PULIN CHANDRA DAW Vs. EMPEROR

JUDGEMENT

(1.) The appellant, Pulin Chandra Daw, has been convicted by the learned Chief Presidency Magistrate, Calcutta, under Section 282, Companies Act, and sentenced to detention till the rising of the Court as also a fine of Rs. 1000, in default, rigorous imprisonment for nine months. The act for which he has been so convicted and sentenced is that he, as a Director of the Santal Parganas Electric Supply Corporation, Ltd., made in the balance sheet of that company for the year 1944, a statement to the effect that the company owed a debt of Rs. 73,000 secured by a first mortgage on all its properties and undertakings, although, in fact, there was no such mortgage and that he thus made a false statement, knowing it to be false, in a material particular in the said balance sheet.

(2.) The facts are simple and are not disputed. It appears that a firm called Datta Brothers obtained a license from the Government of Bihar for the supply of electricity within the town of Deoghar and adjacent localities and the present Company was formed with the object of taking over and exploiting that license. The first Managing Agents of the Company were the firm of Dutta Brothers. Sometime later, one of the partners of that firm died but the Government of Bihar permitted the surviving partners to hold and exploit the license for a further period of one year. Dutta Brothers thereupon continued to be the Managing Agents till April 1941 when another firm Daw's Agency, of which the appellant is a member took over the managing agency. Previously, the appellant had lent to the company various sums of money and in respect of those advances an agreement had been entered into on 8-11-1938 between the company, the then Managing Agents, Dutta Brothers and the appellant by which the company undertook to execute in favour of the appellant a mortgage for Rs. 40,000 within a certain period. Thereafter certain further sums were lent by the appellant and all the debts were consolidated in the year 1939 and on the 1 January of that year a second agreement was entered into between the same parties by which the company agreed to execute a mortgage in favour of the appellant for a sum of Rs. 73,000. It was stipulated that the company would apply to the Local Government for the necessary sanction to create a mortgage within three months of the agreement and that the formal mortgage would be executed within a period of one month from the date of the sanction. A further clause provided that if the company failed or neglected to apply for or to secure the sanction of the Local Government within the time aforesaid, the mortgagee would be entitled to call for immediate repayment of the whole amount. In fact, however, no application was made to the Government for sanction, nor was any mortgage ever executed. The balance sheet of 1941 shows debts owing by the company to the appellant which apparently include the aforesaid sums, but no mention is there made of any mortgage. No balance sheets were published either in the year 1942 or 1948 on account; it is said, of the ban, then existing, on the disclosure of details regarding public utility companies, but is 1944 a balance sheet was published which contained an entry to the following effect: "Loans secured on first mortgage of all the properties and undertakings, Rs. 73,000." It is this entry which is the subject-matter of the present charge against the appellant.

(3.) The complainant was a share-holder of the company, holding a single share of Rs. 10 and also a small creditor. Apparently, he has not been very friendly to the company and when in the year 1943 another share-holder made an application to the Patna High Court for the winding up of the company, he swore the affidavit in support of that application. That application was rejected. Subsequently, at the general meeting of the share-holders called to consider the balance sheet for the year 1944, the complainant raised various objections and among them he asked for information as to how the balance sheet had come to contain an entry to the effect that the sum of Rs. 73,000 had been borrowed on executing a first mortgage. It appears that the chairman asked the appellant to explain this entry and the appellant stated then and there that no mortgage deed had in fact been executed. The complainant seemed to be satisfied for the time being with the information disclosed but subsequently brought the case which resulted in the present conviction of the appellant.