The Delhi High Court’s 2025 ruling makes it clear that any fired employee must return all company property, laptops, phones, documents, and more, immediately. Keeping them violates Section 452 of the Companies Act, 2013, and invites legal action.
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NEW DELHI: In a landmark ruling, the Delhi High Court has held that any employee terminated from service, regardless of the reason, is legally bound to return all company property, including laptops, phones, financial documents, or other assets. Failure to do so will amount to a violation of Section 452 of the Companies Act, 2013, which prescribes punishment for wrongfully withholding company property.
Background of the Case
The judgment came in the case of Smt. Khatter v. State (CRL.M.C. 1637/2017), where Smt. Khatter, a former Managing Director (MD) of a private company incorporated on November 30, 1989, challenged a notice issued against her for violating Section 452.
Khatter, who owns 35% of the company’s shares, was appointed as Managing Director on August 7, 1995, and was a joint signatory along with another director, Smt. Wadhwa. As MD, she was entitled to a salary, commission, and perks such as a car, phone, laptop, and company credit card.
According to the company, Khatter was removed from her post through a Board Resolution dated April 11, 2016, citing “irregularities in discharge of her duties.” On the same day, the Chairperson emailed her requesting that she return all company property immediately. However, Khatter failed to return the items, prompting the company to file a complaint under Section 452 on April 26, 2016.
Subsequently, she was summoned by the court on July 30, 2016, but she did not challenge the summoning order at the time. Instead, she later sought to challenge the Notice on March 16, 2017, which the court found procedurally untenable.
What the Delhi High Court Said
The Delhi High Court observed that once Khatter was removed as Managing Director, she was legally required to return all company assets in her possession. Even though she continued as a Director until June 9, 2016, that did not grant her the right to retain company property.
“As soon as she ceased to be the Managing Director, it was imperative for her to comply with the email notice dated April 11, 2016, and hand over all the articles. Even if she continued as a Director till June 9, 2016, it did not give her any right to retain the articles or documents.”
The Court held.
The Court further held that Section 452 does not require “entrustment” of property, unlike provisions in the Indian Penal Code such as criminal breach of trust. It is a strict liability provision, meaning that if an employee fails to return company property, liability arises automatically.
Court’s Observations on the Notice and Complaint
Khatter argued that the company’s email notice was vague and lacked specifics. However, the Court rejected this contention, stating that the email clearly mentioned all financial records, management accounts, and data stored in computers with passwords. The Court held that this was a valid and sufficient notice.
“Seeking all the records of the company in itself was sufficient notice to the petitioner to return the same. Prima facie, a case under Section 452 is made out.”
The Court observed.
The High Court concluded that the complaint filed on April 26, 2016, was not premature, since Khatter had already been directed on April 11, 2016, to return the items but failed to comply.
The Delhi High Court dismissed Khatter’s petition, stating that the Section 452 notice would stand and the case would proceed to trial.
“There is no merit in the present petition, which is hereby dismissed along with pending applications.”
The Court held.
The Court also clarified that its observations do not express any opinion on the final merits of the case, which will be determined during trial.
Section 452 of the Companies Act, 2013
Section 452. Punishment for wrongful withholding of property
(1) If any officer or employee of a company–
(a) wrongfully obtains possession of any property, including cash of the company; or
(b) having any such property including cash in his possession, wrongfully withholds it or knowingly applies it for the purposes other than those expressed or directed in the articles and authorised by this Act,
he shall, on the complaint of the company or of any member or creditor or contributory thereof, be punishable with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees.
(2) The Court trying an offence under sub-section (1) may also order such officer or employee to deliver up or refund, within a time to be fixed by it, any such property or cash wrongfully obtained or wrongfully withheld or knowingly misapplied, the benefits that have been derived from such property or cash or in default, to undergo imprisonment for a term which may extend to two years.
Section 452 of the Companies Act, 2013 provides that if any officer or employee of a company wrongfully withholds company property, they are liable for punishment. The provision applies to all company officers, including managing directors, directors, and employees who possess company assets such as laptops, cash, documents, or property papers.
This ruling emphasizes that possession of company property becomes unlawful immediately upon termination, and employees must return all such assets forthwith.
Case Title:
PUNITA KHATTER versus EXPLORERS TRAVEL & TOUR PVT LTD
CRL.M.C. 1637/2017, CRL.M.A. 6647/2017, 11143/2017 and CRL.M.A. 17239/2017
READ JUDGMENT
