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  • S. 406 I.P.C and S. 630 of the Companies Act.
  • provisions of S. 630 of the Companies Act
  • clause (b) of S. 630 of the Companies Act.
  • sub-s. (1) of S. 630 of the Companies Act,
  • provisions of S. 630 of Companies Act
  • S. 538 and 545 of the Companies Act
  • S. 630 of the Companies Act
  • S. 63 of the Companies Act
  • Sub-section (2) of S. 630
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Citation Codes
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citation codes
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  • S. 406 I.P.C and S. 630 of the Companies Act.
  • provisions of S. 630 of the Companies Act
  • clause (b) of S. 630 of the Companies Act.
  • sub-s. (1) of S. 630 of the Companies Act,
  • provisions of S. 630 of Companies Act
  • S. 538 and 545 of the Companies Act
  • S. 630 of the Companies Act
  • S. 63 of the Companies Act
  • Sub-section (2) of S. 630
Smart Summary

Judgment Summary — Criminal Revision Nos. 222 & 448 of 1985

Factual and Procedural Background

On 28.6.1983 Amrit Lal Chum, an officer on behalf of Messrs. Jardine Hender Sons Ltd., filed a petition of complaint in the Sub-Divisional Judicial Magistrate, Alipore, alleging offences under S. 406 of the Indian Penal Code and S. 630 of the Companies Act. The complaint alleged that Debi Ranjan Jha, who had held various offices in the company, ceased to be employed on 15.8.1982 and had been in possession of a furnished residential flat (No. 27, Ballygunj Park, Calcutta) provided to him as an officer. It was alleged that he wrongfully retained possession of the flat and the furnishings after termination of employment.

After cognizance, the case was transferred to the Judicial Magistrate, Mr. P.K. Deb. Following examination of witnesses before charge, by order dated 1.2.1985 the magistrate framed a charge under S. 403 IPC, and held that cognizance under S. 630 of the Companies Act was barred by limitation; his order did not expressly record a finding on S. 406 IPC. Both the complainant and the accused filed revisions: Criminal Revisional Case No. 222 of 1985 by the company (seeking framing of charges under S. 630 and S. 406) and Criminal Revisional Case No. 448 of 1985 by the accused (contesting the magistrate's finding that materials supported framing a charge under S. 403 IPC).

Legal Issues Presented

  1. Whether S. 630 of the Companies Act applies to a former officer or employee (i.e., one whose service has terminated) or is confined to persons who are officers or employees at the relevant time.
  2. Whether cognizance of the alleged offence under S. 630 was barred by limitation in the circumstances of this case.
  3. Whether the materials before the learned Magistrate were sufficient to frame a charge under S. 406 IPC (the offence of criminal breach of trust), particularly whether entrustment had been alleged or proved.
  4. Whether the materials were sufficient to sustain the charge framed under S. 403 IPC (dishonest misappropriation), including whether the charged property was sufficiently identified and whether there was a misappropriation of movable property.

Arguments of the Parties

Complainant (Mr. Pradip Ghosh for Jardine Hender Sons Ltd.)

  • The magistrate erred in holding that cognizance under S. 630 was barred by limitation; the magistrate did not properly consider the amended S. 468 Cr.P.C. (1978 amendment) when assessing limitation.
  • Because the complaint also alleged an offence under S. 406 IPC (which attracts a higher punishment), for determining limitation the offence attracting the higher punishment should be relevant; thus, limitation for S. 630 should not have been treated as barred.
  • On the materials before the learned Magistrate, a charge under S. 630 should have been framed (relying on Bombay High Court authorities such as Karkishan Lakhimal Gidwani and Govind T. Jagtiani, and a report in 1985 SLR 2083), which the complainant argued support prosecution of a former employee under clause (b) of S. 630.

