The Delhi High Court refused to quash criminal proceedings initiated against a former Managing Director accused of unlawfully retaining company assets after her removal. The Court held that once an officer ceases to hold office, continued possession of company property becomes unlawful under Section 452 of the Companies Act, 2013, emphasizing that “the provision imposes a strict liability to return company property immediately upon cessation of office.”
The case arose from a complaint filed by Explorers Travel and Tour Pvt. Ltd., alleging that its former Managing Director, Punita Khatter, wrongfully retained company property and financial records following her removal from office.
The company, incorporated in 1989, had appointed Khatter as Managing Director in 1995. She was alleged to have had access to the company’s financial documents, software credentials, and title deeds. Following complaints of misconduct, the Board passed a resolution removing her from the post on April 11, 2016, and directed her to return company property including office keys, vehicles, records, and electronic devices. Despite repeated requests, the company alleged that she failed to return these assets, prompting the filing of a criminal complaint under Section 452 of the Companies Act, 2013.
Counsel for the petitioner argued that since Khatter continued to be a Director until June 2016, her possession of company property could not be considered unlawful. It was also submitted that the complaint lacked specificity regarding the items allegedly withheld, such as the models and serial numbers of devices or details of financial documents.
The petitioner further contended that the trial court’s summoning order was mechanical and based on vague evidence, asserting that entrustment of property, a key element of the alleged offence, was never established. She also maintained that all articles had been duly returned upon her resignation from directorship.
The respondent company opposed the plea, asserting that the petitioner had deliberately withheld several company assets and documents despite repeated notices and a cease-and-desist letter issued by the Board. It was contended that under Section 452 of the Companies Act, entrustment of property is not a necessary element, and liability arises from wrongful withholding alone. The company relied on multiple precedents, including Baldev Krishna Sahi v. Shipping Corporation of India Ltd. and Lalita Jalan v. Bombay Gas Co. Ltd., to argue that former employees and officers are equally bound to return company assets.
The respondent also highlighted that documents recovered by a Court-appointed Local Commissioner disproved the petitioner’s claim of having returned all records.
The Court noted that the petitioner had been removed from her position as Managing Director through a valid Board resolution and was required to hand over all assets immediately thereafter. Her continued retention of company property, even if she remained a Director for a short period, was found to be unjustified.
Justice Neena Bansal Krishna observed that Section 452 of the Companies Act, 2013, “is a strict liability provision that mandates the immediate return of company property once possession becomes unauthorized.” The Court further held that the argument regarding the vagueness of the notice was untenable, as the demand to return “all financial records, accounts, management data, and passwords” was sufficiently clear and comprehensive.
The Court also remarked that since the petitioner had failed to challenge the initial summoning order, the present petition was not maintainable, yet it proceeded to examine the matter on merits given its pendency since 2016.
Concluding that a prima facie case under Section 452 of the Companies Act was established, the Delhi High Court dismissed the petition under Section 482 Cr.P.C. seeking to quash the proceedings. The Court affirmed that the notice framed by the trial court was legally sound and directed that the trial continue in accordance with law. “The observations made herein shall not be construed as an expression on the merits of the case,” the Court clarified while dismissing the petition and pending applications.
Case Title: Punita Khatter vs. Explorers Travel & Tour Pvt. Ltd.
Case No.: CRL.M.C. 1637/2017
Coram: Justice Neena Bansal Krishna
Advocate for Petitioner: Adv. Bharat Chugh, Mr. Rajul Jain, Maanish M. Choudhary, Poorvi Rewalia, Kavya Dhankar, Abhinav Agarwal, Pushp Sharma
Advocate for Respondent: Adv. Rakesh K. Khanna (Senior Advocate), Sachin Bansal, Arushi Jindal
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