AI Drafter 
TaxTMI 
TaxTMI 
1930 (7) TMI 14
X X X X Extracts X X X X
X X X X Extracts X X X X
.... for a direction that they should prosecute the directors, auditors and manager of the said bank for offences under section 282 of the said Act. The application also states that the manager of the bank is liable for false statements made in Form G of the Act but that part of the application is dropped. Section 282 of the Indian Companies Act reads as follows: "Whoever in any return, report, certificate, balance sheet or other document, required by or for the purpose of any of the provisions of this Act willfully makes a statement false in any material particular, knowing it to be false, shall be punishable with imprisonment of either description for a term which may extend to three years, and shall also be liable to fine." In this ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y particular debt which will be recovered, as for a correct estimate of this it is necessary to know all the circumstances of each case, and the financial position of each debtor. In his letter of 16th April, 1928, to the auditors of the Karachi Bank, Limited, Mr. Jamshed Mehta has mentioned that as he had to take into consideration that the Karachi Bank intended to borrow from the Imperial Bank, he had to take a very conservative and rigid view in valuation of the loans made by them to the parties and the securities held, and he goes on to say that in some cases he had no knowledge of the strength of the sureties and had, therefore, to eliminate such parties from consideration and valuation. This means that Mr. Jamshed Mehta adopted a very....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tatement of the profit and loss account which appears below the balance sheet, though no one has attempted to explain how the sum of Rs. 15,000 odd in this account has been arrived at. What the directors of the bank have done is to show a cash profit for the year by adding in a sum which is due no doubt but was never paid and was never likely to be paid. The balance sheet, therefore, contains a false statement and a very material one and I am unable to see how it can be argued that it was not intended to mislead. It was argued that as the balance sheet showed bad or doubtful debts of nearly three lakhs of rupees and the directors in their report stated that they did not declare any dividend, any member of the public having read the balan....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d lets it out on lease for Rs. 50 a year. The following year owing to the depreciation of property, the property is worth Rs. 750 only and a balance sheet would show a loss. The property might, however, in that year be leased for Rs. 75 instead of Rs. 50 and there will, therefore, be a profit as compared with the first year although the value of the assets had decreased. I do not dispute that the Karachi Bank might have made a profit although their assets had dwindled from 48 lakhs in 1926 to 41 lakhs in 1927. But the figures in the balance sheet show that they did not in fact make a profit and this illustration, therefore, is not of much value in relation to the facts of this particular case. I hold then that the statement contained in ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... such compulsion as would make his act not an offence. Nothing has been said to show that Mr. Lokamal was ignorant of the contents of the balance sheet, but it is argued for the directors, Mr. Misquita and Dr. Fonseca, that they did not often attend the meetings of the directors and had no knowledge of banking and accounts. As regards that they may be entitled to some sympathy, if owing to ignorance of banking methods, they have signed a false balance sheet, but at the same time if persons join a board of directors and allow their names to be used as a bait to induce the public to deal with the concern of which they are directors, they must take the consequences if they do not exercise due care and attention in signing a false balance sh....