M.K. Chandrakanth vs M.K. Kannan

Pratap Singh, J.—The accused in S.T.C. 184/91 on the file of Judicial Magistrate No.II, Coimbatore, has filed his petition under S. 482

Criminal Procedure Code, praying to call for the records in the aforesaid case and quash the same.

The respondent has filed private complaint against the petitioner under S. 630 of the Companies Act, 1956. The allegations in it are briefly as

follows:

M/s. Asoka Betelnut Company Private Limited Coimbatore was incorporated in 1976 under the Companies Act, 1956 (which I shall hereafter

referred to as ''the Act''). The accused was the Marketing Director of the said company. In order to improve the business, the company had

entrusted an Ambassador Car bearing Registration No.TMO 6090 to him. The accused used it as a Director of the Company. He was acting

against the interest of the company. The company has filed two suits against him claiming huge amounts. Ultimately he was removed from

Directorship on 7.12.87 as he was acting against the interest of the company. The aforesaid car was entrusted to him for his use as a Director. The

R.C.Book stands in the name of the Company. Since he is no more a Director, he is bound to hand over the same to the company, Despite

demands, he had not returned the car. The offence of withholding the property of the company is a continuing offence. He is possessing it

wrongfully. Hence the complaint for direction to the accused to deliver the car along with the R.C.Book of the company within a time fixed by the

court and for other reliefs.

The accused, the petitioner herein, had resisted the claim on the following grounds: M.K. Krishna Chetty started the business in 1930. It

flourished very well. After his sons became major, he gave the benefits to his sons and after he expired, the partnership was converted into a

private limited company. All the cars were transferred in the name of the company. Only in such circumstances, the car TMO 6090 was registered

in the name of the company, the accused is in control of the vehicle. The relationship between the brothers continued as before and the company

was a joint family business. The accused had filed C.P.65/87 for mismanagement. It is pending. The son of the accused has filed C.S.27/89 and

obtained an injunction restraining the brothers from alienating the immovable property. M.K. Kuppuraj called for an extraordinary meeting of the

company on 2.11.87 in order to remove the accused from permanent directorship. The accused moved the court for an injunction. While it was

pending, M.K. Kuppuraj removed the accused from the directorship. The accused has filed application for reinstatement as a Director and the

application No.697/87 is pending. If the court so directs, he is prepared to return the vehicle.

The petitioner who figures as P.W.1 had filed Exs.P1 to P10. The accused had not let any evidence. On the materials placed before him, the

learned Judicial Magistrate No.II, Coimbatore has passed an order on 1.7.91 directing the accused to hand over the car with R.C.Book to the

company within 15 days of the date of the order and has also indicated that in default, he is liable to be punished under S. 630(1) & (2) of the Act.

Mr. K.A. Panchapakesan, the learned counsel for the petitioner, would contend that he was not able to get the copy of the order at the time of

filing of this petition. He had raised several points assailing the impugned order. Whereas Mr. K.V. Sridharan, the learned counsel appearing for

the respondent, would counter all those contentions and I shall refer to them one by one.

Before referring to the submissions made by Mr. K.A. Panchapagesan, for better appreciation of the case, S. 630 of the Companies Act needs

extraction, It reads as follows:

Penalty for wrongful withholding of property.-(1) If any officer or employee of a company.

(a) wrongfully obtains possession of any property of a company, or

(b) having any such property in his possession, wrongfully withholds it or knowingly applies it to purposes other than those expressed or directed in

the Articles and authorised by the Act, he shall, on the complaint of the company or any creditor or contributory thereof, be punishable with fine

which may extend to one thousand rupees.

(2) The court trying the offence may also order such officer or employee to deliver up or refund, within a time to be fixed by the court, any such

property wrongfully obtained or wrongfully withheld or knowingly misapplied or in default, to suffer imprisonment which may extend to two years.

I shall also refer to the rulings relied upon by the learned counsels, at the outset itself. I shall refer to them later as and when I consider the relevant

submissions.

(I) In 1989 SCC 761 Atul Mathur v. Atul Kalpa it was held that merely because a civil suit filed by accused prior to institution of complaint in

criminal court is pending proceeding with complaint under S. 630 of the Act, is not barred. In paragraph 16, Justice S. Natarajan has observed as

follows:

Merely because respondent 1 had schemingly filed a suit before tendering his resignation, it can never be said that the civil court was in seisin of a

bonafide dispute between the parties and as such the criminal court should have stayed its hands when the company filed a compliant under S.

