Holding

Family members of a living officer or employee cannot be prosecuted under Section 630 of the Companies Act, 1956.

Summary

The appellant J.K. (Bombay) Ltd employed M as a trainee supervisor and allotted him a company flat. After M resigned, he was directed to vacate but refused, claiming unpaid dues. The company filed a complaint under Section 630 of the Companies Act, 1956 against M and his wife and father. The lower courts upheld the process against the family members, but the Bombay High Court set aside the order, prompting an appeal to the Supreme Court. The Court examined whether family members of a living employee can be prosecuted under Section 630. It held that penal statutes cannot be extended to persons not expressly covered, and prosecuting the wife and father would violate Article 21 and public policy. Consequently, the appeal was dismissed and the order of the High Court was affirmed.

Issues considered

Can family members of an employee or ex‑employee be proceeded against and convicted under Section 630 of the Companies Act, 1956?

Legislation cited

Companies Act, 1956s. 630

Subjects

Companies ActSection 630wrongful withholding of propertycriminal liabilityfamily membersemployeeex‑employeepersonal libertyArticle 21public policy

Judgment

J.K.' (BOMBAY) LTD. A
v.
BHARTI MATHA MISHRA AND ORS.

JANUARY 18, 2001

[K.T. THOMAS AND R.P. SETHI, JJ.] B

Company law:

Companies Act, 1956:
c
Section 630-Wrongfitl withholding of property-Ex-employee did not
vacate company property allotted to him during the course of his employment-
Prosecution initiated against his wife and father-Validity of-Held:
Prosecution cannot be initiated against family members of an '"ex-employee'"
or "officer" of a company who is alive-Hence, High Court rightly recalled
the order of process against wife and father of ex-employee. D

The appellant-company employed M as a Trainee Supervision in its
plant and allotted a flat to him for his residence during the course of his
employment. Subsequently, M resigned and he was asked to vacate the flat
in question. However, M refused to vacate the flat and a complaint under E
Section 630 of the Companies Act, 1956 was filed by the appellant against
M, respondent No. 1 and respondent No. 2 who were the wife and father of
M. The Judicial Magistrate rejected the applications filed by respondent No.
1 and No. 2 to recall the order of process against them. The revision petition
filed by them was also dismissed. However, the High Court allowed their writ
petition. Hence this appeal. F
On behalf of the appellant it was contended that as legal heirs of the
erstwhile employee can be prosecuted, the other family members of such
employee, living with him cannot escape their liability of prosecution.

The following question of law arose before this Court :-
G

Whether the family members of an employee or an ex-employee of a
company can be proceeded with in a criminal court, convicted and sentenced
for the commission of offence under section 630 of the Companies Act,
1956? H
439
440 SUPREME COURT REPORTS (200 I] I S.C.R.

A Dismissing the appeal,' the Court

HELD: 1.2. Penal law cannot be interpreted in a manner to cover within
its ambit such persons who are left out by the legislature. The position of
the legal heirs of the deceased employee cannot be equated with the family
members of an erstwhile employee against whom, admittedly, the criminal
B prosecution is launched and pending. In criminal cases the law which initials
conviction and sentence, liberal construction, with the aid of assumption,
presumption and implications cannot be resorted to for the purpose of roping
in the criminal prosecution, such persons who are otherwise not intended
to be prosecuted or dealt with by criminal court. Accepting the contention
C of the appellant would amount to violation of fundamental right of personal
liberty as enshrined under Article 21 of the Constitution, which declares
that no person shall be deprived of his life or personal liberty except
according to the procedure established by !aw. The paramount object of
Article 21 is to prevent the encroachment of the right of a person with
respect to his life and liberty, save in accordance with the procedure
D established by law and in conformity with the provisions thereof. Personal
liberty envisaged under this Article means freedom from physical restraint
of a person by incarceration or otherwise. Agreeing with the plea of the
appellant would also be against public policy, inasmuch as under similar
circumstances the companies would be authorised to resort to harassment
E tactics by having recourse of arraigning minors and old members of the
family of its officer or employee in office or even past. 1445-F-HI

Baldev Krishna Sahi v. Shipping Corporation of India, 119871 4 SCC
361; Amritlal Chum v. Devoprasad Dutta Roy, 1198814 SCC 514 and Gokak
Patel Vokart ltd. v. Dundayya Gurushiddaiah Hiremath, 1199112 SCC 141,
F relied on.

