' AMIR M. KHAN AFRIDI, DIRECTOR (SMD).---This order will dispose of the proceedings initiated against the above-listed 94 applicants through the respective show-cause-notices as indicated above regarding submission of applications for subscription of shares of HBL.
1. Facts of the case are that:--
(i) the Privatization Commission, Government of Pakistan (hereinafter referred to as the Offerer) offered 34.500 million shares to the general public for subscription from July, 26-31, 2007 out of its shareholding in HBL through the Offer for Sale Document dated July 14, 2007 (hereinafter referred to as OFSD) issued, circulated and published with the approval of the Securities and Exchange Commission of Pakistan (hereinafter referred to as the Commission) under section 62 read with section 57 of the Companies Ordinance, 1984.
(ii) Global Securities Pakistan Limited, the Lead Manager to the Offer, on behalf of the Offerer, vide letter dated December 4, 2007 furnished to the Commission a list containing particulars of 2283 applicants including the said 94 applicants who submitted applications for subscription of shares of HBL in violation of section 18A of the Ordinance. The said section 18A stipulates that-- "(1) No person or any other person on his behalf shall make a fictitious application or submit more than one application for shares of companies offered to the public.
(2) In case of contravention of the provisions of subsection (1), the application money shall be liable to confiscation."
It was clearly stated in OFSD, abridged OFSD and the advertisements published, with respect to the said offer, in various. Newspapers' that fictitious and multiple applications (more than one applications by a single applicant) are prohibited and such applications' money shall be liable to confiscation under section 18A of the Ordinance.
(iii) MCB Bank Limited, Head Office, Karachi (hereinafter referred to as the Bank's Head Office) vide letter dated August 10, 2007 read with their letters dated August 13, 2007 and August 15, 2007, on the basis of information provided by MCB Bank Limited, Regional Office, Hyderabad (hereinafter referred to as the Bank's Regional Office) requested THK Associates (Pvt.) Limited (the Share Registrar of HBL and the Ballotter to the Offer (herein after referred to as the Share Registrar)] that out of the total 2283 applications initially forwarded by the Bank, only 92 applications be included in the ballot and the rest of 2191 applications submitted through their Al Abbas Sugar Mills Branch be treated as cancelled.
(iv)The Ballot for selection of applications was conducted on August 11, 2007 and all the said 2283 applications including the said 94 applications submitted through the Bank were included in the said ballot. The Share Registrar vide its letter dated August 15, 2007 intimated the same to the Bank's Head Office and advised it to contact the competent authority i,e, the Commission for necessary instruction in the matter. The Bank's Head Office approached the Commission vide its letter dated September 6, 2007 for issuance of directives authorizing the Lead Manager to the offer for refund of the subscription money of the unsuccessful applications. The Commission vide its letter dated September 18, 2007 requested the Bank's Head Office to provide certain information/documents enabling it to proceed in the matter.
(v) The case was preliminary examined on the basis of information received in this office in response to the above-mentioned letters and subsequent correspondence. The preliminary examination raised the suspicion that most of the 2283 applications submitted through the Bank are made in violation of section 18A of the Ordinance. It was observed that:--
(a) the said 94 applications were made from one single address i,e, MCB Bank Limited, AASM Branch, Mirwah Gorchani, Mirpurkhas;
(b) most of the said 94 applications contained such bank account numbers which were mentioned in other applications as well i,e, the account numbers provided therein were incorrect as these account numbers either mis-match with the respective title of account or even did not exist;
(c) The applicants' signatures affixed on most of the applications varied from those affixed on their respective CNICs. Since most of the bank accounts mentioned in the applications were not maintained with the Bank, hence authenticity of the signatures affixed on the applications could not be verified. Hence, compliance to instruction No,8.5 of Part VIII of OFSD was not made. The said instruction states that "in case of difference of signature with the bank and the computerized National Identity Card (CNIC), both the signatures should be affixed on the Application Form". This instruction was not complied with;
(d) Instruction No,8.15 states that, "Making of any false statement in the application or wilfully embodying incorrect information therein will make the applicant or the bank liable to legal action".
The Bank's Head Office vide letter dated October 24, 2007 stated that out of total 2283 applications, 2191 applications are defective due to non-maintenance of bank account with the Bank. Whereas, most of the said 2191 applications contained numbers of bank accounts. This indicated that the bank account numbers mentioned in the said applications were fictitious; and
(e) Instruction No,8.8 (a) states that "Subscription money must be paid by a cheque drawn on applicant's own bank account". Since the applications in question contained incorrect account numbers, therefore, compliance with this instruction was doubtful.
