2025 (10) TMI 1136 - HC - Companies Law

Petition dismissed: notice to return company records and assets justified complaint under s.452 Companies Act, 2013

Punita Khatter Versus Explorers Travel & Tour Pvt. Ltd.

HC dismissed petition seeking quashing of the notice and proceedings under s.452, Companies Act, 2013. Court held the e-mail notice dated 11.04.2016 ... Seeking quashing of the Notice Order and the proceedings pending in the Court - offence u/s 452 Companies Act, 2013 - alleged wrongful withholding by the Petitioner - challenge to Order of framing Notice on the grounds that on 26.04.2016, petitioner was still holding the post of Director in the Respondent Company and thus, the question of wrongful withholding of any article, does not arise and no offence was made out u/s 452 Companies Act, 2013 - non-application of mind whils passing the impugned order - violation of principles of natural justice - HELD THAT:- The first aspect, which needs mention, is that the Notice dated 11.04.2016 required the Petitioner to handover the articles forthwith, of which she was in possession being the Managing Director of the Company forthwith, but she failed to do so and therefore, present Complaint got filed on 26.04.2016. To say that it was premature, was not correct, as despite being told to handover the articles forthwith, she failed to do so, till the time present Complaint was filed on 26.04.2016 - The second aspect raised by the Petitioner is that even though she was removed from the post of Managing Director on 11.04.2016, but she continued to be a Director in the Company, from which she resigned on 09.06.2016. Section 452 of Companies Act, 2013 provides that if an officer or employee of a Company having in his possession property including cash wrongfully withholds the same, is liable for punishment - In the present case, one the Petitioner seized to be the Managing Director of the Company on 26.04.2016; she, in terms of Section 452 of Companies Act, 2013, was required to handover the assets and documents of the Company forthwith, as mentioned in the Letters dated 11.04.2016 & 15.04.2016 of the Company. Much has been contended by the Petitioner that e-mail Notice dated 11.04.2016 was vague insomuch as it did not give the particulars precisely, but this contention has also been rightly rejected by learned ACMM. It clearly stated that all Financial Records, Accounts, the Management Accounts including the Data In Computer along with their password and all records of the Company, be returned - Hence, as per the submission of the Petitioner, the records were voluminous. Thus, seeking all the records of the Company in itself was sufficient Notice to the Petitioner to return the same. Ld. ACMM has rightly observed that prima facie Notice under Section 452 of Companies Act, 2013 is made out and the Notice has been accordingly framed. There is no merit in the present Petition, which is hereby dismissed. ISSUES PRESENTED AND CONSIDERED 1. Whether the Notice and Order framing charge under Section 452, Companies Act, 2013 (return/ wrongful withholding of company property) should be quashed under the inherent jurisdiction of the Court where the accused was removed as Managing Director but continued as Director at the time of complaint. 2. Whether the Complaint and pre-summoning evidence were vague or lacking material particulars as to the articles alleged to be wrongfully withheld, thereby rendering the summoning and framing of Notice unsustainable. 3. Whether proof of entrustment is a necessary ingredient for the offence under Section 452, Companies Act, 2013, or whether the provision operates without requiring entrustment to be shown. 4. Whether disputed questions of fact, including reliance on documentary and electronic evidence (certificate under Section 65B, Indian Evidence Act), can be adjudicated in exercise of inherent jurisdiction under Section 482 Cr.P.C., or must be left for trial. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Validity of Notice/Order under Section 452 when accused ceased to be Managing Director but was still a Director Legal framework: Section 452, Companies Act, 2013 criminalises wrongful withholding by an officer or employee of company property (including documents) and mandates return of such property when possession becomes unlawful. Precedent Treatment: The Court relied on authorities holding that Section 452 (and its predecessor provisions) cover both present and past employees/officers and that an officer in capacity of MD would be entitled to custody of company records while in office (citing earlier decisions analogously). Interpretation and reasoning: The Court reasoned that property and documents held by an officer by virtue of holding the office of Managing Director must be returned once the officer ceases to hold that office; continuation as a Director alone does not permit continued retention of items specifically in the officer's possession as MD. The Notice dated 11.04.2016 required immediate handover; failure to do so prior to filing of the Complaint (26.04.2016) was not premature. Ratio vs. Obiter: Ratio - possession of company property by virtue of an office (MD) becomes unlawful on cessation of that office and section 452 imposes an obligation to return such property; continuation as Director does not justify retention of property held in MD capacity. Obiter - contextual references to internal board resolutions and communications supporting the factual matrix. Conclusion: The Court upheld the authority of the trial court to frame Notice under Section 452 where the accused had ceased to be Managing Director and had not complied with demand for return of company property; summoning and framing of Notice