This order will dispose of the proceedings initiated under Section 224(4) of the Companies Ordinance, 1984 ("Ordinance") by the Securities and Exchange Commission of Pakistan ("Commission") through Show Cause Notice No. S.M(B.0)C.O.222/9(461)98 dated 24/07/2013 ("Notice") issued to Committee of Administration-Fauji Foundation ("Respondent"), a beneficial owner of more than ten percent equity securities of Fauji Cement Company Limited ("Issuer Company").
2. The facts of the matter leading up to aforesaid Notice are that the Issuer Company is a public listed company and the Respondent being a beneficial owner of more than ten percent of its ordinary shares was required to file returns of beneficial ownership on Form 32, within the period stipulated under Section 222 of the Ordinance. However, it failed to file Form 32 within the stipulated time period, for the changes taken place in its beneficial ownership during the period from April 2012 to November 2012 (the "period"), which attracts penal provisions contain in Section 224(4) of the Ordinance.
3. Section 222(2)(c) of the Ordinance stipulates the period within which the Form 32 is required to be submitted as under:- "where there is any change in the position or interest as aforesaid including a change in the beneficial ownership of any equity, security, within fifteen days of such change".
4. The Respondent filed a return of beneficial ownership on Form 32 with this Commission on 20/12/2012, showing therein the following changes in its beneficial ownership, with the delay as mentioned against each:- {{TABLE}} Sr.
No Date of Transaction Number of Shares Nature Extend or Delay 1 17/04/2012 6,000,000 Sale 233 2 18/04/2012 6,65,0000 Sale 232 3 19/04/2012 5,400,000 Sale 231 4 20/04/2012 25,000 Sale 230 5 23/04/2012 7,700,000 Sale 227 6 24/04/2012 4,100,000 Sale 226 7 22/05/2012 125,000 Sale 198 8 25/05/2012 1,575,000 Sale 195 9 28//05/2012 2,900,000 Sale 192 10 01/06/2012 3,100,000 Sale 188 11 01/08/2012 2,500,000 Sale 127 12 02/08/2012 675,000 Sale 126 13 13/08/2012 3,700,000 Sale 115 14 16/08/2012 3,528,000 Sale 112 15 23/08/2012 2,122,000 Sale 105 16 15/09/2012 14,900,000 Sale 82 17 02/10/2012 1,225,000 Sale 65 18 05/10/2012 8,000,000 Sale 62 19 10/10/2012 3,000,000 Sale 57 20 15/10/2012 1,420,000 Sale 52 21 18/10/2012 7,000,000 Sale 49 22 19/10/2012 4,300,000 Sale 48 23 01/11/2012 5,500,000 Sale 35 24 02/11/2012 19,500,000 Sale 34 25 06/11/2012 6,400,000 Sale 30 26 07/11/2012 53,0000 Sale 29 27 08/11/2012 1,600,000 Sale 28 28 12/11/2012 2,500,000 Sale 24 29 13/11/2012 8,000,000 Sale 23 30 14/11/2012 2,500,000 Sale 22 31 15/11/2012 3,525,000 Sale 21 32 20/11/2012 20,000,000 Sale 16 33 21/11/2012 10,700,000 Sale 15 34 22/11/2012 19,300,000 Sale 14 35 23/11/2012 49,800,000 Sale 13 36 27/11/2012 13,955,500 Sale 9 37 28/11/2012 22,044,500 Sale 8 38 29/11/2012 9,700,000 Sale 7 39 30/11/2012 44,500,000 Sale 6 {{TABLE}}
5. The aforesaid changes in beneficial ownership were reported to the Commission with delay ranges from 6 days to 233 days in contraventions of Section 222(2)(c) of the Ordinance, which prima facie attract penal provisions contain in Section 224(4) of the Ordinance, which provides as under:- "Whoever knowingly and wilfully contravenes or otherwise fails to comply with any provision of section 222, section 223 or section 224 shall be liable to a fine which may extend to thirty thousand rupees and in the case of a continuing contravention, non-compliance or default to a further fine which may extend to one thousand rupees for every day after the first during which such contravention, non-compliance or default continues".
