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TMI Blog1993 (3) TMI 251X X X X Extracts X X X X X X X X Extracts X X X X ..... lants and others on the 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 a 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 inve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 69 of the Companies Act all moneys received from the applicants for shares have to be deposited and kept in an account and in the event the shares are not issued the moneys so received have to be repaid with interest. Reference was also made to section 73 of the Act which requires every company intending to offer shares or debentures to the public for subscription by the issue of a prospectus has to make an application before such issue to one or more recognised stock exchanges, for permission for the shares or debentures intended to be so offered to be dealt with on the stock exchange. All moneys received from applicants in pursuance of the prospectus, have to be kept in a separate bank account until the permission is granted and wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ened. A situation has been reached today where in the bulk of the companies many individuals who have property rights as shareholders and to the capital to which they have directly or indirectly contributed, have no idea how their contributions are being utilised. It can be said that the modern shareholder in many companies has simply become a supplier of capital. The savings and earnings of individuals are being utilised by persons behind such corporate bodies, but there is no direct contact between them. The promoters of such companies are not even known to many investors in shares of such companies. It is a matter of common experience that in some cases later it transpires to the investors that the promoters had the sole object to form a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Indian Penal Code, the court must be satisfied that prima facie an offence under the Indian Penal Code has been disclosed on the materials produced before the court. If the screening on this question is not done properly at the stage of initiation of the criminal proceeding, in many cases, some disgruntled shareholders may launch prosecutions against the promoters, directors and those in charge of the management of the company concerned and can paralyse the functioning of such company. It need not be impressed that for prosecution for offences under the Indian Penal Code the complainant has to make out a prima facie case against the individuals concerned, regarding their acts and omissions which constitute the different ingredients of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e have to be collected during investigation and enquiry and ultimately have to be produced before the court at the stage of trial for a verdict as to whether the ingredients of the offence in question have been established on behalf of the prosecution. The complaint made by the Deputy Secretary to the Government of India to the CBI mentions different circumstances to show that the appellants did not intend to carry on any business. In spite of the rejection of the application by the Stock Exchange, Calcutta, they retained the share moneys of the applicants with dishonest intention. Those allegations were investigated by the CBI and ultimately charge-sheet has been submitted. On the basis of that charge-sheet cognizance has been taken. In s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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