Fired employee returns company laptop only after criminal case filed;
Delhi High Court rules against her for withholding office property
Nov 3, 2025
Synopsis
A recent Delhi High Court ruling clarifies that fired employees must return all company property immediately. Failure to do so, even if property is returned later, constitutes a criminal offense under the Companies Act. The court dismissed a former MD's plea to quash a notice for withholding company assets. This judgment emphasizes strict liability for retaining company property post-termination.
On October 27, 2025, the Delhi High Court ruled that when an employee is fired from job for any reason, they must return all company property including items like laptops and phones. Not returning company property is a violation of Section 452 of the Companies Act, 2013. This Section states that if a company officer or employee wrongfully keeps company property, they can face legal consequences.
This judgement came about when the Delhi High Court was considering a petition filed by Smt Khatter, a former managing director of a company, who wanted to dismiss the notice issued to her for violating Section 452 of the Companies Act, 2013.
The company that issued her the notice, was incorporated on November 30, 1989 and Khatter owns 35% of its shares. She was appointed as a Managing Director (MD) of the company on August 7, 1995 and along with Smt. Wadhwa, a director of the company, they were the company’s joint signatories. The company told the court that Khatter received certain perks and benefits namely car, phone, laptop, credit card, etc in addition to her salary and commission and this was part of her remuneration package.
The company also claimed that as MD, she had access to all financial documents, customer information, passwords of software portals of the company as well as title documents of immovable property owned by the company.
Furthermore, the company said that her conduct led to her removal from the post of Managing Director through a Board Resolution on April 11, 2016. On the same evening, the Chairperson of the company, requested her to hand over certain articles belonging to the company via an email dated April 11, 2016.
Despite receiving the email, she refused to return the articles, leading to the filing of the complaint against her under Section 452 of the Companies Act on April 26, 2016 . On October 27, 2025, she lost the case in Delhi High Court and thus the Section 452 notice stays and now this case will go to trial.
Delhi High Court said this about her termination
Delhi High Court in its judgement (CRL.M.C. 1637/2017) dated October 27, 2025 said that it may be noted that she was summoned on July 30, 2016, and that order of summoning was not challenged. The Delhi High Court said that she should have challenged the Summoning Order, but she chose to wait till March 16, 2017, to challenge the Order on Notice, which is not amenable to revisional jurisdiction.
Delhi High Court said: “It is the Summoning Order, which could have been questioned by the Petitioner (Khatter) on the ground of being unsustainable. Be as it may, since the matter is pending since 2016, it may be considered on merits.”
The Delhi High Court said that as per the case of the company, Khatter was the Managing Director of company and was removed from the post because of irregularities noticed in discharge of her duties.
An Extra Ordinary General Meeting (EGM) was convened on April 11, 2016, wherein the Board Resolution was passed for removal of the Petitioner (Khatter) from the post of Managing Director. On the same day, the information through an email was conveyed to her and she was asked to hand over the articles of the company.
The Delhi High Court said that all the executive powers vested with the Petitioner (Khatter) were withdrawn by the Board of Directors on April 13, 2016. On April 15, 2016, a Cease-and-Desist Notice was issued to her from representing herself as Managing Director of the company.
Khatter clainms she wrote an e-mail on June 18, 2016 wishing to hand over certain articles. The company agreed on June 20, 2016 and stated that there were certain other articles namely laptop, phone, company property papers, etc in her possession. Eventually, articles mentioned in the e-mail dated June 18, 2016 and June 21, 2016 were returned by the Petitioner, which were duly accepted by the company.
Delhi High Court examines the dates of the notice and filing of the criminal case
The Delhi High Court said that the first aspect which needs to be mentioned here is that the notice dated April 11, 2016 that required Khatter to hand over the company’s articles forthwith. She was in possession of these articles as she was the MD of the company, but after she was let go, she failed to return the articles and thus the company filed the complaint on April 26, 2016.
Delhi High Court said: “To say that it was premature, was not correct, as despite being told to handover the articles forthwith, she failed to do so, till the time the present complaint was filed on 26.04.2016.”
The Delhi High Court said that the second aspect raised by Khatter is that even though she was removed from the post of Managing Director on April 11, 2016, she continued to be a Director in the company, from which she resigned on June 9, 2016.
The Delhi High Court said that it is pertinent to observe that assets and documents that were sought to be returned by the Petitioner (Khatter) had been in her possession by virtue of her holding a post of Managing Director.
The Delhi High Court said that therefore, as soon as she ceased to be the Managing Director, it was imperative for her to comply with the e-mail Notice dated April 11, 2016 and handover 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/documents of which she was in possession, being a Managing Director.
Delhi High Court said: “These were the articles in her possession, as a Managing Director and therefore, her defence that since she continued to be a Director till 09.06.2016, she was not required to hand over the documents/assets, is prima facie incorrect.”
The Delhi High Court said that Section 452 of Companies Act, 2013 provides that any officer or employee of a company having in his possession company property including cash, wrongfully withholds the same, (the person) is liable for punishment.
In the present case, one the Petitioner (Khatter) seized to be the Managing Director of the Company on April 26, 2016; she, in terms of Section 452 of Companies Act, 2013, was required to handover the assets and documents of the company forthwith, as mentioned in the Letters dated April 11, 2016 & April 15, 2016 of the company.
The Delhi High Court said that it has been rightly observed by Ld. ACMM (Additional Chief Metropolitan Magistrate) that Section 452 of Companies Act, 2013 does not talk of entrustment. It is, in a sense, a strict liability provision which mandates the return of the property of the company as soon as the possession of such articles with the employee, becomes unlawful.
The Delhi High Court noted that it has been contended by the Petitioner (Khatter) that the e-mail Notice dated April 11, 2016 was vague insomuch as it did not give the particulars precisely, but this contention has also been rightly rejected by learned ACMM. It clearly stated that all Financial Records, Accounts, the Management Accounts including the data in computer along with their passwords and all records of the company, be returned.
The Delhi High Court said that as per the submission of the Petitioner (Khatter), the records were voluminous. Thus, seeking all the records of the company in itself was sufficient Notice to the Petitioner (Khatter) to return the same. Ld. ACMM has rightly observed that prima facie Notice under Section 452 of Companies Act, 2013 is made out and the Notice has been accordingly framed.
Delhi High Court judgement: “Needless to say, that the observations made herein does not tantamount to expression on the merits of the case. There is no merit in the present Petition, which is hereby dismissed along with pending Applications.”
[The Economic Times]
