Bombay High Court
Shubh Shanti Services Ltd. vs Mrs. Manjula S. Agerwalla on 8 April, 2004
Equivalent citations: (2005)4COMPLJ433(BOM), [2005]60SCL439(BOM)
Author: A.S. Aguiar
Bench: A.S. Aguiar
JUDGMENT A.S. Aguiar, J.
1. This appeal arises from the Judgment and Order dated 30-10-1999 passed by the Additional Chief Metropolitan Magistrate, 40th Court, Girgaum, Mumbai, in case No. 4/S/1995 acquitting the accused-Respondents of the offence punishable under Section 630 of the Companies Act.
2. The said order is impugned inter alia on the grounds that the learned Magistrate has given an erroneous finding that since the property is in custody of Court Receiver, he could not pass the order of restoration of the property to the complainant. It is contended that the Magistrate had erred in holding that since the property is in the custody of the Court Receiver, the rights of the parties which are civil rights will be decided by the competent Civil Court in a suit filed by both the parties. Another ground of challenge is that the Magistrate has wrongly concluded that the complainant has failed to prove that the property in question was wrongly held by the accused despite the Appellants having proved the same by the evidence of prosecution witness Nos. 1 and 2 as well as various Exhibits which have gone unchallenged. Yet another ground of challenge is that Magistrate has wrongly decided that the Respondents-accused were permitted to continue in occupation of the said flat by Mr. Goenka, a nonexecutive Chairman of the Board of Directors of the Appellants. It is submitted that the case of the accused has been demolished by the evidence of PW 2 and letters written on behalf of the Appellants viz. Exhibits P-11 and P-12 which were sent after discussion with Mr. Pandya, Managing Director, Mr. Goenka and other Directors. The case of the Respondent is further demolished by Exhibit-16, the unanimous board resolution of the Appellants, at which Mr. Goenka was also present authorising PW2 to take necessary steps for recovery of the flat wrongly withheld by Respondents.
3. Briefly, the case of the complainants that late S.C. Agerwalla was an officer of complainant viz. Herdallia Chemicals Limited. That by a Scheme of Arrangements approved by this Court, the non-chemical business of the company was demerged and vested in Shubh Shanti Company Limited. This was after the impugned order was passed and present appeal filed. Hence, M/s. Shubh Shanti Services Limited came to be substituted in place of M/s. Herdallia Chemicals Limited as Appellants during the pendency of the appeal by order of this Court dated 25-11-2002 (Coram: V.K. Tahilramani, J.). Mr. S.C. Agerwalla was an employee of the company from April 1971 till his death in November 1992 and worked in different capacities in the said company. He was promoted as the Managing Director of the company for a period of five years with effect from 15-6-1988 vide Resolution of Board of Directors dated 14-6-1988. Flat No. 35 in 'Sonmarg' Building at 67-B, Jagmohandas Marg, Mumbai, was purchased in the year 1973. The same was allotted to Mr. S.C. Agerwalla on 19-3-1975. The flat has an area 2400 sq. ft. and the outgoings in respect of the flat were paid by the company. Since allotment, the said Agerwalla was residing in the said flat with his family members in the Sonmarg Building.
4. In September 1992, the Board of Directors of M/s. Herdallia Chemicals Limited renewed the tenure of employment of Shri Agerwalla upto 15-6-1993. In normal course, M. Agerwalla would have retired on 31-12-1992. However, Mr. Agerwalla expired on 2-11-1992 prior to his original tenure of employment coming to an end. At that time, he was the Managing Director of the Company. At the time of the death of Mr. Agerwalla, his widow Manjula, accused No. 1 and daughter Anisha, accused No. 2, were residing with him in the said flat.
