K.G. Amirthalingam vs The Pudupakkam Permanent Fund Ltd.

Arunachalam, J.—Petitioner Amirthalingam was convicted u/s 630 of the Companies Act in E.O.C.C. No. 600 of 1989, on the file of Additional Chief Metropolitan Magistrate (E.O-I) Egmore, Madras and directed to hand over the premises under his occupation, within one month from the date of judgment, failing which he shall suffer six months simple imprisonment.

Brief facts which led to the initiation of the impugned prosecution will have to be stated. Petitioner was the Secretary- cum-Treasurer of Pudupakkam Permanent Fund Limited, situated at No. 12, Pycrofts Road, Madras-14. He was so employed till 26.1.1984. Thereafter, he suddenly absconded. Scrutiny of accounts of the Permanent Fund, prima facie, revealed, that the Petitioner had committed criminal breach of trust.

An Enquiring Officer was appointed by the Permanent Fund, who, after collecting evidence forwarded a report to the Respondent. The report of the Enquiring Officer was placed before the Board of Directors of the Permanent Fund, which, after consideration, passed a resolution terminating the services of the Petitioner, on and from 28.2.1986. When the Petitioner was appointed as Secretary-cum-Treasurer, as a perquisite appended to the job he was allowed to take his residence, in the second floor of No. 12, Pycrofts Road, Madras. After termination of service, according to the Respondent, Petitioner was not entitled to continue in occupation of the premises, which had a link with his appointment as an official of the Permanent Fund. The impugned complaint was laid since the Petitioner was unlawfully squatting in the property.

The defence of the Petitioner was that he had preferred O.S. No. 2262 of 1986 on the file of City Civil Court, Madras, wherein he had also preferred I.A. No. 5877 of 1986, a petition for injunction, obviously pleading for restraining the Respondent, from taking any action in pursuance of the resolution dated 28.2.1986, marked as Ex.P3 before the trial court. On 17.9.1986, City Civil Court, (VII Asst. Judge), Madras dismissed the plea for interim injunction. Petitioner preferred C.M.A. No. 209 of 1986 against the order of dismissal in I.A. No. 5877 of 1986 before the IX Additional Judge, City Civil Court, Madras, who allowed C.M.A. No. 209 of 1986 on 30.1.1987 and ordered an injunction in the following

terms:

According to Petitioner's counsel on and from 36.1.1987, it was no longer possible for the Respondent, to take any proceedings against the Petitioner, in view of the order of injunction in C.M.A. No. 209 of 1986, marked as Ex.D-1 before the trial Magistrate. On 7.3.1989, O.S. No. 2262 of 1986 was dismissed for default. Thereafter on 5.7.1989 the impugned complaint was filed u/s 630 of the Companies Act. On 17.3.1989, Petitioner preferred I.A. No. 6892 of 1989 seeking restoration of O.S. No. 2262 of 1986. This petition was taken up for hearing on 22.2.1990 by the learned VII Assistant Judge, City Civil Court, Madras. Since there was no representation on behalf of the Respondent till 2:45 p.m.

Respondent was called and thereafter set ex parte. Petition for restoration was allowed. A memo was filed before the trial Magistrate, on the date of pronouncement of judgment, that restoration of the civil suit was ordered on the earlier day and the trial court also allowed the order of restoration to be marked as Ex.D2.

Learned trial Magistrate was of the view, that the restoration of the suit, did not vest any right in the Petitioner, to continue to hold possession of the house property and, therefore, passed an order u/s 630 of the Companies Act, which is now under challenge.

Mr. A. Raghunathan, learned Counsel appearing on behalf of the Petitioner, contended that once the suit was restored on 22.2.1990 automatically the order of injunction granted on 30.1.1987 by the IX Additional Judge, became alive and, therefore, the impugned prosecution could not have been continued. He also brought to my notice, that subsequently, the civil suit had been allowed, again ex parte. The contention was, that since the civil court decree was available, action taken by the Respondent, in pursuance of the resolution dated 28.2.1986 cannot be held to be in consonance with law and, therefore the entire proceedings before the trial Magistrate ought to be held as vitiated.

On the contrary, Mr. K.N. Basha, learned Counsel appearing on behalf of the Respondent, contended that even on 28.2.1986, the employment of the Petitioner was terminated and on 5.3.1986 a notice was issued to the Petitioner by the Respondent asking him to vacate and hand over vacant possession of the premises in his occupation, which was earlier handed over to him lawfully as he happened to be an employee of the Permanent Fund. It was also Stated in the notice that a criminal complaint had been launched against him for abuse and misuse of his official position and for his having defrauded the Permanent Fund. A specific reference has been made in the notice that a suit preferred in O.S. No. 3378 of 1985 by the Petitioner on the file of the City Civil Court, Madras, praying for a direction that he would be entitled to continue in occupation of the premises concerned cannot help him in view of lawful termination of his services. In short, Mr. Basha contended that, even before grant of an injunction in the civil court, employment of the Petitioner was terminated and he had not obtained reinstatement in any manner known to law. The order of injunction was subsequent and its effect can only be prospective and not retrospective. Once the services were terminated, in accordance with law continuance of the Petitioner, in the premises allotted to him, would amount to wrongful withholding of it and hence the impugned order passed under the provisions of Section 630 of the Companies Act was lawful and sustainable.