Accused (Mr. Dilip Kumar Dutta for Debi Ranjan Jha)

  • S. 630 must be read with the opening words of sub-s. (1) — “if any officer or employee of a company” — which, he argued, restrict the section to persons who are officers or employees at the relevant time; thus a former officer is not covered.
  • The Bombay High Court approach (as relied on by the complainant) that clause (b) can apply to former employees is incorrect; a plain reading does not permit treating clauses (a) and (b) differently on the question of whether the accused must be an existing officer or employee.
  • Legislative practice shows that where the legislature intended to include former employees or officers it did so expressly (for example, Ss. 538 and 545 of the Companies Act expressly contemplate former employees or officers), and the absence of such language in S. 630 indicates the section should not be extended to former employees.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Karkishan Lakhimal Gidwani v. Achyut Kashinath Wagh, 52 Company Case 1 (Bom) Authority relied upon by the learned Magistrate to conclude S. 630 could be invoked against the accused. The Court noted the learned Magistrate's reliance on this Bombay decision but ultimately reached a different interpretation of S. 630, holding that it does not bring former employees within its mischief; thus the Court did not follow this precedent as applied below.
T.S. Satyanath v. J. Tomas, 87 CWN 850 Authority relied upon by the learned Magistrate to hold that cognizance under S. 630 was barred by limitation. The Court recorded that the Magistrate relied on this decision to conclude limitation barred cognizance; the Court also observed argument that the Magistrate did not consider the amendment to S. 468 Cr.P.C. (1978), but the Court disposed of the S. 630 point on interpretive grounds rather than solely on limitation.
Govind T. Jagtiani v. Sr. Administrative Officer, India Oil Corporation, 1983 (2) CLJ 8 (Bom) Bombay High Court authority relied on by the complainant to support prosecution of a former employee under clause (b) of S. 630. The Court recorded the complainant's reliance on this authority but rejected its application to the present case, concluding that S. 630 properly applies only to existing officers and employees.
Reported decision in 1985 SLR 2083 Cited by the complainant in support of the proposition that clause (b) of S. 630 may reach a former officer/employee. The Court noted the citation but did not accept it as compelling; the Court interpreted S. 630 as confined to present officers/employees and therefore did not apply the 1985 SLR authority to bring the accused within S. 630.
D.C. Works Ltd. v. The State of Sourastra, AIR 1957 SC 264 Authority cited for the principle that the essence of an offence under S. 406 IPC is entrustment. The Court relied on this principle (as cited) to conclude that because neither entrustment nor a fiduciary relationship was alleged or proved, S. 406 did not apply and the learned Magistrate was justified in not framing a charge under S. 406 IPC.
Rameswaran Nandan v. State of Madras, AIR 1958 SC 56 Authority supporting the proposition that entrustment is essential to S. 406 IPC. The Court referred to this authority in concluding that the present case contained neither allegation nor evidence of entrustment and therefore did not merit a charge under S. 406 IPC.

Court's Reasoning and Analysis

The court proceeded in a sequence tied to the reliefs sought in the two revision applications and to the specific statutory issues raised.

1. Interpretation of S. 630 (Companies Act) — applicability to former employees:

  • The Court scrutinised the opening words of sub-s. (1) of S. 630 (“if any officer or employee of a company ...”) and treated those words as a key to interpretation. It also considered the language of clause (b) (referring to “articles and authorised by this Act”) and sub-s. (2) which uses the expression “such officer or employee”.
  • The Court emphasized that sub-s. (2) contemplates orders (deliver up or refund) directed at “such officer or employee,” which presupposes the accused is an officer or employee at the relevant time so that an order to deliver up/refund can be meaningfully enforced; if the accused were a former employee, such mandatory remedial orders would be impracticable.
  • The Court noted legislative examples (Ss. 538 and 545) where the legislature expressly included former employees when that was intended. The absence of such express language in S. 630 supported restricting S. 630 to existing officers and employees.
  • Accordingly, even accepting that limitation did not bar cognizance, the Court concluded on interpretive grounds that S. 630 does not bring a former employee like the accused within its mischief and therefore the magistrate was correct in not framing a charge under S. 630.