5. It is the case of the complainant that on the death of Mr. Agerwalla, the accused failed to handover possession of the flat to the Company but no immediate steps were taken by the company for getting vacant possession of the flat in view of the sudden demise of Mr. Agerwalla. However, in December 1993, the company wrote a letter to the accused calling upon them to vacate the premises. The said letter is at Exhibit P-9. The accused No. 1 sent reply (Exhibit P-10) contending she had acquired the right to purchase the flat belonging to company in 'Blue Heaven' building in terms of the Agreement dated 10-2-1978 by which Mr. S.C. Agerwalla would be entitled to purchase the flat at its written down value after his retirement from the company (Exhibit P-15). It appears that thereafter, since accused No. 1 was suffering from serious illness, the Company on humanitarian ground did not take any steps for obtaining vacant possession of the premises. However, after Mrs. Agerwalla recovered from her illness and since accused failed to vacate the flat, the Company by letters (Exhibits P-11 and P-12) dated 9-11-1994 called upon the accused to vacate the flat. The accused vide letter dated 12-12-1994 (Exhibit P-13) replied stating that the Chairman, Mr. Goenka had requested her to continue to stay in the flat 'Sonmarg' till the company give her possession of the flat in 'Blue Heaven'. She further stated that she had repeatedly requested for completion of the transfer of 'Blue Heaven' flat and had given her consent to the transfer. However, due to some difficulties, the company had delayed in giving possession of the said flat and it was at the request of the company that she agreed to stay on in 'Sonmarg' flat till the company was in a position to give her possession in the 'Blue Heaven' flat. Pursuant to this, the accused, both widow and daughter of the deceased employee Agerwalla, filed a Suit in the High Court being Suit No. 7/95 in December 1994 for specific performance of the Agreement dated 10-2-1978 (Exhibit P-15).
6. Subsequent to the letters dated 9-11-1994 (Exhibits P-11 and P-12) calling upon the accused to vacate the flat, the company at a meeting of the Board of Directors dated 29-11-1994 passed a resolution to prosecute the accused. The said resolution is at 'Exhibit-16'. The case of the prosecution is that complainant has examined two witnesses viz. PW-1 KB. Murlidhar, Chartered Accountant, working in Herdallia Chemicals Ltd. as Vice-President of Finance and Accounts, and PW-2 Grindra Chandrakant Vasudeo who was working as Executive Vice-President-cum-Corporate Finance and Secretary with Herdallia Chemicals Ltd., and both have stated about the Agreement (Exhibit P-15) whereby the Company had to allot the flat in 'Blue Heaven' to Mr. Agerwalla on completion of 30 years in service with the company. They have also referred to the correspondence exchanged between the company and the accused. They have also stated that letter [Exhibit P-22] was written pursuant to the execution of the policy of Mr. Vakil, Mr. Goenka and Mr. Pandya and that said Mr. Goenka was present at the meeting pursuant to which a resolution (Exhibit P-16) was passed to prosecute the accused. PW 2 has, however, denied that the accused were living in the disputed flat with the express licence granted to them by Mr. Goenka on behalf of the company.
7. The accused No. 2 has entered the witness box and examined herself as defence witness No. 1. She has deposed that Mr. Goenka at the time of condolence meeting, after the death of her father, told her that he was aware of the Agreement and that within six months he would solve the problem. She has further stated that Mr. Vakil, a Director of the said company, told her the contract between her father and the company in respect of the allotment of the flat in 'Blue Heaven' involved some tax issues and further that Mr. Goenka had told her that he was unable to implement the contract between his father and the company and they should continue to stay in 'Sonmarg' till the time the problems were solved. The accused has also examined PW-2 Kiran Rahul Patel, married daughter of the deceased. She has also stated that Mr. Goenka had promised that they may continue to stay in the said flat till they could make available the flat to them in 'Blue Heaven'. The third defence witness is Aditya Prakash Gupta, son-in-law of accused, husband of the third daughter of the deceased. Mr. Gupta has stated that he met Mr. Goenka some 8 to 12 times, the first time was on 4-11-1992 when he met him in connection with the said flat. He has referred to four diaries of the years 1992, 1993, 1994 and two diaries of the 1993 showing the entries of the meeting with Mr. Goenka. He has further stated that Mr. Goenka told him to see Mr. Vakil and that after he met M. Vakil, Mr. Vakil told him that it was difficult to transfer the flat in 'Blue Heaven' in his mother-in-law's name because different taxes became applicable. In view thereof, he states he obtained legal opinion of counsel S.C. Dastoor and gave a copy of the said legal opinion to Mr. Goenka on 28-7-1993.
