JUDGMENT
S. Rangarajan, J.
(1) This judgment will dispose of Cr.M.(M) 14 of 1970, Criminal Revisions No. 106, 113, 200, 204 and 228 of 1970 also. These are applications to quash the order of the learned Additional District Magistrate, Delhi dated 20-9-1969 committing 22 accused (out of whom I has since died) including the above petitioners to the Court of Session for all of them being tried for the offence of criminal conspiracy under section 120-B of the Indian Penal Code; the petitioners in Cr. Rev. 263 of 1970 (S. P. Jain) and Cr. Rev. 106 of 1970 (V. H. Dalmia) and Cr. Rev. 204/70 (J. Dalmia) were further charged under section 409 Indian Penal Code . The petitioners in Cr. Rev. 113 of 1970 (M.R. Jain) and in Cr. Rev. 204 of 1970 (J. Dalmia) have been further charged under sections 408 and 465/467 Indian Penal Code . respectively.
(2) The prosecution case, in brief, is that during the period 1946 to 1953, the Dalmia Jain Group along with their co-accused and others were parties to a criminal conspiracy the object of which was to commit and/or cause to be committed criminal breach of trust in respect of funds and assets of Dalmia Jain Airways Limited (hereafter called Airways) including the funds in Current Account No. 716 (entitled “Share Application Money Account”) with the Bharat Bank Limited, Darya Ganj Delhi. This object was to be accomplished by committing or causing to be committed forgeries and making or causing to be made false entries in the books of accounts of not only the Airways, but also three other concerns known as Alien Berry & Co. Ltd. (hereafter referred to as A.B.C.) and Dalmia Cement & Pacer Marketing Co. Ltd. (hereafter called D.C.P.M.) and the Dalmia Jain Aviation (hereinafter called Aviation).
(3) A.B.C. was originally an English company (Thomson and Thomas Wilson). On 4-1-1937 Dalmia Jain & Co. (hereafter called the Managing Agency Co.) was incorporated as a Private Limited Liability Company of which J. Dalmia (A-2) and S. P. Jain (A-3) were appointed as Directors with effect from 30-1-1937; the other Directors included V. H. Dalmia (A-4, son of J. Dalmia) and Shital Prasad Jain (A-10 brother’s son of S. P. Jain, A-3). S. P. Jain is the son-in-law of R. Dalmia, D.C.P.M. was incorporated as a Private Limited Company in 1937 (as it was called after it underwent a change of name in 1938); S. P. Jain (who was its first Director), J, Dalmia (brother of R. Dalmia) and V. H. Dalmia (who became Directors later) functioned as Directors during the concerned period.
R. Dalmia negotiated for the purchase of 29,653 preference and 39,550 ordinary shares of A.B.C. from H. H. Mahabir Shamsher Jang Bahadur Rana and this company came under the full control of the Dalmia Jain Group. S. P. Jain was Director of A.B.C. from 3-5-1945 to 4-12-1948, controlling its affairs directly; V. H. Dalmia was designated Managing Director 01-1.15-5-1945. R. Dalmia, got a remuneration of Rs. 8,000.00 per month from Dalmia Jain & Co., which later became the Managing Agents for Airways as well.
(4) On 27-3-1946 a Current Account was opened in the Bharat Bank in the name of the Dalmia Jain Airways (not Dalmia Jain Airways Limited) by depositing a sum of Rs. 1,000.00. This sum was withdrawn by 30-3-1946: a sum of Rs. 17 lakhs odd is seen to have been over-drawn.
An application was made on 3-5-1946 by R. K. Jain (A-5-a cousin of S. P. Jain) for issue of capital of Rs. 40 lakhs for running the Airways. Consent was given under the defense of India Rules (94-A) by the Examiner of Capital Issues for the issue of Rs. 40 lakhs of capital by the Airways. Rs. 16 lakhs, out of the same, was free but Rs. 24 lakhs had to be invested and not drawn without permission. Rs. 24 lakhs were deposited in the Bank only on 29-11-1946 even though a certificate of incorporation was issued to the Air ways on 9-7-1946
(5) A sum of nearly Rs. 3 crores was collected as share capital of (he Airways and the same deposited in Account No. 716.
(6) This case is a classic example of the manner in which entrepreneurs of business industry can, once overtaken by excessive greed for making money and that too as quickly as possible, not only seek to take advantage of all possible loopholes in the law. but do not even hesitate to violate it. The loop-holes are stated to have been highlighted by the report of the Justice Vivian Bose Commission which went into the working of nine companies controlled by the Dalmia lain Group, but the said report, not being evidence in the case cannot be looked into at least now, for the purpose of this case.
(7) Taking advantage of the public image of them, once they build it they do not seem to stop anywhere until their objective is gained: no means would be taboo, no means too despicable, to adopt. The stage was set by the monetary boom in the wake of World War II. It was also the eve of independence, which was then almost round the corner. Judging by the response that the entrepreneurs of industry or leaders in business and financial fields could get from the public. who were to invest their surplus moneys, earned as a result of the boom produced by the war, on shares in Limited liability companies. it was no surprise that when the Airways was floated in this case, for an authorised capital of Rs. 40 lakhs alone for which the consent of the Examiner of Capital Issues had been obtained, it was heavily over-subscribed, by over Rs. 3 crores. During the period of the World War II. however, restrictions had been placed in the matter of issue of capital with a strict condition, breach of which was made punishable, that capital issue with such consent should not be used for any purpose different from that for which consent for the said issue was given. This was not only to ensure that no money would be spent on purposes which could not be regarded as necessary in the context of the war, but also that the capital issue would itself be used strictly for the purpose or purposes for which it was permitted to issue. It was felt that the provisions made to this effect, by Rule 94-A of the defense of India Rules, 1939, should be continued having regard to the requirements of the. national economy even after the World War Ii was over.
On account of the above-said restrictive provision it became necessary for R. Dalmia, who was himself with his relations and friends controlling several companies, to apply through R. K, Jain, cousin of his son-in-law, S. P. Jain, for permission for issue of Rs. 40 lakhs in order to form the Dalmia Jain Airways Limited. Judging by the earlier response to the Bharat Airways ( a Birla concern) it was not difficult for R. Dalmia and his collaborators to anticipate that the public would subscribe heavily; they seem to have plans ready for using, for their own private profit, such over-subscribed capital. The obvious plan was that the surplus proceeds of the issue of capital sanctioned for the Airways should be utilised by applying for sanction for using the said surplus proceeds for yet another venture as well. Advantage was also taken of the Government’s need to dispose of the U.S. Army etc. vehicles. Along side the proposal to float the Airways, negotiations had been carried on by S. P. Jain on behalf of A.B.C. (which was already concerned with automobiles) with the Director General of Supplies and Disposals (DG S&D) for purchasing among disposal vehicles at the Moran Vehicles Depot for Rs. 1.8 crores, Rs. 5 lakh worth of jeeps (200 from Calcutta plus 200 auto cars and white tractors) at a price to be negotiated and Dodge trucks not committed to other parties (approx. 600) at Rs 7.500.00 each. The above broad heads were agreed to by S. P. Jam on behalf of the A.B.C. and the Dg S&D on 10-7-1946. On the following day the sale letters for Rs. 1.8 crores and Rs. 62 lakhs. thus making a total of Rs. 2.42 crores. were issued by the Dg S&D in the name not only of A.B.C. but also Airways. On the same day application was made for a certificate to commence business : a Statement in lieu of Prospectus was also forwarded on behalf of the Airways. There was yet another application on the same day by S P Jain to the Dg S&D, for purchasing the American Repair Plant (R3A plant) valued by him at Rs. 15 lakhs. S. P. Jain also applied on the following day to the Examiner of Capital Issues for permission to issue Rs. 3.1 crores for purchasing the said disposal vehicles in co-operation and partnership with A.B.C. Having got the said sanction from the Examiner of Capital Issues only a sum of Rs. 82 lakhs were paid by A.B.C. to the Dg S&D on 18-7-1946 by getting a debit from Bharat Bank Ltd. (a Dalmia concern). This amount was repaid by two cheques to A.B.C. by Airways on 24-7-1946 and 26-7-1946 for Rs. 38 lakhs and Rs. 44 lakhs, respectively. It is thus seen that this business had been secured without A.B.C. actually parting with any money itself, but from the funds of the Airways exclusively
(8) Without going into more details, at this stage, it may be noticed that a sum of Rs. 1,85,45,000 was paid by the Airways lo A.B.C., including the above-said two sums, between 24-7-1946 and 7-10-1946. A sum of Rs. 91,50,000 was paid by the Airways lo the D.C.P.M. at Calcutta and Bombay between 27-7-1946 and 26-9-1946. In addition to these sums the D.C.P.M. had also received Rs. 51,35,218 in respect of shares of the Airways; the said amount. however, was not transferred to the share capital account of the Airways (held by the Bharat Bank Ltd. account No. 716). it will thus be seen that the D.C.P.M. had with it Rs. 1.42 odd crores of the Airways money; this was subsequently transferred to the A.B.C. Thus the total funds of the Airways with the A.B.C. in the above manner were Rs. 3.28 odd crores. In addition to these, profits were also made by the A.B.C. from out of the said business, A.B.C. (not Airways) having physical control of the entire stocks as well as the R3A plant purchased from the Dg S&D. A further agreement was entered into on 31-7-1946 between R. Dalmia, on behalf of both the A.B.C. and the Airways with Dg S&D for the purchase of remaining U.S.A. surplus vehicles in the Depot at Jodhpur etc. for Rs. 2.50 crores. The sale letter in respect of these vehicles was issued for the said sum by Dg S&D on 2-8-1946. While enormous profits were made by A.B.C. no part of it was transferred to the Airways even though the device of a joint venture agreement between the A.B.C. and the Airways was adopted. That joint venture agreement bears date 26-8-1946; even before the execution of the same the process of drawing moneys from the Airways had started from as early as 24-7-1946. It is seen that as on 26-8-1946, the date of joint agreement. Rs. 1,35,50,000 had been transferred from the funds of the Airways to the A.B.C.; a sum of over Rs. 70 lakhs had been transferred, from the Airways to the D.C.P.M.; these had swelled up to Rs. 1,85,45,000 and Rs. 1,42,35,218-13, respectively by 7-10-1946. Having purchased from the Dg S&D (vide sale letter dated 28-8-1946) the highly rated R3A plant for Rs. 15 lakhs and inspite of the fact that according to the joint agreement A.B.C. and Airways were each entitled to a moiety of Army vehicles purchased, it was transferred, on 25-9-1947, exclusively in favor of the A.B.C. at cost as per the instructions of R. Dalmia and S. P. Jain. Many questionable and even illegal devices were adopted to enrich the A.B.C. at the expense of the Airways. D.C.P.M., even according to the reports of its Directors, is seen to have been a losing concern, the losses each year being carried over to subsequent year (this is seen to be the position according to the reports of the Directors for the years 1945 and 1946 as well as subsequently).
(9) It is further made to appear that the above joint venture agreement was itself terminated on 30-6-1948 (this is suggested to have been thought of much later) by an agreement which is seen to be wholly unfavorable to Airways and favorable to A.B.C. The entire stock-in-trade was passed on to A.B.C. exclusively in return for the liability in respect of half the cost price; even this liability was got rid of by the device of D.C.P.M. taking over all the losses for no quid pro quo. D.C.P.M. seems to have been the dumping ground for all the losses suffered by other concerns controlled by the Dalmia Group as well.
When there was mounting pressure on Government for investigating the affairs of the Airways it was wound up and attempts to wind it up through court were resisted by means which appear dubious. A scheme of amalgamation, between the Airways under winding up, with the Aviation, was put through successfully before the District Judge. before whom the materials now available were not placed. The net result was that R. Dalmia and his collaborators became richer by nearly one half of the share capital and the shareholders of Airways poorer to that extent.
(10) It seems advantageous to have an idea of the broadest contours even to start with. For this purpose the interim and final reports of the inspectors Ms. Chopra & Co., who were appointed by the Government to go into the affairs of the concerned companies of Dalmia Jain Group, submitted to Government, are of considerable assistance, despite the fact that the final report itself is not as thorough as one would wish. The scrappy, if I may say so, nature of the report is understandable in the context in which the final report was submitted by the inspectors. It is seen from the letter which the inspectors wrote (Document No. 192) to the Secretary, Ministry of Finance, Government of India, on 29-11-1952 that the Chief Commissioner, Delhi had appointed Messrs Vaidyanath Aiyar & Co.. Chartered Accountants, Delhi as Inspectors and Messrs S. P. Chopra & Co. had been asked to hand over to them all the books of accounts and documents relating to the Investigation. The letter was received by the inspectors on 27-11-1952; they informed the Secretary on telephone as well as by letter on the same date that their report was ready; it was delivered to the Secretary the next day. In the said letter the inspectors protested against the change of auditors. It is needless for the purposes of this case to go into the matters which were controverter by the inspectors or the allegation that pressure was brought on them by those connected with the Dalmia Jain Group with a view to stopping the investigation. What concerns us now is that the final report of the inspectors does not appear to be complete or full; yet there is prima facie no reason to distrust the statements made in the said reports concerning the contents of various books of accounts and other documents which are subsequently said to be destroyed; they are not forthcoming. Shri Raghunath Rai, who signed the report on behalf of Messrs S. P. Chopra & Co.. was examined during the police investigation. It is, therefore, permissible to consider at the stage of commitment the contents of the said report in so far as it could be used as material furnishing secondary evidence of documents which stated to have been destroyed and are not forthcoming.
(11) Despite the entire finance for A.B.C. pertaining to the deal in army disposal vehicles, being contributed by Airways, no details of the same were disclosed either to the Examiner of Capital Issues in the Statement in lieu of Prospectus or the Prospectus. Shri Chari drew my attention to the fact that the Statement in lieu of Prospectus was issued one day earlier than the second application submitted by S. P. Jain for the issue of capital in respect of Rs. 3.1 crores but it seems obvious that the deal had been put through earlier; the details of it should, therefore, have been mentioned in the Statement in lieu of Prospectus. The Prospectus of the Airways is dated 26-8-1946 on which date itself a joint venture agreement between the Airways and A.B.C. was executed, yet even the Prospectus is seen to be shorn of the necessary details which could put the participating shareholders on notice of the real state of affairs.
(12) A sum of Annas- 4.00 per share which was collected in excess was not brought into account. It was not disclosed in the application for issue of capital for Rs. 40 lakhs that the Dalmia Jain Co. was proposed to he the managing agents; they were only disclosed as underwriters of the capital. It was mentioned that no Director was interested in the promotion of the Airways but S. P. Jain was the Director of the Dalmia Jain Co. which was proposed to be appointed as managing agents. J. M. Gupta and S. P. Jain were also Directors of the A.B.C. with whom a partnership and joint deal of partnership in respect of army disposals was entered into. The Statement in lieu of Prospectus itself contained particulars which are seen to be false. Even though over Rs. 3 crores in excess were realised as share capital and there was no need at all to pay any underwriting commission in respect of over-subscribed capital a sum of nearly Rs, 7 lakhs was paid to the D.C.P.M. on the entire capital as underwriting commission.
(13) It is seen from the balance-sheet of the Airways for the period ending 7-12-1946 (which being the first statutory report of Airways was bound to disclose, according to S. 77(3)(b) of the Indian Companies Act. 1913, the total amount of the cash received by the company in respect of all the shares allotted) no mention was made of Rs. 51 lakhs odd which is stated to have been received by D.C.P.M. directly in respect of shares of Airways, on the other hand there is no reference at all to D.C.P.M. having collected any such share capital which it did not then pass on to the Airways.
(14) An analysis of the various balance-sheets of the Airways from the commencement till the year ending 30-6-1950 did not contain any trading account; the particulars of the investment in shares were not shown in spite of the fact that the investment in shares were said lo be in concerns controlled or owned by the Dalmia Group; the market value of those shares as well as the fact that there was any loss on such investments were not disclosed; no trading account was attached with the balance-sheet and the profit and loss account; none of the profits made by A.B.C. were credited to the account of the Airways even though according to the joint venture agreement the Airways were entitled to half. The reports for the period ending 30-6-1947, 30-6-1948 and 30-6-1949 gave high hopes of profits for the future while in fact the position of Airways was being progressively undermined in the manner noticed above.
(15) The balance-sheet for the year ending 30-3-1951 was not prepared in spite of the fact that extension was obtained for three months on various pleas without any intention to issue it because of the desire, which became manifest by then, to voluntary wind up the company. The shareholders of A.B.C. was informed at its meeting on 27-2-1947 by S. P. Jain that by sale of 10% of the disposal goods, 25% of the total investments had been moved in, that is, profits were expected out of the business. But all the stocks had been passed on to A.B.C. from Airways at book value, thus depriving Airways of the total profits that were thus made by A.B.C. Out of a capital of Rs. 3.5 crores, 3.1 crore had been advanced to A.B.C. Even, according to the balance-sheet ending 30-6-1950 there was a debit balance of Rs. 1.33 odd crores against A.B.C. which even at that stage represented 40% of the capital issue. With respect to a sum of Rs, 16,75,336-8-7 stated to have been spent prior to incorporation no details were even shown or made available to the inspectors at a time when none of the documents were destroyed. It is only stated that out of the same, Rs. 7,76,027-14 had been paid to the Air Works, London and those expenses remained un-verified. Certain calculation slips, which alone were produced before the inspectors, were unsigned and bore corrections.