Abhilash Vinod Kumar Jain (Smt.) v. Cox & Kings (India) ltd., 119951
3 sec 732, held inapplicable.

1.2. The family members ofan alive 'officer' or 'employee' ofa company
G cannot be proceeded with and prosecuted under Section 630 of the Act.
CRIMINAL APPELLATE JURISDICTION: Criminal Appeal No. 87of
2001.

From the Judgment and Order dated 01.12.1998 in CRLWP 1523/98 of the
H High Court of Bombay.
l.K. BOMBAY LTD. v. B.M. MISHRA [SETHI, .I.] 441

S. Ganesh, P. Venugopal, PS Sudheer, K.J. John, Pradeep Misra and S.V. A
'- Deshpande for the appearing parties.

The Judgment of the Court was delivered by

SETHI, J. Leave granted.

Whether the family members of an employee or an ex-employee of a
B
company can be proceeded with in a criminal court, convicted and sentenced
for the commission of offence under Section 630 of the Companies Act?
(hereinafter referred to as "the Act") is the question of law to be determined
by us in this appeal. Relying upon the judgment of this Court in Abhilash
Vinod Kumar Jain (Smt.) v. Cox & Kings (India) ltd. & Ors., [1995) 3 SCC C
732, it has been argued on behalf of the company that the expression "officer
or employee" appearing in Section 630 of the Act would include all his family
members.

The admitted facts of the case are that one Mata Harsh Mishra, who
is the husband of respondent No. I and father of respondent No. 2, joined D
the employment of the appeliant-company as Trainee Supervisor in its plant.
He was allotted Flat No. 8 in Anil Co-operative Housing Society Ltd., and
possession delivered to him for the purpose of his residence during the
course of employment while he was in the service of the company. It was
made clear to the said employee that he was to remain in possession of the E
premises only during his employment with the company and had to vacate
the flat as and when he ceased to be the employee of the company. The said
Shri Mishra tendered his resignation on 31st March, 1994 which was accepted·
with effect from 4.4.1994 vide letter of the company dated 23.4.1994. He was
directed to hand over the charge of his work to the Production Manager and
vacate the flat in his possession given to him by virtue of his employment. F
Despite notice, the erstwhile employee did not vacate the premises on the
pretext that as he had not been paid his dues, he had a right to remain in
occupation. On 16.5.1995, a complaint under Section 630 of the Act was filed
by the appellant in the court of Judicial Magistrate, Thane, against said Shri
Mishra, its ex-employee and the respondents I and 2 herein. The respondents G
herein moved an application in the court of the Magistrate for recall of the
order of process. Their application was rejected by the Court of the Judicial
Magistrate, First Class, Thane on 12.4.1995. Revision petition filed by them
was also dismissed by the Additional Sessions Judge, Thane which compelled
the aforesaid respondents to file writ petition in the High Court of Bombay
which has been allowed vide the order impugned herein. H
442 SUPREME COURT REPORTS [200 l) 1 S.C.R.

A Secti'on 630 of the companies Act Reads:

"630. Penalty for wrongful withholding ofproperty,-(1) If any officer
or employee of a company-

(a) wrongfully obtaias possession of any property of a company;
B 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 this Act;

c 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
D Cou1i, any such property wrongfully obtained or wrongfully withheld
or knowingly misapplied, or in default, or suffer imprisonment, for a
term which may extend to two years."

