Section 452 Companies Act Not Decriminalised, Criminal Courts Retain Jurisdiction: Kerala High Court

The Kerala High Court on 1 July held that offences under Section 452 of the Companies Act, 2013, relating to the wrongful withholding of company property by an officer or employee, remain triable by criminal courts and were not decriminalised by the Companies (Amendment) Act, 2020.

Justice G. Girish allowed Tata Coffee Limited's revision petition, set aside the Chief Judicial Magistrate, Thrissur's order returning the company's complaint against its former employee, and directed the Magistrate to receive the complaint and proceed with it in accordance with law. He held:

“Except for the aforesaid change of inclusion of a proviso, the Amendment Act 29 of 2020 had not made any change to Section 452 of the Companies Act, 2013.”

Tata Coffee Limited filed a complaint before the Chief Judicial Magistrate, Thrissur, alleging that its former employee had wrongfully retained the residential accommodation provided by the company despite repeated demands to vacate the premises.

While considering the complaint's maintainability, the Chief Judicial Magistrate held that the Companies (Amendment) Act, 2020 had shifted proceedings under Section 452 to the Adjudicating Officer under the Companies Act. The Magistrate consequently observed that the criminal court lacked jurisdiction and returned the complaint. Aggrieved by the order, Tata Coffee filed the revision petition before the High Court.

The High Court examined the amended Section 452 and found that the Companies (Amendment) Act, 2020 merely inserted a proviso restricting imprisonment where a company had failed to pay statutory dues such as provident fund, pension or gratuity to an employee. It held that the amendment did not alter the offence under Section 452 or transfer jurisdiction to an Adjudicating Officer.

It then examined Section 454 and held that it authorises Adjudicating Officers to impose only administrative and civil penalties for statutory non-compliance. It clarified that proceedings before an Adjudicating Officer cannot replace criminal prosecution for offences under Section 452. It went on to examined Section 452(2), which empowers the court trying the offence to direct the return of the wrongfully withheld property and impose imprisonment of up to two years if the accused fails to comply. The Bench observed:

“By no stretch of imagination could it be said that an Adjudicating Officer appointed under Section 454 of the Companies Act, has to be considered as the Court trying the offence under Sub Section (1) of Section 452, and capable of imposing the imprisonment extending to two years for the failure to abide by the direction to deliver back the property to the complainant.”

On the question of jurisdiction, the Bench held that only a Chief Judicial Magistrate or a Magistrate of equivalent rank can try offences under Section 452, as the punishment prescribed under the provision vests jurisdiction in a Magistrate not below that rank. It also noted that the Section falls outside the jurisdiction of Special Courts constituted under Section 435 of the Companies Act, reinforcing that the competent Judicial Magistrate alone can try such offences. It held:

“The express exclusion of the offence under Section 452 from the purview of the Special Courts would make it clear that it is the competent Judicial Magistrate empowered to impose the fine of not less than Rs.1,00,000/- and extending to Rs.5,00,000/-, which is to try the aforesaid offence.”

Accordingly, the High Court allowed the revision petition, describing the Magistrate's conclusion that Section 452 had been decriminalised as "baseless and unsustainable". It set aside the order returning the complaint and directed the Chief Judicial Magistrate, Thrissur, to receive the complaint and proceed with it in accordance with law.

For Petitioner: Advocates D Prem Kamath, Aaron Zacharias Benny, V.G Sankaran, Mathew Angelo Davis, Jyothika Krishna, Tessa Rose and Akhil James

For Respondents: Advocates V.A Haritha and Githesh R, Senior Public Prosecutor