T S R MURTHY Vs. ELISETTI VENKATASWAMY NAIDU

JUDGEMENT

(1.) T. S. R. Murthy filed a private complaint against nine accused in the Court of the Additional Munsif-Magistrate, Vijayanagaram, alleging that they all committed offences under section 628 of the Indian Companies Act, 1956 (I of 1956). A-1 to A-8 were charged with having done the alleged act in their capacity as Directors and A.-9 as Secretary of a company called the "Rainbow Soap and Chemical Company Ltd., Vizianagaram."The accused pleaded 'not guilty.' The learned Magistrate, after full trial, acquitted the accused 1 to 8. He convicted the ninth accused and sentenced him to simple imprisonment for two weeks and a fine of Rs. 100 in default S.I. for one week. The complainant has filed this appeal against that judgment so far as it related to the acquittal of A-1 to A-8.

(2.) The prosecution case, supported by seven witnesses, is to the following effect. P.Ws. 1 to 4 are equity shareholders of the company. In addition, P.W. 1's wife is also an equity shareholder. P.W. 3 was also Secretary-cum-stenographer of the company, having been appointed to that post for a period from 2nd May, 1958 to 2nd May, 1963. Exhibit P-2 is the register of equity shareholders of the company. Exhibit P-3 is another register of the company. A-1, A-2, A-3 were originally directors of the company. Accused 1 to 8 issued a notice (Exhibit P-1) as follows :-

(3.) The notice called for was a special meeting for me purpose of section 173 (2) of the Indian Companies Act (Central Act I of 1956) (hereinafter referred to for convenience as the ' Act ') Consequently, this was accompanied by a statement as required by section 81 of the Act. This statement was signed by A-9 alone as Secretary and mentioned as follows :- "On the intervention of Sri R. Jagannadha Rao, new Union Deputy Minister for Works, Housing and Supply, a compromise was brought about in the litigation concerning the right to manage the affairs of the company and a compromise was filed in the Hon'ble Court of the District Munsif at Vizianagaram in O.S. No. 458 of 1961 and other ancillary matters which were pending. Shri S. P. Mishra was requested to set the house in order and take up the various steps necessary to regularise the affairs of the company.......... Resolution No. 5 : The company was not having a cash balance worth counting at the time the . factory was handed over to Shri S.P. Mishra on 5th June, 1962 by an order of the Court of the Hon'ble Munsif-Magistrate, Vizianagaram, in M.C. No. 5 of 1961. The funds for implementing the terms (of the) compromise and for carrying on other works such as renovation of the factory, repair of machinery etc., were advanced by Shri S.P. Mishra as a loan to the company and with the aid of those funds considerable repair and maintenance work was done. As the company needed funds to implement the reconstruction programme and as Rs. 2,52,000 worth shares were not subscribed at the inception, with a view to regularise the finances of the company, the shares were issued after offering them to the existing shareholders under section 81 of the Indian Companies Act. As no shareholder except two came forward to subscribe, the subscription to the issue was arranged by Shri S. P. Mishra in the Calcutta Share Market through Messrs. Bhalotia and Sons.............. The directors are not personally interested in the proposal of the resolution." The above statement (attached to the notice Exhibit P-1) that notices were issued to the shareholders under section 81 of the Indian Companies Act is false to the knowledge of accused 1 to 9. In fact, P.Ws. 1 to 4 and P.W. 1's wife, who are the equity shareholders, did not receive any notice under section 81 of the Act.