The divergence of opinion between various High Courts regarding
E interpretation of the expression "an officer or employee of a company"
appearing in Sub-section (1) of Section 630 of the Act was resolved by this
Court in Baldev Krishna Sahi v. Shipping Corporation of India, [1987] 4 SCC
361 holding that the expression "officer or employee of a company" applies
not only to existing officer or employee but also includes past officers or
employees where such officer or employee; either (a) wrongfully obtains
F possession of any property, or (b) wrongfully withholds the same after the
termination of his employment. Explaining the position of law this Court held:

'The beneficient provision contained in Section .630 no doubt penal,
has been purposely enacted by the legislature with the object of
providing a summary procedure for retrieving the property of the
G company (a) where, an officer or employee of a company wrongfully
obtains possession of property of the company, or (b) where having
been placed in possession of any such property during the course of
his employment, wrongfully withholds possession of it after the
termination of his employment. It is the duty of the court to place a
H broad and liberal construction on the provision in furtherance of the
.1.K. BOMBAY LTD. v. B.M. MISHRA [SETHI, .I.] 443
object and purpose of the legislation which would suppress the A
mischief and advance the remedy.
" Section 630 of the Act which makes the wrongful withholding of
any property of a company by an officer or employee of the company
a penal offence, is typical of the economy of language which is
characteristic of the draughtsman of the Act. The Section is in two B
parts. Sub-s.(1) by clauses (a) and (b) creates two distinct and separate
offences. First of these is the one contemplated by clause (a), namely,
where an officer or employee of a company wrongfully obtains
possession of any property of the company during the course of his
employment, to which he is not entitled. Normally, it is only the
c
present off;cers and employees who can secure possession of any
property of a company. It is also possible for such an officer or
.._ employee after termination of his employment to wrongfully take away
possession of any such property. This is the function of clause (a)
and although it primarily refers to the existi~g officers and employees,
it may also take in past officers and employees. In contrast, clause (b) D
contemplates a case where. an officer or employee of a company
having any property of a company 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. It may
well be that an officer or employee may have lawfully obtained
E
possession of any such property during the course of his employment
but wrongfully withholds it after the termination of his employment.
That appears to be one of the functions of clause (b ). It would be
noticed that clause (b) also makes it an offence in any officer or
employee of a company having any property of the company in his
possession knowingly applies it to purposes other than those F
expressed or directed in the articles and authorised by the Act. That
would primarily apply to the present officers and employees and may
also include past officers and employees. There is therefore no warrant
to give a restrictive meaning to the term 'officer or employee' appearing
in Sub-section (I) of Section 630 of the Act. It is quite evident that
clauses (a) and (b) are separated by the word 'or' and therefore are
G

• clearly disjunctive."

Again, this Court in Amritlal Chum v. Devoprasad Dutta Roy, [I988] 2
SCC 269; (Three Judge Bench), Atul Mathur v. Atul Katra, [1989] 4 SCC 5 I4
and Gokak Patel Vokart Ltd. v. Dundayya Gurushiddaish Hiremath, [1991] H
444 SUPREME COURT REPORTS [200 I] I S.C.R.

A 2 sec 141, interpreted the position of law and approved the dictum of this
Court in Baldev Krishna Sahi 's case. In Ab hi/ash Vi nod Kumar Jain's case ~
(supra) this Court was concerned with the prosecution of the legal
representatives of the deceased employee and in that context, it held:

"The logical deduction of the analysis of Section 630 of the Act in
B the li.ght of the law laid down by this Court is that:

(i) Clause (a) of the Section is self-contained and independent of
clause (b) with the capacity of creating penal liability embracing
the case of an existing employee or an officer of the company
and includes a past officer or a past employee of the company;
c
(ii) Clause (b) is equally independent and distinct from clause (a) as
regards penal consequences and its squarely applies to ihe
cases of past employees or officers;