2. Whether S. 406 IPC applied (criminal breach of trust — entrustment):

  • The Court identified entrustment as the essence of S. 406 and examined the complaint and witness depositions (P.W.1–P.W.4) for any allegation or proof of entrustment or of a fiduciary relationship.
  • It found no allegation that any furniture, movables, or the flat itself had been entrusted to the accused's care and custody; rather, the evidence established that the accused had been given possession of the flat and furnishings in the course of his service and was obliged to deliver up vacant possession on termination.
  • The Court held that failure to deliver up possession after termination, in the absence of entrustment or fiduciary relationship, is essentially a breach of contract and is remediable in civil proceedings; criminal proceedings under S. 406 were therefore not justified on the materials before the magistrate.
  • The Court referred to Supreme Court authorities (D.C. Works Ltd. and Rameswaran Nandan) in support of the proposition that entrustment is essential to S. 406, reinforcing its conclusion that S. 406 did not apply here.

3. Sufficiency of materials for S. 403 IPC (dishonest misappropriation) — charge actually framed:

  • The Court examined the charge as framed under S. 403 and found a patent defect: the charge did not expressly identify the property alleged to have been misappropriated.
  • S. 403 requires dishonest misappropriation or conversion of movable property. The complaint and evidence did not allege or establish dishonest misappropriation or conversion of any movable by the accused.
  • The flat is an immovable; an offence under S. 403 is limited to movables, so the flat itself could not form the subject-matter of S. 403.
  • The learned Magistrate's reasoning that temporary withholding or use by the accused could amount to misappropriation was rejected by the Court, which observed that Explanation 1 to S. 403 (relied upon by the magistrate) applies to money in cash or valuable securities and not to ordinary furniture or fixtures.
  • On close scrutiny, the Court concluded there were no materials even for framing a charge under S. 403 and that the magistrate should have discharged the accused rather than framing that charge.

4. Disposition flowing from the analysis:

  • Considering the foregoing interpretive and evidentiary analysis, the Court dismissed Criminal Revision Case No. 222 of 1985 (the company's revision) and allowed Criminal Revision Case No. 448 of 1985 (the accused's revision), set aside the order framing a charge under S. 403 IPC, and discharged the accused.

Holding and Implications

Final Disposition:

  • Criminal Revision Case No. 222 of 1985 — Dismissed (the company's grievance that charges under S. 630 and S. 406 should have been framed was rejected).
  • Criminal Revision Case No. 448 of 1985 — Rule made absolute; the order framing a charge under S. 403 IPC was set aside and the accused was discharged.

Implications for the parties:

  • Direct effect: the accused (Debi Ranjan Jha) is discharged; the charge under S. 403 IPC as framed was struck down; no charge under S. 630 or S. 406 was sustained by the Court on the facts and statutory interpretation before it.
  • Scope of the Court's reasoning: the Court interpreted S. 630 as confined to persons who are officers or employees at the relevant time and emphasised that entrustment is essential to convict under S. 406 IPC; beyond these conclusions applied to the case at hand, the opinion does not purport to announce broader procedural consequences beyond the immediate decisions rendered.

Note: This summary is prepared exclusively from the material contained in the provided opinion. No information has been added beyond that text.

    Amritlal Chum v. Devi Ranjan Jha & Anr.

