SHUBH SHANTI SERVICES LTD. versus MANJULA S. AGARWALLA AND ORS

Citation: [2005] SUPP. 1 S.C.R. 264 · Decided: 11-05-2005 · Supreme Court of India · Bench: P. VENKATARAMA REDDI · Disposal: Case Partly allowed

Judgment (excerpt)

A 
SHUBH SHANTI SERVICES LTD. 
v. 
MANJULA S. AGARWALLA AND ORS 
MAY II, 2005 
B 
[P. VENKATARAMA REDDI AND P.P. NAOLEKAR; JJ.] 
c 
I 
·companies Act, 1956: 
Section 630-Scope and object of-Discussed 
Section 630-Withholding of company's property by legal heirs of 
employee of company after his death-Action under section 630 by Company-
Jnterim order in·civil proceedings that heirs:not to be dispossessed except by 
due process of law and proceedings under sectio_n 630 being penal in nature 
D not under due process of law-Sustainability of-Held: Remedy is available 
to the Company to obtain possession of property under section 630-There is 
no necessity to approach civil court-Hence, order unsustainable. 
Sections 630 and 291-Withholding of company's property by legal 
heirs of employee of company after his death, despite notices-Plea that on 
E basis of oral assurance by Chairman of Board of Directors heirs continuing 
in possession of flat until possession of another flat given-Held: No evidence 
that Chairman was authorized by Board of Directors to give such assurance 
for and on behalf of the CompanrFurther, act of Chairman not incidental 
to business of the Company nor a necessity-Assurance given was more of a 
gratuitous act-~Hence, not binding and enforceable .against Company-After 
F service of notice, heirs wrongfully withheld property-Offence .under section 
630(1) attracted-Order of High Court in civil suit appointing Court Receiver, 
delivering him symbolic possession of property, and actual possession to heirs 
as agent of Receiver does not wipe out offence already committed-Fine of 
Rs/000-each imposed-Till order stands, no direction under section 630(2) 
G for obtaining possession to be given 
H 
Board of Direct"rs/Chairman-Power, scope of-Discussed 
Jurisprudence- 'Due process of law'-Meaning of-Discussed-,-Words 
and Phrases. 
264 
SHUBH SHANTI SERVICES LTD. v. MANJULA S.AGARWALLA 
265 
'A' managing director of the appellant company, was allotted A 
property of the company-flat 'S' for residential purpose for himself and 
his family members while he was in service. After' A's death, his wife and 
daughter, respondent nos. 1 and 2 continued to occupy the flat and notice 
to vacate the premises was served. Respondent no 1 informed the 
appellant-company by letter that on ba~is of assurance she continued in 
flat 'S' till possession of flat 'BH' was delivered to her regarding which B 
her husband and the appellant-company had entered into sale agreement. 
Respondents filed suit for specific performance of contract for sale, 
transfer and handover of poss.ession of flat 'BH' against appellant-
company and that they not be disposed of flat 'S' until flat 'BH' is handed 
over to them. Appellant-company filed complaint under section 630 of the C 
Companies Act, 1956 against respondents for wrongfully withholding the 
property of the Company. High Court passed interim order preventing 
respondents from being dispossessed from the premises except by due 
process of law and that proceeding under section 630 being penal in nature, 
cannot said to be proceedings under due process of law. Appellant-
company also filed suit for possession of flat 'S':I-iigh court by interim D 
order appointed Court Receiver and gave him symbolic possession of flat 
'S' and the respondents were given actual possession of flat as agents of 
Receiver, during pendency of suit. Thereafter, magistrate dismissed the 
complaint. Appellant-company filed an appeal which was also dismissed 
Hence the present appeal. 
E 
Partly allowing the appeal, the Court 
HELD: 1.1. Section 630 of the Companies Act, 1956 does not only 
cover cases of the present employee or officer of the company and this 
provision strictly speaking is not penal in the sense as understood under F 
penal law. The main purpose to make action an offence under section 630 
is to provide a speedy and summary procedure for retrieving the property 
of the company, where it ~as been wrongly obtained by the employee or 
officer of the company or where the property has been lawfully obtained 
.but unlawfully retained after termination of the employment of the 
employee or the officer and to impose a fine on the officer or employee of G 
the company if found in breach of the provision 'or Section 630 of the 
Companies Act and further to issue direction if the Court feels it just and 
appropriate for delivery of the possession of the property of the company 
~nd to impose a sentence 

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