1992 PLP 1168 (CLC)

"(b) The Audit Certificate dated 11th December, 1974, was based on unapproved accounts for the year ended 31st December 1973, which contained fictitious entries relating to Capital Reserve and Share Investment Reserve, which were subsequently deleted in the approved accounts as audited on 31st August 1976. There has been no violation of law in this respect. (c) The allegation is baseless. The latest audited annual balance‑sheet available at the time of acquisition of shares was for the year ended 31st December 1972 and in accordance with the provisions of the Schedule to Act XVIII of 1974 only that balance‑sheet could form the basis for determining the break‑up‑value for the purpose of. compensation. The accounts for the year ended 31st December, 1973 as prepared initially contained fictitious entries and the audit certificate based thereon could not be acted upon. The accounts for the year ended 31st December 1973 could be finalised only in August 1976. Hence they could not be taken as a basis for determining the break‑up‑value of shares acquired in May, 1975. (d) The break‑up‑value was required to be determined by the Auditors of the Company as per latest audited annual balance‑sheet of the Company available at the time of acquisition of shares and action was taken accordingly. Consultation with shareholders in the matter was not required. (e) The petitioner has placed reliance on the Audit Certificate dated 11th December, 1974 (copy at Annexure B' to the petition), which was based on unapproved accounts and could not be acted upon as already explained against (b) and (c) above. (f) The direction given to the Auditors of the Company meant only re-audit of the accounts for year ended 31st December, 1973 on the basis of the accounts as prepared after omitting incorrect entries relating to Capital Reserve and Share Investment' Reserve .

11. It is also to be noticed that M/s. Mana & Company the Auditors of the Company, respondent No.4 have admitted in their written statement that they had issued the certificate dated 11th December, 1974 on the basis of the audited balance‑sheet for the account year ending 31st of December, 1973.

12. From the above the conclusion which fallows is that the audited balance‑sheet for the year ending 31st of December, 1973 being available had to be considered "the latest balance‑sheet" and the break‑up‑value of the shares of the petitioner should have been worked out on the basis of that balance sheet.

13. So far as the revaluation of the fixed assets of the company and its subsequent deletion of certain entries by the new management, this aspect need not be dilated upon in view of the pronouncement of the Supreme Court in the above‑cited case wherein it has been held that it was open to the company to revalue its assets and the entries in the latest balance‑sheet could not be reversed by the new management.

14. Notice may also be taken of letter dated 28th November, 1974, addressed by the Ministry of Communication, Government of Pakistan to the Chairman Pakistan Shipping Corporation Board Karachi copy of which has been filed as Annex. `K' to this petition. The relevant paragraph of the said letter reads as under:‑ "The matter has been considered further by the Finance Division in consultation with the Law Division. It has been held that the determination of the break‑up‑value of shares for the purpose of the Schedule to the Pakistan Maritime Shipping (Regulation and Control) Act, 1974, the "latest audited annual balance‑sheet" would be the one available on the date of acquisition of shares . The break-up‑value certificates in respect of the various Shipping Companies furnished by you were based on the latest audited annual balance‑sheet as available on the date of the takeover as indicated below:‑ (1) Pan Islamic Steamship Company. (2) Chittagong Steamship Corporation, (3) Muhammadi Steamship Company Ltd. as on 31st. December, 1972. (4) Crescent Shipping Lines Ltd. (5) Trans Oceanic Steamship Co. Ltd. (6) Pakistan Shipping Line Ltd. as on 30th December 1972) (7) Gulf Shipping Corporation Ltd. as on 30th June, 1973.) Fresh break‑up‑value certificates may now be .obtained from the auditors of the companies at 1 to 6 on the basis of their latest audited annual balance‑sheets as prepared for the completed accounts in 1973, i.e. as on 31st December, 1973 in the case of the companies at 1 to 5 as on 30th September, 103 in the case of the company at 6." In face of this letter the insistence of the respondents that the break‑up‑value was to be worked out on the basis of balance‑sheet for the year 1972 is wholly ill‑founded. In view of what has been stated above this petition is allowed in terms that the respondents are directed to work out the break‑up value of the shares of the petitioner in accordance with the balance‑sheet for the year ending 31st of December, 1973 as audited by the Auditors at that time. No order as to costs. AA./R‑22/L Petition accepted.