2. Explanations of the said 94 applicant were called through independent letters dated January 25, 2008 and April 21, 2008 by sending at the address mentioned in their respective applications and through the Bank. In response vide various letters mostly dated February 13, 2008, the allegations made through the above-stated explanation letters were denied and it was stated that blank column of the shares subscription applications for bankers details were erroneously filled in by the officials of the Bank. However, response on same styled letters further raised the suspicion.
Therefore, show-cause-notices under section 18A of the Ordinance were issued to the said 94 applicants by the following three officers of the Commission. Officer-wise breakup of the show- cause-notices issued is as under:-- Sr.No. Adjudicating Officer Total Number of cases
1. Mr. Muhammad Farooq, Joint Director47
2. Ms. Musarat Jabeen, Director25
3. Amir M. Khan Afridi, Directo 22 Total 94
3. Individual hearings in the said 94 cases were conducted by the above-mentioned 3 officers during the period from June 30, 2009 to February 11, 2009. The applicants were allowed to appear either in person or through representatives duly authorized through written power of attorney and were directed to bring along with the following documents:--
(i) CNIC in original and an attested copy thereof of the applicant and that of the attorney, if any;
(ii) bank account statement, for the period mentioned in the respective show-cause-notices, of the bank account mentioned in the application;
(iii) counterfoil of the pay order (in case subscription money is paid through pay order) along with bank account statement of the bank account through which the subscription money was paid;
(iv) in case the subscription money is neither paid through bank account mentioned in the application nor paid through pay order, then bring the bank account statement of the bank account through which the subscription money was paid;
(v) provisional acknowledgement (receipt), issued to the applicant by the Bank at the time of acceptance of application for subscription of shares of HBL; and
(vi) any other document(s), which in opinion of the applicant be useful to support his claim.
4. During the hearings held by the above-mentioned 3 officers, five persons appeared on behalf of 63 applicants claimed to be their attorneys whereas 31 applicants remained absent Breakup of the applicants represented by the said five persons is as under:--
(i) 20 Applicants mentioned at Sr.Nos.3, 44 to 47, Sr.No,74 to 77, Sr.Nos.80 to 85 and Sr.Nos.88 to 92 represented by Mr. Yaseen;
(ii) 16 Applicants mentioned at the Sr.Nos.15 to 26 and Sr.Nos.37 to 40 represented by Mr. Ali Asghar;
(iii) 14 Applicants mentioned at Sr.Nos.27 to 36, Sr.Nos.41 to 43 and Sr.No,48 represented by Mr. Nadeem Akhtar;
(iv) 11 Applicants mentioned at Sr.No,4 to 14 represented by Mr. Hussain Ali; and
(v) 2 Applicants mentioned at the Sr.No,1 to 2 represented by Mr. Abdul Ghani.
5. In most of the cases, the attorneys failed to produce the requisite documents particularly original CNICs of the applicants and attested copies of the bank account statements. Further, it was observed that all the attorney documents presented during the hearings were same styled and pattern and there were clear variances in the signature of the applicants affixed on, the attorney documents and on the respective CNICs. After hearings and noticing the similarities in each individual case, all the adjudicating officers were of the unanimous view that most of the applications submitted through the Bank appeared to be an elaborate scheme and that the share subscription applications have not been submitted by the applicants i,e, the persons named therein rather these applications have been submitted by same person or group of persons with ulterior motives.
6. The Bank's Head Office vide letter dated October 24, 2007 informed that out of the total subscription money amounting to Rs,54,825,500 an amount of Rs,51,136,000 was transferred to the agent bank i,e, National Bank of Pakistan for onward credit to the officer's bank account whereas the remaining amount was transferred to the bank for its disposal. It was further confirmed that all the share certificates, except those allotted against 92 genuine applications, were delivered to the Lead Manager to the Offer.
