Gujarat High Court
Petlad Bulakhidas Mills Co. Ltd. vs State Of Gujarat And Ors. on 14 November, 1997
Equivalent citations: [1999]97COMPCAS900(GUJ), (1998)2GLR1065
JUDGMENT Abichandani, J.
1. In these Revision Applications, the original complainant, i.e., Petlad Bulakhidas Mills Co. Ltd. has challenged the order passed by the learned Judicial Magistrate, First Class. Petlad on December 23, 1985 below applications exs. 5 and 7 in Criminal Case Nos. 1302 of 1984, 1303 of 1984, 1304 of 1984, 1305 of 1984 and 1306 of 1984, holding that the cases filed under Section 630(1) of the Companies Act, 1956 (hereinafter 'the Act') by the complainant were barred by limitation under the provisions of Section 468(2) Procedure, 1973 (hereinafter 'the Code') rejected the complaints.
2. According to the complainant, the respective Respondent No. 2 of these petitions were given the premises belonging to the company at the time when they were its employees, and though they were required to vacate the premises at the time of their superannuation on January 9, 1983, June 8, 1983, May 25, 1983 and May 24, 1983, respectively, they continued to occupy the premises unauthorisedly and were wrongfully withholding the property of the company.
3. The respondent No. 2-ex-employees made applications in the criminal cases exs. 5 and 7, contending in application ex. 5 that since the complaints were filed more than one year after their retirement and since the offence under Section 630(1) of the Article was punishable only with fine, they were barred by limitation under Section 468 of the Code and also contending in the application ex. 7 that the provisions of Section 630 of the Article were not applicable to the facts of the case and, therefore, the Court had no jurisdiction to entertain the complaints under that provision. As regards jurisdiction, the learned Magistrate held in favour of the complainant and, therefore, we are not concerned with that aspect of the matter in these revision applications, which are directed only against the learned Judicial Magistrate's order passed below ex. 5 dismissing the complaints on the ground that they were time-barred.
4. In all these cases, the complaints were filed on July 9, 1984, which was after one year and some months of the retirement of these respondent-ex-employees. The learned Magistrate had taken the date of retirement of these ex-employees as the basis for computing the period of limitation.
5. Under Section 630(1) of the Act it is, inter alia, provided that if any employee of a company having any property of a company in its possession wrongfully withholds it, he shall, on the complaint of the company, be punishable with fine, which may extend to Rs. 1,000. Under Section 468 of the Code, bar is imposed against taking cognizance of an offence of the categories specified in sub-Section (2), after the expiry of the period of limitation prescribed therein. In respect of the specified category of offences, accordingly, under Section 468(2), the period of limitation in respect of the offences punishable with fine only is prescribed as six months. The period of limitation in relation to an offender would commence on the date of the offence, as provided by Section 269(1)(a) of the Code. It was, therefore, contended on behalf of these ex-employees that the complaints which were filed under Section 630(1) of the Act having been filed more than one year after the dates on which they can be said to have withheld the property, were barred by limitation. This argument found favour with the learned Magistrate.
6. There is no dispute about the fact that on the date on which the complaints were presented, these ex-employees were still in possession of the property of the company. Therefore, not only at the time when they retired and did not return the property to the company they can be said to have withheld the property, even thereafter each day that they continued to remain in possession and did not return the property they can be said to have withheld the same from the company. The withholding of the property of the company was a continuous conduct of these ex-employees till the date of the complaint. Therefore, the complaints which were filed against these ex-employees could not be confined only to the conduct of these ex-employees when they actually retired, but these were complaints alleging wrongful with holding of the property of the company each day thereafter till the filing of the complaint. Therefore, according to the complainant, the ex-employees were committing a continuing offence by wrongfully withholding the property of the company. Under Section 472 of the Code, in the case of continuing offence, a fresh period of limitation would begin to run at every moment of the time during which the offence continues. The learned Magistrate has over looked this provision. In view of this provision, it cannot be said that these complaints were filed beyond the period of limitation. The complaints could not, therefore, have been dismissed on the ground that they were time-barred.