(16) Aviation was floated in 1947 with a capital of Rupees One crore sanctioned by the E.C.I. The major portion of the capital of that concern was noticed by the auditors to be financed by the Airways, although the shares were taken in the name of different individuals and companies. Among other instances, there was an entry in the investment account of the Airways for the year ending 30-6-1949 showing a sum of Rs. 70,25.000 as being share application money in the name of various persons, including Mr. S. P. Jain (whether it is Mr. Shanti Prasad Jain, A-3. or Shital Pershad Jain, A-10, is a question to which I shall revert later). The entries in the accounts were manipulated under three different heads of account, i.e. in such a way as to hide the true nature of the transaction and so that the shareholders may be kept ignorant of their true nature, one such instance is the disclosure of Rs. 1,74,45,000 in the list of shares given to the inspectors, as having been purchased through D.C.P.M.; the relevant voucher, however, showed that shares of the value of Rs. 74,00,000 of the Jaipur Udyog (another Dalmia concern) were purchased through Premier Trading Co. and Jaipur Traders. No details were furnished even to the Inspectors concerning who were the Directors of those companies and why those shares were purchased. Nor was any proof of their market value even in respect of concerns of the Dalmia Group which were wound up the shares of those concerns were purchased by the Airways at cost price. it is obvious that there could be no genuine buyer at cost price, of shares of those liquidated companies. The investment in shares of the various joint stock companies were seen by the Inspectors to be mere paper transactions made by R. Dalmia to manipulate the funds of the company to his own advantage and were not in the interest of the shareholders of Airways. Investments in existing companies were made for much more than the face value (as in the case of Shampurji Barocha Mills’ Bombay at double the face value and in case of Madhoji Dharamsi Manufacturing Co. Ltd., Bombay at three times the face value).
(17) On 11th July, 1946, S. P. Jain had submitted a proposal for buying Rs. 2,42,00,000 worth of army vehicles in respect of which a sale letter was issued by the Director General, Supplies and Disposals (DG S&D) on 11-7-1946 in the joint names of A.B.C. and the Airways. On the same day S. P. Jain had also given a proposal to the Dg S&D for the purchase of an American Repair Plant known as R3A plant so that the army vehicles which had been thus purchased could be put into shape. On the next day (12-1-1946) S. P. Jain submitted an application to the Examiner of Capital Issues for the Rs. 3,10,00.000 worth of shares, to which consent was given on 13-8-1946.
(18) Up to 7-10-1946, Rs. 1,85,45,000 had been paid to A.B.C. from Account No, 716 by various cheques; up to 26-9-1946 various payments by cheques, amounting to Rs. 91,50,00,000 were made to D.C.P.M., Rs. 51 lakhs odd having been previously transferred as debit to D.C.P.M.
(19) The Prospectus of the Airways was issued on 26-8-1946, on which date a joint venture agreement was executed between the Airways and A.B.C. It is worth recalling that the process of drawing moneys from the Airways, as noticed earlier, had started as early as 24-7-1946, by which date Rs. 1,35,50,000 had been made over to A.B.C. and Rs. 73,63,656 to D.C.P.M.; by 7-10-1946 the amounts paid were Rs. 1,85,45,000 and Rs. 1,42,35,218.13, respectively.
(20) In respect of the above R3A plant the sale letter had been issued in the name of both A.B.C. and Airways on 28-8-1946 for a sum of Rs. 15 lakhs.
(21) The joint venture business of A.B.C. and Airways was said to he terminated by the agreement dated 11-6-1948, to take effect from 30-6-1948. Rs. 2,85,66,250 was mentioned to be half share of the price of the disposal vehicles due to Airways; the said amount had to be paid in three Installments. The first two Installments were not paid in cash but A.B.C. transferred a credit entry of Rs. 1,74,00,000 to D.C.P.M. for payment to Airways, Under the said arrangement A.B.C. took over all the rights, interests, claims and liabilities of Airways in the joint business for the above-said amount i.e. Rs. 2.85,66,250 and undertook to repay to Airways a sum of Rs. 2.85 crores odd and the termination of the so-called joint venture. The Airways made an entry in the account book debiting a sum of Rs. 3,10,66,852-4-1″ to the account A.B.C. which included the above-said sum of Rs. 2.85 crores odd and the previous balance of Rs. 25,00,602- 4-1″ as per the ledger account. As a result of these and other book adjustments the debit of A.B.C. was transferred to D.C.P.M. to the extent of Rs. 60 lakhs without any cash payment. On 14-7-1949 the account of A.B.C. was credited with the sum of Rs. 30 lakhs in respect of Hundi in favor of D.C.P.M. debiting the account of D.C.P.M. correspondingly. On 30-7-1949 A.B.C. was credited with Rs, 10 lakhs and D.C.P.M. was debited correspondingly. Thus the first Installment was paid to A.B.C. only by means of book entries. A. sum of Rs. 13,01,035-15-1 was shown to have been paid as interest by A.B.C. to Airways on 28-2-1950 only by means of adjustment entries. The second Installment seems to have been adjusted in the 547 following manner : Rs. 74 lakhs was credited to the accounts of the Airways on 29-6-1950 by a Hundi for the amount drawn on by A.B.C. On the same day the liability of D.C.P.M. was discharged by showing purchase of shares of the said value from concerns whose names were not even mentioned in the entries. The balance of Rs. 1,35,25,417 is stated to have been transferred to the D.C.P.M. under an ante-dated forged agreement. Forged minutes are said to have been brought about at a meeting of the Board of Directors of the Airways containing the said ante-dated agreement bearing date 5-8-1951 and also a forged agreement bearing the same date transferring to D.C.P.M. the liability of A.B.C. due to Airways.
(22) The original agreement itself not being forthcoming the prosecution has relied on the following circumstances as being inconsistent with such an agreement having been entered into on 5-8-1959. According to the said agreement the purchase price of the vehicles and spare parts was to be paid by the Airways and A.B.C.; if any of the two parties invested anything over and above a half share interest was to be paid on the excess at a rate to be agreed upon by the parties; A.B.C. was to appropriate the sale proceeds in the first instance against its half share of the purchase price till it was fully realised and there after payment was to be made to Airways, provided however, that if. in any event, the amount invested by the Airways was not realised in full, A.B.C. would bear half of such deficit and make it good to Airways. The trial balance (Document Nos. 1082, 1089, 1093. 1100 and 1104) of A.B.C. showed that for the period ended 30-11-1951, a sum of Rs. 1,35,25,417-1-0 was due to the Airways and that as on 29-2-1952 a sum of Rs. 1,38,32,240-3-6 was due to Airways; the liability of A.B.C. to Airways was transferred to the D.C.P.M. This becomes further clear if reference is made to the Voucher No. 64. dated 30-11-1951 (Document No. 1099) which shows that Rs, 3.11,092-2-9 was given credit by A.B.C. to Airways as interest due from the former to the latter. This Voucher contains an entry of cancellation-the amount is stated to have been adjusted on 29-6-1951. The cancellation is in the handwriting of R.P. Gurha (A-16). Further corroboration is available from the statement (Document No. 1035) which was prepared by R. P. Gurha, as disclosed some time after November, 1951, showing that the A.B.C. was indebted to Airways in the sum of Rs. 1,35.25.417-1. The statement was transmitted by telex to R. Sharma (since dead) (Document No. 1097). Still further support is available from adjustment of entries made in accordance with agreement dated 5-8-1951 in the Ledger Account of D.C.P.M. in the name of Airways between July 1951 to 13-6-1952 copy of the said Ledger Account is Document No. 242.
(23) The above agreement is said to have been brought about with an ante-date (3-8-1951) transferring to D.C.P.M. nearly the entire assets of Airways. The complaint by Dr. Nigam (Document No. 99). a shareholder of the Airways, on 20-11-1951, was referred by the Government to the Registrar on 25-1-1962 for necessary action. A person called S. Chandra filed a petition under section 162 of the Indian Companies Act for the compulsory winding up of the company on 15-4-1952 pressing for the appointment of a Liquidator. There was the risk of A.B.C.. having to make good the amount to Airways. despite D.C.P.M. undertaking the liability of the A.B.C. to Airways if compulsory winding up was ordered.
(24) Since A.B.C. was not a party to the said agreement dated 5-8-1951 and some evidence to show that A.B.C. had agreed to the arrangement was also necessary, a forged Resolution of the Board of Directors of A.B.C. is said to have been brought about. The Resolution is Document No. 1075. carbon copy of which is Document No. 906. It is stated that there are differences between the two documents, in the last paras. regarding the said arrangement in question, Two Directors. Raizada Man Mohan Lal and R. Sharma, also were present at the said meeting where the Resolution was alleged to have been passed, arc now dead. A draft of the proceedings filed does not contain this Resolution and the typed script of this part of the Resolution is stated not to tally with the typed script of the previous: pages in the minutes of the meeting. It is stated that the whole thing was a part of a scheme to make D.C.P.M., which was financially unsound, undertake the liability of the A.B.C. to the Airways. It is further stated that the D.C.P.M. had undertaken to shoulder this liability of the A.B.C. to the Airways even without any consideration or quid pro quo. The balance-sheets of the D.C.P.M. for the period from 28-2-1945 to 28-2-51 (Document Nos 310. 325. 338, 362, 363 and 368) show the poor financial position of the company.
(25) On 24-3-1952 the Aviation had resolved to convert itself into a private company. On 27-3-1952 the Registrar, on receipt of the letter of M. R. Jain, asked for a copy of the agreement between the Airways and A.B.C., particulars of interest charged and the amount due from the A.B.C., together with names and details of the companies in which the shares of the value of Rs. 1 , had been purchased. A copy of the said letter was also dispatched on 1-4-1952 by the Registrar to the Managing Agents by registered post. but even to this letter no reply appears to have been sent for a period of two or three months thereafter.
(26) On 9-4-1952 the Managing Agents resolved that they should resign their managing agency even though there was a period of 15 years more to run. This was made to appear as the resuit of what had been undertaken at the time of the disruption of the joint venture to persuade the Managing Agency Co. to resign their managing agency of the Airways. S. P. Jain presided at the said meeting when this Resolution was passed.
(27) On the next day the Dalmia Cement and Paper Marketing Co. (D.C.P.M.) also resolved to convert itself into a private limited company.
It was at this juncture (on 15-4-1952) that S. Chandra had filed an application before the District Judge, Delhi for compulsory winding up the company. On 23-4-1952 R. Dalmia issued a press communique (Document No. 111) assuring the shareholders that they would get back their share capital in full and giving his personal guarantee for the same. The above-said application of S. Chandra was followed by another application of M. C. Podder on 8-5-1952) in the District Court for compulsory winding up of the Airways.
(28) On 7-6-1952 Messrs S. P. Chopra & Co. were appointed inspectors; on 13-6-1952 by a general resolution at an extraordinary general meeting of the Airways, the Airways was would up and C. P. Lal (R. 26) was appointed Liquidator. What C. P. Lal did will be noticed later.
(29) It is needless for the purposes of these petitions to set out all the facts pertaining to the other accused who are not before me now as petitioners.
(30) The ease of the prosecution is that a probe into the affairs of the Airways was also sought to be avoided by not merely fabricating an ante-dated dissolution of liabilities of the joint venture between the Airways and the A.B.C., but also voluntary winding up the Airways, a scheme which is suggested to have been carried into effect by not only manipulating the proceedings before the District Judge in such manner as to frustrate the attempts made to have the winding up through the court, instead of voluntarily, and by putting through a scheme of amalgamation by which the Dalmia Group accomplished its design. It is the further case of the prosecution that further probe into the affairs of the company as stalled by not only securing the books expeditiously from the Liquidator but by passing a resolution on turn destroying them and perhaps ultimately destroying them also.
(31) All the present petitioners. R. Dalmia and some others are stated to have been parties to a criminal conspiracy, during the period between July, 1946 and April, 1953 by agreeing amongst themselves and some others to commit and/or cause to be committed criminal breach of trust in respect of the Airways’ funds and assets including those in Current Account No. 716, funds had been entrusted to R. Dalmia (as promoter and Director of the Airways and as a representative of the Managing Agents), J. Dalmia (similarly Director of Airways and of the Managing Agency company) and (and some others) to S. P. Jain and V. H. Dalmia (as Directors of the Managing Agency company). Forgery is said to have been committed in respect of certain documents and also falsifying the accounts and proceedings of A.B.C., D.C.P.M. Aviation and the Airways in order to accomplish the object of the said conspiracy.
(32) The Memorandum and Articles of Association of the Airways was filed in the office of the Registrar of Companies, Delhi on 4-7-1966 by J. M. Gupta (deceased). They purport to have been signed by 7 persons who had not much financial stake in the company, one of whom. Shadi Lal Saluja, an employee, denied, in his statement under section 161 Criminal Procedure Code .. that he had signed the same, his denial getting support from the opinion of the Examiner of Questioned Documents. Simla. Some of the other signatories who admitted their signatures stated that they had no personal interest or financial stakes in the promotion of the company. The Certificate of Incorporation of the Airways was granted on 9-7-1946. On 11-7-1946 a Statement in lieu of Prospectus was issued and it was signed by R. K. Jain (A-5), J. M. Gupta and S. P. Jain in which it was mentioned that Rs. 1,50,000 was required to start the business of the company and proposing Dalmia Jain Co. as Managing Agents of which S. P. Jain was the Chairman. The first Directors of the Airways were S. P. Jain (A-3), J. Dalmia (A-2), R. K. Jain (A-5) and J. M. Gupta (deceased), R. K. Jain was a relation of S. P. Jain and occupied a high position in the Bharat Bank Ltd. which was controlled by Dalmia Jain Group. J. M. Gupta was an employee of one of the concerns of Dalmia Jain Group. The Managing Agency company was incorporated as a private limited company on 4-1-1937. Among those who promoted the said company were S. P. Jain, his wife Smt. Rama Jain and J. Dalmia
(33) An inaccurate picture seems to have been given by S. P. Jain who wrote to the Examiner of Capital Issues (Document No. 705) on 11-7-1946 explaining that the expenditure of Rs. 2.42 crores represented a commercial transaction and it was not a case of acquisition of fixed assets. It was represented that the purchased secondhand vehicles, nearly 20,000, would have to be sold after reconditioning them, by overhauling and painting, involving expenditure of at least not less than Rs. 1,000 per vehicle. Though a commercial transaction, it was explained, it was not of the normal commercial type but a special one of its kind. Rs. 70 to 80 lakhs would be required as “fixed assets” in the shape of land, buildings, offices, godowns etc. The capacity of the reconditioning plant would be about 80 to 90 trucks per day. Handling charges at the rate of Rs. 300 per vehicle from long distances would themselves amount to Rs. 60 lakhs. Other details were also mentioned in order to make out a case for giving consent, and that too early.
(34) Having thus acquired the highly rated R3A plant for Rs. 15 lakhs the same was released exclusively in favor of A.B.C. for the same consideration of Rs. 15 lakhs, by way of book adjustment alone.
(35) On 31-7-1946, R. Dalmia agreed to buy, on behalf of A.B.C. and Airways, remaining U.S.A. surplus vehicles in the depot of Jodhpur etc. .(Document No. 706) for Rs. 250 lakhs. The sale letter (Document No. 707) was issued in respect of the same for the said amount. on 2-8-1946. The Second Consent Order, it may be recalled, was issued only subsequent to the purchase of the first and second lots of U.S.A. surplus vehicles. It has to be noticed in his connection that even in July, 1946 (on the 24th and 26th) payments were made by cheque of Rs. 38 lakhs by B. M. Gupta and R. K. Jain, and Rs. 44 lakhs by J. M. Gupta and R. K. Jain, a total of Rs. 82 lakhs, to the A.B.C.
(36) It may be recalled that between 27-7-1946 and 26-9-1946 payments to the extent of Rs. 91,50,000 had been made from Account No. 716 to D.C.P.M.; D.C.P.M. itself had directly received the shares for the Airways to the value of Rs. 51,35,213. Thus a sum of Rs. 1,42,35,218.13 was due by D.C.P.M. to Airways.
(37) Even though the joint venture agreement between A.B.C. and Airways was executed only on 26-8-1946. the process of drawing moneys in favor of both the A.B.C. and D.C.P.M. had started as early as 24-7-1946 in the case of the former, and 27-7-1946 in the case of the latter, and by the date of said joint agreement Rs. 1.35,50,000 and Rs. 73,63,656 had been handed over to A.B.C. and D.C.P.M. respectively: by 7-10-1946 the amounts swelled up to Rs. 1,85,45,000 and Rs. 1,42,85,218.13, respectively.
(38) It is significant that no interest was charged or fixed as per clause (2) of the joint agreement. By 9-12-1946, Rs. 2,47.00,000 alone had been paid to the D.G. S&D by A.B.C., towards payment of the price of the vehicles and spare parts; it is seen from the statutory report of the Airways (Document No. 38) that as on 7-12-1946, the said money had been shown as having been paid by the Airways to the Dg S&D through A.B.C.
(39) On 28-9-1946 Account No. 716 had a credit balance of Rs. 8 lakhs which was converted into a debit balance by showing transfer of two amounts, Rs. 30 lakhs and Rs. 7 lakhs from this account to the Bharat Bank Ltd., Fort Branch, Bombay. Two Bank Drafts for the respective amounts were issued by the Bharat Bank Ltd., Daryaganj, Delhi, in favor of M/s. Govern Bros., (Rampur) Ltd. under the instructions of Ram Sahai Bahal, Manager of the Head Office of the Bharat Bank Ltd., Delhi debiting Account No. 716 with the said amounts. When examined under section 161 Criminal Procedure Code . Ram Sahai Bahal had stated that he had instructed Bharat Bank Ltd., Daryaganj Delhi not only to issue the above-said two Drafts by debiting Account No. 716 to the said extent but also another Draft of Rs. 13 lakhs by debiting the Sundry Debtors Account at the instance of R. Dalmia. Ram Sahai Bahal had instructed that all these Drafts be sent to No. 9, Man Singh Road, one of the residences of R. Dalmia, and hand over the same to Sriyans Parshad Jain, elder brother of S. P. Jain. That the three Drafts were duly cashed is seen from the entries in the Ledger of the Bharat Bank, Fort Branch, Bombay debiting the Bharat Bank Ltd., Daryaganj, Delhi with sum of Rs. 50 lakhs on 1-10-1946. Sriyans Parshad Jain was negotiating on behalf of Messrs Dalmia Investment Co. with the Provident Fund Investment Co. Ltd., the managing agents of Sir Shampurji Barocha Mills and Madhoji Dharmsi Manufacturing Co. Ltd. (controlled by the Dalmia Group) for the purchase of the Shares of the two companies. Rs. 30 lakhs was to be paid by Sriyans Parshad Jain by way of earnest money for the purchase of these shares of Shampurji Barocha Mills and Rs. 20 lakhs for the purchase of shares of Madhoji Dharamsi Manufacturing Co, On 30-9-1946 Sriyans Parshad Jain addressed a letter to the Provident Fund Investment Co. Ltd. enclosing a draft of Rs. 30 lakhs for the purchase of shares of Shampurji Barocha Mills Ltd. and Drafts of the value of Rs. 20,00,000 for the purpose of shares of Madhoji Dharamsi Manufacturing Co. on behalf of Dalmia Investment Co. Ltd. It is thus seen that the funds of Airways were diverted for the above-said purposes in order to enable the members of the Dalmia Jain Group to acquire control and ownership of other companies.