I have carefully considered the divergent contentions placed, for my scrutiny, by either counsel. There cannot be any dispute and in fact it has not been disputed, that allotting of accommodation is linked with the appointment of the Petitioner as Secretary-cum-Treasurer of the Respondent organisation. Naturally, accommodation is attached to the office and not relatable to any specified person. Once the employment of the person in service is terminated, automatically the successor will become entitled to occupy this residential accommodation. It is no doubt true, that the Petitioner had preferred O.S. No. 2262 of 1986 before the City Civil Court, Madras, and had also obtained an injunction from the appellate Court on 30.1.1987, restraining the Respondent herein from taking any action in pursuance of the resolution dated 28.2.1986, either directly or through his representatives or agents, till the disposal of the main suit.

As rightly contended by Mr. K.N. Basha, order of injunction can only be prospective on and from 30.1.1987 and it cannot have any retrospective effect. There is no dispute that even on 28.2.1986 employment of the Petitioner was terminated and a notice was issued on 5.3.1986, directing the Petitioner to vacate the premises occupied by him, purely as an appendage to his official position, since, after his termination, his continuance was unlawful. Ex.P2 notice issued through counsel to the Petitioner clearly indicates that the Petitioner had chosen to file O.S. No. 3378 of 1985 before the City Civil Court, Madras, long prior to initiating O.S. No. 2262 of 1986, wherein he had prayed for a relief for declaration that he will be entitled to continue in occupation of the second floor of premises No. 12, Pycrofts Road, Madras, until his services were lawfully terminated. After obtaining instructions from his client and verifying the court records, Mr. A. Raghunathan, Petitioner's counsel, fairly stated that the aforestated suit was dismissed for default. Obviously, the prayer made in O.S. No. 3378 of 1985 should be held to have been rejected in law. Therefore, unless the Petitioner is able to get himself reinstated by means of a court order or any lawful order by a competent authority, holding that his services were not lawfully terminated, he will not be entitled to continue in occupation of the premises, which, of course, he has entered into lawfully as an official of the Respondent. I have no hesitation in holding that continuation of the Petitioner in the aforestated premises after 28.2.1986 and in any event after 5.3.1985 when the lawyer's notice was issued is certainly wrongful withholding of the amenity provided. There cannot be a divergent notice that the injunction order passed on 30.1.1987 could only operate prospectively and it could not have retrospective effect. If that be so, when the termination of employment of the Petitioner was even in February/March, 1986, obtaining of an injunction on 30.1.1987 cannot enure in favour of the Petitioner. Petitioner ought to have vacated the premises in question, of course reserving his right, if so advised, to proceed for damages against the Respondent, in the event of his termination, christened as unlawful, gets set aside by orders of a competent authority.

Of course, there will be no difficulty in agreeing with Mr. A. Raghunathan, that once the suit was restored the order of injunction passed by the appellate court will become alive. But that facet cannot help the Petitioner in the instant case, since the injunction was later, as a matter of fact, much later, after the employment of the Petitioner was lawfully terminated. Again, it cannot be overlooked, that a specific prayer made by the Petitioner in O.S. No. 3378 of 1985, before the City Civil Court, Madras, to continue in occupation of the premises in question till his services were lawfully terminated, must be deemed to have ended against him. Not only the injunction obtained by the Petitioner in the appellate court on 30.1.1987 does not help him, but also the dismissal of O.S. No. 3378 of 1985, goes against him. It has not been contended before me, that the Petitioner has been reinstated in any manner known to law. It is also not disputed that the Petitioner is not in service as on date. If these two aspects store at the face of the Petitioner, the inference is inevitable that his continuance in the premises is not only unlawful, but also unauthorised.

Supreme Court in Baldev Krishna v. Shipping Corporation of India Ltd. (A.I.R. 1987 S.C. 2245) held as hereunder.

S. 630(b) 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 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 Cl.(b). It would be noticed that Cl.(b) also makes it an offence if any officer or employee of a company having any property of the company in his possession knowingly applies it to purposes other those 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-

S. (1) of Section 630 of the Act. The beneficent provision contained in Section 630 no doubt penal, has been purposely enacted by the legislature with the object providing a summary procedure for retrieving the property of a company.

Supreme Court further stated, that it was 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.

Eschewing for a moment the technical submissions made on behalf of the Petitioner, if one were to consider, whether the Petitioner was justified in squatting over the property intended for other succeeding officials of the Respondent Fund, even after his termination, lawfulness or otherwise of which is yet to be determined, the emphatic answer will have to be in the negative. Law and Justice need fusing together.

In Atul Mathur Vs. Atul Kalra and Another, Supreme Court again observed, that the object of Section 630 of the Companies Act was to provide speedy relief to a company, when its property was wrongfully obtained or wrongfully withheld by an employee or ex-employee."" That was a case where there was a civil suit pending trial without any interim order of injunction. Supreme Court stated that merely because civil suit had been filed by the accused prior to institution of a criminal complaint, criminal court was not debarred from proceeding with the complaint. When the impugned prosecution was initiated in the instant case, on 5.7.1989, there was no injunction in force. Only on the date on which the order was pronounced by the criminal court, order of restoration of the suit, passed on the earlier day, was produced for scrutiny of the criminal court.

However, we need not have to digress on this aspect, for, as already stated, the interim injunction ordered in C.M.A. No. 209 of 1986 can operate only prospectively, on and from 30.1.1987 and cannot go backward. I am unable to find any infirmity in the order passed by the trial Magistrate. This Criminal revision case which has no merit, shall stand dismissed.