    N.G Chaudhuri, J.:—On behalf of Messrs. Jardine Hender Sons Ltd., Amrit Lal Chum, one officer of the said company filed on 28.6.83 a petition of complaint in the court of Sub-Divisional Judicial Magistrate, Alipore under S. 406 I.P.C and S. 630 of the Companies Act. The sum and substance of the complaint was that Debi Ranjan Jha, the accused held various offices under the company during a long career but his service under the company came finally to an end on 15.8.82 It was alleged that prior to that date as an officer of the company he was given possession of a furnished flat in premises No. 27, Ballygunj Park, Calcutta of which he was obliged to deliver up possession to the company on termination of his employment. It was alleged that having wrongfully retained possession of the flat after ceasing to be an officer of the company, Mr. Jha, the accused, committed an offence under S. 63 of the Companies Act and having dishonestly and willfully retained articles of furniture with which his flat was furnised he committed further an offence under S. 406 I.P.C After cognizance was taken the case was transferred to the court of Mr. P.K Deb, Judicial Magistrate, Alipore. After examining the witnesses before charge by an order dated 1.2.85 the learned Magistrate felt satisfied that there were materials for a charge under S. 403 I.P.C and he framed a charge accordingly. He, however, concluded that the case of complainant in so far as it came under the provisions of S. 630 of Companies Act the conizance of the offence was barred by limitation. In respect of the offence under S. 406 I.P.C the learned Magistrate did not expressly record anything in his order. Both the complainant and the accused felt aggrieved with the order of the learned Magistrate dated 1.2.1985 The complainant company has come up in revision under S. 401 read with S. 482 Cr. P.C giving rise to Crl. Revisional Case No. 222 of 1985 wherein, on behalf of the company, grievance is made that on the materials placed before the learned Magistrate, the learned Magistrate should have framed charge under S. 630 of the Companies Act and also under S. 406 of the I.P.C On behalf of the accused a revision application has been filed giving rise to Criminal Revisional Case No. 448 of 1985. On behalf of the accused, it is argued with force that the learned Magistrate was wrong in concluding that materials placed before him were sufficient for framing a charge under S. 403 I.P.C and that the learned Magistrate was wrong in concluding that materials placed before him were sufficient for framing a charge under S. 403 I.P.C

