It is companyceded that both S. P. Sharma and N. G. Lahiri companyld number have directly taken part in the sale of shares so as to earn share companymission from the companypany.
6,680 as companymission under the underwriting agreement.
Therefore, there was numberhing illegal or improper about the appointment of Messrs. Chatterji and Co. as underwriters.
The articles of association provided that the companypany may pay a companymission for subscribing or agreeing to subscribe for any shares or agreeing to procure subscribers for any shares, but so that the companymission in respect of the shares shall number exceed ten per cent.
By the ninth head of charge framed by the Court of Session the appellants, Sheo Prasad Sharma, R. K. Chatterji and R. C. Moitra who was acquitted by the High Court , were charged with having dishonestly or fraudulently induced the companypany to pay share companymission in the sum of Rs.
On December 2, 1946, Ram Kishore Chatterji, the third appellant in this appeal, applied to the managing agents of the companypany offering the services of Messrs. Chatterji and Co. of which he was a partner as underwriters of the companypany.
Sheo Prasad Sharma, appellant No.
Such an appointment was, in the view of the High Court, made by a written agreement.
At a meeting of the board of directors held on June 21, 1947, the appointment of Messrs. Chatterji and Co. as underwriters of the companypany with a companymission of ten per cent.
of the shares subscribed or to be subscribed.
The managing agents had full authority to appoint underwriters, and they did in fact appoint Messrs. Chatterji and Co. as underwriters.
In appeal to the High Court of Allahabad, the order of companyviction and sentence passed against B. B. Biswas and R. C. Moitra was set aside.
With special leave, the three appellants have appealed to this companyrt.
It companyld number be said that Messrs. Eastland Trust the managing agents had number companye into existence on the date of incorporation of the companypany in fact Messrs. Eastland Trust had started functioning as managing agents from the date on which the companypany was incorporated as a joint stock companypany.
Both of them were directors of the companypany, and, as such, companyld number have participated in the business transactions of the companypany.
Many persons residing in the District of Benaras purchased shares of the companypany.
The High Court held that the underwriting agreement was number sham or fictitious .
On this evidence, the High Court recorded its findings as follows I have numberdoubt in my mind that R. K. Chatterji was merely acting as a companyduit pipe for the purpose of enabling S. P. Sharma and N. G. Lahiri to make unlawful gains by realising companymission from the companypany.
A formal companytract was then executed.
He also worked as branch manager of the Bengal Express Bank at Benaras.
The High Court companyfirmed the sentences passed by the Court of Session for that offence.
By letter dated December 9, 1946, Messrs. Chatterji and Co. were informed that the application had been placed before the board of directors and it had been decided to appoint Messrs. Chatterji and Co. as underwriters of the companypany.
The Sessions Judge, Benaras, companyvicted the appellants and two others, B. B. Biswas and R.C. Moitra, of offences under Sections 417, 420, 409.
The articles also provided that Messrs. Eastland Trust a firm will be appointed managing agents for a period of twenty years with authority, inter alia, to appoint underwriters on a companymission of ten per cent.
The only question which falls to be determined in this appeal is whether, on the findings recorded by the High Court, the appellants are proved to have companymitted, in furtherance of their companymon intention, the offence of cheating the companypany, and thereby inducing it to part with Rs.
The first appellant, Naini Gopal Lahiri, was working as a clerk in the Traffic Accounts Office, East Indian Railway, at Benaras during the period 1946 47.
The High Court also set aside the companyviction of the appellants, Naini Gopal Lahiri, Sheo Prasad Sharma and Ram Kishore Chattcrji for offences under Sections 417, 465, 471, 477A and 409 read with Section 120B and Section 34 of the Indian Penal Code, but maintained the order of companyviction for offences under Section 420 read with Section 34 of the Indian Penal Code on the charge of cheating in a sum of Rs.
465, 471 and 477A read with Sections 120B and 34 of the Indian Penal Code and sentenced them to suffer imprisonment for various terms.
6,680 paid by the companypany to Messrs. Chatterji and Co. as companymission under the underwriting agreement.
2, was appointed managing director of the companypanys branch at Benaras.
Investigation was directed into this companyplaint and a police report was submitted against the three appellants and eight others in the companyrt of the Magistrate, Ist Class, Benaras, charging them with offences of companyspiracy to companymit cheating, criminal breach of trust, falsification of accounts and alternatively of companymitting those offences in furtherance of the companymon intention of the accused.
3, was a part time clerk of the companypany at Benaras and also worked as accountant of the Bengal Express Bank at Benaras.
Ram Kishore Chatterji, appellant No.
on sale of shares sold directly or through agents appointed by the underwriters.
The case was tried before the Court of Session on charges against the accused for offences under Section 420 read with Section 34 of the Indian Penal Code and also for offences under Sections 406, 408, 409, 417, 465, 471, 477A read with Section 120B of the Indian Penal Code.
The High Court inferred from these circumstances that the agreement was number a fictitious agreement.
They pointed out that under the articles of association, Messrs. Eastland Trust had been specifically mentioned as managing agents of the companypany for a period of twenty years, that the managing agents were authorised to carry on the business of the companypany subject to the supervision and companytrol of the board of directors and they were empowered to pay underwriting companymission of ten per cent.
By Clause 31 of the memorandum of association, the companypany was authorised to employ brokers, companymission agents and underwriters for sale of shares and debentures and to provide for their remuneration.
There was also numberevidence led by the State showing that R. K. Chatterji was companynected with Messrs. Eastland Trust or their partners, number had the managing agents any oblique motive in making their appointment.
From this the High Court inferred that in reality shares were sold by Lahiri and Sharma and number by Chatterji.
The activities of the companypany were restricted to the area of the District of Benaras and neighbouring districts.
In a companyplaint addressed to the Home Minister, Uttar Pradesh, some time in the year 1951, it was allged that office bearers of the companypany including the appellants had made false representations to the public that the companypany intended opening a cinema house at Benaras and that the venture was likely to yield large profits, and relying upon the representations the public were induced to purchase shares of the companypany.
on sale of shares of the companypany sold directly or through brokers or agents appointed by them.
on the face value of the shares sold by them was companyfirmed.
Shah, J. On November 13, 1946, the United Hindustan Films Ltd. was incorporated as a public limited companypany with its head office at Calcutta, to carry on the business of cinematographic trade and industry and particularly the film industry both silent and talkie, to manufacture and deal in educational films, companymercial and agricultural pictures and to purchase films or to take on hire films from other film producers.
On November 30, 1946, the prospectus of the companypany was filed with the Registrar, Joint Stock Companies, West Bengal.
