2010 (7) TMI 275 - SC - Companies Law

Penalty - For wrongful withholding of property Whereby and whereunder the appellant s criminal complaint filed under section 406 read with section 34 of the Indian Penal Code hereinafter referred to as IPC and under section 630 of the Companies Act, 1956 (hereinafter referred to as the Act ) was dismissed?

Summary

Issues Involved:

1. Dismissal of the criminal complaint by the trial court on technical grounds.
2. Validity of the Power of Attorney and the resolution authorizing Mr. V.S. Parthasarthy.
3. Wrongful withholding of property under Section 630 of the Companies Act.
4. Applicability of Section 621 of the Companies Act.
5. Merits of the appellant's complaint and the defenses raised by the accused.

Issue-wise Detailed Analysis:

1. Dismissal of the criminal complaint by the trial court on technical grounds:

The trial court dismissed the appellant's criminal complaint filed under Section 406 read with Section 34 of the IPC and Section 630 of the Companies Act, citing hypertechnicalities. The High Court also dismissed the appellant's application for leave to file an appeal. The Supreme Court noted that both courts adopted hypertechnicalities, leading to a grave error in refusing to grant leave and rejecting the appellant's application for prosecution under Section 630 of the Act.

2. Validity of the Power of Attorney and the resolution authorizing Mr. V.S. Parthasarthy:

The trial court questioned the genuineness of the Power of Attorney executed on 31-12-2001, notarized on 5-6-2002, and scribed on a stamp paper purchased on 18-4-2002. The Supreme Court critically examined the original documents and found them genuine, stating that they duly authorized Mr. V.S. Parthasarthy to file and prosecute the complaint against the accused. The Court rejected the argument that the Power of Attorney was fictitious or manufactured.

3. Wrongful withholding of property under Section 630 of the Companies Act:

The Supreme Court examined Section 630 of the Act, which penalizes wrongful withholding of company property by an officer or employee. The Court noted that the complaint seeking possession of the servant quarter was maintainable and that the Magistrate erred in dismissing it on technical grounds. The Court emphasized that the accused No. 1, who retired in 1992, had wrongfully withheld the property and had given an undertaking to vacate it by 31-1-2000, which he failed to honor.

4. Applicability of Section 621 of the Companies Act:

Section 621 deals with offences against the Act being cognizable only on complaint by the Registrar, shareholder, or Government. The Supreme Court found it unnecessary to examine the applicability of this section, as it was doubtful whether accused No. 1, a caretaker, could be categorized as an officer of the company. The Court left this question open for future consideration.

5. Merits of the appellant's complaint and the defenses raised by the accused:

The Supreme Court found that the accused's defenses, including the claim that the Power of Attorney was fictitious and that the undertaking to vacate was given under coercion, were unconvincing. The Court highlighted that the accused had continued to occupy the servant quarter for over 18 years without any right to do so. The Court directed the accused to vacate the premises by 1-10-2010 and hand over peaceful possession to the appellant company, failing which they would face imprisonment and a fine.

Conclusion:

The Supreme Court set aside the orders of the Metropolitan Magistrate and the High Court, allowing the appellant's complaint under Section 630 of the Companies Act. The Court exercised its powers under Article 142 of the Constitution to ensure complete justice, directing the accused to vacate the premises by 1-10-2010 or face imprisonment and a fine. The Court emphasized that no further mercy or sympathy could be shown to the accused, who had displayed an adamant and dilatory attitude.