RADHEY SHYAM KHEMKA Vs. STATE OF BIHAR

JUDGEMENT

(1.) THE appellants on the relevant date, were managing director and directors of a Public Limited Company registered as M/s. Bihar Cable and Wire Industries Limited (hereinafter referred to as lithe Company"). A case was instituted by the Central Bureau of investigation (hereinafter referred to as lithe CBI") against the appellants and others on basis of a complaint made by the then Deputy Secretary, Ministry of industrial Development and Company Affairs, Government of India. It was alleged that after the registration of the company aforesaid as a Public Limited Company, the appellants as managing director and directors issued prospectus inviting public subscriptions of 42,000 equity shares and 3,000 preference shares. It was given out by the appellants to the investors that application was being made to the Calcutta Stock Exchange for enlisting the shares of the company for official quotation. Such application which was made on behalf of the company was rejected by the stock exchange. In spite of the rejection the share money collected from different investors was held by the appellants and none of the share -holders were either informed or were repaid. It was also alleged that money lying in the bank, on account of the share applications, were transferred to another account of the Company: The circumstances were pointed out in the complaint made to the CBI as to how the acts of the appellants clearly indicated their dishonest intentions to convert the share application money for their own benefit, and as such they had committed the offence under section 409 read with section 405 of the Penal Code.

(2.) AFTER investigation of the allegations made in the complaint aforesaid the CBI submitted a chargesheet against the appellants along with some others for their trial for the offence under section 409 of the Penal Code. When the Special Judicial Magistrate, CBI cases, Patna, rejected the prayer of the appellants to discharge them, validity of that order was questioned by filing an application under section 482 of the Code of Criminal Procedure. The High Court rejected the said application.

(3.) IL is true that the Companies Act contains provisions regarding the issuance of prospectus, applications for shares and allotment thereof and provides different checks over the misuse of the fund collected from the public for issuance of shares or debentures. But can it be said that where persons issue prospectus and collect moneys from public assuring them that they intend to do business with the public money for their benefit and the benefit of such public, but the real intention is to do no business other than collecting the moneys from the public for their personal gain, still such persons are immune from the provisions of the Penal Code?