Employee Cannot Wrongfully Retain Company Property; Such Act Is Punishable: High Court

In the present case, the petitioner is Punita Khatter, and the respondent is Explorers Travel & Tour Pvt. Ltd, a company where the petitioner was a former managing director. The petitioner filed a petition before the Delhi High Court to challenge the notice and order dated 16.03.2017 in Complaint Case No. 470389/2016, filed by the respondent company, where it had accused the petitioner of wrongfully withholding some of the company’s properties, even though the company had repeatedly made requests to return those assets.

When the petitioner was appointed as a managing director, she was given several perks, such as cars, a Mobile Phone, a Credit Card, and a Visa Card. She had control of all financial documents, customer information, passwords of the company’s software portal and title documents of immovable property owned by the Respondent company. Because of her conduct, she was removed from the post of Managing Director after passing a Board Resolution dated 11.04.2016.

The company alleged that despite her removal, she did not return the company’s property. An email was sent to her on 11.04.2016 asking her to return all the company’s assets and documents. However, the petitioner did not comply with this.

The petitioner argued that she was still holding the post of Director in the company until 26.04.2016. She also claimed that in the demand letters, the company did not mention which assets were to be returned. She said that she has returned all the articles mentioned in the email dated 18.06.2016 and 21.06.2016. She said that there was no proper entrustment of property as required under Section 452 of the Companies Act.

The respondent company argued that even though she was a director until 09.06.2016, the property was given to her due to her role, and once she was removed from the role, she had no right to hold it. The Delhi High Court also supported the respondent’s view and held that even if she was a Director until 09.06.2016, she did not have any rights to retain the articles and the documents. These were given to her as a managing director.

The Court clarified that Section 452 of the Companies Act, 2013 says that if an officer or employee of a company wrongfully withholds the company’s property, they must be punished. The court further said that Section 452 of the Act does not talk of entrustment. Instead, it mandates to return of the property of the company if the possession of such articles by the employee becomes unlawful. However, In this current case, the petitioner was required to return the property and documents to the company, but she did not. Therefore, the High Court dismissed the petition.