(40) Subsequently a third application for further capital issue of Rs. 3 crores was made; this is stated to have been rejected,
(41) The statutory report of the Airways for the period up to 7th December, 1946 shows allotment of 35 lakh shares against payment and receipt of Rs. 3″ crores in cash, in respect of 35 lakh shares. Rs. 2.47 crores was shown as payments made to DGS&D through A.B.C. and Rs. 24 lakhs as fixed deposit in the Universal Bank Ltd. made by A.B.C. in favor of Airways. The indebtedness of the A.B.C. to Airways was shown at the reduced figure of Rs. 57,30,218.13. Out of the Rs. 24 lakhs placed by A.B.C. in the account of Airways on 29-11-1946 with Universal Bank Ltd., Rs. 11″ lakhs were withdrawn 11 days later and paid to A.B.C.; the balance was paid to A.B.C. on 12-1-1947. In respect of Rs. 1,42.85.218.13 which had been paid to 552 thw D.C.P.M. an entry was passed on 7-12-1946 transferring the same from D.C.P.M. to the debit of A.B.C.
(42) On 28-2-1947, 2323 disposal vehicles were transferred to the D.C.P.M. at cost price for Rs. 47,19,800; it is seen that they were. sold subsequently on behalf of the D.C.P.M. for Rs. 1,02,67,705. A sizeable profit was made by D.C.P.M. 42(a). It is worth recalling in this context that on 25-9-1947 the R5A plant which was purchased by joint venture for Rs. 15 lakhs was transferred to A.B.C, at cost under instructions of both R. Dalmia and S. P. Jain. With reference to this transfer it is seen from the letter of Shital Pershad Jain to S. L. Verma, Chief Accountant of the Bharat Bank Ltd., Delhi dated 25-9-47 (Document 832), in which he had referred to how the account of the Airways should be adjusted and written, that the reconditioning and assembly plant of Rs. 15 lakhs had been kept in A.B.C. “independently”. The following statement was made :
“YOU will know that previously the idea was to divide the total amount of Rs. 5.82.00.000 (since revised to Rs. 5,86,32.500) half and half between Dalmia Jain Airways and Allen Berry, but since then it has been decided by Syt S. P. Join that reconditioning and assembly plant may be kept solely in Allen Berry, as decided by Syt R. Dalmia, and the balance amount representing the cost of vehicles and spare parts be only taken in business. If, therefore, an entry of Rs. 2,91,00,000 has already been passed in Dalmia Jain Airways please arrange correction thereof”.
(43) S. P. Jain’s anxiety to retain for the A.B.C. the benefit of the R34 plant, manifest from the commencement, has been made still more manifest by this reported decision of S. P. Jain, despite the earlier agreement. The above letter can be taken into consideration under S. 10 of the Evidence Act against S. P. Jain 43 (a). Another company by the name Dalmia Jain Aviation was floated by Dalmia Jain Group on 11-3-1948 and the 7 subscribers to the Memorandum & Articles of Association included V, H. Dalmia, J. M. Gupta and M. P. Modi, who were the first Directors. Five shares were allotted to each of the promoters in the first allotment on 21-12-1948 at the rate of Re. 1. per ordinary share and Rs. 10 per preference share. The issued capital of the company was 7″ lakh ordinary shares of Rs. 10 each and 35,000 preference shares of Rs. 100 each. 7,500 ordinary shares and 250 preference shares were allotted to 15 persons against cash receipt of Rs. 10,000 which was paid by Airways from out of Account No. 716. With the money of the Airways applications were made from various individuals including V. H. Dalmia and M. R. Jain. The authorised capital of Rs. 1 crore was sanctioned by the order of consent passed by the Examiner of Capital Issues on 15-11-1947. It is seen that the entire share money came from the Airways but the shares were allotted in the names of private persons. The second allotment of 24,750 preference and 7,42.500 ordinary shares was made on 7-2-1949 by a resolution of the Board of Directors in the meeting dated 7-2-1949. Among, them we find that 2.42,500 ordinary shares had been allotted to S. P. Jain. The prosecution suggested that the reference was to A-3, but it is seen from Document Nos. 857, 840 and 841 that it was Shital Prasad Jain who had applied for those shares; Document No. 553 948 shows that an. allotment of the said shares for the identical amount (Rs. 2,42,500) was made only in pursuance of two applications for preference shares (Document Nos. 840 and 841 for Rs. 1.42 lakhs and Rs. 1 lakh, respectively). But it is seen from the statutory report of Aviation for the year ending 30-6-1946 that Rs. 7,42,500 wax disclosed as the amount having been utilised for applying for shares in Aviation in the names of certain individuals including “Mr. S. P. Jain”. But it is pointed out for S. P. Jain that the identical amount is mentioned in the resolution and that this is relatable to Shital Prasad Jain. In other words, it is stated that the inspectors did not get this point from. any other independent source except the said resolution.
(44) Despite no cash having been paid, the whole of the amount of Rs. 1 crore (the price of ordinary and preference shares worth Rs. 25 lakhs and Rs. 75 lakhs, respectively) was shown as received in cash in the statutory report of the Aviation (Document No. 531 ) as on 9-7-1949. It is further seen from the interim report of the inspectors dated 28-7-1952 (Document No. 158) that while in the application sent to the Examiner of Capital Issue it was stated that a sum of Rs. 42 lakhs of the said issue will be utilised for taking up the Air Section of the Airways, as per book value, on 31-8-1947, no effect was even given to this proposal, as it appeared from the Airways carrying on charter flight business even after 31-8-1947. A Hundi appears to have been drawn in favor of Aviation by the D.C.P.M. for transferring the said liability to the D.C.P.M. (the D.C.P.M. being the dumping ground of such liability) subsequently ordinary shares of Rs. 74 lakhs were shown as sold by the Airways and a debit made by the D.C.P.M. in the account of the Airways. With reference to this matter in the final report of the inspectors dated 27-11-1952 it had been mentioned that the accounts for the year ending 30-6-1949 of Air- ways showed shares of the Aviation worth Rs. 10,000 and 90,000 were purchased on 21-12-1948 and 5-2-1949. respectively, in addition to the above Rs. 74,25.000.
(45) A sum of Rs, 40 lakhs was shown on 30-5-1949 as being the proceeds of shares sold to D.C.P.M. The balance carried forward was Rs. 35,25,000. The inspectors called for details of such investmerits, the examination of which showed that 7″ lakhs, ordinary shares of Rs. 10 each and 250 preference shares of Rs. 100 each of Aviation were purchased from that company at face value costing the company a total sum of Rs. 75.25.000. Out of this shares of the value of Rs. 40,00,000 were transferred to D.C.P.M. The Inspectors asked for the balance-sheet of Aviation and the details about the position of the subscribed capital of that company, but no information was given. It was, therefore, not possible to determine whether Aviation had become a subsidiary company of the Airways, no particulars having been furnished along with the balance-sheet as required under section 132-A of the Indian Company Act, 1913. The Inspectors also considered that the sale of shares for Rs. 40 lakhs to D.C.P.M. was not genuine since the amount has not been recovered from them; they observed as follows :
“IT seems that a major portion of the capital of Messrs Dalmia Jain Aviation Ltd. was financed by this company although the shares may be in the names of different individuals 554 or companies. It has been done by manipulation of entries through different heads of account in such a way as to hide the true transaction. We also asked for the
(46) What the inspectors stated about the state of the accounts of D.C.P.M. may also be noticed. At the close of the yr, ending 30-6-1950, the Directors never wanted the share-holders to show a debit balance against D.C.P.M. in the balance-sheet of 30-6-1950. The balance-sheet dated 30-6-1950 was issued in 1951, the intention being to conceal the exact nature of the transactions. A sum of Rs. 1,74,45,000 had been shown as investment in fully paid shares of joint stock companies. Though the details were not mentioned in the balance-sheets, the inspectors found that in addition to the above-said sum of Rs. 35,25,000 carried forward from the period ending 30-6-1949, shares of two Dalmia Jain enterprises (Shampurji Barocha Mills Ltd. and Madhoji Dharamsi Manufacturing Co.) had been purchased for Rs. 65,20,000 and of the shares of Jaipur Udyog Ltd. (another Dalmia Jain enterprise) for Rs. 74 lakhs (thus making the total figure of investment in shares to Rs. 1,74,45,000). No information concerning these had been supplied either to the share-holders along with the balance-sheet as required by law or even to the Inspectors. Therefore. they observed as follows :
“THERE seemed to be no other reason for purchasing these shares except that the amounts were required by Seth Ram Krishan Dalmia to carry on his multifarious activities ……. . Two companies out of these are alleged to have gone into liquidation ……All these investments are a positive fraud on the share-holders and amount to misappropriation of funds”
(47) The Inspectors also noticed that the accounts for the year ending 30-6-1951 had not been published and circulated to the shareholders. The accounts being very simple could have been finished between the close of the year i.e. 30-6-1951 and the date of the liquidation of the company. The inspectors, therefore, drew the inference that the Directors never wanted to disclose these accounts to the public and managed to get extension of time up to the date of liquidation.
(48) The accounts for the period ending 13-6-1952 i.e. up to the date of liquidation not having been prepared, they had a copy of the trial balance of the Head Office Accounts as well as of the Air Section Accounts of Airways, up to the date of liquidation, a perusal of which revealed that all the inter-connected companies which were showing debit balances previously had been closed by transfer to D.C.P.M. account The entire balance of the investment in shares of joint stock companies representing the investment in various companies had also been transferred to D.C.P.M., which account showed a debit balance of Rs. 3,42,78,923-13, which was stated to be. done by virtue of the agreement passed by the Board of Directors of the company on 21-7-1951. As already noticed the said agreement was against the interests of the share-holders since there was no real and effective chance of recovering those amounts which were spread out as payable over a period of 10 to 15 years by Installments and coupled with many conditions.
(49) It is necessary at this stage to notice the scheme of amalgamation that had been put to the liquidator and which he in turn submitted to court. On behalf of Aviation, 5 persons (P. K. Roy, S. N. Dudani, R. P. Gurha, M. R. Jain and L. R. Sharma) wrote to the Liquidator on 16-11-1952 that Aviation had agreed to take over the entire assets and liabilities of Airways provided their scheme, which was enclosed therewith, was sanctioned by the court with such modifications as may be acceptable to them and stating that the proposed scheme was in the best interests of the joint body of the share-holders. Aviation was to pay to Airways a sum of Re. l.00 per share of Rs. 10.00 each, within two weeks of the notice served by the members of the Airways on the Aviation, in the manner described in that scheme; Aviation was to pay to the members of the Airways in full and final settlement of all their rights and interests in 11 yearly Installments at As. 12 each per share, the first Installment being payable one year after the payment of above said Re. l.00 and the final Installment of Re. l.00 should be paid after the last of the 11 yearly Installments. Each member of Airways may at his discretion agree to accept cash payment of Rs. 4/8.00 per share within two weeks of the said notice or a sum of Rs. 6.00 to be paid in six yearly Installments of Re. l.00 each. It was stated in the scheme itself that 15 lakh shares of the Airways (out of 35 lakh shares) were held by persons or companies associated directly or indirectly with R. Dalmia. R. Dalmia guaranteed the payment of all the amounts due to the members as undertaken to be paid by Aviation. The Liquidator applied accordingly under sections 153 and 153-A to the District Judge certifying that he had carefully examined the proposed scheme of arrangement and that it deserved consideration by the court and general body of the members. The prayer was that the court may direct a meeting of the members of Airways to be called and if the scheme was agreed to, with or without modifications, by the requisite majority of the members the same may be sanctioned.
(50) By order dated 5-12-1952 the District Judge directed a meeting of the share-holders to be fixed at the Registered Office of the company in Delhi on 31-12-1952. Three separate meetings of the share-holders were directed to be held on the same day at 10 A.M., 3 P.M. and 4 P.M.; Shri Charan Das Puri was appointed Chairman of all the three meetings, or in his absence Bakshi Gurcharan Singh, Advocate.
(51) At the meeting of the share-holders certain modifications were suggested.
(52) By order dated 10-2-1953, Shri S. S. Dulat, District Judge (as he then was) approved the scheme in the main transferring the assets of Airways to Aviation. Shri Daphtary appeared on behalf of the, three share-holders who filed objections to the scheme. Shri Daphtary stated to the District Judge that the proposed arrangement was better than 10-iosiHCD/71 556 the ordinary winding up but felt that there was room for certain modifications which were finally agreed upon. The scheme as finally agreed was as follows :
(1) Rs. 5/4.00 per share to be paid immediately to those who wish to avail of the option. (2) Rs.7.00 per share in five years. (3) Rs. 10/4.00 per share in 10 years.
The District Judge felt that the scheme as modified was in the interest of the members and that it should be substituted for ordinary winding up. At the suggestion of Shri Daphtary, R. Dalmia furnished a guarantee by a formal deed which was filed in the court. By the order approving the scheme the District Judge had omitted to pass a formal direction that the entire assets of the Airways stood transferred to Aviation which he made good on 13-2-1953 when his attention was drawn to it by the Liquidator by means of an application. On the same day the records of Airways were handed over by C. P. Lal and they were resolved on 25-3-1953 to be destroyed.
(53) After the Government of India had appointed Shri Pettigara as a Public Prosecutor, who advised the filing of a complaint, the Registrar of Companies addressed a letter to the Inspector General of Police, Special Police Establishment on 18-11-1953, which was registered as F.I.R. on 19-11-1953, on the basis of the Registrar’s report. On 11-12-1956 the Central Government appointed a Commission of Inquiry under the Commission of Inquiries Act, 1952 to look into the affairs of the 9 companies of the Dalmia Jain Group, among which were Airways, A.B.C.. D.C.P.M. and Aviatiota. The Commission of Inquiry, which was presided over by Mr. Justice Vivian Bose, submitted its report to the Government on 15-6-1962.
(54) Subsequently there was also a committee, of jurists consisting of the then Solicitor General, Shri Daphtary, and Shri Viswanath Shastri, who examined the report of the Bose Commission; they selected 10 different heads under which prosecution could be launched and had indicated the further lines of investigation. It was thereafter that the Police completed the investigation that had been launched as far back as in 1953 and filed the charge-sheet in 1964.
(55) The Special Police Establishment filed a charge-sheet in the court of the District Magistrate, Delhi against 24 persons on 5-5-1964 which resulted in the impugned committal order on 20-9-1969. Revision petitions which were filed by the present petitioners before the Additional Sessions Judge, before they moved this Court, were rejected p, on 28-2-1970
(56) The learned committing Magistrate did not examine any witness but has committed the accused, as stated above, to stand their trial before the Sessions Court on the basis of the documents as well as the statements, which have been examined by the Police during the investigation of 129 witnesses. The learned Magistrate considered, under 7 heads, the evidence in support of the prosecution allegations, such as,
(1) Beneficial interest of Dalmia Jain Group and the control exercised by them over A.B.C. and D.C.P.M.; 557 (2) Floatation of Dalmia Jain Airways Limited and the control exercised by the Dalmia Jain Group over this company during the relevant period; (3) Collection of Share Application Money from. the share-holders of Airways and entrustment of dominion over those funds and other assets to J. Dalmia, V. H. Dalmia, S. P. Jain (among the petitioners) and R. Dalmia etc.; (4) Criminal breach of trust of the funds and assets of the Airways by the accused persons; (5) Forging of documents and falsification of accounts to achieve the object of the conspiracy; (6) The inception and continuance of the criminal conspiracy; and (7) The parts played by the various accused in the commission of those offences.
(57) The relevant facts and circumstances relied on by the prosecution have been set out by me in a narrative form. The evidence pertaining to each of the petitioners will be discussed separately later.
(58) But before dealing with the evidence against each of the petitioners separately, it will be helpful to advert to the following contentions, of a general nature, which were advanced on behalf of one or another of the petitioners. The prosecution case, it may be recalled, is that the illegal acts, which formed the subject matter of the conspiracy fall under three heads :
(1) violation of Rule 94-A of the defense of India (2) violations of the relevant provisions of the Companies Act; and (3) misappropriation of moneys of Airways by commiting breach of trust.
(59) To appreciate the contentions put forward by Shri A. S. R. Chari, learned counsel for S. P. Jain, who advanced the leading arguments in the case, it is necessary to notice the conditions imposed by the Examiner of Capital Issues and the legal position.
(60) At the time when the Airways was floated, in 1946, Rule 94-A of the defense of India Rules, 1939 was in force. According to subrule (2) of Rule 94-A no company could make an issue of capital except with the consent of the Central Government which under subrule (3), was authorised to impose conditions while giving its consent. Violations of the said conditions were made punishable under sub-rule 10, with rigorous imprisonment up to five years. The application for issue of capital had to state the purpose for which the funds collected from the shareholders could be used and the consent order had to incorporate a condition that the funds should be used for that purpose only but no other without the permission of the Central Government.
