TaxTMI 
TaxTMI 
2005 (5) TMI 324
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.... the pendency of the appeal before High Court. 3. Brief facts of the case are that the complaint was filed by the Company on 13-1-1995 on the allegation that one Shri Suresh Chander Agarwalla, husband of Respondent No. 1 and father of respondent No. 2 was employed with the appellant Co. since 1971 till his death on 2nd of November 1992. He was appointed Managing Director of the appellant Co. for a period of five years with effect from 15th of June, 1988. Flat No. 25 in a building called "Sonmarg" at 7B, Jagmohandas Marg, Mumbai, owned and possessed by the appellant-company was allotted to late Shri S.C. Agarwalla on 10th of March, 1975 to be used for residential purpose for himself and members of his family during the period he was in service of the appellant. Board of Directors had extended the term of Shri S.C. Agarwalla as Managing Director of the Company up to 14th of June, 1993. However, unfortunately, on 2nd of November, 1992, Shri S.C. Agarwalla died when he was whole time Managing Director of the appellant-company. Respondents 1 and 2 were residing with him in Sonmarg flat being members of his family. Even after the death of Shri Agarwalla, they continued to occupy the sai....
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....hereof. Thus, they have committed an offence, punishable under section 630 of the Companies Act read with section 109 of the Indian Penal Code. 4. From the case set up by the respondent and the evidence led, the case of the respondents is that there were discussions between them and the Chairman of the Board of Directors of the appellant and the Chairman, Board of Directors has assured them to continue to stay in Sonmarg flat until such time as the contract in respect of sale of Blue Heaven flat was implemented and therefore the possession of the respondent of Sonmarg flat is not unauthorized or wrongful. Before complaint was filed, a Civil Suit No. 7 of 1995 was filed by Respondents 1 and 2 against appellant company on 23-12-1994 in the High Court for specific performance of the contract dated 10th of February, 1978 for sale, transfer and to hand over possession of Flat No. 33, 3rd Floor, Blue Heaven Cooperative Housing Society Ltd., Mount Pleasant Road, Bombay. In the suit further relief claimed is that the defendants be ordered and decreed not to dispossess or interfere with the occupation and residence of the 1st plaintiff and her family in Sonmarg flat, Napean Sea Road, Bomb....
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.... Chairman of the Company and thus it cannot be said that they have wrongfully withheld the property of the company. It was further held that the matter is pending consideration before the civil court and, therefore, the Court cannot pass order of restoration of possession to the appellant Co. till rights of the parties are ascertained. 7. The appellant-company preferred an appeal before the High Court. The High Court dismissed the appeal holding that the respondents have made out a bona fide, probable and plausible defence that they were allowed to occupy the flat at Sonmarg by the Chairman of the Board of Directors till the flat in Blue Heaven is made available to them. Respondents shall ultimately succeed in the suit for specific performance or not is another matter. The respondents have made out a case that an assurance was so given and thus the appellant has failed to prove that the respondents are in wrongful possession of the flat in Sonmarg. Apart from this, the High Court has further held that a suit for recovery of the possession of the flat in Sonmarg filed by the appellant-company, a Court Receiver has been appointed and the respondent has been appointed as an agent of ....
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.... the section, it is apparent that sub-section (1) is in two parts. Sub-section (1) of clauses (a) and (b) creates two different and separate offences. Clause (a) contemplates a situation wherein an officer or employee of the company wrongfully obtains possession of any property of the company during the course of his employment to which he is not entitled whereas clause (b) contemplates a case where an officer or employee of the company having any property of the company in his possession, wrongfully withholds it or knowingly applies it to purposes other than those expressed or directed in the articles and authorized by the Company. Under this provision, it may be that an officer or an employee may have lawfully obtained possession of any property during the course of his employment, still it is an offence if he wrongfully withholds it after the termination of his employment. Clause (b) also makes it an offence, if any officer or employee of the Company having any property of the company in his possession knowingly applies it to purposes other than those expressed or directed in the articles and authorized by the Act. This section does not make any difference between the movable an....