8. After filing the suit No. 7 of 1995 for specific performance of contract in this Court, interim order came to be passed on a statement made by counsel on behalf of the Appellants (complainant) that the Respondents would not be dispossessed from the premises in 'Blue Heaven' except by due process of law. Suit No. 7 of 1995 is filed by Respondents for specific performance of the Agreement (Exhibit P-15) and for restraining the Appellants for dispossessing the Respondents from the flat in 'Sonmarg'. The injunction granted by the High Court is still in operation. The complaint in which the impugned order was passed was filed on 13-1-1995. Pending the complaint, Appellants filed suit No. 2391 of 1997 in this Court praying for possession of the 'Sonmarg' flat and for appointment of Receiver pending the disposal of the suit. At the ad interim stage, order dated 21-7-1997 came to be passed by this Court (S.H. Kapadia, J.) rejecting the application for appointment of Court Receiver. The Appellants' appeal therefrom came to be rejected. However, subsequently by order dated 16-11-1998 passed by this Court (D.K. Deshmukh, J.) Receiver came to be appointed in respect of 'Sonmarg' flat and Respondents came to be appointed as 'Agents' of the Receiver. An order for payment of royalty was also passed. Both the above suits are pending before this Court. The order appointing Court Receiver was, therefore, prior to the passing of the impugned order by the Magistrate dated 30-11-1999.
9. The learned trial Judge by his impugned order has come to the conclusion that the accused cannot be said to have wrongly withheld possession of the flat in building 'Sonmarg'. In support of his conclusion, he has referred to the documentary evidence, viz. correspondence between the company and the accused from which it is clear that the accused were under the bona fide impression that they have a right to continue in the said flat 'Sonmarg' till they got the flat in 'Blue Heaven' and therefore, their occupation of the said flat in 'Sonmarg' cannot be said to be wrongful. Furthermore, the learned Magistrate has observed that the property is in the custody of the Court Receiver and as per the direction of the High Court, the rights of the parties which are civil rights will have to be decided by a competent Court in civil suit and the Magistrate did not have power to order restoration of possession to the complainant when the matter was sub judice before the competent Court.
10. Learned Advocate Mr. Menon for the Appellants has contended that the claim of the Respondents accused that they are entitled to continue to occupy the flat in 'Sonmarg' till they got possession of the flat in 'Blue Heaven', is not borne out by the evidence on record. It is pointed out that the claim of the respondent accused has been specifically denied by the PW2 who stated that it is not true to say that the accused is living in the disputed flat with the express licence granted to her by Mr. Goenka on behalf of the company and that it is not true to say that the company has deliberately not transferred the flat in 'Blue Heaven' and thereby committed breach of Agreement. It is further contended that Mr. Goenka was a Non-Executive Chairman of the Board of Directors during the period from 1983 to 1984 and he did not participate in the day-to-day affairs of the company which were being looked after by Managing Director Mr. Pandya. It is further pointed out that PW2 has also stated that the correspondence with the accused calling upon her to handover possession of the disputed premises (Exhibits PW-11 and PW-12) was written by Mr. Pandya, Mr. Goenka and Mr. Vakil, Directors, and that pursuant to the unanimous resolution (Exhibit 16), the complaint came to be filed. At the said meeting, Mr. Vakil, Mr. Pandya and Mr. Goenka were present.