(61) The defense of India Act was enacted under the powers granted under section 102 of the Government of India Act, 1935. The emergency, which existed when the defense of India Act 1939 was passed continued till the war came to an end on 1st April, 1946. The Act expired six months thereafter on 30th September, 1946, together with all rules and orders made there under. In the absence of a saving clause no prosecution could be commenced after the expiry of the life of the Act if S. 6 of the General Clauses Act was not applicable to such a case. Such a saving clause was provided by Ordinance Xx of 1946 which was replaced by Ordinance V of 1947 and which in turn was repealed by the Capital Issues Act, 1947 which came into force on 5-1-1948. On 30-3-1946, before the expiry of the defense of India Act, the Governor General had promulgated an Ordinance (XX of 1946) which contained an express saving clause in terms similar to S. 6 of the General Clauses Act. Ordinance V/47, however, did not contain such an express provision.
(62) The Capital Issues (Control) Act, 1947 was enacted to keep in existence the control over capital issues imposed by Rule 94-A of the defense of India Rules. According to the statement of objects and reasons of the said Act (Gazette of India, 1947, Part V. P. 264) although there had been appreciable change in the general conditions which constituted the principal reason for the introduction of the control in war time, it was thought, in the light of experience gained, that such control was still necessary to secure the balanced investment of the country’s resources-industry, agriculture and social services. By reason of S. 16 of the Capital Issues (Control) Act, 1947 all orders made or deemed to be made under the provisions of the Capital Issues (Continuance of Control) Ordinance V of 1947, and in force immediately before the commencement of the Act was to continue to be in force and be deemed to be orders made under the corresponding provisions of Act Xxix of 1947; S. 6 of the General Clauses Act was to apply on the expiration of the said Ordinance as if it had been repealed by the Act:
(63) The Examiner of Capital Issues vide his order dated 4-6-1946 (hereafter called the First Consent Order) had informed the Airways that the Government of India had given their consent under Rule 94-A to the proposed issue of Rs. 40 lakh worth of shares subject to the following among other conditions :
“4. It is also a condition of this consent that all amounts raised by this issue in excess of the free money as below shall be deposited with a bank or invested in Government securities and shall not be withdrawn or disposed of otherwise without the previous approval of the Government of India. The said free money shall be Rs. 16 lakhs. . .”
Another condition was:
“THE proceeds of this issue must not, without the further permission of the Central Government be used for any other object of expenditure than those described in the application to which this order relates”.
Yet another requirement was that in any Prospectus or other documents referred to in sub-rule (5) of Rule 94-A it must be stated that the consent of the Central Government had been obtained to the issue and that a complete copy of the said order giving consent would be. 559 open for public inspection at the head office of the company. The Airways were also informed that if action was taken in pursuance of the said consent and if the company subsequently violated any condition attached to the consent it would be an offence under sub-rules (2) and (10) of Rule 94-A. The purpose for which the said capital of Rs. 40 lakhs was sought to be issued was mentioned in the supporting application as follows:
“TO establish, maintain and work lines of aerial conveyance between one place to another as may from time to time be selected by the company and to manufacture, buy, sell, prepare let on hire and deal in air conveyance of all kinds and component parts etc.”
(64) On 12th July, 1946 S. P. Jain, whose interests lay in A.B.C., made an application on behalf of Airways for capital issue of Rs. 31 lakh ordinary shares of Rs. 10 each in order to “deal with motor cars, spare parts and set up workshops, for repairing, overhauling, assembly etc.” The names of the Directors of the company had been given therein as J. Dalmia, S. P. Jain, R. K. Jain and J. M. Gupta. It was stated that Airways, in cooperation and partnership with A.B.C., had purchased from the Director General of Supplies & Disposals, motor vehicles of the value of Rs. 2.42 crores, and negotiations were in progress for purchasing spare parts, workshop equipment etc. of approximately 50 lakhs. The working capital required was stated to be Rs. 16 lakhs, the expenses for issue of share capital approximately 2 lakhs and the total requirement Rs. 310 lakhs. By letter dated 13-8-1946 permission was granted as prayed for by the Examiner of Capital Issues (this will be hereafter referred to as Second Consent Order). Two of the conditions attached to the said order included, among others, the conditions as before, namely, that the proceeds of the said issue must not, without the further permission of the Central Government, be used for any other object of expenditure than those described in the application to which the order related and that violation of any of the conditions would be an offence under sub-rules (2) and (10) of Rule 94-A.
(65) As will be noticed later, R. Dalmia committed Airways to a second purchase of Rs. 2.50 crores. Both these, by S. P.. Jain and R. Dalmia, are stated to be without any formal agreement being drawn up between A.B.C. and Airways and without any formal authority from Airways. All that A.B.C. did concerning these transactions was only to make the Bharat Bank advance Rs. 82 lakhs on 11-7-1946 and recoup it from Airways on 26-7-1946. Even the joint venture agreement bearing date 26-8-1946, was, as will be explained in greater detail later, seem to be in the interest of Airways; it was to the manifest advantage of A.B.C. Airways had thus been used for this deal by both S. P. Jain, openly associating himself with this and R. Dalmia, who was then in the background also came forward later when he committed for the purchase of Rs. 2,5 crore worth of Army disposals. It will be useful to read Rule 94-A in this context :
“94-A: Control Of Capital Issues : (1) For the purpose of this rule- (a) securities shall mean the following instrument issued or to be issued by or for the benefit of a company, viz. (i) 560 shares, stocks and bonds, (ii) debenture, (iii) other instruments creating a charge or lien on the assets of the company, and (iv) instruments acknowledging loan to or indebtedness of the company and guaranteed by a third party or entered into jointly with third party; (b) a person shall be deemed to make an issue of capital who issues any securities whether for cash or otherwise. (2) (a) No company, whether incorporated in British India or not, shall except with the consent of the Central Government- (i) make an issue of capital in British India; (ii) make in British India any public offer of securities for sale; (iii) renew or postpone the date of maturity or repayment of any security maturing for payment in British India. (b) The Central Government may on application make an order according recognition to an issue of capital made or to be made outside British India by a company not incorporated in British India. (3) The Central Government may qualify any consent or recognition accorded by it under sub-rule (2) with such conditions whether for immediate or future fulfillment, as it may think fit to impose; and where a company acts in pursuance of such consent or recognition it shall comply with the terms of any condition so imposed. (4) No company incorporated in British India shall, except with the consent of the Central Government, make an issue of capital outside British India. (5) No person shall issue in British India any prospectus or other document offering for subscription or publicly offering for sale any security which does not include a statement that the consent or recognition, as the case may be, of the Central Government issue in British India any document publicly offering for sale any security issued with the consent or recognition of the Central Government if such issue was made by a private company or if the order according to it consent or recognition contained a condition that the securities should be privately subscribed. (6) The Central Government may by order condone a contravention of sub-rule (2), sub-rule (4) or sub-rule (5) and on the making of such order the provisions of this rule shall have effect as if an exemption had been granted under this rule from the operation of sub-rule (2). sub-rule (4) or sub-rule (5), as the case may be, in favor of the thing done in contravention of such sub-rule. (7) No person shall accept or give any consideration for any securities in respect of an issue of capital made or proposed to be made in British India or elsewhere unless the consent or recognition of the Central Government has been accorded to such issue of capital. 561 (8) No person shall sell or purchase or otherwise transfer or accept transfer of any securities issued by a company in respect of any issue of capital made after the 17th May, 1943, in British India or elsewhere unless such issue has been made with the consent or recognition of the Central Government. (8A) Any person authorised in this behalf by the Central Government may for the purpose of enquiring into the correctness of any statement made in any application for consent or recognition to an issue of capital or of ascertaining whether or not the requirements of any condition. attached to an order according such consent or recognition have been complied with- (a) require any company or any officer of a company which has made such application or obtained such order to submit to him such accounts, books or other documents or to furnish to him such information as he may reasonably think necessary, or (b) at any reasonable time enter any office, factory, land or other premises occupied by such company and inspect the office, factory, land or other premises and require any person found therein who is for the time being in charge thereof to produce to him and allow him to examine such accounts, books or other documents as may relate to the business Of the company or to furnish to him such information as he may reasonably think necessary. (9) The Central Government may by special or general order grant exemption from all or any of the provisions of this rule. (10) If any person contravenes the provisions of this rule he shall be punishable with imprisonment for a term which may extend to five years or with fine or with both”.
(66) The application of S. P. Jain for capital issue of Rs. 3,10,00,000 was preceded by a Memorandum signed by S. P. Jain as well as by the D.G.S. & D on 10-7-1946 setting out the broad heads forming the basis of sale of surplus disposal of Army vehicles as one lot for Rs. 2.42 lakhs (Document No. 700). There was no mention in this of the Airways. This was itself preceded by a meeting of Williamson. General Manager of A.B.C. with the D.G. S. & D. (Document No. 9) on 2-7-1946 when negotiation for the purchase of disposal vehicles was made for the Airways.
(67) The second application for the issue of capital was obviously made in the name of Airways itself, because it was Airways which was in possession of the over-subscribed capital of over Rs. 3 crores which was sought to be utilised for the purchase of the disposal vehicles. The manner in which the agreement (particularly clause 1 ) was drawn up by the Dalmia Group, by which R. Dalmia and S. P. Jain were the leading figures was to the manifest advantage of A.B.C. and to the manifest deteriment of Airways. Not only the purchases but the entire assets were, as noticed above, passed on to A.B.C. A sale letter was 562 issued by D.G.S.& D. (Document Nos. 701 and 702) on 11-7-1946 in the joint names of A.B.C. and Airways regarding vehicles at Moran for Rs. 1,80,000,00 and jeeps and Dodge cars at Calcutta for Rs. 62 lakhs, making a total of Rs. 2.42,00,000, as on 10-7-1946 (later raised to Rs. 2,71,32,500). A letter was signed by R. K. Jain on 11th itself requesting for a certificate to commence business and forwarding a Statement in lieu of Prospectus containing a declaration but yet concealing the fact that Army disposal goods worth Rs. 2.42 crores had been purchased in the joint account of A.B.C. and Airways. On the same day, S.P. Jain wrote to the D.G.S.&D. (Document No. 703) that it was essential to acquire the American Repair Plant (hereafter called R3-A plant) without which it would not be possible to recondition nearly 20,000 vehicles which had been acquired; a sum of Rs. 15 lakhs was offered for this purpose.
(68) One of the conditions of the consent given for the issue of Rs. 40 lakhs was “that all amounts raised by this issue” in excess of the free money should be deposited in the bank and that without the further permission of the Central Government “the proceeds of this issue” must not be used for any other object of expenditure than those described in the application. The language of these conditions is plain and unambiguous. It is clear from Rule 94-A, set out earlier, that there could be no capital issue without the consent of the Central Government and that any person contravening the conditions of the said issue would be punishable. The only aspect that could be properly urged could be whether, as a fact, any part of the proceeds of the issue had been used for any other object of expenditure than those described in the application for capita] issue and to which the Consent Order related. It is incontrovertible that Rs. 3.5 crore had been realised as a result of the said issue and that without any specific consent of the Central Government it could not be used for any other purpose. It is also noticed, as a fact, that even before obtaining the Second Consent Order, moneys had been drawn from Account No. 716 belonging to the Airways and diverted to A.B.C. This contravened the First Consent Order. It is no doubt true that the Central Government may by order condone a contravention; if condoned it would have the same effect as if an exemption has been granted from the operation of sub-rule (2). There has been no such express order of condensation in this case. Shri Chari contended that by reason of Second Consent Order, which permitted a further issue of capital of Rs. 3.1 lakhs, the Central Government had condoned the transgression, if any, of the First Consent Order. This argument, I am afraid, has no validity because there was no application, expressly or by necessary intendment. to condone any contravention which had taken place earlier. Neither in the application in respect of Rs. 3.1 crores nor even later on was the Examiner of Capital Issues informed that the fact that “proceeds of the issue” under the First Consent Order had been diverted, for purchasing vehicles.
(69) The next contention of Shri Chari on this aspect was that the defense of India Rules, 1939 had come to an automatic end by efflux of time and there could, therefore, be no prosecution in respect of any violation of the above Rule. This point was developed by Shri Chari in the following manner : The Capital Issues (Control) Act (XXIX) of 1947, received the consent of the Governor General on 563 18-4-1947. The provisions of the said Rule were continued by Ordinances Xx of 1946 and V of 1947. According to S. 16 of the above Act all orders made or deemed to be made under Ordinance V of 1947 and in force immediately before the commencement of this Act were to continue to be in force and be deemed to be orders made under the corresponding provisions of this Act. It was further enacted by sub-section (2), that S. 6 of the General Clauses Act (10) of 1897 shall apply upon the expiration of the said Ordinance as if it had been repealed by these Acts, Shri Chari relied upon S. 6 of the General Clauses Act, which states the effect of the repeal only in respect of any Central Act or Regulation. His contention was that S. 6 did not apply to an Ordinance. S. 3(50) of the said Act defines Regulation as one made by the President under Article 240 of the Constitution and includes one made by him under Article 253 and by the Central Government under the Government of India Acts, 1870, 1915 and 1935. Under S. 42(2) of the Government of India Act, 1935 an Ordinance promulgated by the Governor General shall have the same force and effect as an Act of the Federal Legislature. S. 311(6) also states that any reference in the Government of India Act, 1935, to Federal Acts shall be construed as including a reference to an Ordinance made by the Governor General. For this reason, the contention of Shri Chari that S. 6 of the General Clauses Act applies only to Acts and not Ordinances is not correct. Shri Chari cannot derive any assistance from the fact that a special provision having been made by S. 2(3) of Ordinance Xx of 1946 to the effect that S. 6 of the General Clauses Act shall apply upon the expiry of the defense of India Rules and continued in force by 7.2 as if that Rule were an enactment and had then been repealed by a Central Act and the absence of such a provision in Ordinance V of 1947. What was stated in S. 2(3) of the Ordinance was in fact the legal position as laid down by the Government of India Act, 1935; in other words, it was a mere surplusage. The absence of such provision, therefore, in Ordinance V of 1947 could not make any difference.
(70) The committing Magistrate did not deal with the above contention, but proceeded on the view that even if the defense of India Rules had elapsed the Rules having been in force at the relevant time was sufficient. Rule 94-A having been in force at the relevant time a conspiracy to do illegal act, namely, violating the lawful conditions of Rule 94-A was legally possible.
(71) There seems to be still less force in the contention of Shri Chari that there should have been a complaint in writing by the Examiner of Capital Issues at the time when the prosecution was launched; he did not develop this point.
(72) Shri Chari next contended that in respect of any surplus capital received over and above the capital in respect of which consent for issue was given by the Examiner of Capital Issues there was no jurisdiction on the part of the Examiner of Capital Issues to impose any particular condition particularly by reason of the fact that according to S. 10 of the Indian Companies Act, 1913 it was a liability of the company to return to the subscribers the entire share capital when the minimum required was not obtained or if there was any over-subscription. His point, in other words, was that in respect of the oversubscribed capital the company could return the over-subscribed 564 capital, in excess of what was allotted to the parties concerned and that no further permission of the Examiner of Capital Issues would be necessary to perform the statutory duty which had been laid upon the company in this regard by the above provision of the Companies Act. It seems to me that this argument is mis-conceived. It does not appear in the first place, nor was it so stated, that the over-subscribed capital was returned in accordance with law to the persons who had applied for shares. The prosecution case, on the other hand, that the diversion of funds for uses outside the scope of the Consent was also made in respect of such over-subscribed capital. Secondly, Rule 94-A, set out in extenso earlier, laid a complete embargo on a company making an issue of capital without the consent of the Central Government, and further laid down that if any conditions were imposed while granting such consent for the issue in question any contravention of such conditions would render the persons liable to imprisonment as provided under sub-rule (10). Since no issue at all could be made without such consent, the conditions governing the consent would fasten themselves on the entire issue.
(73) Shri Chari also relied upon Capital Issues Control, a Government of India handbook, issued in 1965 by the Ministry of Finance, Department of Economic Affairs, on the following paragraphs on page 5:
“6.10. Unless there are good reasons to the contrary companies which are floated as public limited companies, particularly those with good growth prospects, whether falling within S. 3 or S. 43-A of the Companies Act, are expected to make a public offer of their shares at least to the extent necessary to qualify their shares for listing on a recognised stock exchange.
6.11. To avoid complaints about delay in the return of money to the unsuccessful applicants for the shares in the case of an over-subscription, an assurance is sought from companies that after the issue is made, the allotments will be effected expeditiously and that the money sent in by unsuccessful applicants will be refunded within two months from the date of closing the lists.
In the event of an over-subscription, companies would find it of advantage to seek the advice of the Stock Exchange where the shares would be listed, on the method of allotment to be followed.
These instructions need not detain us because we are not concerned with the conditions which obtained much later, in the year 1965; we are concerned with the conditions of the issue in 1946.
(74) Yet another point raised by Shri Chari was that as per S. 141-A of the Indian Companies Act, 1913 that if any report is made as a result of inspection and audit of the affairs of the company under S. 138 that any person who is guilty of an offence in relation to a company for which he is criminally liable, the Central Government shall refer the matter to the Advocate General or the Public Prosecutor and that in this case Shri Pettigara, who has been appointed as the Public Prosecutor by the Delhi Government under Notification dated 565 13-5-1953 and that on 13-11-1953, had addressed a letter to the Registrar of Companies with a suggestion that the matter may be placed before court. S. 141-A (2) reads as follows :
“IF the officer to whom the matter is referred considers that the case is one in which the prosecution ought to be instituted he shall cause proceedings to be instituted. . .”
View of the above provision, Shri Chari contends that S.P.E. was not correct in registering an F.I.R., as it did, on 19-11-1935. In order to appreciate the above contention S. 278(3) of the Indian Companies Act, 1913 may also be read: “Notwithstanding anything contained in the Code of Criminal Procedure, 1898 every offence against this Act shall, for the purposes of the said Code, be deemed to be non-cognizable”.
