. XYZLimited decided to terminate the services of Mr. X, who was employed as sales manager

It is apprehended by the company that the sales manager may not vacate the company’s flat at Bombay. What action can be taken by the company under the Companies Act to regain possession of the flat? Is it necessary to take such action under the Companies Act before terminating the services of Mr. X? Will it make any difference if the flat is not owned by the company but taken on lease?

fC.A. (Final) May, 2000J

.9L1l.5 .

Wrongful Withholding of Property

The company can take action under Section 630 of the Companies Act, 1956 if the sales manager refuses to vacate the residential accommodation provided by the company.

According to Section 630, it is an’offence if .Y_9.f!icror employee of a company (a) wrongfully obtains possession of anfprop-erty of a company”or (b) having any such property in his possession wrongfully withholds it or knowingly applies ito purposes other than those expressed or directed in the Articles and authoed by the Act and such an offence is punishable with fine which may extend to,Rs. 1,00(r[Section 630(1)]. Further, the Court trying the offence may also order such officer or employee to. deliver to the company, any such property wrongfully’ obtained or wrongfully withheld, within a time fixed by the Court. Non-compliance of the court’s order is an offence

punishable with imprisonment for a term which may extend to two years [Section 630(2)J.

So, the company can file a complaint under Section 630 as it provides speedy relief to the company.

Tl).ough the expression used in Section 630 is not ‘past or present officer or employee’, it has been held by the Supreme Court that the term ‘officer or employee’ in Section 630 applies not only to existing officers or employees of a company but also to past officers or employees if such officer or employee either (a) wrongfully obtains possession of any property of the company; or (b) having obtained such property during the course of his employment withholds the same after the termination of his employment [Baldev Krishna Sahi Vs. Shipping Corporation of India Ltd. (1988)]. In view of the Supreme Court’s decision, it is possible to initiate action under Section 630 even after terminating the services of Mr. X.

It is not necessary that the property in question should be actually owned by the company. Even if the company exercises only a leasehold right, the provisions of Section 630 can be invoked [Po V. George Vs. Jayens Engineering Co. (P) Ltd. (1990)].