11. It is also the contention of the learned Advocate for the Appellants that no evidence has been brought on record by the Respondents to show that any such permission had been granted and in the absence of Mr. Goenka being examined, the evidence of the defence witness being mere hearsay, is inadmissible. It is pointed out that defence witness No. 2 has specifically stated that he did not want to examine either Mr. Pandya or Mr. Goenka. It is further pointed out that PW 3 has admitted as follows:--
"I agree that my in-laws/accused persons are residing in the present flat without permission."
Thus, it is contended that the accused -Respondents are residing in the flat and their possession is wrongful.
12. It is contended by the Appellants that possession of the flat in 'Sonmarg' by Respondents as 'Agents' of the Court Receiver in suit No. 2391 of 1997, cannot prevent their prosecution under Section 630 of the Companies Act. Reference is made to the order dated 23-9-1998 in suit No. 590 of 1998 passed by this Court (Coram: D.G. Deshpande, J.) wherein it has been observed that "Court proceedings between the plaintiffs and defendant who is an accused in the criminal proceedings, the joining of the Court Receiver is not at all necessary nor is it necessary for plaintiffs to seek leave of the Court for continuation of the said proceedings". The defence of the accused-Respondents is that they can continue in occupation of the flat in 'Sonmarg' until the flat in 'Blue Heaven' is allotted to them as per the Agreement dated 10-2-1989 (Exhibit 15). They contend that they are not liable to vacate the flat in 'Sonmarg' since the flat was the official residence of Mr. Agerwalla which he was entitled to occupy till the date of his retirement, and that after his death, his heirs are entitled to the benefit of the Agreement (Exhibit 15) for getting the flat in 'Blue Heaven'. It is further pointed out that they had been specifically told that the exchange of flat could not be done immediately as the flat was in occupation of the employee of National Rayon, a company of the Herdallia group and that they continue to reside in the said flat on the personal assurance given to them by Mr. Goenka. Thus, there appears to be a clear nexus between the respondent getting possession of the flat in 'Blue Heaven' and their vacating the flat at 'Sonmarg'. A suit has been filed by the Respondents-accused being Suit No. 7 of 1995 for specific performance of the Agreement (Exhibit P-15). The suit is pending. We are not concerned with the final outcome of the suit. However, the interim order passed in the suit on the undertaking given by Counsel for the Appellants that they will not dispossess the Respondents without due process of law is a fact that ought to have taken into consideration by the trial Court in deciding whether the Respondents-accused were in wrongful possession of the flat in 'Sonmarg'.
13. Since the complaint is one of wrongful possession of the company property viz. flat at 'Sonmarg', it is essential for this court to ascertain whether possession of the accused-respondents is, in fact, unlawful or wrongful. The accused-Respondents have relied upon assurances given to them by Mr. Goenka, the Chairman of the Company that they need not vacate the flat in 'Sonmarg' till they got possession of the flat in 'Blue Heaven'. Reference has been made to this in several letters as well as in the evidence of the defence witnesses. Mr. Goenka who allegedly gave the assurances has not been examined either by the Appellants or Respondents. It is the contention of the learned Advocate for the Appellants that it was for the Respondents to have examined Mr. Goenka as their witness to support their case that such an assurance was given by Mr. Goenka himself. The question of Mr. Goenka deposing before the Court as witness was the subject-matter of proceedings before the trial Court, and the trial Court had in fact passed an order that Mr. Goenka be summoned as a Court witness. However, this order was challenged by the Respondents accused in Revision and the said order was set aside. Thus, Mr. Goenka could not be examined either in support of the contention of the Respondents that he had given the said assurance nor by the Appellants to prove that he had not given any such assurances. In the circumstances, no adverse inference can be drawn against the Respondents for having failed to examine Mr. Goenka.