were not vulnerable on this ground. Issue 2 - Alleged vagueness and lack of material particulars in the Complaint and pre-summoning evidence Legal framework: Criminal complaints must specify material particulars sufficiently to enable the accused to understand allegations; however, the adequacy of particulars for summoning is judged on prima facie evidence and whether documents and communications supply necessary clarity. Precedent Treatment: The Court applied settled procedural principles that deficiencies in particulars that raise disputed factual issues are ordinarily matters for trial, not for quashment under inherent jurisdiction. Interpretation and reasoning: The Court held that the demand for 'all financial records, accounts, management accounts including data in computer along with their password and all records of the Company' was sufficiently specific in the circumstances because the items sought were those in the accused's possession as MD and the documents/e-mails and subsequent communications identified categories of items (laptops, phones, statutory books, credit cards, agreements). The trial court's reliance on these categories and on recovery noted by a Local Commissioner provided adequate basis for framing the Notice. Ratio vs. Obiter: Ratio - broad categorical demands for return of records and specified classes of items may be sufficient as a notice under Section 452 where those items are shown to be in the officer's possession; particulars that raise disputed factual questions do not warrant quashing at the prima facie stage. Obiter - comments on voluminous nature of records and practicality of specifying serial numbers at the complaint stage. Conclusion: The Complaint and pre-summoning evidence were not so vague as to invalidate the summoning or framing of Notice; the objection on vagueness is rejected and left to be tested at trial if controverted. Issue 3 - Necessity of proving entrustment as an ingredient of Section 452 offence Legal framework: Text of Section 452, Companies Act, 2013 does not expressly require proof of entrustment; it penalises wrongful withholding by an officer or employee of company property. Precedent Treatment: The Court endorsed the view of the trial court and relied on prior case law and analogy to predecessor provisions that entrustment is not a necessary ingredient; the provision is construed as imposing strict liability once possession by virtue of office becomes unlawful. Interpretation and reasoning: The Court agreed with the trial court that Section 452 is concerned with possession by an officer/employee and wrongful withholding when such possession becomes unlawful; entrustment need not be independently proved where possession arises from office functions. The Court noted that the pre-summoning evidence and board communications demonstrated that the items were in the accused's possession as MD. Ratio vs. Obiter: Ratio - Entrustment is not an essential element of Section 452; possession by virtue of office suffices and the obligation to return arises when that office-holder's possession becomes unlawful. Obiter - comparative references to erstwhile Section 630 and supporting case law on scope of provision. Conclusion: Lack of separate proof of entrustment does not vitiate the complaint or the framing of Notice; the statutory provision applies to past officers who wrongfully withhold property of the company. Issue 4 - Competence of Court to resolve disputed factual questions and admissibility of electronic documents at the quashment stage Legal framework: Section 482 Cr.P.C. is a limited inherent jurisdiction; it is not ordinarily exercised to decide disputed questions of fact which require trial. Electronic documents require compliance with Section 65B Evidence Act for admissibility where applicable. Precedent Treatment: The Court reiterated that disputed factual issues, including extent/identity of items and veracity of documents, must be left for trial; documents intended to be relied upon could be tendered with proper certification under Section 65B at trial. Interpretation and reasoning: The Court observed that the Respondent had filed the required certificate under Section 65B and that many objections raised by the Petitioner engaged disputed facts (e.g., whether items were returned, which items remained withheld, serial/IMEI particulars). These issues could not be resolved in exercise of inherent jurisdiction. The Court noted that a Local Commissioner's recovery report formed part of pre-summoning evidence supporting the prosecution case. Ratio vs. Obiter: Ratio - Section 482 should not be used to decide contested factual issues or to replace trial adjudication on evidentiary disputes; admissibility and weight of electronic evidence are matters for trial subject to statutory certification. Obiter - remarks on procedural choice to challenge earlier summoning order rather than the subsequent framing order. Conclusion: The Petition was an inappropriate vehicle to decide disputed factual and evidentiary questions; the pre-summoning evidence and statutory certification were sufficient to sustain framing of Notice and the matter must proceed to trial. Final Disposition The Court dismissed the petition for quashing of the Notice and proceedings under Section 452, Companies Act, 2013, holding that (i) the requirement to return company property arises on cessation of the office in which possession was held, (ii) entrustment is not an essential element of Section 452, (iii) the Complaint and pre-summoning evidence were not unconstitutionally vague, and (iv) disputed factual and evidentiary issues are to be decided at trial rather than by exercise of inherent jurisdiction under Section 482 Cr.P.C.