6. The Commission took cognizance of the aforesaid default and issued Notice to the Respondent under Section 224(4) of the Ordinance, calling upon it to explain through written reply along with documentary evidence, if any as to why action may not be taken against it pursuant to Section 224(4) of the Ordinance, for aforesaid contraventions of Section 222 of the Ordinance. Mr. Aziz Ikram, Deputy General Manager Finance of the Respondent ("Authorized Representative"), filed written reply to the Notice vide letter dated 2/8/2013.
7. Furthermore, in order to provide an opportunity of being heard in person, hearing in the matter was fixed for 29/08/2013 at the Commission's Head Office, Islamabad. On the said date, the Authorized Representative appeared on behalf of the Respondent. The submissions made in writing as well as verbally on behalf of the Respondent by the Authorized Representative be ummarized as under:- a. Subsequently after obtaining all regulatory approval, right shares were issued @ 92% by the Issuer Company at a discounted price of Rs. 5/- per share to pay back company's borrowings. By giving consideration to the unfavorable market of cement sector none of the institutions was ready to underwrite the issue. However, the Respondent being major sponsor agreed to under write the issue. b. Due to heavy renunciation by almost 99.9% share holders, the Respondent had to purchase the shares over and above its proportionate shares as per terms of the under writing. c. After completion of all formalities the Respondent decided to off load the shares obtained as underwriters through open market. Accordingly in April 2012 (after 9 months of purchase) the Respondent stated that selling of the said shares. d. On the completion of requisite sale of shares through brokerage house, the information u/s 222 was submitted to Commission on misunderstanding of reporting/compliance time lines as per rules. e. The Respondent being, a trust cannot enter into speculative nature of shares trading and holds the shares of listed companies as strategic investments for long term. f The delay in reporting was not intentional and requested to condone the same. g. The Authorized Representative assured that the Respondent will comply with the requirement of Section 222 of the Ordinance within the prescribed time period in future.
8. I have considered the submissions made on behalf of the Respondent and observed that the main plea of the Authorized Representative is that "on the completion of requisite sale of shares the requisite return was submitted to Commission on misunderstanding of reporting/compliance time lines as per rules".
9. In this regard, it is pointed that the provisions of Section 222 of the Ordinance clearly describe the period for filing of returns of beneficial ownership as under:- Section 222 (2)
The period within which the said return is to be submitted to the registrar and the Commission shall be
(c) where there is any change in the position or interest as aforesaid including a change in the beneficial ownership of any equity, security, within fifteen days of such change;
10. The transcript of law is very clear, which describes that the change in beneficial ownership is requited to be reported within fifteen day of its occurrence. Thus, it is evident that the aforementioned argument submitted on behalf of the Respondent does not have any merit.
Furthermore, the Respondent has sold 330 million shares in 39 transactions during the period from 17/04/2012 to 30/11/2012 and reported the said changes to the Commission with delay ranges from 06 days to 233 days.
11. Hence, in the light of aforesaid discussion, I am of the view that the Respondent has committed the violation. However, it has filed the return on its own motion. Taking a lenient view of the default, in exercise of powers conferred under Section 224 (4) of the Ordinance, I hereby impose a fine of Rs. 25,000 (twenty five thousand rupees only) on the Respondent and no further fine for continuous default is imposed.
12. The Respondent is directed to deposit the fine in the account of the Commission being maintained in the designated branches of MCB Bank Limited, within 30 days of the date of this order and furnish Original Deposit Challan to this office.
13. This Order is issued without prejudice to any other action that the Commission/Registrar may initiate against the Respondent in accordance with the law on matter subsequently investigated or brought to the Notice of the Commission.