2010 PLP 69 (CLD)

ALI AZEEM IKRAM, DIRECTOR (ENFORCEMENT).-This order shall dispose of the proceedings initiated against the Directors of Hamid Textile Mills Limited (hereafter referred to as the ("Company") for default made in complying with the provisions of subsection (1) of section 158 of the Companies Ordinance, 1984 (the "Ordinance").

2. The facts leading to this case, briefly stated, are that in terms of the provisions of subsection (1) of section 158 of the Ordinance, the Company was required to hold its Annual General Meeting (the "AGM") for the year ended June 30, 2008 on or before October 31, 2008. The Company failed to hold the afore-said AGM within the' prescribed time period. The failure of the Company to comply with the afore-said mandatory requirements necessitated action against the Company and its Directors in terms of subsection (4) of section 158 of the Ordinance. Consequently, a show-cause notice dated March 13, 2009 ("SCN") was served on the Company and its Directors including the Chief Executive calling upon them to show cause as to why penalties as provided under subsection (4) of section . 158 read with section 476 of the Ordinance may not be imposed on them. The Chief Executive and other Directors, however, did not respond to the afore-said SCN. In order to provide an opportunity of personal hearing the matter was fixed for July 30, 2009.

3. On the date of hearing Mr. Khawar Almas Khawaja-Chief Executive appeared before me on behalf of all the Directors to argue the case. During the course of hearing while admitting the default he contended that due to change of management and delay of annual audit for financial year, 2008 the Company was not able to hold AGM in time. He requested for taking a lenient view of the default.

4. Before proceeding to decide this case, I consider it to highlight the importance of the strict observance of the aforesaid mandatory provisions of the law. The protection of the investors/shareholders is one of the primary objectives of the Ordinance. It is investors/shareholders who provide seed for capital formation. If the interest of the investors is protected, they will save and invest more. Their interest is protected by transmission of timely, adequate and meaningful information to them. It is the annual and interim accounts, which provide information to the investors about the affairs of the Companies. AGM is a forum where the investors can freely discuss, speak and vote on important matters concerning approval of accounts, appointment of auditors, election of Directors etc. It has unfortunately been noted that the Directors of the Company are not observing these compulsory requirements of law, as it was observed that AGM was held on May 9, 2009 with a delay of 6 month and 8 days.

5. Although the default is established yet keeping in view the past track record of the Company and the fact that the Company has held AGM though with a delay, I am inclined to take a lenient view in the matter and instead of imposing maximum fine of Rs.500,000 on every Director and a further fine of Rs.2,000 per day for the continuous default for each quarter, I impose a fine of Rs.100,000 (Rupees one hundred thousand only) on Mr. Khawar Almas Khawaja the Chief Executive of the Company only under subsection (4) of section, 158 of the Ordinance other Directors are strictly warned to be careful in future. I hope that Directors of the Company will react positively to this lenient view and ensures compliance with mandatory provisions of the Ordinance in future. The Chief Executive of the Company is hereby directed to deposit the afore-said fine of Rs. 100,000 (Rupees one hundred thousand only) in the designated Bank account maintained in the name of Securities and Exchange Commission of Pakistan with MCB Bank Limited within thirty days from the receipt of this Order sand furnish receipted vouchers or pay by a DD/pay order issued in the name of Commission for information and record, failing which proceedings under the Land Revenue Act, 1967 will be initiated which may result in the attachment and sale of movable and immovable property. It may also be noted that the said penalties are imposed on the Chief Executive in his personal capacity and he is required to pay the said amount from his personal resources. H.B.T./43/SEC Order accordingly.