2019 (12) TMI 397 - SC - Companies Law

Temporary injunction in respect of the disputed property - Corporate Debtor - whether an application under Section 630(2) of the 1956 Act was maintainable, in spite of pendency of the civil suit and issue of temporary injunction in respect of the disputed property? - HELD THAT - The mere issuance of a temporary injunction by the civil court directing maintenance of status quo in respect of the disputed property does not make the dispute bona fide or bar the company s right to recover the disputed property from the accused employee under Section 630 of the 1956 Act. At best, such an injunction would only bar the company from creating any rights in favour of third parties pending disposal of the civil suit. This is because the cause of action in the civil suit is completely different from the question of whether the employee is wrongfully withholding the company s property, which is the issue for consideration in the present criminal proceedings - If prima facie the trial court finds that the company has the right to possess the property, the issuance of a temporary injunction by the civil court cannot be used to defeat the company s lawful right of possession. Whether an order could be made under Section 630(2) prior to final disposal of the complaint under Section 630(1)? - HELD THAT - Where the Magistrate has found that prima facie the company has a right to possession of the disputed property, he may grant interlocutory relief under Section 630(2) prior to conclusion of the trial under Section 630(1). Courts have time and again observed that Section 630 has to be given a liberal interpretation so as to facilitate expeditious recovery of the company s property - given that the primary object of Section 630 is to provide a speedy mechanism for restoration of wrongfully withheld property to companies, we find that the provision should be construed as far as possible to facilitate a remedy in favour of the aggrieved company and to prevent the wrongful retention of the property for an unduly long period by the accused - In the present case, the courts below have not committed any error in allowing the appellant company s application under Section 630(2) during pendency of substantive criminal proceedings. Whether the company is entitled to pray for dispossession of 2nd Respondent from the property? - Whether it is required that 2nd Respondent should have been in possession of the disputed property as a perquisite of his service? - HELD THAT - Section 630 nowhere requires that the company should have title to the property. The emphasis is on whether the accused has obtained wrongful possession of the property which defeats the company s lawful right of exclusive possession, even though the property as such may not belong to the company but to a thirdparty landlord or licensor - it is true that in the majority of cases falling under the ambit of Section 630, it has been that property possessed by the company was allotted to an employee for the purposes of residential accommodation, etc. as an incidence of his service, at the first instance itself. In the present case, the 2nd Respondent has been a director of the company since 1988, and claims to be in permissive possession of the disputed property as per the alleged understanding between him and his relative, the deceased Arun Kumar Bajoria, since 1994. However the company acquired the disputed property only in 2008. Be that as it may, the 2nd Respondent has failed to rebut the fact that as of 26.4.2008 it is the company which has acquired the exclusive right to possess the property, and the company handed over possession to him w.e.f 1.5.2008 only in his capacity as the director of the company. Whatever may have been the situation prior to 26.4.2008, on and after that date the company became entitled to recover possession of the disputed property. Inherent powers under Section 482 of the Cr.P.C - HELD THAT - Section 397(2) of the Cr.P.C provides that the High Court s powers of revision shall not be exercised in relation to any interlocutory order passed in any appeal, inquiry, trial or other proceeding. Whereas Section 482 of the Cr.P.C provides that nothing in the Cr.P.C will limit the High Court s inherent powers to prevent abuse of process or to secure the ends of justice. Hence the High Court may exercise its inherent powers under Section 482 to set aside an interlocutory order, notwithstanding the bar under Section 397(2). However it is settled law that this can only be done in exceptional cases. This is, for example, where a criminal proceeding has been initiated illegally, vexatiously or without jurisdiction. 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 - 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. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Maintainability of an application under Section 630(2) of the Companies Act, 1956 during the pendency of a civil suit and issue of temporary injunction.
2. Whether an order under Section 630(2) can be made prior to the final disposal of the complaint under Section 630(1).
3. Entitlement of the company to dispossess the 2nd Respondent from the property.
4. Requirement for the 2nd Respondent to be in possession of the disputed property as a perquisite of his service.
5. Justification of the High Court in exercising its inherent powers under Section 482 of the Cr.P.C.

Detailed Analysis:

1. Maintainability of an application under Section 630(2) of the Companies Act, 1956:
The court established that a company has a separate legal personality, and any orders in the civil suit between the 2nd Respondent and the vendors would not bind the appellant company as it was not a party to the suit. The court cited precedents (Damodar Das Jain v. Krishna Charan Chakraborti and Atul Mathur v. Atul Kalra) to assert that the pendency of a civil suit does not bar a complaint under Section 630 if there is no bona fide dispute regarding the company’s right over the property. The court found no bona fide dispute in this case since the 2nd Respondent’s claim was based on an oral agreement without documentary evidence, while the appellant company had at least symbolic possession through an agreement. The court concluded that a temporary injunction directing status quo does not bar the company’s right to recover the property under Section 630.

2. Whether an order under Section 630(2) can be made prior to the final disposal of the complaint under Section 630(1):
The court emphasized that Section 630 should be liberally interpreted to facilitate expeditious recovery of the company’s property. It referred to the Supreme Court’s decision in Baldev Krishna Sahi v. Shipping Corporation of India Limited, which supports granting interlocutory relief under Section 630(2) before the conclusion of the trial under Section 630(1). The court noted that the provision aims to prevent wrongful retention of property and should be construed to favor the aggrieved company.

3. Entitlement of the company to dispossess the 2nd Respondent from the property:
The court criticized the High Court’s strict interpretation requiring the company to have title to the property and for the accused to possess the property as a perquisite of service. The court clarified that Section 630 focuses on whether the accused wrongfully possesses the property, even if the company does not own it. The 2nd Respondent admitted the property was transferred to the appellant company, and the court found that the company had the exclusive right to possess the property since the agreement dated 26.4.2008. The court dismissed the 2nd Respondent’s argument about being misled into delivering the title documents.

4. Requirement for the 2nd Respondent to be in possession of the disputed property as a perquisite of his service:
The court noted that Section 630 does not require the property to be allotted as a perquisite of service. It is sufficient that the accused was put into possession of the property in their capacity as an officer/employee and continued to withhold it without any independent right after cessation of employment. The court found that the 2nd Respondent’s claim of an oral agreement did not establish an independent right to the property.

5. Justification of the High Court in exercising its inherent powers under Section 482 of the Cr.P.C:
The court held that the High Court’s powers under Section 482 should only be exercised in exceptional cases of illegality or lack of jurisdiction. The interlocutory order under Section 630(2) was based on a prima facie assessment and did not conclusively decide the ongoing trial. The court found no exceptional case warranting the exercise of inherent powers by the High Court. However, the court agreed with the High Court’s direction for the trial under Section 630(1) to be completed expeditiously and noted that any decree in favor of the 2nd Respondent in the civil suit must be honored.

Conclusion:
The appeal was allowed, and the impugned judgment was set aside. The court reaffirmed the company’s right to recover possession of the property under Section 630 despite the pendency of the civil suit and the issuance of a temporary injunction. The court emphasized a liberal interpretation of Section 630 to facilitate speedy recovery of wrongfully withheld property.