1987 (9) TMI 316 - SC - Companies Law

Whether the provisions contained in subsection (1) of section 630 which provide for the launching of a prosecution against an officer or employee of a company for wrongful possession of such property under clauses (a) and (b) of sub-section (1) of section 630 and for the recovery of such property by the issue of process under subsection (2), also extend to past officers and employees of the company? Whether the court trying the offence has the power to issue process under sub-section (2) against such officer or employee? Held that - Appeal dismissed. Considering the facts of present case it cannot be disputed that the flat in question is owned by the company and it also cannot be disputed that the petitioner came to occupy the said flat by virtue of his being in the employment of respondent No. 1 company. It follows that on his retiring from the company, the provisions of section 630 of the Companies Act will become applicable. This case, therefore, is neither one which deserves to be quashed nor one which is liable to be stayed pending the declaratory suit in the Court of Small Causes. In any event, I do not find this case which calls for interference in exercise of the jurisdiction either under article 227 of the Constitution of India or section 482 of the Criminal Procedure Code. Thus no merit in the petition and the same is dismissed. Rule discharged. Smt. Shenoi applies for continuation of stay for a period of three weeks in order to enable the petitioner to approach the Supreme Court. Shri Vashi objects to the grant of time. I find the request of Smt. Shenoi to be reasonable. Stay to continue for a period of three weeks from today.

Issues Involved:
1. Applicability of Section 630 of the Companies Act to past officers and employees.
2. Jurisdiction of the trial Magistrate to entertain the complaint and issue process.
3. Validity of the petitioner's claim of tenancy rights.
4. Allegation of mala fide action by the respondent.
5. Whether the criminal proceedings should be stayed pending the declaratory suit.

Issue-wise Detailed Analysis:

1. Applicability of Section 630 of the Companies Act to Past Officers and Employees:

The petitioner contended that Section 630 of the Companies Act was not applicable to him as he was no longer an officer or employee of the respondent company. The court examined the judgment of the Calcutta High Court in Amritlal Chum v. Devi Ranjan Jha, which held that Section 630 applies only to existing officers and employees. However, the court rejected this view, citing the decisions of the Bombay High Court in Harkishin Lakhimal Gidwani v. Achyut Kashinath Wagh and Govind T. Jagtiani v. Sirajuddin S. Kazi, which held that Section 630 applies to both current and past officers and employees. The court emphasized that the term "officer or employee" includes past officers or employees who wrongfully withhold company property after their employment ends.

2. Jurisdiction of the Trial Magistrate to Entertain the Complaint and Issue Process:

The petitioner argued that the trial Magistrate lacked jurisdiction to entertain the complaint and issue process under Section 630. The court dismissed this argument, stating that the trial Magistrate was within his rights to issue process based on the complaint filed by the respondent. The court upheld the trial Magistrate's decision to issue process, emphasizing that the petitioner, by wrongfully withholding the flat after retirement, fell within the scope of Section 630.

3. Validity of the Petitioner's Claim of Tenancy Rights:

The petitioner claimed tenancy rights over the flat, asserting that his tenancy continued even after retirement. The court rejected this claim, stating that the flat was provided to the petitioner as part of his employment, and his right to occupy the flat ceased upon termination of his employment. The court referred to the case of Krishan Avtar Bahadur v. Col. Irwin Extross, which held that an employee cannot claim tenancy rights over company property after the termination of employment. The court concluded that the petitioner's claim of tenancy was not valid and did not warrant staying the criminal proceedings.

4. Allegation of Mala Fide Action by the Respondent:

The petitioner alleged that the respondent's actions were mala fide, as they resorted to criminal proceedings after their eviction proceedings were stayed. The court found no merit in this allegation, stating that the respondent was justified in filing the criminal complaint under Section 630 after the petitioner wrongfully withheld the flat. The court emphasized that the respondent's actions were in accordance with the law and aimed at retrieving the company's property.

5. Whether the Criminal Proceedings Should be Stayed Pending the Declaratory Suit:

The petitioner argued that the criminal proceedings should be stayed pending the outcome of his declaratory suit in the Small Causes Court. The court rejected this argument, stating that the filing of a declaratory suit does not automatically stay criminal proceedings. The court cited the case of Krishan Avtar Bahadur v. Col. Irwin Extross, which held that criminal proceedings under Section 630 can proceed independently of any civil suit regarding tenancy rights. The court concluded that there was no justification for staying the criminal proceedings.

Conclusion:

The court dismissed the petition, finding no merit in the petitioner's arguments. The court upheld the trial Magistrate's decision to issue process under Section 630 of the Companies Act and rejected the petitioner's claim of tenancy rights. The court also dismissed the allegations of mala fide action by the respondent and found no reason to stay the criminal proceedings pending the declaratory suit. The stay was continued for three weeks to allow the petitioner to approach the Supreme Court.

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