7. Further, the Bank's Regional Office vide letter dated January 14, 2008 intimated that an amount of Rs,3,172,500 is outstanding in the books of the bank and requested for authorization for refund of the said amount, being the subscription money of unsuccessful applications, to the claimants through pay orders as the claimants do not maintain any account with the bank. The Commission vide letter dated January 30, 2008 while declining the above-mentioned request directed the Bank's Regional Office to hold the said money till further orders as legal proceedings in the matter have been initiated by the Commission. The Bank's Regional Office was also requested to provide lists of the applicants to whom subscription money was refunded by the bank and to whom subscription money was not refunded. In response vide letter dated February 21, 2008, the Bank's Regional Office provided list of applications against which refund of Rs,423,000 was made and list of applications against which refund of Rs,3,172,500 was withheld by the Bank.
8. In view of the above, the Bank was requested vide letter dated November 12, 2008 to provide certain information, on a pre-set format, relating to detail of payments made by each of the said 2283 applicants. The Bank's head Office vide letter dated January 2, 2009 intimated that most of the applications were financed through two Cheques bearing No,033205 amounting to Rs,47,000,000 and Cheque No,03328 amounting to Rs,3,384000 both dated July 31, 2007 drawn on PIS Account No,3600-4 maintained with the Bank in the name of Mr. Ahsan Habib son of Habibullah.
Further investigation in the matter revealed that the said 94 applications were not financed through the bank account numbers mentioned therein rather subscription money of most of the applications was paid through different cheques drawn on the Bank Account No,3071-8 tilted Mr. Nadeem Akhtar maintained with the Bank.
9. The above-mentioned information prima facie further suggested that most of the applications submitted through the Bank for subscription of shares of HBL appeared to be fictitious and have been submitted with ulterior motives as a part of a well thought out scheme by using identities of the said 94 applicants. These facts were brought to the notice of the Commission by all the adjudicating officers. The Commission in its 25th meeting held on July 22, 2009 decided that the cases of all the 2228 (2283-55=2228) applicants including the said 94 applicants be heard by the undersigned. 55 applications being multiple were already disposed of through separate orders.
10. Rehearing in all the said 2228 applications including the said 94 applications were fixed from September 28, 2009 to October 8, 2009 at the Commission's regional office viz. The Companies Registration Office, 4th Floor, State Life Building No,2, North Wing, Wallace Road, Karachi. Hearing Notices requiring the applicants to appear in person were issued in the names of all the said 94 applicants at the addresses mentioned in the applications and as well as their permanent and temporary addresses mentioned in their CNICs. To ascertain genuiness of the applications, personal appearance in the hearings was made mandatory.
11. On October 8, 2009 Mr. Yaseen, an employee of Al Abbas Group appeared before me and claimed that he is appearing on behalf of Mr. Arif Shehzad, an employee of the Bank and representative of 95 applicants including the above-listed 94 applicants and 1 applicant out of those 55 applicants whose cases were already decided separately as mentioned in para 9 above.
He argued and admitted that:-
(1) the said 95 applications have been submitted by Mr. Arif Shehzad on behalf of the applicants with their consents;
(ii) out of 95 applicants, he provided CNICs in original of 63 applicants mentioned at Sr.Nos.1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 13, 14, 15, 17, 20, 21, 22, 25, 26, 27, 30, 31, 32, 34, 35, 36, 37, 38, 39, 40, 41, 42, 44, 48, 51, 54, 55, 56, 57, 58, 59, 61, 62, 63, 64, 66, 67, 68, 69, 70, 71, 75, 76, 77, 80, 81, 83, 84, 85, 87, 88, 89, 92 and 93;
(iii) out of the said 95 applications, 68 applications were actually financed through bank account No,3071-8 titled Mr. Nadeem Akhtar and the balance 27 applications were financed through cash; and
(iv) he has purchased 1,500 shares of HBL from 15 different persons out of the said 95 applicants.
Mr. Yaseen on behalf of Mr. Arif Shehzad admitted that submission of applications for subscription of shares of HBL with fake particulars like fake bank account number was a mistake committed by him but it was due to unawareness of law. He requested for sympathetic consideration and promised that he will not repeat such a mistake.
