2004 (4) TMI 293 - HC - Companies Law

Employees can face prosecution for withholding company property post-termination

The court dismissed the application seeking to quash criminal proceedings under section 482 Cr. P.C. It held that terminated employees could be prosecuted ... Penalty - For wrongful with-holding of property Issues:1. Quashing of criminal proceedings under section 482 Cr. P.C.2. Jurisdiction of the Court in a case of wrongful withholding of property under section 630 of the Companies Act.3. Interpretation of section 630 in cases of terminated employment.Analysis:Issue 1: Quashing of criminal proceedings under section 482 Cr. P.C.The petitioner sought quashing of criminal proceedings and an order passed by the Judicial Magistrate under section 630 of the Companies Act. The petitioner's service was terminated, and he was asked to vacate the residential quarter allotted by the company. The petitioner's counsel argued that the termination was illegal and referred the dispute to the Labour Court under the Industrial Disputes Act. The counsel contended that the criminal prosecution was an abuse of the court's process due to the ongoing dispute over the termination.Issue 2: Jurisdiction of the Court in a case of wrongful withholding of property under section 630 of the Companies ActSection 630 of the Companies Act penalizes the wrongful withholding of company property by an officer or employee. The court deliberated on whether an employee, whose services were terminated, could be prosecuted under this section. Citing the case of Baldev Krishna Sahi v. Shipping Corpn. of India Ltd., the court held that even terminated employees could be prosecuted under section 630 if they wrongfully withheld company property post-termination. The court emphasized that the provision applies to both present and past employees, and the offense is committed when possession is wrongfully retained after termination.Issue 3: Interpretation of section 630 in cases of terminated employmentThe court further referred to the case of Lalita Jalan v. Bombay Gas Co. Ltd., which reiterated that wrongful withholding involves a continuous act of not returning company property post-termination. In the present case, as the petitioner's service was terminated in 1999, his possession of the quarter became wrongful. The court clarified that until the termination is declared illegal and the employee reinstated, the possession remains unauthorized. Therefore, the initiation of criminal proceedings under section 630 was deemed valid and not without jurisdiction.In conclusion, the court dismissed the application, finding no merit in quashing the criminal proceedings under section 482 Cr. P.C. The judgment reaffirmed the applicability of section 630 of the Companies Act to cases of terminated employment where company property is wrongfully withheld, emphasizing the continuous nature of the offense post-termination.