M.K. Chandrakanth Vs. Kannan - Court Judgment

Pratap Singh, J.

1. The accused in STC. No. 340 of 1992, on the file of the Judicial Magistrate No. II, Coimbatore, has filed this petition under section 482 of the Criminal Procedure Code, praying for calling of the records in the abovesaid case and quash the same.

2. Short facts are : The respondent has filed a private complaint against the petitioner for offence under section 630(1) of the Companies Act. The allegations in it are briefly as follows :

Messrs. Asoka Betel-nut Co. P. Ltd. is manufacturing and selling scented betel-nuts called 'Asoka'. Messrs. Shenthil Traders, in which the accused is a smaller Hindu undivided family, was appointed as a distributor for the sale of manufactured scented betel-nut powder and the products under the brand name of 'Asoka'. By virtue of this appointment, the accused was the marketing director of Messrs. Asoka Betel-nut Co. P. Ltd. The accused did not look after Asoka Betel-nut and the produce business properly. He was using the funds of Messrs. Asoka Betel-nut Co. P. Ltd. for his own purposes. The accused was removed from the directorship on December 7, 1987. The accused is wrongfully withholding the property of the company. The accused was appointed as a distributor for Messrs. Asoka Betel-nut Co. P. Ltd. with effect from April 1, 1977, on terms mutually agreed on August 1, 1977. The company was requested to supply betel-nut to the accused as required by him from time to time and raise invoice for the same and the accused should make payment in accordance with the agreement. The accused had to pay various amounts which are given in detail in paragraph 14. The accused did not make payment towards any specific invoice but was making payment in lump sum from time to time. He has no right whatsoever to withhold the property of the company after having been removed from the directorship. Hence a direction should be given to the accused to deliver the properties cited at paragraph 14 of the complaint and punish him under section 630(1) of the Companies Act.

3. Mr. K. A. Panchapagesan, learned counsel for the petitioner, would submit that to make out an offence under section 630(1) of the Companies Act, 1956 (which I shall hereinafter refer to as 'the Act'), two ingredients are to exist :

1. The accused must be an officer or employee of the company.

2. The property of the company must be withheld by him.

4. In the instant case, neither of the two ingredients are alleged or made out and hence the entire prosecution is liable to be quashed.

5. I have heard, Mr. K. V. Sridharan, learned counsel for the respondent, on the above aspects. I have carefully considered the submissions made by rival counsel. To consider the submission, section 630(1) of the Act needs extraction. It reads as follows :

'(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.'

6. The complaint has been laid with the prayer for a direction to the accused to deliver the property cited in paragraph 14 of the complaint and punish him under section 630(1) of the Act. In paragraph 14, the amounts as per annexure 1 from Messrs. Shenthil Traders which can be substantiated by the office account books of Asoka Betel-nut Co. P. Ltd. are given. There are two items, one for Rs. 8,70,774.33 and another for Rs. 74,88,886.33 with interest. Even, as per paragraph 14, these amounts were due from Messrs. Shenthil Traders. In paragraph 12 of the complaint, it is stated that the accused was appointed as a distributor of Messrs. Asoka Betel-nut Co. P. Ltd. with effect from April 1, 1977, on terms mutually agreed and signed by both on August 1, 1977. A conjoint reading of paragraphs 12 and 14 would show that certain amounts were due to Asoka Betel-nut Co. P. Ltd. from Messrs. Shenthil Traders. As per the prayer in paragraph 15, a direction is to be issued to the accused to deliver these amounts mentioned in paragraph 14. These amounts were due from him only in his capacity as a distributor because of his connection with Messrs. Shenthil Traders. I am clear that, by no stretch of imagination, a 'distributor' can be brought within the category of any 'officer' or 'employee of the company'. On that short ground, the entire prosecution is liable to be quashed.

7. Mr. K. V. Sridharan, learned counsel for the respondent, would submit that the accused was appointed as a marketing director and that there is an allegation in paragraph 5 of the complaint that he was using the funds of Messrs. Asoka Betel-nut Co. P. Ltd. and those amounts were not paid back to the company by the accused and thus offence under section 630(1) of the Act was committed.

8. I am unable to accept this submission for the reason that it was not said to be the property which was returned. The amount due from Shenthil Traders was shown as the amount retained by the accused and for it, a direction was sought in paragraph 15 of the complaint. That apart, even assuming that the accused was using the funds of Messrs. Asoka Betel-nut Co. P. Ltd. for his own purposes, that was not premise on which this complaint has been laid for offence under section 630(1) of the Act. Looking at the case from any angle, I am clear that the prosecution cannot be sustained.

9. In the result, the petition is allowed. All further proceedings in STC No. 340 of 1992, on the file of the Judicial Magistrate No. II, Coimbatore, shall stand quashed.