2025 (4) TMI 1120 - HC - Companies Law

Rejection of prayer for discharge of the petitioner - rejection on the ground that prayer for discharge by the petitioner cannot be entertained because Law is apposite that if any officer or employee of a company having validly obtained possession of a property of a company wrongfully retains the same as appears to be the case in this proceeding it would constitute an offence contemplated in Section 452 of the Companies Act 2013 - HELD THAT - In the present case the Learned Magistrate only issued summons upon the petitioner. The Learned Trial Court shall have to decide the case on its own merits on the basis of the evidence led by the parties for final decision. It is beyond the jurisdiction of this Court to embark upon final conclusion at this stage without leading evidences by the parties that the petitioner wrongfully withheld the articles of Company or not. In the case of Hooghly Mills Company Limited Vs. State of West Bengal and Another 2019 (12) TMI 397 - SUPREME COURT the Hon ble Supreme Court held that In the present case the order of the Magistrate under Section 630(2) was an interlocutory relief based on a prima facie assessment of facts and did not conclusively decide the ongoing trial under Section 630(1). If the Magistrate finds that the appellant company has been unable to prove that the 2nd Respondent was wrongfully withholding possession of the property such interlocutory relief shall stand vacated. In light of the above discussion it is clear that there was no exceptional case of illegality or lack of jurisdiction in the interlocutory order of the lower court calling for the exercise of the inherent powers of the High Court under Section 482 Cr.P.C. In the light of above discussion and judgments passed by the Hon ble Supreme Court in the aforesaid referred case this Court is of the opinion that the Criminal Revisional application has devoid of merits. Conclusion - Order of rejection of discharge from the case is found correct legal and well within the jurisdiction as such same is not required to be interfered. Revision dismissed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court include:

(a) Whether the petitioner, who was formerly a Director of the Company, wrongfully withheld possession of the Company's property, thereby attracting liability under Section 452 of the Companies Act, 2013.

(b) Whether the complaint filed under Section 452 of the Companies Act, 2013 read with Section 200 of the CrPC is liable to be quashed on the ground that it is frivolous, vexatious, or instituted with mala fide intent as a counterblast to matrimonial and civil disputes between the parties.

(c) Whether the petitioner's discharge from the criminal proceedings was rightly refused by the Learned Chief Judicial Magistrate.

(d) The applicability and interpretation of Section 452 of the Companies Act, 2013 concerning wrongful withholding of company property by an officer or employee who is no longer in office.

(e) The extent of the High Court's inherent powers under Section 482 of the CrPC to quash criminal proceedings that may be an abuse of process or instituted with ulterior motives.

2. ISSUE-WISE DETAILED ANALYSIS

(a) Wrongful withholding of company property by petitioner under Section 452 of the Companies Act, 2013

Legal Framework and Precedents: Section 452 of the Companies Act, 2013 penalizes any officer or employee of a company who wrongfully obtains or withholds possession of any property of the company. The punishment includes a fine and may extend to imprisonment. The offence is cognizable upon complaint by the company or its members.

The Court also referred to the Supreme Court's decision in Hooghly Mills Company Limited Vs. State of West Bengal, which clarified that possession of company property must be in the capacity of an officer or employee, and wrongful withholding after cessation of employment attracts liability.

Court's Interpretation and Reasoning: The Court found that the petitioner was no longer a Director of the Company at the time of institution of the complaint. However, the Company alleged that the petitioner was wrongfully withholding several articles (including a Honda Jazz car, television sets, laptops, and air conditioners) which were purchased for the use of the Managing Director and were in the petitioner's possession.

The Court noted that while the petitioner resides in the flat owned by her husband (the Managing Director), she is not the exclusive possessor of the Company's property but a user of the same as the wife of the Director. The property remains within the residence belonging to the husband, who continues as a Director.

However, the Honda Jazz car was found to be exclusively used by the petitioner for personal purposes, and since she was no longer a Director, the Court held that prima facie, she is not entitled to retain the car without the Company's permission.

Key Evidence and Findings: The Company's Board authorized its agent to initiate proceedings after the petitioner failed to return the articles despite repeated requests. The petitioner denied possession or wrongful withholding, claiming the items were in the matrimonial home and used jointly.

Application of Law to Facts: The Court held that the issue of wrongful withholding is a question of fact to be decided at trial. Prima facie, the complaint disclosed an offence under Section 452, especially concerning the car. The petitioner's status as a former Director and the nature of possession of company property were relevant factors.

Treatment of Competing Arguments: The petitioner argued that she was no longer a Director and that the complaint was a counterblast to matrimonial disputes, hence frivolous and vexatious. The Company contended that the complaint was bona fide to recover its property. The Court found that the matrimonial discord and civil disputes did not negate the prima facie case of wrongful withholding.

Conclusion: The Court upheld the cognizance of offence and process issuance against the petitioner, rejecting the discharge application at this stage.

(b) Quashing of proceedings on grounds of mala fide, frivolity, or abuse of process

Legal Framework and Precedents: The Court examined the scope of inherent powers under Section 482 CrPC to quash criminal proceedings that are manifestly frivolous, vexatious, or instituted with mala fide intent, citing the landmark judgment in State of Haryana v. Bhajan Lal. The Court also considered recent judgments emphasizing the need for courts to look beyond the FIR's averments in matrimonial or personal disputes to detect ulterior motives.