If a view is mechanically taken that whenever a suit has been filed before a complaint is laid under S. 630, the criminal court should not

proceed with the complaint it would not only lead to miscarriage of justice but also render ineffective the salutary provisions of S. 630.

The Apex Court has also pointed out that merely because the company''s claim to possession was refuted, it would not become a bonafide

dispute.

(ii) In (1987 L.W.Crl.371) Balasubramanian v. The E.I.D. Parry (India) Ltd., Justice K.M. Natarajan has pointed out that the action of the

petitioner, in that case, who was admittedly permitted to occupy the property during his employment, in not vacating the premises after termination

of his employment would certainly amount to wrongful withholding which would attract the prosecution under S. 630 of Companies Act.

(iii) In (1987 61 Com. Cases 744 (Rajasthan) Beguram v. Jaipur Udhyog Ltd., it was held that S. 630 of the Act applies to wrongful withholding

of both movable and immovable property and that the offence is a continuing offence and there is no period of limitation within which prosecution

must be filed.

Mr. K.A. Panchapagesan, would contend that no order under S. 630(2) of the Act can be passed independently and that such an order to

deliver the property can be passed only after finding the accused guilty and punishing him under S. 630(1) of the Act. In the instant case, the trial

Magistrate has given a finding in para 6 of the order that the Ambassador car was given to the accused as a Director, that he was removed from

the directorship and he is under obligation to return the car to the company. Then in para 8 of his order, the trial Magistrate has directed the

accused to return the car to the company within 15 days of the date of the order viz., 1.7.91. As per S. 630(2) of the Act, the court which tries the

offence may also order such officer or employee to deliver up or refund within a time to be fixed by the court, any such property wrongfully

obtained or wrongfully withheld or knowingly misapplied, or in default, to suffer imprisonment for a term which may extend to two years. In the

instant case, after giving a finding as aforesaid, the trial Magistrate had directed the return of the car within 15 days and has also indicated that in

default, the penal provisions would be applied. In view of language of S. 630(1) of the Act, the finding and direction of the trial Magistrate, as

above, is perfectly in order. It need not be that only after giving a punishment under S. 630(1) of the Act, the trial Magistrate shall proceed to act

under S. 630(2). Such and interpretation is not warranted on the plain language of the section, Hence I am unable to accept this contention put

forth by Mr. K.A. Panchapagesan.

Mr. K.A. Panchapagesan, next contended that when the subject matter of the complaint under S. 630 of the Act is under dispute in a civil court,

the criminal court cannot pass any valid order for disposal of the property until the civil court decides the dispute. To consider this ground certain

facts need be stated. The R.C.Book, relating to the Ambassador car bearing Registration No.TMO 6090, is standing in the name of the company.

The accused was a Director of the company. He is in control of the vehicle. He was removed from the directorship of the company. In his

objection before the trial Magistrate, he has stated that he has filed an application for reinstatement as a Director, in application No.697/87. That

would impliedly admit that he was removed from the directorship of the company. Ex.12 is the copy of the resolution passed on 7.12.87

whereunder he was removed from the directorship. In this backdrop the contention that the dispute is pending a civil court that criminal court

cannot pass any valid order for the disposal of this property, and that only the civil court decides the dispute is to be considered. The ruling of the

Apex Court, which I have given as ruling No.(i) supra is a clear answer to this contention. I would also like to point out that it was elicited from the

petitioner who figured as P.W.1 in re-examination that he is not a party in the suit filed by Sowmyaram (sic) in the High Court and he is not a party

in the case pending before the Supreme Court and that he is not also not a party in the company case filed by the accused. In the above

circumstances, the second contention of the petitioner also falls to the ground.

Mr. K.A. Panchapagesan, would further contend that petitioner was removed from the directorship on 7.12.87 but this compliant was filed on

27.12.90 it is more than 3 years after the alleged offence and hence the complaint is barred by limitation. I am clearly of the opinion that this is a

continuing offence. So long as the accused continuously withholds, the property, the offence continues. So the question of limitation, as put forward

by the learned counsel is not tenable. In this regard, I am in agreement with the ruling given as No.(iii) supra.

In view of the above, this petition which does not have any merit shall stand dismissed.