12. The Bank also shares its internal enquiry report dated August 30. 2007 conducted in the instant case. Brief excerpts of the report are reproduced as under:--
(i) the branch has accepted 2283 applications (including the said 94 applications) for subscription of shares of HBL of which 2191) applications have been received from Al Abbas Sugar Mills authorities [1851 applications against non-account holders, 13 applications against closed accounts and 327 applications against bank accounts] whereas the balance 92 applications were accepted from the general public holding proper bank accounts;
(ii) two bank accounts numbering 3071-8 titled Mr. Nadeem Akhtar and numbering 3600-4 titled Mr. Ahsan Habib both maintained with the Bank were used by Al Abbas Sugar Mills authorities to receive and pay shares subscription money of Rs,2,279,500 and Rs,50,384,000 respectively for 2191 applications of the Mills employees;
(iii) out of total 2283 applications, just 419 applications [92 applications other than Mill's employees Accounts and 327 applications of Mill's employees Accounts] were found to be correct whereas the balance 1864 accounts were concealed knowingly and deliberately by the Branch Manager and Computer Operator who passed/posted cheques and vouchers appearing on the computerized sheets;
(iv) Syed Amir Hassan, Branch Manager admitted that he has accepted improper share applications from two employees of the Mill on the pressure of the Mill's authorities who are their most valued client and the biggest group of industries in the area;
(v) Mr. Arif Shehzad, the Computer Operator of the bank has also admitted that he has posted irregular vouchers;
(vi) the enquiry officer has concluded that both the above-mentioned officials of the Bank have not followed proper procedure and allowed one group/party to produce large number of applications of such persons who do not even maintain any account with the Branch. The Branch.
Accepted applications containing fictitious bank account numbers and forward the same to the Main Branch; and
(vii) the enquiry officer has fixed responsibility on both the above-mentioned officials for mishandling the matter.
13. In view of the foregoing paragraphs it is stated that:--
(i) all the attorney documents provided were same styled and pattern;
(ii) there were clear variations in signature of the applicants affixed on the so called attorney documents and copies of the respective CNICs;
(iii) in support of his argument that Mr. Arif Shehzad had obtained consents of the applicants for submission of applications in their names. Mr. Yaseen failed to bring the applicants in person before me;
(iv) in complete negation to the claim of Mr. Yaseen, 1 applicant appeared in person before me, presented his original CNICs and stated that he has neither submitted any application for subscription of shares of HBL through the Bank nor authorized any person to submit any application on his behalf; and
(v) subscription money of 68 applications was paid through 17 different cheques drawn on bank 'account No,3071-8 tilled Mr. Nadeem Akhtar whereas subscription money of the remaining applications was paid through cash.
14. I have considered the arguments presented before me by Mr. Yaseen claiming to be representatives of the said 94 applicants, 1 applicant appeared before me in person and the correspondence exchanged in the matter. Perusal of the applications and information received in the matter reveals that:-
(i) the said 94 shares subscription applications have not been actually submitted by the applicants named therein rather these applications have been submitted by some employees of Al Abbas Group by misusing identities i,e, CNICs etc., of different individuals along with collusion of some employees of the Bank;
(ii) appearance of just 1 applicant in person despite specific directions of personal appearance, submission of same styled attorney documents and clear variation in signatures of the applicants affixed on the so called attorney documents and copies of the respective CNICs, casts serious doubts on the genuiness of the applications. This apprehension further strengthened when the applicant appeared in person denied submission of any application for subscription of shares of HBL;
(iii) non-appearance in person of the remaining applicants despite specific directions proves that the shares subscription applications were not submitted by the applicants named therein;
(iv) the information received from the Bank establishes that the money used for the shares subscription applications was funded by some employees of Al Abbas Group, which leaves no doubt in my mind that the said 94 applications are fictitious; and
(v) despite providing adequate opportunities of hearing nothing was brought on record to prove that the said 94 applications are not fictitious. Further, certain admissions as mentioned above by Mr. Yaseen during the hearings in the instant case as well as other cases related to share subscription of HBL and request for amicable settlement of the matter also proves that the said 94 applications are fictitious and knowingly and wilfully submitted in violation of section 18A of the Ordinance.
15. In view of the above, I am of the considered opinion that submission of the said 94 applications was a fraudulent, collusive and a pre-arranged scheme made and implemented by some employees of Al-Abbas Group with the help of some employees of the Bank in violation of section 18A of the Ordinance. The said 94 applications are fictitious and, therefore, subscription money of the said 94 applications is confiscated under subsection (2) of section 18A of the Ordinance. The concerned authorities having custody of the subscription money of the said 94 applications are directed to forthwith deposit the respective amounts with the Commission.
' This order is being issued without prejudice to any other action which may be taken under the law against the persons involved in submitting the said fictitious applications.