1995 (9) TMI 225 - HC - Companies Law

Summary

Issues Involved:
1. Quashing of proceedings under section 482 of the Code of Criminal Procedure.
2. Allegations of wrongful withholding of property under section 630 of the Companies Act, 1956.
3. Determination of whether the matter is a civil wrong or a criminal offense.
4. Evaluation of the memorandum of understanding and its impact on the case.

Issue-wise Detailed Analysis:

Quashing of Proceedings under Section 482 of the Code of Criminal Procedure:
The petitioner sought the quashing of proceedings in S.T.C. No. 594 of 1995 on the file of the Judicial Magistrate No. VI, Coimbatore. The court considered whether the complaint of the respondent was liable to be quashed under section 482 of the Code of Criminal Procedure. The petitioner argued that the complaint was an abuse of the process of the court and was filed to harass and coerce him. The court, however, found that it was not appropriate to quash the proceedings at this stage as the allegations in the complaint needed to be evaluated during the trial.

Allegations of Wrongful Withholding of Property under Section 630 of the Companies Act, 1956:
The respondent filed a complaint alleging that the petitioner, a former managing director, wrongfully retained properties belonging to the respondent-company after ceasing to be the managing director. The properties included a Hindusthan Contessa car, a diesel generator set, computers, and an automatic exhaust gas analyser. The court noted that section 630 of the Companies Act makes it an offense for any officer or employee of a company to wrongfully withhold or misapply company property. The court emphasized that the wrongful retention of company property is punishable under section 630 and that the petitioner had no right to retain the properties after ceasing to be an officer of the company.

Determination of Whether the Matter is a Civil Wrong or a Criminal Offense:
The petitioner contended that the allegations amounted to a civil wrong and not a criminal offense. The court, however, highlighted that criminal law and civil law can run side by side and are not mutually exclusive. The court referred to the Supreme Court's decision in Pratibha Rani v. Suraj Kumar, which stated that providing a civil remedy does not take away the right to file a criminal complaint. The court concluded that the allegations in the complaint, if proven, would constitute an offense under section 630 of the Companies Act and that the matter could not be dismissed as merely a civil wrong.

Evaluation of the Memorandum of Understanding and Its Impact on the Case:
The petitioner relied on a memorandum of understanding dated July 15, 1994, to assert his rights over the disputed properties. The court, however, found it inappropriate to consider the memorandum at this stage without legal proof. The court emphasized that disputed questions of fact, such as whether the memorandum could bind the corporate body and whether the petitioner's possession of the properties was wrongful, could only be decided during the trial. The court declined to evaluate the genuineness or credibility of the memorandum at this stage, stating that these were matters of evidence to be addressed during the trial.

Conclusion:
The court dismissed the petition for quashing the proceedings, stating that the allegations in the complaint needed to be evaluated during the trial. The court found that the petitioner had an opportunity to present his contentions during the trial and that no prejudice would be caused to him by allowing the proceedings to continue. Consequently, the court also dismissed the related Criminal Miscellaneous Petitions Nos. 1861 and 1862 of 1995.