(iii) the entitlement of the officer or employee to the allotted property
D of the company is contingent upon the right and capacity of the
officer of the employee by virtue of his employment to continue
in possession of the proRerty belonging to the company, under
authority of the company and the duration of such right is
coterminous with his/her employment.
E
Thus, inescapably it follows that the capacity, right to possession and
the duration of occupation are all features which are integrally blended
with the employment, and the capacity and the corresponding rights
are extinguished with the cessation of employment and an obligation
arises to hand over the allotted property back to the company, where
F the property of the company is held back whether by the employee,
past employee or anyone claiming under them, the retained possession
would amount to wrongful withholding of the property of the company
actionable under Section 630 of the Act. The argument of the learned
counsel for the appellants that since the provisions of Section 630 of
the Act are penal in nature the same must be strictly construed and,
G
the parties which have not been expressly included by the legislature
in Section 630( I) of the Act, cannot by any interpretative extension
be included in the said provision, ignores the situation that by a
deeming fiction, the legal representatives or heirs of a past employee
or officer, in occupation of the property of the company, would continue
H to enjoy the personali!y and status of the employee or the officer
J.K. BOMBAY LTD. v. B.M. MISHRA [SETHI, J.] 445

only. A
This Court further held that Section 630 of the Act is intended to
provide speedy relief to the company where its property wrongfully obtained
or wrongfully withheld by an "employee or a officer" or a past employee and
officer" or "legal heirs or representative" deriving their colour and content
from such an employee or off:cer, in so far as the occupation of the property B
·~ belonging to the company, is concerned. The beneficial provision would be
defeated if the legal heirs or family members who continue in possession of
the allotted premises, are permitted to remain in possession despite the
cessation of the relationship of deceased employee with the company.
Answering the question referred to it, the Court held:
c
"Thus, our answer to the question posed in the earlier part of this
judgment is in the affirmative and we hold that a petition under S.630
of the Act is maintainable against the legal heirs of the deceased
;
officer/employee for retrieval of the Company's property wrongfully
' withheld by them after the demise. of the employee concerned." D
Stretching further the verdict of the Court in Abhilash Vinod Kumar
Jain's case, the learned counsel appearing for the appellant has submitted that
as legal heirs of the erstwhile employee can be prosecuted, the other family
members of such employee, living with him cannot escape their liability of
prosecution. The argument, though attractive on the face of it, is devoid of E
any force when examined in depth in the light of the constitutional mandate
and the legal provisions applicable in the case. The penal law cannot be
interpreted in a manner to cover within its ambit such persons who are left
out by the legislature. The position of the legal heirs of the deceased employee
cannot be equated with the family members of an erstwhile employee against
whom, admittedly, the criminal prosecution is launched and pending. In criminal F
cases the law which entails conviction and sentence, liberal construction,
with the aid of assumption, presumption and implications cannot be resorted
to for the purpose of roping in the criminal prosecution, such persons who
are otherwise not intended to be prosecuted or dealt with by criminal court.
Accepting the contention of the appellant would amount to the violation of G
fundamental right of personal liberty as enshrined under Article 21 of the
Constitution which declares that no person shall be deprived of his life or
personal liberty except according to the procedure established by law. The
paramount object of Article 2 I is to prevent the encroachment of the right of
a person with respect to his life and liberty, save in accordance with the
procedure established by law and in conformity with the provisions thereof. H
446 SUPREME COURT REPORTS [200 I] I S.C.R.

A Personal liberty envisaged' under this Article means freedom from physical
restraint of a person by incarceration or otherwise. Agreeing with the plea of
..
the appellant would also be against the public policy, inasmuch as under
similar circumstances the companies would be authorised to resort to
harassment tactics by having recourse of arraigning minors and old members
B of the family of its officer or employee in office or even past.
We are of the firm opinion that all the family members of an alive
'officer' or 'employee' of a company cannot be proceeded with and prosecuted lr
under Section 630 of the Act. The order impugned does not suffer from any
illegality, requiring our interference.
c There is no merit in this appeal, which is accordingly dismissed.

V.S.S. Appeal dismissed.