(75) It was held by Hidayatullah, J. (as his lordship then was) speaking for the Supreme Court in Pravin Chandra Mody v. State of Andhra Pradesh that “where the information discloses a cognizable as well as a non-cognizable offence the Police Officer is not debarred from investigating any non-cognizable offence which may arise out of the same facts. He can include that non-cognizable offence in the charge-sheet which he presents for a cognizable offence. Both the offences if cognizable could be investigated together under Chapter Xiv of the Code and also if one of them was a non-cognizable offence”.
(76) An identical contention was raised on behalf of R. Dalmia and G. Ramachandran (since deceased), in Criminal Revision No. 98-D of 1966 before Gurdev Singh, J. of the Punjab High Court on Circuit at Delhi, and was repelled as early as on 27-5-1966, with the following observations. All the present petitioners had been imp leaded as respondents in the said Revision Petition:
“NO provision in the Companies Act or in the Code of Criminal Procedure has been pointed out which debars a court from taking cognizance of the offences for which the petitioners are being proceeded against on a complaint made by the Public Prosecutor under S. 141-A (2) of the Indian Companies Act. The petitioners’ learned counsel has also not been able: to refer to any provision or authority under which the investigation conducted by the Police, as in the circumstances of the present case. prevents the court from taking cognizance of the case brought before it by the Police report under S. 173 Criminal Procedure Code . The present case must be distinguished from the cases in which there is a statutory hurdle or bar to a criminal court taking cognizance of the offences complained of against the accused or the prosecution, or is otherwise incompetent for want of previous sanction of the prescribed authority or for some such reason. The offences under which the petitioners are being prosecuted are offences under the Indian Penal Code. One of these is under S. 409 of the Indian Penal Code which is cognizable. It cannot thus be disputed that the Police had the power to investigate. In view of the decision of this Court 566 in Messrs Dalmia Jain Airways Limited case that the Police was validly seized of the investigation on the report laid down by the Registrar of Companies, it cannot be said that the investigation was illegal”.
(77) The case referred to arose out of this very investigation and was decided by learned Chief Justice and Bishan Narain, J. whose observations in that case were quoted by Gurdev Singh, J. the observations were as follows:
“THE investigation under S. 137 appears to me to be very different in scope from the investigation under the Code of Criminal Procedure and it is difficult to hold that by enactment of sections 137 to 141-A the legislature intended to abrogate the provisions contained in Chapter Xiv of the Code of Criminal Procedure when offences are committed in relation to the companies”.
(78) It may also be noticed that as against the decision in the said case by a Division Bench on 2-12-1964 (Cr.W.103-D of 1964) not only the application for leave to appeal against that order but also the application for granting special leave had been refused.
(79) Apart from the fact that this question having been already decided could not be urged again, I respectfully concur with the observations both of the Division Bench as well as of Gurdev Singh J. quoted above.
(80) It was contended by Shri Chari that the provisions of the Delhi Special Police Establishment Act (26) of 1946, according to its preamble, only constituted a special Police force in Delhi for the investigation of certain offences in the Union territory in regard to the investigation of specified offences and that it did not extend to the filing of the charge-sheet by the said Police. For appreciating this contention it is necessary to read the following : Section 2.
“CONSTITUTION and powers of special police establishment.-(1) Notwithstanding anything in the Police Act, 1861, the Central Government may constitute a special police force to be called the Delhi Special Police Establishment. . . . for the investigation (in any Union territory) of offences notified under section 3. (2) Subject to any orders which the Central Government may make in this behalf, members of the said police establishment shall have throughout (any Union territory) in relation to the investigation of such offences and arrest of persons concerned in such offences, all the powers, duties, privileges and liabilities which police officers of (that Union territory) have in connection with the investigation of offences committed therein. (3) Any member of the said police establishment of or above the rank of Sub-Inspector may, subject to any orders which the Central Government may make in this behalf, exercise in (any Union territory) any of the powers of the officer in charge of a police station in the area in which he is for the time being and when so exercising such powers shall, subject to any. such orders as aforesaid, be deemed to be an officer in charge of a police station discharging the functions of such an officer within the limits of his station”.
Thus the officer in charge of a police station in the area in which the police officer for the time being acts, is deemed to be an officer in charge of a police station discharging the functions of such an officer within the limits of his station when he is exercising the powers conferred on him by the said Act.
(81) According to Shri Chari the formation of opinion by the police officer so investigating could not be said to be a part of the investigation and therefore the filing of the charge-sheet by the officer investigating in exercise of the powers of the said Act was outside the ambit of the said Act. His contention is, however, seen to be opposed to the observations of Jagannadhadas, J. in H. N. Rishbud and another v. State of Delhi . These observations were followed in State of Madhya Pradesh v. Mubarak Ali . The observations made by Jagannadhadas, J. were as follows :
“THE scheme of the Code also shows that while it is permissible for an officer in charge of a police station to depute some subordinate officer to conduct some of these steps in the investigation, the responsibility for every one of these steps is that of the person in the situation of the officer in charge of the police station, it having been clearly provided in Section 168 that when a subordinate officer makes an investigation he should report the result to the officer in charge of the police station. It is also clear that the final step in the investigation, viz., the formation of the opinion as to whether or not there is a case to place the accused on trial is to be that of the officer in charge of the police station”.
(82) Shri Chari also contended that since the police officer could only investigate, but not take any preventive action, himself he could not be deemed to be a police officer for the purpose of being able to file a charge-sheet. If this contention is correct it would have the consequence of not enabling the committing court in this case to make a commitment under S. 207-A of the Code of Criminal Procedure as in any proceeding instituted on a police report; in other words, it should have adopted the procedure under section 208 Cr. P.O., relating to a proceeding otherwise than on a police report by recording evidence itself. It seems to me that the petitioners could derive no real help from the series of decisions, which need not be specifically referred to, where it was held that a confession to a police officer, who has the power only to investigate but not of taking preventive action, is admissible under S. 25 of the Evidence Act. Shri Chari also referred to the Bihar and Orissa Excise Act. 1915 where an express power was conferred under S. 78(4) on the investigating officer to submit a report which shall, for the purposes of S. 190 of the Code of Criminal Procedure, 1898 be deemed to be a police officer to a Magistrate having jurisdiction to enquire into or try the case and empowered to take cognizance of offences .on such report, and contended that in the absence of such a provision in the Delhi Police Establishment Act specially empowering the S.P.E. not only to investigate but also to file and submit a report to the court, any report submitted by the S.P.E. could not be considered to be a report under S. 190(1)(b) of the Code of Criminal Procedure. Under subsection (3) of the said section, for the purposes of S. 156 of the Code of Criminal Procedure the area to which an excise officer empowered under sub-section (2) is appointed shall be deemed to be a police station and such officer shall be deemed to be an officer in charge of that police station.
(83) My attention has been also drawn to the decision in Badaku Joti Savant v. State of Mysore (A.I.R. 1966 S.C. 1764) where Wanchoo J. speaking for the Supreme Court discussed the scheme of the Sea Customs Act, 1878 and of the Central Excises and Salt Act, 1944 vis-a-vis S. 190(1)(a) and (b) and S. 251-A of the Code of Criminal Procedure. In order to come within the definition of a police officer for purposes of clause (b) of S. 190 he should be a police officer properly so called. It was held that the Central Excise Officer would have to make a complaint under S. 190(a) if he wanted the Magistrate to take cognizance of an office,, for example, under S. 9 of that Act. It was pointed out that the main purpose of the Central Excises and Salt Act was to enable the Central Excise Officers to levy and collect excise duties; the power of a police officer which was given to them was only in order that they may carry out their duties in this behalf. In coming to the conclusion that he was not a police officer within the meaning of S. 190(1)(b), S. 21 of that Act, which invested the powers of an officer in charge of a police station when investigating the cognizance of a case did not include the power to submit a charge-sheet under S. 173, it was noticed that unlike in the case of the Bihar & Orissa Excise Act the Central Excise Officer is not deemed to be an officer in charge of a police station all that was provided was that he might exercise the same powers as the officer in charge of a police station; in other words, he was not deemed to be an officer in charge of a police station. The ratio of this decision it seems to me, is that if an officer is by a statute deemed to be an officer in charge of a police station, as the police officer in this case was under the terms of The Delhi Special Police Establishments Act, then there can be no further question as to whether he is a police officer or not. To contend that he would not still be a police officer would be to completely nullify the effect of the deeming provision.
(84) Mudholkar, J. speaking for the majority of the Supreme Court in Raja Ram Jaiswal v. State of Bihar held that a confession made by a person accused of an offence under the Bihar & Orissa Excise Act before an Excise Officer was one made to a police officer. In coming to that conclusion reliance was placed upon the provisions in the said Act, deeming him to be a police officer, even though he does not belong to the police force constituted under the Police Act.
(85) The effect of a deeming provision was clearly explained by Lord Asquith in East & Dwellings Co. v. Finishing Borough Council 1952 A.C. 109(132) .
“IF you are bidden to treat an imaginary state of affairs as real, you must surely unless prohibited from doing so, also imagine as real the consequences and incidents which if the putative state of affairs’ had in fact existed, must inevitably have flowed from or accompanied it. The statute says you must imagine a certain state of affairs; it does not say that having done so, you must cause or permit your imagination to boggle when it comes to the inevitable corollaries of the state of affairs”.
These observations have been followed by the Supreme Court in a number of cases (vide, for instance. State of Bombay v. Pandurang Vinavak and others Air 1935 S.C. 244) .
(86) Shri Chari cannot seek to derive any assistance from the fact that in addition to enacting such a deeming provision the Bihar & Orissa Excise Act also authorised him specifically to submit a report to a Magistrate; this was nothing more than a surplusage. In the face of the said deeming provision it could not be contended that he is not an officer in charge of a police station in that area where he is exercising the powers conferred on him by the Special Police Establishments Act.
(87) The question for consideration here is whether by reason of the deeming provision he became a police officer for the purpose of investigation and according to the above-quoted observations of the Supreme Court it is clear that the formation of an opinion by a person authorised to investigate is also one that falls within the expression ‘investigation’. In this light the expression “investigation” in S. 4(1), as including all proceedings under the Code for collection of evidence by a police officer or by any person, other than a Magistrate who is authorised by a Magistrate in this behalf, is of no assistance to the petitioners.
(88) The argument which had been raised before the committing Magistrate, that the sanction of the District Judge should be obtained for prosecuting the accused for offences of forgery and conspiracy was not advanced before me; nor was it contended that the Commission of Inquiry was also a court. The Commission of Inquiry was rightly held by the committing Magistrate not to be a court.
(89) Yet another argument was that S. 1(2) Criminal Procedure Code . must be read subject to S. 5(1) thereof; according to the former anything contained in the Code of Criminal Procedure in the absence of any specific provision to the contrary would not affect any special or local law or of any special jurisdiction or power conferred, or any special form of procedure prescribed by any other law for the time being in force, according to S. 5(1), all offences under the Indian Penal Code shall be investigated, enquired into, tried and otherwise dealt with under the provisions hereinafter contained. Section 5(2) states that all offences under any other law shall be investigated, enquired into, tried and otherwise dealt with according to the same provisions, but subject to any enactment for the time being in force regulating the mariner or place of investigation enquiring into. trying or otherwise dealing with such offences. There is no enactment in the instant case which has made any regulation contrary to that of the Code of Criminal Procedure. I am unable to see any force in the said argument because no other statutory provision has been brought to my notice which precluded investigation by the Police in this case. I can find nothing in the decisions in re Subbiah Tevar (A.I.R. 1939 Mad. 856) and Emperor v. Faujdar & Ors. which is of any assistance to the petitioners concerning this contention.
(90) It is also settled law vide (already cited) that any defect or illegality in investigation, however serious, has no direct bearing on the competence or procedure relating to the commencement of the trial. No doubt the Police report which results from an investigation, is according to S. 190 of the Code of Criminal Procedure, the material on which cognizance is taken, but it cannot be maintained that valid and legal Police report is the foundation of the jurisdiction of the court to take cognizance. As pointed out by Jagannadhadas, J. S. 190 Criminal Procedure Code . is one of a group of sections under the heading “conditions requisite for initiation of proceedings”. The language of the section is in marked contrast to the other group under the same heading, namely, sections 193 and 195 to 199. It is not, therefore, possible to say that the cognizance of invalid Police report is a nullity. Such an invalid report, assuming that it is invalid, may still fall under either clause (a) or (b) of S. 190(1) and at best cognizance so taken would only be in the nature of an error in the proceeding antecedent to the trial which is curable under S. 537 Criminal Procedure Code . It would have relevancy only if the investigation can be shown to have brought about a miscarriage of justice. To the same effect are the observations of Subba Rao, J. (as his lordship then was) in State of U.P. v. Bhagwant Kumar Joshi (A.I.R. 1946 S.C. 221, at page 226) “But where the prosecution evidence has been held to be true and where the accused had full say in the matter, the conviction cannot obviously be set aside on the ground of some irregularity or illegality in the matter of investigation; there must be a sufficient nexus, either established or probabilised, between the conviction and the irregularity in the investigation.”
(91) It was contended by Shri A. C. Mitra, learned counsel for V. H. Dalmia and J. Dalmia that the committing Magistrate should have recorded the evidence of witnesses who were examined under S. 161 Criminal Procedure Code . if he had to rely on anything stated by them during such examination. He urged that the expression “evidence and documents” employed in S. 207-A must as per S. 4(2) Criminal Procedure Code . be understood in the sense defined in the Indian Penal Code. S. 29 of the Indian Penal Code defined “document” in the following manner :
“THE word ‘document’ denotes any matter expressed or described upon any substance by means of letters, figures, or marks, or by more than one of those means, intended to be used, or which may be used, as evidence of that matter”.
He further relied upon S. 162 Criminal Procedure Code . which made statements recorded under S. 161 Criminal Procedure Code . to be used in evidence only to the extent “hereinafter provided” and how that expression had been interpreted by the Supreme Court in Tahsildar Singh v. State of U.P. . But this does not advance the argument of Shri Mitra because the question here is totally different; it is concerning the extent to which the materials could be considered by the Magistrate while committing a case under S. 207-A despite the fact that those materials are yet to be proved at the trial. What is alone of relevance for the point debated by Shri Mitra is whether a committing Magistrate can act on the basis of the statements of witnesses recorded under S. 161 Cr. P.C. without their being examined. On this aspect it is sufficient to refer to the observations of Shah, J. (as his lordship then was) in Ramnarayan Mor v. State of Maharashtra , “Among the documents which the Magistrate has to consider are the documents which the prosecution proposes to rely upon at the trial including the statements and confessions, if any, recorded under Ss. 164 and 161(3)… Normally in a criminal trial, the court can proceed on documents which are duly proved, or by the rules of evidence made admissible without formal proof, but under the amended Code the Legislature has in S.207-A prescribed a special procedure in proceedings lor commitment of the accused. The record consists of the oral evidence recorded under sub-s.(4) of S. 173 (sic. S.207A), and it would be difficult to regard only those documents which are duly proved, or which arc admissible without proof as “evidence” within the meaning of cl.(6) and not the rest. There is no substance in the contention that the Legislature could not have intended that the accused should be examined in respect of documents which are not duly proved before the Court.. . . . ”
(92) In the face of the above observations the contention of Shri Mitra is not open before me.
(93) It is also useful to refer to certain observations of Shah, J. concerning the expression “save as hereinafter provided” in S. 162 vis-a-vis S. 510 Criminal Procedure Code . in. Ukha Kolhe v. State of Maharashtra (A.I.R. 1963 S.C. 1531),. The argument in that case, which was repelled, was that a report submitted by the Chemical Examiner to a Police Officer became inadmissible in evidence, because such a report could be proved only under a latter provision of the Code i.e. S.510 Cr. P.C. by production of the document itself. In other words, the argument was that the expression “hereinafter” in S. 162(1) was restricted to S. 162 alone (to what was provided by that very S. 162) and not by any part of the Code. While repelling he argument, Shah, J. speaking for the court, observed as follows:-
“THE word ‘hereinafter’ is, in our judgment, not restricted in its operation to S. 162 alone but applies to the body of the Code; to hold otherwise would be to introduce a patent inconsistency between S.207A and S. 162 of the Code, for by the farmer section in committal proceeding, statements recorded under section 162 arc to be regarded as evidence”.
(94) For a fuller appreciation of the position S.207A(6) as well as S. 173(4)of the Code of Criminal Procedure may be read :
“207A.(6) When the evidence referred to in sub-section (4) has been taken and the Magistrate has considered ah the documents referred to in section 173 and has, if necessary, examined the accused for the purpose of enabling him to explain any circumstances appearing in the evidence against him and given the prosecution and the accused an opportunity of being heard, such Magistrate shall, if he is of opinion that such evidence and documents disclose no grounds for committing the accused person for trial, record his reasons and discharge him, unless it appears to the Magistrate that such person should be tried before himself or some other Magistrate, in which case he shall proceed accordingly”.
“173(4). After forwarding a report under this section, the officer in charge of the police station shall, before the commencement of the inquiry or trial, furnish or cause to be furnished to the accused, free of cost, a copy of the report forwarded under sub-section (1) and of the first information report recorded under section 154 and of all other documents or relevant extracts thereof, on which the prosecution proposes to rely, including the statements and confessions, if any recorded under section 164 and the statements recorded under sub-section (3) of section 161 of all the persons when the prosecution proposes to examine as its witnesses”.
Sub-section (4) of S. 173 as well as S. 207A were introduced by Act 26 of 1955. A mere perusal of S. 173(4) is sufficient to convey the idea that statements and confessions, if any, recorded under s. 164 Cr.P.C. and the statement recorded under S. 161(3) Criminal Procedure Code . are included in the expression documents as implied in that sub-section and that copies of those documents have to be furnished to the accused free of cost. It is settled law ( vide Brij Bhushan Singh v. Emperor, 1946 P.C, 38) that a statement recorded under S. 164 Criminal Procedure Code . is not substantive evidence; yet a copy of the same has to be given under S. 173(4) and could be considered under S.207A(6) Criminal Procedure Code . Thus even apart from any authority a plain reading of Ss. 207A(6) and 173(4) would itself lead to a rejection of Shri Mitra’s argument.
