company’s property during the course ofemployment for example, for safe custody of the property or formaintenance thereof. The purpose for which and the time at whichpossession was given is irrelevant. What is sufficient is that the accusedwas put into possession of the property in their capacity as an officer/employee of the company and continued to withhold such property withouthaving any independent right, title or interest thereto even after cessationof his employment. As we have found in the discussion supra, mere oralagreement or understanding would not be sufficient to establish such anindependent right.

11. Coming to the final issue, Section 397(2) of the Cr.P.C providesthat the High Court’s powers of revision shall not be exercised in relationto any interlocutory order passed in any appeal, inquiry, trial or otherproceeding. Whereas Section 482 of the Cr.P.C provides that nothing inthe Cr.P.C will limit the High Court’s inherent powers to prevent abuseof process or to secure the ends of justice. Hence the High Court mayexercise its inherent powers under Section 482 to set aside an interlocutoryorder, notwithstanding the bar under Section 397(2). However it is settledlaw that this can only be done in exceptional cases. This is, for example,where a criminal proceeding has been initiated illegally, vexatiously orwithout jurisdiction (See Madhu Limaye v. State of Maharashtra,(1977) 4 SCC 551).

In the present case, the order of the Magistrate under Section630(2) was an interlocutory relief based on a prima facie assessmentof facts and did not conclusively decide the ongoing trial under Section630(1). If the Magistrate finds that the appellant company has beenunable to prove that the 2[nd] Respondent was wrongfully withholdingpossession of the property, such interlocutory relief shall stand vacated.In light of the above discussion, it is clear that there was no exceptionalcase of illegality or lack of jurisdiction in the interlocutory order of the

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Alower court calling for the exercise of the inherent powers of the HighCourt under Section 482, Cr.P.C.

However we are in agreement with the High Court’s directionthat the trial under Section 630(1) ought to be completed as soon aspossible. Further, it is needless to say that if the civil court passes aBdecree in favour of the 2[nd] Respondent in Suit No. 2126/2009, suchdecree must be honoured and possession of the disputed property maybe restored to him accordingly.

Hence the appeal is allowed and the impugned judgement is setaside, in the above terms.

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Kalpana K. Tripathy

Appeal allowed.

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