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....h section 630 of the Act falls in Part XIII of the Companies Act and provides for penal consequences for wrongful withholding of the property of the company, the provisions strictly speaking are not penal in the sense as understood under the penal law. The provisions are quasi-criminal. They have been enacted with the main object of providing speedy relief to a company when its property is wrongfully obtained or wrongfully withheld by an employee or officer or an ex-employee or ex-officer or anyone claiming under them." The Court has explained and interpreted the term 'officer' or 'employee' of the Company in section 630 of the Companies Act and said that it would include the legal heirs and representatives of the employee or the officer concerned, continuing in occupation of the property of the company after the death of the employee or the officer. 14. A Three Judges Bench of this Court in Lalita Jalan v. Bombay Gas Co. Ltd. [2003] 6 SCC 1071 has drawn a distinction between the provisions of the Statute which are purely of a penal nature and the Companies Act, particularly provisions of section 628 to section 631 of the Companies Act and held : "17. The purpose of criminal jus....
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....ed person." (p. 119) From above narration of authorities, it is absolutely clear that section 630 of the Companies Act, does not only cover cases of the present employee or officer of the company and this provision strictly speaking is not penal in the sense as understood under penal law. The main purpose to make action an offence under section 630 is to provide a speedy and summary procedure for retrieving the property of the company where it has been wrongly obtained by the employee or officer of the company or where the property has been lawfully obtained but unlawfully retained after termination of the employment of the employee or the officer and to impose a fine on the officer or employee of the company if found in breach of the provision of section 630 of the Companies Act and further to issue direction if the Court feels it just and appropriate for delivery of the possession of the property of the company and to impose a sentence of imprisonment when there is non-compliance of the order of the Court regarding delivery or refund of the property of the company. 15. On 23-12-1994, Respondents 1 and 2 filed a civil suit No. 7 of 1995 for specific performance of the contract f....
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....w, cannot be sustained. Filing of civil suit for possession by the Company does not deprive the Company of the right to institute prosecution under the Companies Act and incidentally get an order for delivery of possession. It is stated that the civil suit was filed by way of abundant caution as well as to obtain reliefs which cannot be granted by a Criminal Court trying an offence under section 630. 16. The next important question is whether the possession of respondents of the property belonging to the company, namely, the Sonmarg flat, after the death of Shri S.C. Agarwalla, is unlawful and unauthorized and therefore wrongful. Both the Courts, namely, the Court of Magistrate and the High Court on appreciation of the material placed before them have clearly held that after the death of Shri Agarwalla, on the basis of assurance given by the Chairman of the Board of Directors of the appellant-company, Shri Goenka to Respondent No. 1 the said flat is being occupied by the Respondents. We have summarized the High Court's ultimate finding on this issue on the question of assurance given by Chairman Shri Goenka to Respondent No. 1. The learned counsel for the appellant took us through....
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....ve been delegated to him by the Board within the limit permitted by the Companies Act or any other law. The position of the Chairman of the Board of Directors is not substantially different from an individual Director. Under the Companies Act, Chairman of the company does not have any special or extraordinary rights to be exercised by him without being authorized by the Board of Directors. The Board of Directors of course have an authority to delegate the power or authority to act for and on behalf of the company to the Chairman of the Board of Directors. Section 291 of the Companies Act authorizes the Board of Directors of the Company to exercise such powers or of such acts or things as the company is authorized to exercise and do such acts or things, except in the matter where the power is to be exercised by the company in general meeting. The exercise of the powers by the Board shall be subject to the provisions contained in the Companies Act or any other Act or in the Memorandum or Articles of the company. Therefore, under section 291 of the Companies Act, the action of the Board of Directors should be in conformity with the provisions of the Company Law or any other enactment....
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....eath of Shri Agarwalla, of the flat in Sonmarg. Apart from this, the Board of Directors itself could exercise the powers in accordance with the Memorandum of association or the Articles of the company. Any power exercised beyond the memorandum or the articles of the company would not bind the company. Any assurance given by the Board of Directors either should be authorised object of the company by the memorandum of association or the articles of the company or its purpose should be reasonably ancillary or incidental to carrying on the companies business. Evidence produced on record indicates that agreement was entered into between the company and husband of the respondent No. 1 regarding Blue Heaven flat. Late Shri Agarwalla was old employee of the company since 1971. He expired on 2-11-1992 and assurance was given by the chairman to widow of ex-employee with whom he had long standing relation, when he went to see her to console her on 4-11-1992, barely two days after the death of Shri Agarwalla. Such evidence in our opinion irresistibly point, predominant, if not, the only consideration operating in the mind of chairman was to console the widow and to permit her to live in the f....