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RADHEY SHYAM KHEMKA AND ANR. ETCvs STATE OF BIHAR ANR ETC.

FACTS

The appellant, a public limited companyissued prospectus inviting publicsubscriptions of equity shares and preferenceshares. The prospectus stated thatapplication was being made to the stock

exchange, the share money collected fromdierent investors was held by appellantsand the share holder were neither informedof the rejection by the stock exchange norpaid back the share money. Further, themoney was transferred to another account ofcompany. The ecretary, !ndustrial

development and company aairs lodged acomplain with the "#! against the company.

"#! started investigations and submitted acharge sheet against the appellant. Theecial $udicial %agistrate, "#! cases, rejectedthe prayers made before it discharge theappellants. !t was contended that theprovisions of the companies act took care ofthe investors by putting restrictions on themisbehavior of the promoters and thedirectors of the company for any lapse ontheir part in such matters and they could notbe summoned to stand trial for oencesunder the &enal code.

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'ismissing the appeals, this court. Themodern share(holder in companies hassimply become supplier of capital. The

savings and earnings of individuals are beingutili)ed by person behind such corporatebodies, but there is no direct contactbetween them. The promoters of suchcompanies are not even known to manyinvestors in shares of such companies.

!n the present case , the prosecution has toprove that the appellants as promoters ordirectors has dishonest intention since thevery beginning while collecting the money*sfrom the applicants for the shares anddebentures or that having collected suchmoney*s they dishonestly misappropriated

the same.

The prosecution pending against theappellants cannot be quashed only on theground that it was open to the applicants forshares to take recourse to the provisions ofthe companies act.

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JUDGEMENT:

From the judgement and order dated+.-.+/0 of the patna high court. .1%ishra, %anish %isra and &." 2apur for the3ppellants. %rs. 2. 3mareswari, ".4. 5ao ,3.'.1 5ao and .1. $ha for the respondents.

The judgment of the court was delivered by

1.&. ingh.The appellants on the relevantdate, were managing director and directors ofa &ublic 6imited "ompany registered as %7s#ihar "able and wire !ndustries 6imited.

!t was alleged that after the registration ofthe company aforesaid as a &ublic 6imited

company, the appellants as managingdirector and directors issued prospectusinviting public subscriptions of 89::: equityshares and 0::: preference shares. !t wasgiven out by the appellants to the investorsthat application which was being made to the"alcutta tock ;xchange for enlisting theshares of the company for o

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of the company was rejected by the stockexchange . !nspite of the rejection the sharemoney collected from dierent investors was

held by the appellants and none of the shareholders were either informed or were repaid.!t was also alleged that money lying in thebank, on account of the share applicantions ,were transferred to another account of thecompany. The circumstances were pointedout in the complaint made to the "#! as to

how the acts of the appellant, clearlyindicated their dishonest intentions toconvert the share application money for theirown bene=t.

!f accepting the allegations made andcharges leveled on their face value, the court

had to come to the conclusion that nooence under the penal code was disclosedthe matter would have been dierent. Thiscourt has repeatedly pointed out that thehigh court should not while excercising powerunder section 8/9 of the code usurp the

jurisdiction of the trial court . The power

under section 8/9 of the code has beenvested in the >igh court to hold a paralleltrail . only on the basis of the statements anddocuments collected during investigation orenquiry , for purpose of expressing anopinion whether the accused concerned islikely to be punished if the trail is allowed toproceed. The appeals are accordinglydismissed. The trail court should proceed

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with the case in accordance with law. ?emake it clear that we have not expressed anyopinion on the merit of, charges leveled

against the appellants.