7. Refusal to vacate company's quarters after retirement from company's service constitutes a continuing offence within the meaning of Section 472 of the Code, as held by the Supreme Court in Gokak Patel Vokhari Ltd. v. Dundayya Gurushiddaiah Hiremath 1991 2 SCC 141. Therefore, the learned Magistrate was not right in dismissing the complaint on the ground that they were barred by limitation and the complaints will have to be heard on merits.
8. The other question which arises for our consideration is regarding the constitutional validity of the provisions of Section 630. When these matters were before the learned single Judge, an affidavit was filed by these ex-employees, in which a contention was raised against the constitutionality of the provisions of Section 630 of the said Act. The learned single Judge, by his common order dated October 23, 1991 passed in these revision applications observed in paragraph 8 that there was no prohibition of law on any party whether the petitioner or the respondent, in raising a contention regarding the validity of any provisions and that it was open to any party to raise such a question and the Court may, in its discretion, allow it to be raised. The learned single Judge allowed the contention to be raised and directed the matter to be placed before the Division Bench in view of the challenge against the constitutional validity of the said provisions. That is how the matters came up before us.
9. The learned Counsel appearing for these ex-employees reiterated the contentions against the constitutional validity of the said provision, which were raised in the affidavit, which was filed by the ex-employees in some of these criminal revision applications. It has accordingly been contended that the provisions of Section 630 of the Act are violative of Articles 14 and 21 of the Constitution of India and beyond the legislative competence of the Union Parliament. It is contended that Section 630 of the Act causes invidious discrimination between the employees of the company who occupy the premises of the company and the employees of partnership firms, private individuals and co-operative societies, who occupy premises of such entities during service with them. It is submitted that discrimination between such different sets of employees is not warranted and such differentiation between employees of the companies and other employees have no nexus with the object sought to be achieved by the Act and that there is no valid basis for differentiating them from other employees. It is submitted that the employees who are given premises by their employers would all fall in the same class and there cannot be such different treatment given to the employees of one set of employees. It is further contended that there is inherent lack of power in the Union Parliament to enact the provisions of Section 630 of the Act. It is submitted that there was a relationship of landlord and the tenant brought about between the employers and the employees and the cases of these ex-employees would be covered by Section 13(1)(f) of the Bombay Rent Act, which takes care of the category of service tenants. It is submitted that the relationship of landlord and tenant can simultaneously exist between the employer and the employee and, therefore, in context of the employees occupying the premises of the employer on payment of rent or otherwise, the matter would fall within the legislative competence of the State Legislature alone under Entry 18 of List II, and that would not be the subject-matter of any relating to companies.
10. Section 630 of the Act, which is being challenged, reads as under :
"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 this 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 for a term which may extend to two years".
It is clear from this provision that it relates to property of a company which would mean both movable and immovable property. This provision provides a penalty for wrongful withholding of the property of a company by any officer or employee. Under Entry 43 of the Union List contained in the Seventh Schedule to the Constitution, the Parliament is empowered to make law with respect to incorporation, regulation and winding up of trading corporations, including banking, insurance and financial corporations, but not including co-operative societies. Under Entry 44 of the said List, the Parliament can make law with respect to incorporation, regulation and winding up of corporations, whether trading or not, with objects not confined to one State, but not including universities.
11. The provisions of Section 630 apply to such corporation, which are covered by Entries 43 and 44. These provisions are designed to protect the property of a company and to prevent its officers or employees from wrongfully obtaining or keeping such property. The law reflected in this provision, therefore, clearly relates to regulation of the companies. Providing for protection of the properties of such companies has a direct hearing on the aspect of the regulation of the company. Therefore, in our opinion, the Parliament is empowered to make law under the Entries 43 and 44 of the Union List for protecting the properties of a company. The object of the Act, inter alia, is to regulate the affairs of the companies including the control of the management and protection of the property of the company. The provisions of Section 630 of the Act are quasi-criminal in nature and they have been enacted with the main object of providing speedy relief to a company when its property is wrongfully obtained or wrongfully withheld by an employee or officer or an ex-employee or officer or anyone claiming under them. As held by the Supreme Court in Smt. Abhlash Vinodkumar Jain v. Cox & Kings (India) Ltd. (1996-III-LLJ-(Suppl.)-354) (SC) the object of the Act, inter alia, is to regulate the affairs of the companies including the control of the management and protection of the property of the company. The object of Section 630 of the Act has, therefore, a direct nexus with the object of the Act. Section 630 of the Act is, therefore, within the legislative competence of the Parliament and it squarely falls within the law making powers of the Parliament reflected in Entries 43 and 44 of the Union List to the Seventh Schedule of the Constitution. There is, therefore, no substance in the challenge against the said provision on the ground of lack of legislative competence of the Parliament in enacting the said provisions.