    2. There is no dispute that the employment of the accused Mr. Jha as an officer of the Company Jardine Hendrsons and company and its subsidaries, was finally terminated on 15.8.82 as alleged in para 8 of the complaint. There is again no dispute that from a date prior to the said date as an officer of the aforesaid company the accused was in possession of a residential fiat in premises No. 27, Ballygunj Park, Calcutta of which the company was a lease and the said flat was suitably furnished with articles of furnitures and many other things for the benefit and enjoyment of the accused. There is again no dispute that after the filing of the complaint, in execution of a search warrant the company has recovered most of the articles from the flat in question which were in possession and enjoyment of the accused. The accused, however continues to possess the flat. Mr. Pradip Ghosh, learned Advocate, for the company read out before us the order of the learned Magistrate dated 1.2.85 and points out that relying on the decision in the Case of Karkishan Lakhimal Gidwani v. Achyut Kashinath Wagh reported in 52 Company Case 1 (Bom), the learned Magistrate concluded that the provisions of S. 630 of the Companies Act could be invoked against the accused and he could be prosecuted thereunder, but relying on the decision of this Court in the case of T.S Satyanath v. J. Tomas, reported in 87 CWN page 850 he held that cognizance of the said offence was barred by limitation, because of the express provisions of S. 468 Cr. P.C Mr. Ghosh submits that the finding of the learned Magistrate on the point of limitation is erroneous and misconceived. He does not appear to have considered the provisions of S. 468 Cr. P.C as amended in 1978. Mr. Ghosh contends that in the present case the complaint mentioned an offence under S. 406 I.P.C attracting higher punishment than the offence under S. 630 of the Companies Act, and for the purpose of determining limitation, the first mentioned offences was only relevant. This part of the contention of Mr. Ghosh is acceptable. Mr. Ghosh proceeds on to argue that if the cognizance of the offence under S. 630 of the Companies Act was not barred by limitation the learned Magistrate ought to have framed a charge under S. 630 of the Companies Act. Mr. Ghosh reads out the interesting judgment of the Bombay High Court earlier referred to in support of his contention. He relies on a further decision of the Bombay High Court in the case of Govind T. Jagtiani v. Sr. Administrative Officer India Oil Corporation (Bom) reported in 1983 (2) Company Law Journal 8 (Bom) and contends that Bombay High Court has taken the view consistently that an officer of employee of a company whose service has been terminated or has come to an end may be prosecuted under clause (b) of S. 630 of the Companies Act. For the same purpose, Mr. Ghosh relies on the case reported in 1985 SLR 2083. Mr. Dilip Kumar Dutta, learned Advocate appearing on behalf of the accused Mr. Jha, however, lays emphasis on the opening words of sub-s. (1) of S. 630 of the Companies Act, namely, “if any officer or employee of a company” and argues that the said opening words qualify as governing clause the acts of deliquency mentioned in clauses (a) and (b) of the Section. Mr. Dutta contends that the Bombay High Court was in error when in the case cited by the learned Magistrate, it held that for the purpose of clause (a) of S. 630(1) of the Act the accused was required to be an officer or employee of a Company but for the purposes of prosection under clause (b) the accused could be a former or past officer or employee of the company Mr. Dutta argues that a plain reading of the section does not permit making different interpreation of the two clauses in the manner suggested by the Bombay High Court. He contends that the Bombay High Court virtually went to the length of legislating instead of interpreting the law. The argument of Mr. Dutta has considerable weight. Further Mr. Dutta has referred us to S. 538 and 545 of the Companies Act and the contends that whenever the makers of the law in their wisdom, thought it proper to bring within the mischief of the provisions of the Act former employees or officers of a company they did not hesitate to do so and they expressly legislated. He points out that both Ss. 538 and 545 contemplate prosecution of formerly employees and officers of a company which is under liquidation. Mr. Dutta argues that if the law makers desired that S. 630 would apply equally against the present officers and employees of a company and past or former employees and officers of a company they would have expressed that desire in proper language. When, Mr. Dutta argues, such a desire has not been expressed in S. 630 of the Act there is no reason to give a twisted and labored interpretation to the section which its plain reading does not permit. The arguments of Mr. Dutta are undoubtedly weighty. We have additional reasons also to hold that S. 630 of the Companies Act applies only to existing officers and employees of a company. No doubt, the opening words of sub-s. (1) serve the purpose of a key to the interpretation of the section. We are also to bear in mind the words of clause (b) of sub-s. 1 also, which read as follows: “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”. The “articles and authorised by this Act” are most likely to be known by only the employees of the company. So we feel tempted to confine the application of this clause to existing officers and employees of the company Sub-section (2) of S. 630 indicates that if an offence under the section is established, the court is to 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 mis-applied, or in default to suffer imprisonment for a term which may extend to two years. We lay emphasis on the use of the expression such officer and employee in sub-s. (2). We mean to say that the order of delivering up or refund can be passed to only on an officer or employee of the company. That is possible when the accused in the case is an officer or employee of the company on the date of management. If the accused is not such an officer or employee obviously such an order of refund cannot be passed on him. If it is possible to pass such an order no further order need be passed by the Court. This means that rights of the company or persons against the company are to be safeguarded in the proper way and for that no punishment need be imposed on the delinquent. If it is possible to give a direction under the first part of the sub-section. Only when it is not possible to secure compliance with the direction aforesaid the court is expected to order imprisonment in default of compliance. This attitude of law to the delinquent suggests that the provisions of S. 630 are to be restricted in their operation against existing officers and employees of the company over whom the company has some hold or authority. Apart from this, we think that if a person while holding an employment under a company obtained possession of some articles in that capacity and subsequently withheld the same or mis-appropriate the same for the purpose of prosecuting him the company or anybody else would avail himself of the provision of S. 403 or 406 of the I.P.C There is no necessity for incorporating special provisions with respect to such persons in the Companies Act itself. The provisions to the Act can be applied to past or formal employees if there are sufficient indications in the relevant provisions of the Act as we find in the case of Ss. 538 and 545 of the Act. Considering all these we arrive at the conclusion that even though cognizance of the offence under S. 630 of the Companies Act alleged in the petition of complaint was not barred by limitation yet a correct and proper interpretation of S. 630 did not bring a former employee of the company like the accused in the present case within the mischief of the said section. We, therefore, hold although for different reasons altogether, that the learned Magistrate was right in not framing a charge under S. 630 in the instant case. The grievance of Mr. Ghosh is unjustified.

