1997 (11) TMI 418 - HC - Companies Law

Issues Involved:
1. Limitation period for filing complaints under Section 630(1) of the Companies Act, 1956.
2. Constitutional validity of Section 630 of the Companies Act, 1956.

Detailed Analysis:

1. Limitation Period for Filing Complaints:

The original complainant, The Petlad Bulakhidas Mills Co. Ltd., challenged the order of the Judicial Magistrate, First Class, Petlad, which dismissed the complaints under Section 630(1) of the Companies Act, 1956, as barred by limitation under Section 468(2) of the Code of Criminal Procedure, 1973. The complaints were filed more than one year after the retirement of the respective respondents, who continued to occupy company premises unauthorizedly.

The respondents argued that the complaints were time-barred as they were filed more than one year after their retirement, and the offence under Section 630(1), punishable only with fine, had a limitation period of six months under Section 468(2) of the Code. The Magistrate accepted this argument and dismissed the complaints.

However, the High Court held that the wrongful withholding of the company's property was a continuous offence. Each day the ex-employees continued to occupy the premises without authorization constituted a fresh offence. Under Section 472 of the Code, a fresh period of limitation begins at every moment during which the offence continues. Therefore, the complaints were not time-barred, and the Magistrate's order dismissing them on this ground was incorrect. The refusal to vacate the company's quarters after retirement constituted a continuing offence, as held by the Supreme Court in Gokak Patel Vokhart Ltd. v. Dundayya Gurushiddaiah Hiremath.

2. Constitutional Validity of Section 630:

The ex-employees challenged the constitutional validity of Section 630, arguing that it violated Articles 14 and 21 of the Constitution and was beyond the legislative competence of the Union Parliament. They contended that Section 630 discriminated between employees of companies and employees of other entities like partnership firms and cooperative societies, which was not justified. They also argued that the relationship between the company and its employees was akin to a landlord-tenant relationship, falling under the legislative competence of the State Legislature under Entry 18 of List II.

The High Court rejected these contentions, holding that Section 630 was within the legislative competence of the Parliament under Entries 43 and 44 of the Union List. The provision aimed to protect the property of companies and was part of the regulation of companies. The object of Section 630 had a direct nexus with the object of the Companies Act, which included the regulation of company affairs and protection of company property. The provision was designed to provide speedy relief to companies when their property was wrongfully withheld by employees or ex-employees.

The Court further held that Section 630 was not discriminatory or arbitrary. It applied to employees who occupied company premises due to their employment and were expected to return the premises upon termination of their employment. The provision facilitated the allocation of premises to subsequent employees and prevented dishonesty by ex-employees.

The challenge to the validity of Section 630 on the grounds of Articles 14 and 21 failed. The Court emphasized the need to interpret beneficent provisions broadly to suppress mischief and advance the remedy.

Conclusion:

The High Court allowed the Revision Applications, set aside the Magistrate's order dismissing the complaints as time-barred, and directed the trial Court to proceed with the hearing of the cases on merits. The request for a certificate of fitness for approaching the Supreme Court was rejected, as the case did not involve any substantial question of law of general importance.

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