Court's Interpretation and Reasoning: The Court acknowledged the petitioner's claim that the complaint was a retaliatory measure in the backdrop of multiple litigations including domestic violence and criminal complaints against her husband. However, it held that the presence of matrimonial discord does not automatically render the criminal complaint under Section 452 frivolous or malicious.

Key Evidence and Findings: The Court noted the ongoing matrimonial disputes and multiple FIRs but found that the complaint under Section 452 was supported by prima facie material regarding wrongful withholding of company property.

Application of Law to Facts: The Court applied the Bhajan Lal categories and found that the present case does not fall within the grounds for quashing such as absence of offence, lack of jurisdiction, or mala fide institution. The complaint disclosed a prima facie offence and was not inherently improbable or absurd.

Treatment of Competing Arguments: The petitioner's reliance on judgments where criminal proceedings were quashed for mala fide or lack of prima facie case was distinguished on facts. The Court observed that the petitioner's case involved a prima facie offence under a specific statutory provision, unlike the purely matrimonial or civil disputes in those cases.

Conclusion: The Court declined to quash the proceedings on grounds of mala fide or abuse of process.

(c) Refusal of discharge application under Section 452 of the Companies Act, 2013

Legal Framework and Precedents: The Court referred to the principle that discharge applications at the pre-trial stage require the Court to examine whether the allegations, taken at face value, disclose a prima facie offence. The Court also cited Madhavrao Jiwaji Rao Scindia's case emphasizing that discharge should be granted only if no prima facie case is made out.

Court's Interpretation and Reasoning: The Learned Chief Judicial Magistrate rejected the discharge application on the ground that the petitioner, as a former officer of the Company, was alleged to have wrongfully withheld company property, which constitutes an offence under Section 452.

Key Evidence and Findings: The complaint and preliminary evidence indicated that the petitioner continued to possess company property without authorization.

Application of Law to Facts: The Court found no error or perversity in the Magistrate's order rejecting discharge. The prima facie materials justified continuation of proceedings.

Treatment of Competing Arguments: The petitioner's contention that she was no longer a Director and thus not liable was held to be a matter for trial and not for discharge at the preliminary stage.

Conclusion: The Court upheld the refusal to discharge the petitioner.

(d) Applicability of Section 452 of the Companies Act, 2013 to former officers/employees

Legal Framework and Precedents: Section 452 penalizes wrongful possession or withholding of company property by officers or employees. The Supreme Court in Hooghly Mills clarified that wrongful withholding after cessation of employment or office attracts liability if the accused has no independent right to the property.

Court's Interpretation and Reasoning: The Court observed that although the petitioner was no longer a Director, the issue of wrongful withholding depends on whether she had lawful possession or independent right to the property. The car, being used exclusively by her post cessation, prima facie attracted liability.

Key Evidence and Findings: The petitioner's name was removed as Director following disputed resignation letters alleged to be forged. The petitioner denied authorizing such resignation but was no longer on record as Director.

Application of Law to Facts: The Court held that the legal position requires trial to determine wrongful withholding by a former officer. Prima facie, the complaint disclosed an offence under Section 452.

Treatment of Competing Arguments: The petitioner's denial of resignation and claim of forgery were noted but left for trial. The Company's authorization of complaint and evidence of possession were accepted as sufficient for cognizance.

Conclusion: Prima facie, Section 452 applies to the petitioner's case, and the complaint was maintainable.

(e) Exercise of inherent powers under Section 482 CrPC to quash proceedings

Legal Framework and Precedents: The Court considered the scope of Section 482 CrPC to prevent abuse of process or secure ends of justice, including quashing proceedings that are frivolous, vexatious, or mala fide, as per the principles laid down in Bhajan Lal and subsequent Supreme Court decisions.

Court's Interpretation and Reasoning: The Court emphasized that such powers are to be exercised sparingly and only in exceptional cases where no prima facie case exists or proceedings are manifestly mala fide.

Key Evidence and Findings: The Court found no exceptional circumstances warranting interference. The complaint disclosed a cognizable offence and was supported by prima facie evidence.

Application of Law to Facts: The Court declined to quash the proceedings under Section 482, holding that the complaint was not an abuse of process or instituted with ulterior motives sufficient to invoke inherent powers.

Treatment of Competing Arguments: The petitioner's reliance on judgments quashing proceedings on mala fide grounds was distinguished on facts, as the present case involved a statutory offence with prima facie evidence.

Conclusion: The Court refused to exercise inherent powers to quash the proceedings.

3. SIGNIFICANT HOLDINGS

"The question of discharge of the petitioner at this stage, even prior to commencement of trial, does not arise" where prima facie materials disclose an offence under Section 452 of the Companies Act, 2013.

"Petitioner is not the exclusive user of those articles. The petitioner is only a mere user of those articles along with Mr. Sunil Bansal, who is still one of the Directors of the Company."

"Prima facie petitioner is not entitled to retain the car when she is no more a Director of the Company."

"The order of rejection of discharge from the case is found correct, legal and well within the jurisdiction as such same is not required to be interfered."

"The case of the present petitioner does not fall within any of the categories mentioned in Bhajan Lal's judgment warranting quashing of proceedings."

"The Court owes a duty to look into many other attending circumstances emerging from the record of the case over and above the averments and, if need be, with due care and circumspection, to try and read between the lines" in cases where mala fide or ulterior motive is alleged.

"It is beyond the jurisdiction of this Court to embark upon final conclusion at this stage without leading evidences by the parties that the petitioner wrongfully withheld the articles of Company or not."

"The Criminal Revisional application has devoid of merits and is dismissed."