NAINI GOPAL LAHIRI Vs. STATE OF UTTAR PRADESH

JUDGEMENT

(1.) On November 13, 1946, the United Hindustan Films Ltd. was incorporated as a public limited company 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, commercial and agricultural pictures and to purchase films or to take on hire films from other film producers." By Clause 31 of the memorandum of association, the company was authorised to employ brokers, commission agents and underwriters for sale of shares and debentures and to provide for their remuneration. The articles of association provided that the company may pay a commission for subscribing or agreeing to subscribe for any shares or agreeing to procure subscribers for any shares, but so that the commission in respect of the shares shall not exceed ten per cent. of the shares subscribed or to be subscribed. 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 commission of ten per cent. on sale of shares of the company sold directly or through brokers or agents appointed by them.

(2.) On November 30, 1946, the prospectus of the company was filed with the Registrar, Joint Stock Companies, West Bengal. On December 2, 1946, Ram Kishore Chatterji, the third appellant in this appeal, applied to the managing agents of the company offering the services of Messrs. Chatterji and Co. of which he was a partner as underwriters of the company. 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 company. A formal contract was then executed. At a meeting of the board of directors held on June 21, 1947, the appointment of Messrs. Chatterji and Co. as underwriters of the company with a commission of ten per cent. on the face value of the shares sold by them was confirmed.

(3.) The activities of the company were restricted to the area of the District of Benaras and neighbouring districts. Sheo Prasad Sharma, appellant No. 2, was appointed managing director of the companys branch at Benaras. He also worked as branch manager of the Bengal Express Bank at Benaras. Ram Kishore Chatterji, appellant No. 3, was a part-time clerk of the company at Benaras and also worked as accountant of the Bengal Express Bank at Benaras. 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.