14. Be that as it may, what this Court has to consider is whether the Respondents have made out a probable case that assurances were given by Mr. Goenka permitting the Respondents to continue in occupation of the flat at 'Sonmarg' till they were given the flat at 'Blue Heaven'. As stated earlier, the evidence of the defence witness is corroborated by the correspondence on record showing that such an assurance was given by Mr. Goenka. On the other hand, from the written replies of the appellants company to the letters of the Respondents claiming that such an assurance was given by Mr. Goenka, we find that there is no specific denial of the defence case that such an assurance was given by Mr. Goenka to the Respondents. No doubt, the evidence of Mr. Goenka would have helped clinch the issue one way or the other. For the reasons stated above, Mr. Goenka has not been examined and neither the Appellants nor the Respondents, have examined Goenka as their witness.
15. This being the state of evidence on record and since proceedings under Section 630 of the Companies Act are penal in nature, this Court has to consider whether the Respondents have made out a probable case that the assurance was in fact given by Mr. Goenka. Both in their letters to the company as well as before the Court, the Respondents have reiterated the assurance given by Mr. Goenka. It was for the Appellants to have denied at the earliest possible opportunity that such an assurance was given by Mr. Goenka. Nowhere in the correspondences has the Appellant company specifically denied the Respondents' claim that Mr. Goenka had given the assurance. Nor has Mr. Goenka send any letter to the Respondents denying their claim of any assurance having been given by him. No doubt, in the correspondence, there is a general denial by the Appellants of the allegations made by the Respondents and the Appellants have been at pains to point out that Mr. Goenka was party to and fully aware of all the correspondence made on behalf of the company. However, we find no specific denial in the correspondence of the alleged assurance given by Mr. Goenka. Since Mr. Goenka is a party to the resolution to prosecute the Respondents, there ought to have been at least a formal denial by Mr. Goenka that he had given any such assurance of permitting the Respondents to stay in the flat 'Sonmarg' till possession was given to Respondents of the flat in 'Blue Heaven'. The failure on the part of the company to deny the averments of assurance given by Mr. Goenka which is manifest from the two letters of Respondents to Mr. Goenka being Exhibits P-22 and P-23, receipt of which is admitted by the Appellants, would require this Court to draw an inference in favour of the Respondents, making the respondents case a probable one. Proceedings under Section 630 of the Companies Act being criminal proceeding, the accused need only make out a probable defence. On the other hand, the complainant/prosecution to succeed must make out a case beyond reasonable doubt. Respondents have made out a probable and plausible defence that they were allowed to occupy the flat in 'Sonmarg' till the flat in 'Blue Heaven' was made available to them. Whether Respondents ultimately succeed in their suit for specific performance is another matter and not material for deciding the complaint. The Respondents have made out a probable case that an assurance was so given. Neither the Appellant company nor Mr. Goenka has specifically denied that any such assurance was given by Mr. Goenka to the Respondents. Thus, the Appellants have failed to prove that the Respondents are in wrongful possession of the flat in 'Sonmarg'.
16. Apart from the above, the Appellants have filed a suit for a recovery of possession of the flat in 'Sonmarg', Court Receiver has been appointed in the suit and the Respondents have been appointed as 'Agents' of the Court Receiver. In these circumstances, it cannot be said that the Respondents are in wrongful possession of the premises. Nor can it be said that the said Respondents have no right to continue in occupation of the flat in 'Sonmarg' as they do so pursuant to their perceived rights as heirs to the estate of Mr. Agerwalla, deceased employee of the complainant-company, Herdallia Chemicals Ltd.
17. Prior to the filing of the complaint under Section 630 of the Companies Act, the Respondents filed a suit for specific performance of the Agreement (Exhibit P-15) and this Court has granted an injunction preventing Respondents from being dispossessed except by due process of law. Section 630 proceedings being penal in nature cannot be said to be the due process of law adopted by the Appellants for recovery of possession from the Respondents.
18. In this circumstance, I find no reason to interfere with the order passed by the learned Magistrate. Hence, the appeal is rejected and dismissed.