    3. Mr. Ghosh next contends that on the materials placed before him the learned Magistrate should have framed a charge under S. 406 I.P.C against the accused. The essence of an offence under S. 406 is entrustment. In the petition of complaint there is no whisper that any articles of furniture or movable or immovable was entrusted to the care and custody of the accused. Taking a liberal view of the complaint we examined the evidence adduced but found nothing therein to indicate that anything was entrusted to the accused. We have read the deposition of P.W 1, P.W 2, P.W 3 and P.W 4 examined by the learned Magistrate. The witnesses do not say that the accused was entrusted with any articles of furniture or with any other movable or even with the flat itself. The sum and substance of the deposition is that as a condition of service one accused was given possession of a flat furnished with articles and the implication is that with the termination of his employment he was to deliver up vacant possession of the flat together with fixtures and furniture with which the flat was furnished. If the accused has not delivered up possession of the flat with fixtures and furniture to the company on the termination of his employment he has only commihed a breach of contract. The company is well entitled to file a suit in a civil court for appropriate reliefs. Proceedings in a criminal court cannot be resorted to reach that end. It is to be noted that the company did not prosecute the accused under S. 448 I.P.C We may, in this connection, refer to the decisions of the Supreme Court in the case of D.C Works Ltd. v. The State of Sourastra reported in AIR 1957 SC 264 and the case of Rameswaran Nandan v. State of Madras reported in AIR 1958 SC 56. We are satisfied from a reading of different decisions of the Supreme Court and other judicial decisions that the essence of an offence under S. 406 is entrustment. In the present case neither entrustment was alleged or proved nor any fiduciary relationship between the accused and the company was alleged to have been proved. We are, therefore, satisfied that the learned Magistrate was perfectly justified in not framing a charge under S. 406 I.P.C We cannot uphold the contentions of Mr. Ghosh in this behalf.

    4. We have indicated that the accused has his grievance against framing of a charge under S. 403 I.P.C The learned Magistrate has, as a matter of fact, framed a charge against the accused under the said section Reading the charge, as framed we notice a patent or obvious defect therein. In the charge the property in respect of which the alleged mis-appropriation was made has not been expressly mentioned. This is a serious lacuna in the charge itself. Further S. 403 I.P.C required that there must be a dishonest misappropriation or conversion to one's own use some movable property. In the present case there is no allegation of misappropriation or conversion by the accused of any property. We have noticed that the substance of the petition of complaint is that the accused did not give up possession of the flat with furniture and fixtures immediately on the termination of his employment under the company. Accepting that the accused is still in possession of the flat with fixtures and furniture his possession of the flat with fixtures and furniture does not amount to misappropriation or conversion of the articles of furniture and fixtures to his own use. In so far as the flat itself is concerned that being an immovable property that cannot be a subject matter of the offence under S. 403 I.P.C which is restricted to movables only. The learned Magistrate has observed in his order that dishonest misappropriation for a time only is misappropriation within the meaning of section. The learned Magistrate meant to say that even if the accused poshed fixtures furniture given to him for his enjoyment in the fiat for a temporary period subsequent to the termination of his employment under the company such use and enjoyment by the accused amounted to misappropriation. We regret we cannot share this view. The illustration under explanation 1 to S. 403 indicates beyond doubt that explanation 1 applies only to money in cash or valuable securities and not to ordinary articles of fixtures or furniture. We, are, therefore, of the view that on a close secutiny of the evidence adduced we should arrive at the conclusion that there were no materials for framing a charge under S. 403 even against the accused. The learned Magistrate, in our view should have discharged the accused. In the result, after hearing the learned Advocates and taking the view as indicated above we conclude that the revision case no. 222 of 1985 which is being treated as a contested application is liable to be dismissed on contest and is, as a matter of fact, so dismissed. With regard to the other revision application namely, Criminal Revision no. 448 of 1985, we are satisfied that the said application should be allowed and the rule issued should be made absolute. The order impugned in so far as it framed a charged under S. 403 against the accused in case No. C/1054/83, T.R/188.83 before Shri P.K Deb, the learned Judicial Magistrate, 3rd court, Alipore, be set aside. The accused is discharged.

    Gobindra Chandra Chatterjee, J.:—I agree.

    Criminal Revision Case No. 222 of 1985, dismissed; Criminal Revision Case No. 448 of 1985, Rule made absolute; the order framing charge under S. 403 I.P.C set aside.

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    Comments

    Amritlal Chum v. Devi Ranjan Jha & Anr.
    (Jul 26, 1985)