2003 (4) TMI 436 - SC - Companies Law

Whether the appellants having not vacated the flat after the death of Shri N.K. Jalan to whom it was allotted in his capacity as Director of the Company come within the ambit of section 630 of the Act? Held that - Appeal dismissed. If an erstwhile or former employee is prosecuted under section 630 of the Act on account of the fact that he has not vacated the premises and continues to remain in occupation of the same even after termination of his employment in normal circumstances it may not be very proper to prosecute his wife and dependent children also as they are bound to stay with him in the same premises. The position will be different where the erstwhile or former employee is himself not in occupation of the premises either on account of the fact that he is dead or he is living elsewhere. In such cases all those who have come in possession of the premises with the express or implied consent of the employee and have not vacated the premises would be withholding the delivery of the property to the company and therefore they are liable to be prosecuted under section 630 of the Act. This will include anyone else who has been inducted in possession of the property by such persons who continue to withhold the possession of the premises as such person is equally responsible for withholding and non-delivery of the property of the company.

Issues Involved:
1. Applicability of Section 630 of the Companies Act, 1956 to family members of a deceased employee.
2. Interpretation of the term "wrongful withholding" under Section 630.
3. Distinction between present and past employees under Section 630.
4. Legal heirs' liability under Section 630.
5. Penal nature of Section 630 and its constitutional implications.

Issue-wise Detailed Analysis:

1. Applicability of Section 630 of the Companies Act, 1956 to Family Members of a Deceased Employee
The primary issue was whether Section 630 of the Companies Act, 1956, which penalizes wrongful withholding of company property, applies to family members of a deceased employee. The Court held that the section applies not only to current and former employees but also to their heirs or representatives who wrongfully withhold company property. The Court cited the case of Smt. Abhilash Vinodkumar Jain v. Cox & Kings (India) Ltd., which established that heirs of a deceased employee continuing to occupy company property could be prosecuted under Section 630.

2. Interpretation of the Term "Wrongful Withholding" under Section 630
The Court emphasized that "wrongful withholding" is a continuous process and not a single act. The term means holding back or keeping back the property, thereby depriving the company of its possession. The Court referred to the dictionary meaning and previous judgments, such as Baldev Krishna Sahi v. Shipping Corpn. of India Ltd., which interpreted "wrongful withholding" to include actions by past employees who retain company property after their employment ends.

3. Distinction between Present and Past Employees under Section 630
The Court noted that Section 630 should be interpreted broadly to include both present and past employees. It cited multiple cases, including Amrit Lal Chum v. Devoprasad Dutta Roy and Gokak Patel Volkart Ltd. v. Dundayya Gurushiddaiah Hiremath, which supported the view that past employees could be prosecuted for wrongful withholding of company property. The Court rejected a narrow interpretation that would limit the section's applicability to current employees only.

4. Legal Heirs' Liability under Section 630
The Court clarified that legal heirs of a deceased employee who continue to occupy company property are liable under Section 630. It distinguished between legal heirs and other family members, stating that legal heirs derive their right to occupy the property through the deceased employee and must vacate upon the employee's death. The Court rejected the argument that only legal heirs under the Hindu Succession Act could be prosecuted, affirming the broader interpretation from Smt. Abhilash Vinodkumar Jain's case.

5. Penal Nature of Section 630 and Its Constitutional Implications
The Court addressed the argument that Section 630, being a penal provision, should be strictly construed. It held that while the section imposes penalties, its primary purpose is to retrieve company property. The Court distinguished between civil wrongs and crimes, noting that Section 630's objective is not punitive but remedial. It rejected the view from J.K. (Bombay) Ltd. v. Bharti Matha Mishra that prosecuting family members of a former employee would violate Article 21 of the Constitution, affirming that judicial orders do not infringe fundamental rights.

Conclusion
The Court concluded that Section 630 of the Companies Act, 1956, applies to family members of a deceased employee who wrongfully withhold company property. It affirmed the broader interpretation of "wrongful withholding" to include both present and past employees and their heirs. The Court dismissed the appeal, upholding the prosecution under Section 630.

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