(95) Another contention which has been set out in almost all the present revision petitions, but which has not been seriously argued before me, is that by reason of the fact that the learned District Judge had found that no fraud had been proved before him, there could not be any further prosecution of any of the accused in this case. There being no force at all in this contention it need not be dealt with at any length. The learned District Judge had only observed that no evidence of fraud etc. had been adduced before him. As the subsequent discussion will show none of the several incriminating circumstances were placed before him. While disallowing the request for compulsory winding up, the learned District Judge was handicapped because of the necessary evidence not produced before him. Privilege had been claimed even in respect of the reports of the Inspectors, If even some portion of the facts now known were placed before him the learned District Judge would have passed an order for compulsory winding up. While dealing with the proposed amalgamation of Airways and Aviation he was not appraised of the fact that this was a device by which the assets of Airways were passed on to Aviation. While it was made to appear that R. Dalmia was guaranteeing the payment of about half the face value of the shares to the share-holders of Airways in reality he was only guaranteeing a moiety of what was due to the shareholders, the rest being diverted to the use of those having a dominating voice in the Dalmia Group including himself. When Shri Daphtary appeared for some of the share-holders and stated to the learned District Judge that the share-holders of the Airways might prefer immediate payment of about half the shares he was only stating what was practicable and prudent turn the share-holders to do in that situation for Airways had been reduced to a shambles by reason of mismanagement and fraud.
(96) Having thus cleared the ground by adverting to all the contentions of a general nature, it would be well to set out the scope of a preliminary inquiry by the committal court. The Supreme Court had occasion to define the scope of the preliminary inquiry in a number of cases. Of them it would be sufficient for the purpose of this case to notice the following only. The committing Magistrate has to apply a judicial mind to the materials on which he has to form a judgment vide R. P. Kapur v. State of Punjab and Pramathu Nath Dalukdar & Am v. Saroj Ranjan Sarkar . He had to come to a conclusion that the case is a fit one for committing the accused to the court of Session vide K. P. Raghavan & Am. v. M. H. Abbas & Am. , . The following observations of Shah, J. (as his lordship then was) in Alamohan Doss & Ors. v. The State of West Bengal (1970 Cr. L.J. 860) may be noticed
” Magistrate holding an enquiry is not intended to act merely as a recording machine. He is entitled to sift and weigh the materials on record, but only for seeing whether there is sufficient evidence for commitment, and not whether there is sufficient evidence for conviction. If there is no prima facie evidence or the evidence is totally unworthy of credit, it is his duty to discharge the accused: if there is some evidence on which a conviction may reasonably be based, he must commit the case. The Magistrate at that stage has no power to evaluate the evidence for satisfying himself of the guilt of the accused. The question before the Magistrate at that stage is whether there is some credible evidence which would sustain a conviction”.
(97) Where the prosecution case is based on circumstantial evidence and there are some circumstances which can give rise to an inference of guilt it is not for the committing Magistrate to decide whether the circumstances, taken as a whole, arc in consistent with reasonable hypothesis of innocence: this is because such a conclusion can be drawn only after appreciating the evidence, which is not the function of the inquiring Magistrate. All that is required is a consideration whether the evidence discloses a prima facie case and not whether the totality of the circumstantial evidence leads to conclusion of his guilt alone.
(98) The expression “sufficient “rounds for committing” which occur in Ss. 209 and 210 Criminal Procedure Code . are still there even after the introduction of S. 207A(6). according to which the accused may be discharged if no grounds are disclosed for committing the accused persons for trial. The said expression fell for consideration before the Supreme Court in Ramgopal Ganpatrai Ruia v. State of Bombay . After noticing the conflict of judicial opinion on this question, Sinha. J. (as his lordship then was) observed that the apparently conflicting observations of some of the High Courts had to be read in the light of the facts and circumstances disclosed in those cases and that though it was easy to say that a Magistrate should commit the accused for trial if he is satisfied that sufficient grounds for doing so have been made out but difficult to apply those crucial words to individual cases. Sinha, J. summed up by saying that where there is much to be said on both sides the Magistrate should commit the case it would be for the jury then, in England, to say which of the two conflicting versions will find acceptance at their hands.
(99) The scope of powers of the court of revision while dealing with a commitment order were explained as follows by Shah, J. in Alamohan Dass & Ors. v. State of West Bengal . The Headnote reads :
“NORMALLY the High Court in a revision application filed against the order of commitment under Section 207A does not enter upon a reappraisal of the evidence on which the order of commitment is made. Interference in revision is justified only where a substantial question of law arises on which the correctness of the order of commitment may be effectively challenged, where there is no evidence on which the order of commitment could be made, where there has been denial of a right to fair trial, where there is reason to think because of failure to comply with the rules of procedure or conditions precedent to initiation of criminal proceedings, where by ignoring the substantive law which constitutes the offence, or misconception. of evidence on matters of importance grave injustice has resulted, and on similar other grounds. But in other cases interference with the order of the Magistrate committing, the accused for trial may not be justified and the trial before the Court of Session should be allowed to run its course”.
In the same Shah, J. also pointed out that a Magistrate holding such an inquiry :
“WAS entitled to sift and weigh the materials on record, but only for seeing whether there is sufficient evidence for commitment, and not whether there is sufficient evidence for conviction. If there is no prima facie evidence or the evidence is totally unworthy of credit, it is his duty to discharge the accused, if there is some evidence on which a conviction may reasonably be based, he must commit the case. The Magistrate at that stage has no power to evaluate the evidence for satisfying himself of the guilt of the accused.. The question before the Magistrate at that stage is whether there is some credible evidence which would sustain a conviction”.
(100) Shri Frank Anthony drew my attention to the decision of this Court in State v. Manchanda where Hardayal Hardy, J. (as his lordship then was) upheld an order of discharge passed by the committing Magistrate. But his lordship had observed as follows :
“THE word “groundless” in my judgment does not mean anything more nor less than the absence of a reasonable ground to expect a conviction. It is, therefore, open to the Magistrate at this stage to examine the material placed before him by the prosecution and also the material and explanation 575 suggested on behalf of the accused and to consider that material in the light of arguments addressed to him by both sides”.
These observations only restate the principles laid down by the Supreme Court. It is in the light of the above-said principles that the evidence pertaining to each of the petitioners before this court has to be discussed. Before doing so, however, it may be well to bear in mind the legal principles to be applied to a charge of conspiracy. As observed by Subba Rao, J. in Sardool Singh Kavishar v. State of Maharashtra the essence of the conspiracy is that there should be an agreement between the persons to do one or other of the acts in S. 120-A of the Indian Penal Code. It reads as follows :
“120A. When two or more persons agree to do. or cause to be done,- (1) an illegal act. or (2) an act which is not illegal by illegal means, such an agreement is designated a criminal conspiracy”.
The said agreement may be proved by direct evidence or may be inferred by acts and conduct of the partics. There is no difference between the mode of proof of an offence of conspiracy and that of any other offence. S, 10 of the Indian Evidence Act introduced the concept of agency and, if the conditions laid down therein are satisfied, the acts done by him arc admissible against the co-conspirators. But before S. 10 can be invoked the following conditions should be present : ( 1 ) There shall be prima facie evidence affording reasonable ground for believing that two or more persons are members of the conspiracy; (2) if the said condition is fulfillled, anything said, done or written by any one of them, in reference to the common intention will be evidence against the other; (3) anything said. done or written by him after the intention was formed by any one of them would be admissible. (4) It would also be relevant for the said purpose against another who entered the conspiracy whether it was said, done or written before he entered the conspiracy or after he left it; it can also be used against the co-conspirator and not in his favor.
(101) As pointed out by Jagannadhadas. J. in an earlier decision where the same party was involved (Sardool Singh Kavishar v. State of Bombay, 1958 S.C.R. 161) , the conduct of each individual coconspirator including his acts, writings and statements, irrespective of time to which it relates, can be relied upon by the prosecution to show the criminal intention of the individual accused with reference to his proved participation in the alleged conspiracy. It has also been pointed out by the Supreme Court in R. K.Dalmia & Ors. v. Delhi Administration (A.I.R. 1962 S.C. 820) with reference to the frauds conceived and perpetrated in respect of another company, namely the Bharat Insurance Co., Madholkar, J. pointed out (at p. 1874, para 317) that it is not necessary that each member of a conspiracy must know all the details of the conspiracy.
(102) Paull, J. explained in R. v. Griffiths & Ors. (1965 2 All England Reports 448) that “except in simple cases a conspiracy count (if one is needed at all) should be tried separately to substantive counts; and any practice of adding what may be called a rolled-up conspiracy charge to a number of counts of substantive offences should cease”; those observations, however, would have no application to a case where there is evidence from which it could be inferred that each of the alleged conspirators knew that there was, or was coming into existence, a scheme, to which he attached himself and to which there were other parties and which went beyond the act that he agreed to do, so that all would be shown to have been acting in pursuance of a common criminal purpose.
(103) On the merits of the commitment so far as J.Dalmia is concerned Shri A. C. Mitra did not advance any argument; they were confined to V. H. Dalmia (A-4) apart from the question that if statement of any witness examined under S. 161 Criminal Procedure Code . had to be relied upon by the committing Magistrate that witness should have to be examined. The only serious question for consideration in the petitions before me is whether the commitment of all or any of the petitioners before me was justified. The case against each of the petitioners as well as the other accused in the case has been separately analysed by the committing Magistrate But while discussing the evidence and the circumstances pertaining to each of the petitioners it would be necessary in their appropriate context to refer to a few errors of fact committed by the learned Magistrate.
(104) It would now be convenient to consider the case against V. H. Dalmia (A-4) son of J. Dalmia (A-2). The first aspect to be noticed is that according to the prosecution case, which is denied, he signed the joint venture agreement between the Airways and A.B.C. The original agreement is not forthcoming. It is one of those stated to have been destroyed in pursuance of the resolution to destroy the document of Airways. According to the copy of the said agreement it is seen that it was attested by one Goel, an employee of the company (since dead). An application was made on behalf of V. H. Dalmia to examine, the said Goel, but the prosecution did not choose to examine him. Despite the strenuous arguments advanced by Shri Mitra about what, he said, was the duty of the committing Magistrate to examine necessary witnesses, he was unable to show how the Magistrate could have compelled the prosecution to examine the said Goel. Shri Mitra’s reply to this contention was that the Magistrate should have examined him under S. 540 Criminal Procedure Code .. but Shri Mitra was unable to cite any principle or authority for the further contention that. if the committing Magistrate did not examine any witness under S. 540 the commitment could itself be quashed: Goe1 being dead no direction could be given to examine him under S. 540. This argument of Shri Mitra need not detain us any further.
(105) Shri Raghunath Rai, Chartered Accountant, belonging to Messrs S. P. Chopra & Co., who had signed the preliminary and final reports of the investigation, had ‘stated during his examination under S. 161 Criminal Procedure Code . on 29-8-1955 (he was examined on various dates) as follows:
“THE agreement entered into between Messrs Dalmia Jain Airways Ltd. and Messrs A.B.C. Ltd. in relation to disposal goods were shown to me and I obtained a copy of the same from Shri C. P. Lal, Liquidator who sent it to me under cover of his letter dated 28-10-1952. The agreement has been signed by Mr. J. M. Gupta. an employee of Seth Ram Krishna Dalmia and V. H. Dalmia. on behalf of Messrs A.B.C. and Shri J. M. Gupta and Shri J. Dalmia father of Shri V. H. Dalmia on behalf of Dalmia Jain Airways Ltd.”
As discussed earlier this statement of Shri Raghunath Rai concerning the execution of the joint venture agreement by V. H. Dalmia on behalf of A.B.C. could be taken into consideration subject of course to anything further being elicited from him during his examination in the Sessions Court. The statement would be secondary evidence of the contents of the agreement, the original of which is not forthcoming but is alleged to have been destroyed. The said statement of Shri 1) Raghunath Rai under S. 161 Criminal Procedure Code . was itself based upon. and incorporates the following statement which occurs in the final report :
“THIS agreement (reference is to the joint venture agreement) has been signed by J. M. Gupta (an employee of Seth Ram Krishna Dalmia) and V. H. Dalmia on behalf of Messrs A.B.C. and Shri J. M. Gupta and Shri J. Dalmia on behalf of this company”.
Nor further argument on these lines was possible once it was seen that the final report had referred to the said fact and the same had also been elicited during: the examination under S. 161 Criminal Procedure Code .
(106) V. H. Dalmia was a director of the managing agency company from 9-10-1943 to 1-12-1947 and of A.B.C. from 15-54945 to 3-11-1947-he was also its managing director from 15-5-1945 to 10-7-1947. He was also a director of D.C.P.M. from 15-5-1943 to 29-10-1947. It is contended that he was never on the board of directors of Airways but it was noticed that he had been a party to the joint venture agreement, which though denied by him. is contradicted by Raghunath Rai. who claims to have seen the original agreement. The joint agreement is one of the several steps resorted to by the persons conspiring to deplete the Airways of its funds for the profit of those conspiring. He also signed the cheques in favor of the Director General of Supplies & Disposals towards the purchase of disposal vehicles on behalf of A.B.C. Tt was an agreement dated 15-6-1947 (Document 778) with the Dg S&D regarding payment in Installments by A.B.C. Ltd. and the Airways. Whoever is stated to be a party to the joint venture agreement would, in the absence of any further explantion, be a party to the conspiracy. He and his father attended the general meeting held on 13-6-1952 when. the resolution for winding up the company voluntarily and appointing C. P. Lal as voluntary liquidator was passed. In these circumstances Shri Mitra cannot ask the commitment to be quashed on the mere ground that he was only 19 in 1946 (his age was actually given 21 years). It would make no real difference. whether he joined the conspiracy from the inception or at a later point of time. It is not. however, the prosecution case that V. H. Dalmia at any time had dominion of the funds of Airways. His learned counsel, Shri Mitra, urged that there should not have been a. charge against V. H. Dalmia under S. 409 Indian Penal Code . in the circumstances. But this can be pointed out to the Sessions Judge and be considered by him when he frames charges at the time of the commencement of the trial. It is needless for this court to consider the details of the charges at this stage except to answer the broad question whether the commitment against all or any of the petitioners before this court should be quashed or not.
(107) It is necessary to refer to a contention (as set out in para 38 of the grounds) advanced by Shri P, K. Khaitan. who followed Shri Mitra, on behalf of V. H. Dalmia. Shortly stated the point is that a sum of nearly Rs. 4.55 crores was received as share application money of Airways and that if any amount over and above Rs. 3.50 crores, which alone could be allotted, had been diverted by any of the persons connected with the alleged conspiracy that could not itself be a diversion of the funds of Airways, that amount being only the excess share capital. This argument overlooks the fact even then it would be a breach of the condition imposed by the Examiner of Capital Issues. Even as a fact it is incorrect: the statutory report only discloses Rs. 3.5 crores as the share application money which had been received. When Shri Khaitan was asked to explain, by giving the figures as to how he had stated that Rs. 4.55 crores odd were received as share application money by Airways, he could only give me the total of 3 sums, namely, Rs. 3.98 odd crores as per police document No. 1206, Rs. 17.27 odd lakhs as per police document No. 228 and Rs. 39.13 odd lakhs as per police document No. 226. as mentioned in paragraph 38 of the grounds of revision. In the absence of the share applications and/or the share register etc. showing the amounts received by way of share application and how the allotments were made, such an argument cannot be adduced. When asked for further details concerning this contention Shri Khaitan did not choose to give any further details but concluded his argument, on this aspect, abruptly. It is sufficient, therefore, to notice that it has not been made out that Rs. 1.05 crore was the balance of share capital money and had been refunded in accordance with the provisions of law as they stood at the relevant time. Tt has also been noticed that the diversion of the moneys of the Airways amounted to much more than Rs. 1.05 crore. I should confess. I am even unable to understand the relevancy of this contention based on Rs. 1.05 crore being the excess share capital; it is not even a case of diversion of the funds of Airways less than Rs. 1.05 crore.
(108) Dalmia So far as J. Dalmia, father of V. H. Dalmia. is concerned no serious argument at all was advanced before me in support of the petition to quash the commitment. He was a member of the Dalmia Jain Group which controlled not only the managing agency company but also the Airways during the relevant time. As a part of that group he was associated with the gaining of control over A.B.C. On a number of occasions, drawings were made from the funds of A.B.C. for his personal expenses but shown as expenses, in the company’s account books. He was the director and managing director of D.C.P.M. during the relevant period which seems to have been the dumping ground of the liabilities undertaken by A.B.C., in addition to funds of Airways being dishonestly and improperly diverted to D.C.P.M. He was one of the promoters and directors of Airways during the relevant period. He signed the managing agency agreement, and the underwriting agreement, on behalf of D.C.P.M., with Airways. He also signed the Prospectus of Airways and also the joint venture agreement. He further signed the statutory report of Airways which did not even indicate that the funds of Airways were diverted to D.C.P.M. When the joint venture agreement was sought to be terminated he was a director of Airways. The termination was an obviously fraudulent attempt aimed to prevent the sale proceeds of the disposals going into the coffers of Airways from that of A.B.C. The profit and loss accounts of the joint venture business for 4″ years were signed by him. It is the case of the prosecution that these were ante-dated. He was also the Chairman of the. Board of Directors of Bharat Insurance Company at a time when Aviation purported to sell 24,750 preference shares of Airways to the Bharat Insurance Company. He wrote to D.C.P.M. to purchase the said shares of Aviation by debiting the amount to Bharat Insurance Company. He also signed the mortgage deed executed between Airways and A.B.C. to the Government of India and others. He also participated in the share-holders meeting of Airways when the decision to voluntarily liquidate it was taken.
