The Kerala High Court (Ernakulam Bench) has clarified that Section 452 of the Companies Act, 2013 has not been decriminalised by Amendment Act 29 of 2020. The amendment only introduced a proviso protecting former employees from imprisonment in cases where the company has defaulted on statutory dues. The Court held that the jurisdiction to try an offence under Section 452 vests exclusively with the competent Judicial Magistrate (not below the rank of Chief Judicial Magistrate), and not with the Adjudicating Officer under Section 454.
The Court emphasised that the Adjudicating Officer’s powers are confined to administrative penalties for statutory non-compliance and do not extend to criminal punishments. The express exclusion of Section 452 from the Special Courts under Section 435 further reinforces that criminal courts retain full cognizance over such offences.
A Single Judge Bench of Justice G. Girish, after examining Section 452 of the Companies Act, 2013, observed that the only change introduced by Amendment Act 29 of 2020 (effective 22.01.2021) was the insertion of a proviso to Sub-Section (2), which restricts the court from ordering imprisonment of a former employee in wrongful possession of a dwelling unit if the company has not paid dues such as provident fund, pension fund, gratuity, or workmen’s compensation to that employee. No other change was made to Section 452 by the 2020 amendment.
The Bench drew a sharp and critical distinction between “penalties” and “punishments” under the Companies Act. It held that Section 454, which empowers the Adjudicating Officer, deals only with penalties for non-compliance of statutory requirements, which are administrative, civil, or contractual in nature, and has no bearing on penal offences under the Act. The Magistrate’s conclusion that Section 454 sweeps in punishments under criminal offence provisions like Sections 36, 38, 57, 76A, 86, 127, 147, and 452 was held to be “totally unfounded”.
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The Bench further noted that Section 452 expressly provides for a fine of not less than Rs. 1 lakh and extending to Rs. 5 lakhs, and Sub-Section (2) additionally empowers the Court trying the offence to order delivery of property and, in default, imprisonment extending up to two years. The Bench held that by no stretch of imagination could an Adjudicating Officer under Section 454 be treated as the “Court trying the offence” capable of imposing such imprisonment.
Crucially, the Bench pointed to Sections 435 and 436 of the Companies Act, which establish Special Courts for speedy trial of offences under the Act, and noted that Section 452 is expressly excluded from the jurisdiction of those Special Courts. This express exclusion, the Bench held, makes it abundantly clear that it is the competent Judicial Magistrate — and not any Adjudicating Officer or Special Court, who is empowered to try the offence under Section 452.
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Briefly, Tata Coffee Limited, a Private Limited Company operating out of Malakiparai Estate, Thrissur, Kerala, filed a complaint against Ramla, a former employee, alleging commission of an offence under Section 452 of the Companies Act, 2013. The allegation was that Ramla wrongfully withheld the residential accommodation provided to her by the company and refused to vacate the premises despite repeated demands. The Chief Judicial Magistrate, Thrissur, returned the complaint at the preliminary hearing stage on maintainability, holding that after the 2020 amendment to the Companies Act, penalties under Section 452 are to be adjudicated by the Adjudicating Officer under the Companies Act and not by any criminal court. The Magistrate went further and declared that no criminal court has jurisdiction to take cognizance of an allegation under Section 452 after the 2020 amendment, effectively treating the provision as decriminalised.