12. The Bombay High Court in Kishan Avtar Bahadur v. Col. Irwin Extross reported in 1986 59 Comp Cas 417 had an occasion to consider the legislative competence of Parliament for enacting Section 630 of the Act and for the reasons, with which we respectfully agree, rejected the contention that the provisions of Section 630 of the Act, so far as they relate to immovable property are ultra vires the legislative competence of Parliament. It was held that as per entry 93 of the Union List, Parliament can legislate in respect of offences against laws with respect to any of the matters in the Union List. It was also held that the powers of the Parliament to legislate in respect of a company relating to immovable property covered by Entries 43 and 44, were in no way curtailed by entry 18 appearing in List II to the Seventh Schedule to the Constitution of India, which, inter alia, relates to land, land-tenures including the relation of landlord and tenant.
13. The provisions of Section 630 are designed essentially to safeguard the property of the company as noted above and they are not provisions which can be called in pith and substance a law relating to land-tenure, and, therefore, falling within entry 18 of the State List in the Seventh Schedule to the Constitution. These provisions of Section 630 are enacted with the object of providing summary procedure for retrieving the properties of the company, as held by the Supreme Court in the case of Baldev Krishna Sahai v. Shipping Corporation of India Ltd. (1988-II-LLJ-202) (SC). The Supreme Court observed that at pp 205-206 :
"The provision contained in Section 630 no doubt penal, has been purposely enacted by the Legislature with the object of providing summary procedure for retrieving the property of the 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 broad and liberal construction on the provision in furtherance of the object and purpose of the legislation which would suppress the mischief and advance the remedy. (para 7)
14. The ex-employees of the company, who were admittedly given premises during their employment and there was nexus between their employment and the occupation of the premises of the company by them, were always expected to return the premises on termination of their employment or superannuation and they cannot be said to be persons who fall in the same class as tenants of partnership firms, private individuals and other entities.
15. The provisions of Section 630 are wide in their amplitude and since the purpose is to protect the property of the company, one of the ways of protecting the property of the company which is given to the employees is to provide for return of such property when the employment ends. Such a provision can never be said to be arbitrary or discriminatory. On the contrary it would make way for the subsequent employees for being allotted the premises and would prevent dishonesty on the part of the ex-employees who were required to return the premises to the company. In interpreting a beneficent provision the Court must be forever alive to the principle that it is the duty of the Court to defend the law from clever evasion and defeat and prevent perpetration of a legal fraud, as held by the Supreme Court in context of Section 630 of the Act, in the case of Cox & Kings (India) Ltd. (supra).
16. We, therefore, do not agree with the contentions of the ex-employees that the provisions of Section 630 are discriminatory or that they deprive them of their right to life under Article 21 without following the procedure established by law. The challenge against the validity of Section 630 of the Act, therefore, fails.
17. Under the above circumstances, we allow these revision applications and set aside the impugned orders of the learned Magistrate dismissing the complaints on the ground that they are barred by limitation and direct the trial Court to proceed with the hearing of these cases in accordance with law and to complete the proceedings preferably within six months from the date of the receipt of the order.
18. At this stage, the learned counsel for these respondent-ex-employees requests for a certificate of fitness for approaching the Supreme Court against this order. In our view, the case does not involve any substantial question of law of general importance which requires to be decided by the Supreme Court, as contemplated by Articles 133 and 133A of the Constitution of India. The matter entirely rests on the plain reading of the provisions and the settled legal position. Therefore, this is not a fit case where the certificate can be granted. This request is, therefore, rejected.