(109) He was, along with R. Dalmia and S. P. Jain, entrusted with the dominion of the funds of Airways. He signed the Prospectus of Airways on 26-8-1946 along with S. P. Jain and others, which did not mention the purchase of disposal vehicles worth Rs. 2.5 crores by R. Dalmia on 31-7-1946.
(110) Along with his brother R. Dalmia, he had decided to terminate the joint venture agreement to substantially divert the interests and rights of the joint business to A.B.C. at the expense of Airways- at this time he was one of the directors of Airways. Shanti Prasad Jain
(111) It was noticed that he is the son-in-law of R. Dalmia; he is stated to be one of the most influential members of the Dalmia Jain Group. He was the director and managing director of A.B.C., as well as director of Airways and D.C.P.M. He resigned his directorship of D.C.P.M. in December, 1947, of Airways in August 1948 and severed his ostensible connections with A.B.C. in December 1948. He was the director of the managing agency company during the relevant period receiving a remuneration of Rs. 8,000.00 per month. He promoted D.C.P.M., signing its Memorandum and Articles of Association along with his wife and some others; he was also the deputy managing director of the company for a time. He promoted Airways and was its first director; he signed the Prospectus of Airways in which the purchase of disposal vehicles to the extent of Rs. 2.5 crores was concealed. It was he who entered into an agreement with the Dg S&D for the purchase of disposal vehicles for Rs. 2.42 crores and it was he who made the application to the Examiner of Capital Issues for further issue of Rs. 3.10 crores on behalf of Airways. Out of the large amount of moneys which were transferred from Airways to D.C.P.M., it is seen that Rs. 29 lakhs were deposited in his personal over-draft account with the Eastern Bank Ltd. and Allahabad Bank Ltd., Calcutta. He was also the managing director of the Bharat Bank where the funds of Airways were deposited and from which they were diverted. He was also responsible for the conception of the joint venture agreement of A.B.C. with Airways; he was seen to have had a hand in the termination of the venture. In spite of the share application money of about Rs. 3 crores having been received he and other directors of Airways appointed D.C.P.M. as underwriters merely to earn the commission without any risk being involved by such underwriting. He was responsible for the R3A plant being acquired for Airways and A.B.C. to start with and then despite the said plant being, hailed as one of the few such plants in this part of the world and despite the joint venture agreement treating Airways and A.B.C. as being entitled to moiety of the assets including this plant. He was responsible for the decision to exclude the R3A plant as the separate asset of A.B.C. (vide letter dated 25-9-47, Document No. 832).
(112) Both S. P. Jain as well as R. Dalmia had been responsible for Airways being involved in the purchase of Rs. 2.42 and Rs. 2.50 crores worth of disposal vehicles, respectively, both in partnership with A.B.C. These were done without any formal authority from Airways and even without any agreement reduced into writing or even settling the terms at that time. Even the partnership agreement was executed later. From a reading of the agreement it would seem that the whole capital of Rs. 3.10 crores had to be supplied by Airways and nothing by the A.B.C. The initial payment of Rs. 82 lakhs made on 11-7-1946 to the Dg S&D by A.B.C. was by making the Bharat Bank to pay and recoup the entire advance from Airways by 26-7-1946. S. P. Jain was the person who initiated the deal on both. sides; the rest, excluding R. Dalmia, were dummies and concerned with both the companies being controlled by the same group. As it was explained earlier, all the agreements from the point of view of Airways were detrimental to it; some clue to the kind of manipulation which was made by S. P. Jain could be had from what happened with respect to the R3A plant. It was bought for Rs. 15 lakhs on 28-8-1946 on behalf of both A.B.C. and Airways, the payment of Rs. 15 lakhs being made by Airways. This was undoubtedly the property of the partnership but still S. P. Jain decreed that it should be exclusive property of A.B.C. alone. The plant was said to be an exceedingly valuable one; according to S. P. Jain it could re-condition easily 30,000 trucks a year. In a speech made by him on 27-2-1947 he himself is reported to have said that there were very few such plants outside America. No explanation has yet been offered on behalf of S. P. Jain concerning how and why the R3A plant could be converted to the exclusive use of A.B.C.
(113) It is seen that it was made to appear that as a consideration of the joint venture agreement being terminated the managing agency company would be persuaded to resign. S. P. Jain’s connection with this could be traced to his having later on as the committing Magistrate describes it, “stage managed the resolution of the Dalmia Jain & Co. Ltd.. dated 9-4-1952 in order to impart genuineness to the ante-dated agreement”. Thus resolution was signed by S. P. Jain as Chairman of the meeting and it purports to terminate the managing agency agreement between Dalmia Jain Airways Ltd. and Dalmia Jain & Co. Ltd. This is made to appear as being in conformity with the termination of the liability under the joint venture agreement which, it may be remembered, is alleged to have been ante-dated, a suggestion which gains some support from the features noticed earlier.
(114) At the conclusion of Shri Chari’s arguments he could only urge that by reason of S. P. Jain having resigned his Directorship of D.C.P.M. in December 1947, of Airways in August 1948 and his connections with A.B.C. in December .1948, he could not be visited with knowledge of anything that happened in those concerns after he had ceased to be a Director and that he could not even be imputed with knowledge of the fact of Rs. 29 lakhs having been deposited in his personal over-draft accounts with the Eastern Bank Limited and Allahabad Bank, Calcutta, as noticed earlier. This explanation has to be made good. Shri Chari could not but agree when it was put to him, that if the entire scheme of the joint venture, and its subsequent disruption were conceived by S. P. Jain also, then there would be no possibility of separating his case, at least at this stage, from others who have been committed on that basis. I consider it needless now to consider the case of S. P. Jain in greater detail. The case of the prosecution is that he along with R. Dalmia was the chief architect of the conspiracy and in the circumstances no inferences could be drawn in his favor from his merely ceasing to be Directors of Airways and D.C.P.M., and Managing Director of A.B.C. The case of the prosecution is that even subsequent to his formal severance with A.B.C. Shital Prasad Jain, his own nephew, was made Director from 9-12-1948 in which capacity he continued till 26-4-1951. The inference which may or may not be properly drawn from these cumulative circumstances are only for the trial judge and not for the committing Magistrate. & Par tap Kumar Roy :
(115) Partap Kumar Roy, petitioner in Cr. Rev. 200 of 1970 (is the son of M. K. Roy, old employee of the Dalmia Jain concerns) was the Director of D.C.P.M. from 19-2-1952 to 12-2-1953 and a benami share-holder of shares of Airways of the value of approx. Rs. 4.94 lakhs. He was also one of those who proposed the scheme of amalgamation of Airways and Aviation. He had himself written two letters on 2-11-1952 and 16-11-1952 to Airways suggesting the transfer of its assets to Aviation. He was also present at the general meeting of the share-holders on 13-6-1952 when a resolution winding up Airways was passed. The prosecution seeks to draw an inference of guilty participation against all those connected at least with Airways and Aviation from acts, such as, the proposal of amalgamation between Airways and Aviation. Those who proposed the said amalgamation, it is suggested, knew that Aviation was practically a company only on paper and that the amalgamation was a device by which the Airways could itself get out of the winding up, which was voluntarily made. by getting the approval of the share-holders (which was easy to anticipate on account of the dominating position of the Dalmia Group) for the amalgamation, and consequent approval by the court, and what is more, get at the records of the Airways for the purpose of making them unavailable for any probe. In the absence of any further facts or explanations by those concerned, to counteract the inferences arising from such participation in bringing forward the amalgamation between Airways and Aviation and/or passing a resolution concerning the destruction of records of Airways, the prosecution seeks to draw an inference of guilt against those so connected from such participation. The same consideration would be equally applicable not only to Mangat Ram Jain but also to S. K. Sanghi both of whom were party to the resolution of the Board of Directors of Aviation, authorising the Secretary, after the said amalgamation, to destroy the records of Airways. The latter was an employee of the Dalmia Jain Group and at the time of the resolution was a Director of the Aviation. His connection with R. Dalmia is indicated by his having been appointed a Liquidator of two Dalmia concerns, the Premier Merchants and also the General Marketing Company.
(116) Mangat Ram fain: So far as Mangat Ram Jain is concerned he seems to have been connected not only with the proposed scheme of amalgamation but also with the resolution for voluntary winding up. In addition, it is stated that he withdrew a sum of Rs.5 lakhs of share-application money from the account of Airways in pursuance of a cheque which was issued in his name on the Bharat Bank, Delhi by S. L. Verma and R. K. Jain. This cheque was duly cashed by Mangat Ram Jain. The purpose is not known; it is stated for the prosecution that it was not one connected with any business of the company. On 29-11-1946 an entry was made as if the amount had been paid to A.B.C. on 14-9-1946. On 30-11-1946 a reverse entry was made to show that the first entry was wrongly made. Shri Bipin Behari Lal contends that from these circumstances an inference cannot be made that he misappropriated the amount himself for it is seen that the money had been brought into account later and dealt with in the aforesaid manner. Shri Bipin Behari Lal contends that whatever inference is possible on the basis of the above cheque for Rs. 5 lakhs being drawn and cashed from the Bank against others connected with it, none advise to Mangat Ram Jain could be made. This aspect only bears of the substantive charge framed against him under S. 408 I.P.C. and the would have to be appreciated only at the trial as to what inference is possible against him by reason of his not only having cashed the cheque himself and which was dealt with in the accounts in the aforesaid manner having regard to the fact that he wa.s himself an Assistant Accountant at the time, though not an Assistant Secretary or Secretary, as the learned Magistrate erroneously thought. The learned Magistrate also thought that Mangat Ram Jain had been a party to the joint venture agreement but it is seen that he had merely attested the agreement; at the time he attested it he was an Assistant Secretary. This indicates that the attestation was made by him later and that he was not himself a party to the agreement. It is seen that Mangat Ram Jain had attested a document as Secretary on 22-11-1951; it is also seen that yet another person, not Mangat Ram Jain, was the Secretary on 14-7-1950. Despite these errors in the committal order, I do not. find sufficient reason to interfere with the commitment of Mangat Ram Jain in the view that he had himself been one of those who had suggested the amalgamation. It can not be presumed in his favor, at this stage, without any further explanation by him, that he had no knowledge of any incriminating circumstances for he had become the Secretary of Aviation, on the formation of that company, in March, 1948. Aviation. is seen to be only a company that existed on paper; a considerable portion of the money of Airways had been utilised for taking the shares the Aviation, in the names of some individuals including Mangat Ram Jain himself. A sum of Rs. 24.25 lakhs had been debited to D.C.P.M. on account of share application money received by D.C.P.M. from the Bharat Insurance Company and the voucher in this regard (Document No. 947, dated 1-2-1949) had been prepared by him. Similarly yet another voucher dated 5-2-1949, also of Aviation, debiting Airways with a sum of Rs. 74.75 lakhs on account of share application money for the allotment of shares of Aviation to certain individuals had been prepared by him; he had also credited the share application money account of Aviation accordingly. The committing Magistrate also referred to yet another voucher dated 5-2-1949 of Aviation prepared by him, for Rs. 90,000 on account of the balance of shares call money at the rate of Rs. 9.00 per ordinary share and Rs. 90.00 per preference share issued in the name of other persons. He had also signed the advice on 29-6-1951 as Secy. of Airways advising A.B.C. about debit of Rs. 3.11 odd lakhs on account of interest due from A.B.C. for the period 1-1-1951 to 30-6-1951. He himself owned 160 ordinary shares and 25 preference shares of Aviation. If in spite of such knowledge which can be even presumed by his having been the Secretary at one point of time or another, of the Aviation as well as Airways, he had been a party to proposing the amalgamation in November, 1952. the case against him also cannot be separated, at this stage at least, from the case against the others who had all been parties to putting through the said scheme of amalgamation.
(117) Shri Bipin Behari Lal relied on my judgment in B. K. Parekh v. Joint Chief Controller of Imports & Exports & Anrs. (Cr. Rev. No. 36 of 1970, decided on 8-2-1971) (25). The committal of a servant of a company, charged with certain fraudulent acts, was quashed by me on the ground that there was no legal evidence in support of the charges against the accused but that such evidence, as there was, was inconsistent with the accusations made against him.
(118) Sushil Kumar Sanghi: He was an employee of Dalmia Jain Group and Director of Aviation. He was also a party to the resolution authorising the Secretary of Aviation to destroy the records of Airways. He was appointed Liquidator of Premier Merchants and General Marketing Company, both being Dalmia; concerns. As explained already any one who was a party to the resolution to destroy the records of Airways has, at this stage, to be presumed to be connected with this conspiracy unless he was not aware of anything which would even put him on notice of the sinister object in authorising the destruction of the records pertaining to Airways. It is obvious that the entire scheme of amalgamation was put through for getting rid of the winding up itself and getting at the records of Airways from the Liquidator with a view to destroying them. Every one connected with Airways and Aviation should have known that the Inspectors were appointed to enquire into the affairs of Airways; this was attempted to be stalled by the devise of winding up of the company and appointing a Liquidator. Despite all that has been noticed concerning D.C.P.M. and its liability to Airways and how this liability was brought about, it has to be shown that any one who was a party or any of the above did so bona fide and without any fraudulent intention
(119) Shri Rameshwar Dayal, learned counsel for S. K. Sanghi, urged that the conspiracy to commit breach of trust had come to an end before the date of the said resolution and, therefore, without anything more being alleged against him he could not be said to be a party to the conspiracy by his mere participating in that resolution. While discussing the legal principles that have to be borne in mind reference was made to the decision of the Supreme Court in 1958 S.C.R. 161- Sardool Singh Kavishar v. State of Bombay (12), cited by Shri Rameshwar Dayal himself. It is worth recalling that Jagannadhadas, J. had pointed out that the conduct of each individual conspirator, irrespective of the time to which it relates, can be relied upon by the prosecution lo show the criminal intention of that individual with reference to his proved participation in. the alleged conspiracy. Even apart from this consideration, if getting rid of the records of Airways was necessary to accomplish the purpose of the conspiracy it could not be stated that the said act of destruction or paving the way for it by passing a resolution is itself not a part of the conspiracy.
(120) Shri Rameshwar Dayal also referred to the fact that there was no charge under s. 201 Indian Penal Code . against S. K. Sanghi and that the Chief Commissioner while giving sanction to prosecute for the offence of a, conspiracy had not given any sanction in respect of an offence under S. 201 Indian Penal Code. I am afraid this contention is also misconceived because the mere passing of a resolution for destruction of the records does not by itself amount to concealment of evidence though it would be a step taken towards it. In fact, except that the accounts and other documents, have not been produced there is no evidence concerning whether they are in fact destroyed and much less about who actively destroyed them, if it is so. All that we know is that they are not forthcoming. It not being the prosecution case that S. K. Sanghi actually destroyed any of those records, a charge under S. 201 Indian Penal Code . seems neither possible nor appropriate against S. K. Sanghi. I have referred to these aspects only to show that the entire basis of the contemn of Shri Rameshwar Dayal is without any foundation.
(121) C. P. Lal:I have relegated to the concluding portion of the judgment where details pertaining to the winding up of Airways, the appointment of C. P. Lal as Liquidator, the efforts to resist the liquidation of Airways ‘ through court and the manner in which the scheme of amalgamation of Airways an Aviation had been proposed in order to gain access to the records of Airways (some details pertaining to amalgamation have been already noticed), and ultimately to put them out of reach of any one seeking to probe further into the affairs of Airways.
(122) By a letter dated 15-6-1952 C. P. Lal wrote to the Registrar of Joint Stock Companies that he had been informed orally about his being appointed as liquidator of Airways and that a letter from the inspectors to Airways had been brought to his notice, to which the company had already replied that no intimation had been received by them about his appointment from the Registrar. C. P. Lal also informed the Registrar that he was going out of town for 10 days on personal work and asked to be informed about the position. On 2-7-1952 the Inspectors wrote to the Registrar stating that even though C. P. Lal had returned before 30-6-1952 he was not available and that when they met him he informed them he wanted to meet the Registrar and discuss the implication of the order for investigation in view of the fact that the company had gone into liquidation. It was further stated that C. P. Lal had informed him that he would not show the books or give any information unless the legal position was clarified. The Registrar wrote on 3-7-1952 that the Inspectors informed him about his evading to show the books needed in connection with the investigation of the affairs of Airways and that if he did not do so action would be taken under the Indian Companies Act. On the same day C. P. Lal wrote to the Registrar that the order of investigation had become infructuous on account of voluntary winding up and his being appointed liquidator, for the company was no longer in existence except for its beneficial winding up. He ended by saying that the legal position should be appreciated and necessary instructions cancelling the investigation may be issued. By a letter dated 4-7-1952 the Registrar wrote to C. P. Lal that the legal contentions had been discussed with him personally and that he was informed about these contentions not being tenable. He was requested to make the books available to the Inspectors who had been advised to contact him again. The Inspectors wrote to the Registrar on the same day informing him about the steps taken by them to contact the Liquidator and expressing apprehension that even the books may be removed from the Registered Office of the company. He suggested serious action, like applying for a search warrant, for securing the books. On 7-7-1952 the Registrar forwarded a copy of the Inspectors’ letter to the Secretary (Development) Delhi State Government and suggested that the books of the company may be seized. On the same day C. P. Lal wrote to the Registrar denying the allegation that he was evading and informed him that two petitions -one under S. 162 and another under S. 153(c) of the Companies Act were pending before the District Judge, Delhi and that when he had appeared court on 4-7-1952 and that certain restrictions had been imposed on him. He also stated that he was re-examining the legal position; in the light of such advice he proposed to make a representation to the Government and. if necessary, to apply to the court for directions. He wanted the Registrar to advise the Inspectors not to press or investigation in the meantime. He also stated that he would offer the necessary cooperation once the legal position was clarified. But the Registrar by his letter dated 8-7-1952 pressed him to produce the books by 10th July, 1952 on pain of legal action. On the same day he also filed a complaint for an offence under S. 140(5) of the Companies Act against C. P. Lal.
