1997 (8) TMI 427 - HC - Companies Law

High Court upholds substitution of legal heirs in criminal case, deems retention of company property wrongful.

Jolly Durga Prasad Versus Goodricks Group Ltd.

The High Court of Calcutta dismissed the revisional application, affirming the validity of substituting legal heirs in criminal proceedings following a ... Wrongful withholding of company's property Issues Involved:1. Substitution of legal heirs in criminal proceedings.2. Validity of wrongful withholding of company property under Section 630 of the Companies Act.3. Impact of civil proceedings and interim injunction on criminal proceedings.4. Determination of bona fide dispute and stay of criminal proceedings.Issue-wise Detailed Analysis:1. Substitution of Legal Heirs in Criminal Proceedings:The court addressed the issue of whether the legal heirs of Arun Kumar Durgaprasad, who died during the pendency of the criminal case, could be substituted as accused. The learned Magistrate allowed the substitution based on the Supreme Court decision in Smt. Abhilash Vinod Kumar Jain v. Cox & Kings (India) Ltd., holding that the prosecution did not abate with the death of Arun Kumar Durgaprasad. The heirs had no independent capacity to continue occupying the flat after his death. The court upheld this substitution, rejecting the argument that substitution is alien to criminal law.2. Validity of Wrongful Withholding of Company Property under Section 630:The court examined whether the retention of the flat by Arun Kumar Durgaprasad and subsequently by his heirs was wrongful under Section 630 of the Companies Act. It was undisputed that Arun Kumar Durgaprasad was an employee and was provided the flat as an incident of his employment. Upon his voluntary retirement effective from 1-10-1994, his right to occupy the flat ceased. The company allowed him to stay till 31-12-1994, after which his possession became wrongful. The court found that the retention of the flat by his heirs continued to be wrongful, thus attracting the provisions of Section 630(1)(b).3. Impact of Civil Proceedings and Interim Injunction on Criminal Proceedings:The heirs argued that the civil suit for specific performance of an alleged agreement to sell the flat should take precedence, and the interim injunction granted by the civil court rendered their possession rightful. The court noted that the civil suit and the interim injunction did not affect the criminal prosecution under Section 630. The court emphasized that the criminal proceeding aimed at providing speedy relief to the company for wrongful withholding of its property. The doctrine of part performance under Section 53A of the Transfer of Property Act was not applicable as the alleged agreement was not in writing.4. Determination of Bona Fide Dispute and Stay of Criminal Proceedings:The court analyzed whether the dispute over the flat constituted a bona fide dispute warranting a stay of the criminal proceedings. It held that the mere filing of a civil suit or obtaining an interim injunction did not make the dispute bona fide. The court referred to the principles laid down in various judgments, including Atul Mathur v. Atul Kalra and Texmaco Ltd. v. Arun Kumar Sharma, emphasizing that every dispute does not become bona fide merely because it is raised in a civil suit. The court concluded that the dispute over the flat was not bona fide and did not fall within the exclusive jurisdiction of the civil court. Consequently, there was no ground for staying the criminal proceedings.Conclusion:The High Court of Calcutta dismissed the revisional application, holding that the criminal proceedings under Section 630 of the Companies Act should continue. The substitution of legal heirs was valid, the retention of the flat was wrongful, and the civil proceedings and interim injunction did not preclude the criminal prosecution. The court emphasized the importance of swift criminal justice and rejected the stay of criminal proceedings.