(123) On 10-7-1952, C. P. Lal informed the Registrar that he had applied to the District Judge on 9-7-1952 as to whether he should allow inspection, that the matter was sub Judice and that he would abide by the directions of the court. The Registrar again informed him, by his letter dated 14-7-1952, that the application to the District Judge for directions did not debar the Government from carrying out investigation by Inspectors, and advised him to produce the books before the Inspectors on 16-7-1952. The Registrar asked the Inspectors to furnish an interim report, by a separate letter and Registrar also addressed the Government to make arrangements for getting a search warrant to seize the books. C. P. Lal wrote to the Registrar on 16-7-1952 that his petition before the District Judge was fixed for hearing on 22-7-1952, that he was collecting the account books of Airways but was requesting that Inspectors may stay their hands till the petition was decided.
(124) By letter dated 20-8-1952 the Government advised C. P. Lal that there was no provision in the Companies Act for stay of the investigation by the Inspectors on the appointment of a voluntary Liquidator and requesting him to make the books of accounts and other documents available to the Inspectors failing which the Government would be compelled to take action for contravention of . 140(3) of the Act. It is only thereafter that C. P. Lal agreed to produce the account books and the documents even without any directions being given to him by the court. Subsequently, however, the account books and other documents were produced before the Inspectors, and in some of their letters, to which specific reference need not be made at this stage, the Inspectors thanked C. P. Lal for his cooperation.
(125) It is necessary to note in this context that C. P. Lal filed an application under Ss. 153 and 153-A of the Companies Act before the District Judge, Delhi on 3-12-1952 praying for permission to amalgamate Airways which had gone into voluntary liquidation with Messrs Dalmia Jain Aviation Limited since it was represented to him that the scheme of amalgamation of the two companies was likely to be approved by a majority of the members of Airways. The said application was based on a letter to the official Liquidator written by P. K. Roy, S. N. Dudani, R. P. Gurha, M. R. Jain and L. R. Sharma stating that they had negotiated with Aviation who had agreed to take over the entire existing assets and liabilities of Airways (in liquidation). The position concerning Airways was, as appears from the statement of R. Dalmia, who was examined before the District Judge as a witness for Chandra, that after April, 1952 he had got about 10 lakh shares of the Airways (out of about 35 lakh shares) at the rate of 4.8 per share (face value being Rs. 10 per share) when the market price for those shares was about Rs. 3 to Rs. 3/4.00 per share. All the shares were fully paid up. Out of 10 lakh shares, 8 lakh shares had been transferred to the books of the company before the voluntary winding up. It is also seen that in respect of a. further 5 lakh shares the Dalmia Group had become owners. They had thus a dominating position in Airways. It was thus not difficult to put though am scheme they wished.
(126) It is also worth recalling that Aviation itself was floated with a capital of Rupees one crorc; this was to separate Aviation business from the business pertaining to motor vehicles after the assets of Airways were transferred almost wholly in favor of A.B.C. by the process of the termination of the joint venture liability by an agreement dated 5-8-1951 and Airways itself was voluntarily disolved. The amalgamation of Airways and Aviation was thought of as a further step to achieve the common purpose, the way for it having been cleared by the joint venture agreement between Airways and A.B.C. being terminated on 11-6-1948 (to take effect from 30-6-1948) and by the said agreement dated 5-8-1941 alleged to be ante-dated) transferring the liability of A.B.C. to D.C.P.M. which voluntarily undertook the liability of A.B.C. for no ostensible consideration whatsoever. It is also worth noticing that under the arrangement terminating the joint venture, A.B.C. had taken over all the rights, interests and claims and liabilities of Airways in the joint business for only Rs. 2,85,66,250, being the initial value of the share of Airways in stock under the joint venture. Even the payment of the said amount was to be in Installments’ the first by 30-6-1949, the second by 30-6-1950 and the balance by 30-6-1951. For the first two Installments admittedly no cash payment was made but there were merely entires by way of book adjustment. Shares to the value of Rs. 74,000 are stated to have been purchased by D.C.P.M. for Airways and it was not even mentioned in the Prospectus of Airways as to shares of which company or companies had been bought. It was concerning this aspect Dr. Nigam had specifically complained. Aviation was only a company on paper with no real assets, the share application money for which shares were allotted to individuals or companies belonging to the Dalmia Group had been mostly advanced from the funds of Airways.
(127) On 3-12-1952 the District Judge dismissed the petition for winding up filed by Chandra who by that time had gone to England. Even earlier, on 20-11-1952 Shri A. K Khanna, learned counsel for Chandra, had stated to the court that his client had gone away to England and asked for permission to deliver interrogatories by post. Therefore, Shri Khanna had no more evidence to produce. Oil that day only three witnesses had been summoned for Chandra, two of whom were examined; a clerk was left over. Shri Khanna subsequently applied for summoning 9 more witnesses to which Shri Ved Vyas appearing for some of the Directors, objected saying that they were not included in any of the lists filed earlier. Shri Khanna, therefore. wanted to summon J. Dalmia. as a new witness, J. Dalmia himself was present in the court then. The clerk who had been left over as well as J. Dalmia were immediately examined and orders were pronounced (later) on 3-12-1952, dismissing the application for winding up.
(128) On the materials before the court no other order could probably have been passed: even the interim report of the Inspectors not having been made available to the court, because privilege had been claimed in respect of the report (dated 28-7-1952) by an affidavit dated 26-11-1952. The application of Poddar was dismissed subsequently on 10-2-1953. Earlier on 13-1-1953 Shri Rajinder Narain, counsel for Poddar, had stated to the court that he was unable to find anything about Poddar and that as far as he knew he was “really out of mind”. There was one more petitioner, Mr. Nagori, who was desirous of proceeding with the petition; but his counsel Shri Rajinder Narain had stated to the Distt. Judge that the petition may be adjourned pending the determination of the petition sanctioning the scheme for amalgamation and that if that was ordered there would be no point in proceeding further with the petition for compulsory winding up. The scheme of amalgamation was approved by the District Judge by his order dated 10-2-1953, on the same day the application of Poddar also was dismissed.
(129) On 12-2-1953 C. P. Lal, who was at least aware of the way the proceedings were conducted, made an application to the District Judge through Shri Ved Vyasa for transferring the assets and liabilities of Airways to Aviation. This was ordered on 12-2-1953 and the records except of one office were handed over by C. P. Lal to Aviation on 13-2-1953. Even on 12-2-1953 C .P. Lal had written to Aviation that as per the order of the court passed on 10-2-1953 permitting the scheme of amalgamation of the assets sad liabilities of Airways to be transferred to Aviation and that they may depute an officer to take charge of the relevant records etc. He retained a sum of Rs. 52.500 as remuneration and another sum of Rs. 7,500 as outstanding cost of liquidation, including the fee of the Auditor who would audit the statements of income and expenditure for the period of liquidation. All the records are stated to have been handed over to G. Ramachandran (since dead), Director Aviation as per the details mentioned in the letter of the same day by Ramachandran to C. P. Lal; the records of at least one office were not even purported to be handed over.
(130) It is urged for the prosecution that the inference of conspiracy between C. P. Lal and R. Dalmia and his group is possible from the following features:
( 1 ) The knowledge which C. P. Lal did have that Inspectors had been appointed by the Government to investigate the affairs of Airways. (2) The voluntary winding up was effected within six days of the appointment of Inspectors. (3) There was a demand for winding up through court and at least apprehensions had been expressed (through out of the report of the Inspectors had not been received by him. then, as the learned Magistrate thought) that the records of Airways were sought to be destroyed. (4) C. P. Lal endeavored to resist the Inspectors having: access to the account books and documents of Airways for a fairly long period-this dilatoriness on his part is contrasted with the hurry with which he had handed over the records of Airways to Aviation finally. (5) He had not brought the heavy indebtedness of D.C.P.M. to Airways to the notice of the court. (6) His refusal to look into the allegations made pertaining to the management of Airways. (7) His statement in the petition to court for sanctioning the amalgamation that he had carefully examined the proposed scheme; he recommended it for the consideration of the court and the shareholders. (8) His presence at the meeting, of the shareholder which met to consider the proposed scheme; he is also stated to have addressed the meeting of the share-holders, which was addressed by R. Dalmia.
(131) It is now necessary to advert to a few broad features referred to by Shri Frank Anthony on behalf of C. P. Lal. He drew my attention to S. 126(1) of the Indian Companies Act, 1913 (with which Act alone we arc now concerned) which provides that the Liquidator could exercise all or any of the powers which a court can exercise during winding up in support of his contention that he had ample discretion to take or not to take any particular action. Yet, not being an officer of the court within the meaning of S- 140(1) of the Act he was not bound to produce books and documents in his custody or power relating to the company to the Inspectors appointed by the Central Government under S. 138 to investigate the affairs of the company. Regarding the latter it is sufficient to notice that C. P. Lal himself had not taken up the position that he was not bound to submit the books for examination by the Inspectors; he contended that by reason of the company having been wound up there could be no 11 inspection at all of the affairs of the company, which position also he abandoned later, after the Government clarified the position and directed him to produce the account books etc. before the Inspectors and without even getting the directions of court for which he had applied. In this light the question raised by Shri Frank Anthony relying on S. 140(1) of the Act that he was not an officer of the company and therefore he was not bound to produce the account books etc. to the Inspectors is not one which falls for consideration.
(132) Regarding the powers of the Liquidator, as noticed earlier, not only Shri Frank Anthony but Shri Gobind Das also relied on the said power. While the former relied upon the said power to indicate the kind of discretion and his own judgment which he could exercise the latter urged that inspite of his being clothed with. such powers he did not choose to elicit from the former Directors of the company such information as was necessary before he commended the proposed amalgamation scheme for consideration by the court.
(133) Shri Frank Anthony was at pains to show, relying on the very letters written by the Inspectors thanking C. P. Lal for his cooperation in the matter of producing the account books etc. that his initial resistance was even consistent with his own vanity being pricked when he was so commanded by the Inspectors and in the view he took that after the winding up there could be no probe at all into the affairs of the company. I am unable to appreciate this argument for the reason that if as a Liquidator it was his duty to go into the affairs of the company, if need be. by eliciting the necessary information from the former directors of the company, he should have, normally, thought that any probe into the affairs of the company by the Inspectors appointed by the Government would itself help him and not hinder him in his work as a Liquidator.
(134) Concerning the cooperation he is said to have given later to the Inspectors, as acknowledged by the Inspectors, it will also be relevant to notice what the Inspectors had to say on this question in their final report :
“SINCE our appointment the voluntary liquidator has not been sympathetic and it seems he has been taking instructions from the ex-directors of the company to decide whether or not to show the books to us although later on he submitted to our orders but even then he has been very slow in producing the books and in giving us all the information required by us”.
Shri Frank Anthony also laid stress on the total number of hours during which the Inspectors were allowed inspection but as it is seen from the above remark of the Inspectors even after he produced the books he was stated to have been very slow in giving all the information required by them. It is not suggested that such slowness was due to want of sufficient staff or that C. P. Lal had asked for such staff and it was not made available to him.
(135) Shri Frank Anthony also relied upon S. 78 Indian Penal Code ., one of the general exceptions provided in Chapter Iv of the Code : “Nothing which is done in pursuance of, or which is warranted by the judgment or order of, a Court of Justice, if done whilst such judgment or order remains in force, is an offence, notwithstanding the Court may have had no jurisdiction to pass such judgment or order, provided the person doing the act in good faith believes that the Court had such jurisdiction”. In practical terms, Shri Frank Anthony relied on the said provision in support of his contention though C. P. Lal in handing over the account books etc. was only doing so in obedience to the orders of court and that he was bound to do so. But it has to be appreciated that the case of the prosecution is that the whole scheme of amalgamation was a device to ultimately get at the documents of Airways in order to avoid further and fuller probe into the affairs of Airways; in this context Shri Gobind Das urged that it was C. P. Lal who applied to the court for directions to hand over the assets And immediately the orders were passed he handed over the same that very day. In the total context, Shri Gobind Das contrasted the dilatoriness on the part of C. P. Lal earlier and what he described as the indecent haste in handing over the documents as stated above. From this he contends, an inference is possible to draw having regard to all the circumstances of the case that he was also a party to the conspiracy.
(136) It seems to me, having given this matter my anxious consideration, that having regard to the scope of the committal proceeding it would not be for the Magistrate to draw inferences, by appreciating the entire evidence and circumstances, one way or the other. This principle must now be regarded as well-established; what is not permissible for the committing Magistrate to do would not be permissible for the court of revision to do either.
(137) Shri frank Anthony also urged me to bear in mind the well established legal position concerning circumstantial evidence-that it should be compatible with the innocence of the accused and incompatible with his guilt. But this is what has to be done at the final tally, during the trial; it seems to be very much more than what can be undertaken now. This is not a case where there is nothing, no circumstances at all, against C. P. Lal which would justify his commitment. Surely he has to explain not only his entire conduct-both his commissions and omissions from the commencement till the time of his handing over records-but he has also to explain, in particular, why he stated in the application to court for considering the proposed scheme that he had “carefully examined” it.
(138) It is true, no doubt, as pointed out by Shri Frank Anthony, that even if the Liquidator did not apply for such a scheme being sanctioned, any of the share-holders of Airways and/or Aviation could have done so; but the point that is material to consider is why did C. P. Lal not only put forward the scheme of amalgamation before the court, as it was suggested to him, but went further to assure the court that he had considered the scheme carefully ? He could not have made, at least without sufficient explanation being given, that statement without acquainting himself with the position of Airways as well as of Aviation. If he had known the true state of affairs by such careful examination he could not withhold what he came to knew from the court. He also owed a duty to the share-holders to tell them about such factors as he came to know as a result of, according to his own statement, his carefully examining the scheme. If he had appraised the share-holders of the true position they may not have approved the scheme; if he had at least told the court about the true position the court, it seems obvious that it may not have not only permitted a a compulsory winding up, through court, but also directed a fuller inquiry before permitting the voluntary winding up to stand. Even a cursory look at the affairs of Aviation would have revealed that it bad practically no other assets excepting the liabilities undertaken by D.C.P.M., and that D.C.P.M. itself was financially in a poor way without any means of clearing that liability; per contra he could have known, even by such cursory examination, of the relevant trial balances and statutory reports of not only Airways but of Aviation and D.C.P.M., that A.B.C. had become richer by the joint venture with Airways, had pocketed all the profits but passed on even its own liability to Airways to D.C.P.M. In these circumstances without at least giving any satisfactory explanations C. P. Lal could not ask for the commitment to be quashed. His solemn certificate to court that he had carefully examined the scheme of amalgamation could be taken and was meant to be taken into consideration. As it is seen now on the materials placed before the court it could not have passed any other order except to dismiss the applications for compulsory winding up and permitting the amalgamation. But it was the duty of the Liquidator, who being a lawyer was also an officer of the court, to place before it such matters as it was his duty to discover at least that without much difficulty by making a prima facie examination of the company’s involvement with Aviation, D.C.P.M. and A.B.C. Having regard to the accusation made that the documents were being sought to be destroyed it was only to be expected of the Liquidator that he could appraise the court of such apprehensions before obtaining an order from the court and could have asked the court to expressly permit him to hand over the record. It is necessary, in this context, to at least notice, without deciding it. the argument of Shri Gobind Das that the documents of the company are not its assets and all that C. P. Lal did was to get a direction from the court concerning the assets of the company and under the cover of such directions he handed over all the documents including the account books of the company as well. He further urged that having regard to the large number of documents it must have been a. very great effort to hand them over in such a short period, on the very day, the order concerning the handing over of assets was made by the court. He further urged that the Liquidator had taken no steps to take any proceedings against the directors and other persons under S. 235 of the Act to recover amounts lost to the company.
(139) In this situation it would not be enough for C. P. Lal to say, as he did through his counsel before me, that his recommendation concerning the scheme of amalgamation was accepted by the court. No material has yet been placed in support of the contention that C. P. Lal knew only as much as the court did. While that a court can do is confined to the materials placed before it the position of the Liquidator, armed with sufficient powers under the Companies Act, in order to know about the affairs of the company, is different. Having given this matter my anxious consideration and keeping fully in view the fact that C. P. Lal is a member of the bar who came upon the scene immediately after the winding up of Airways, it seems to me that it would be inappropriate to quash the commitment even as far as he is concerned.
(140) Before concluding I have to point out that it has become necessary to deal with numerous contentions, both of fact and of law, raised on behalf of the petitioners before me. I have made every endeavor to abstain from expressing any views of mine on the questions of fact which will have to be decided at the trial. If I have referred to any, as alleged by the prosecution, that was only to indicate the materials from which inferences could be drawn ultimately. Yet, I may make it clear that the trying Judge will appreciate the evidence and circumstances untramelled by anything I have stated or even be deemed to have stated even by implication.
(141) The Supreme Court having clearly defined the scope of the powers of the committing Magistrate he cannot appreciate the evidence or the circumstances in its totally as the trial Judge could, in order to draw inferences, for the purpose of discharging him-that will be the function of the trial court and not of the committing Magistrate. It bears, I trust, repetition to state that while dealing with these petitions to quash commitment this court is as much confined by the limitations of the committing Magistrate and cannot enlarge the scope of the Magistrate’s functions in a manner which would involve the appreciation of the totality of the evidence and the circumstances. In the result all these petitions are dismissed.
(142) Before taking leave of the case I have to point out the need for expeditious trial. This case, for various reasons, has been pending for so long. The responsibility for this may lie both on the prosecution and the accused. The charge-sheet itself was filed after several years; but on account of the mere delay in filing the charge-sheet a case which deserves to be committed to the Session could not be thrown out. The accused a.lso must also take a fair share for the trial of the case having been delayed so much because of the successive applications of an interlocutory nature by one or another of the accused having been filed taking at least one of them up to the Supreme Court. I consider it necessary, in these circumstances, to direct that the Sessions Judge, Delhi will make arrangements for the trial of this case as expeditiously as possible.