1. ORDER LINDER THE PROVISIONS OF SECTION 208 READ WITH SECTION 476 OF THE COMPANIES ORDINANCE 1984 ]'his order will dispose c.>t the procemiim,r,s initiated against the directors r.q.M/s Kohinoor Power Company limitcti (the "Company") pertaining to contravention of tile provisions of Settton 2O of the Companies Orciinance, 1984 (tile "Qrdinancen The Company is incorporated in Pakistan as pubilc limited company and is Listed on filE stock exchanges of Pakil,ttni. Issued.
2. Subscribed and Paid up capita[ of the Companv is ]Zs. 12{1.000,0D0i- comprising of I 2r0110.000 ordinary shares of Rs. 10 each 05 on j le 30, 2008. The Company is engaged in the bosineyc of generation .And distribution of electricity.
3. The fac.11.5 IL...Id:Eng to this ease, brionv oati...4.! Are !Hat Ilia Fnforcement departimmt of Securities and Exchange Cornmission of ral4istari ("Commission") conducted examination of the annual audited accounts of the Compariv for. The period ended Tune 30. NOR; ("Accounts") revealed that the Company has ailowed credit period of 31 days to its ru!Storners, other than the associates, However, credit period aiinwed to its associate kolsinoor Industries Limited ("KIL") stood at 4i11 days: furthermore, accounti of MI. In the tinols of the Company revealed that maximum debit bAinet.
4. 430-.Tancling at Inv end of any month during the year is 1,ibstiLluial1v more than Rs. 31,49 million which is greater than total Sale to KIT_ in financial year 2003, as it i7vident from the following analysis: Sales to Associate 29,375,601 Net ...11es (other than Associate) 370,236,837 TradE; Debts (other than Associate 32,653,892 Collection period .31 days Sates to Associate 25,723, (9J TE'VILL Debts {[(IL)
5. 31,48.8.3S1 Collection Period 441 days From above analysis it is apprehended that the Companv has given abnormal trade credit to its associate Kn. Without The authority of a special resoltoion and ,,vititout an:v return. This is in contravention to the provisions of Section 208 of the Ordinance, Therefore, a 5how cause notice dat,:d March 21), .21119 ("SCN") was issued to 11-le directors 01 Lhr Company t9 explain as to why penalties in terms of Sub-section (.3) of Section 208 of the Ordinance. May. Not he imposed on them, 5_ The reply of SCN was submitted by all the directors.
6. Vide their letter dated May 27, 20(19, the seriatim reply given by the Company is given below: Kit has suspended its operations w.e.1 12 October 2007, Thereafter KR, has stopped bruying electricity from the Company, The Company has not sold electricity Lo K I., for whole year, it is only July Nig-October 2007 (3 months and 1.2 days), Therefore, c.Alcii Eating collection period by 360 days is not correct. ICl I. His paid Of it6 balance and as ern .31-(0-209, the balance is nil.
7. Currently the Company is only dealing with Fesco and us-Ala:lion period is 20-30 days_ Further, Company; requested to withdraw SCN as the issue does not tail under the ambient of Section 208 of lk Ordinance, In order to provide an opportunity of personal hearing, the case was fixed on July Me a109 on which date Mr M_ Omer IarOocl .Director) appeared before me on behalf of 11 the directors of the Company. He reiterated his earlier stance as was given through written submissions in response to the show cause notice_ 1n 7. 1 feel it approprlate to quote here the retivant provisions of the Ordinanco., Sub- section (1) of Section 208 of the Ordinance provides that; f1) ceiwrpitny 5a11711 110r make aFJir riJYo3t!Wwent RF111 2sf its companies or gissooni.Rd reiwicrukings e...Vci-Tht 1'4 I hilir thr 02,rnrprit1jr 1.7.( Jr 24:re'r N112.010 2rhia2 24,141 ire. Nahepe allrorr.12.1 2PriesiOre7nt a achl...41 r tircTigivd that filo return on ii2I71..,:..Ttnort in. The ; pr of roan ,;,1.1a11 nor (h. h. :7F .r!'7.11'.! II ht' I1::4rolVir.11.: re)?: 21,11)C.::hrrg covrpro r EV/11020 iOn: cxres:4iml 'inp01-7,111.1cpr 422211 hrei rear. Loans, nektivh-r' rep tf y. i4r1127.Cr 2rmw offleei, antr amount, toirrieh is mit in the Pf tthi e rrt PlOrMai trede: credit. .S. I have analyzed the written represerliatiorl made by the Company., verbal submissions of the reprinentative and relevant provif,iolis of the law. Mv. ubservation9 In the Lase are hereunder; The Company was advised in Orders issued by this Commission under Section 208 and Section 495; of Companies Ordinance. 1984 ("Ordinance") dates October 02. 2000 and July 17r 2007 respeviveh. To treat 3 months sale as normal trade credit, but trade credit given 10 KIL eNceerls approximately 14 months. Firthermore, no interest was charged on outstanding balance during the yoar ended haw: 30, 2008. As admitted by the Company that collection period from other than associate is 20-30 days. Therefore, credit period given to KIL is not a normai kmde credit.
8. The proviso of Sub-Section (I) of Section 208 of the Ordinance is very clear. Tt explains that expressiOn investment s133i1 include loans, advances, equit.Sr, by whatever name called, or an," arnountwhich is not In the nature of norrita1 trade eredit, The Company givon credit to KTL with no time frame for rep:wet.... a.- has been observed from the ledger accounts for the year ended 00 lune 30. 200S. Such transaction cannot be .Tertned as normal trade credit, hence, falls within the ewionation of investment as given in Sub-section (1) of Section 21-./ti of the Ordinance. Tht normal trade credit is a credit which the Company .Etencls to its customer!. Against the' sale of goods in the normal course of business and most of times it is based on industry norms,
9. For the foregoing reasons, I am of the firm opinion that the provisions of Section 20F.4.
9. Of the Ordinance have been violated and d.Frectors arc liable for the penalties as defined in Stib- section (3) of Section 208 of the Ordinance, Howevv.r. 'keeping in view the fact that the debt is now mcovered by the Companvr I am inclined to take a lenient view rind instead of imposing a rnaxinium fine of Rs. Ten million on each director hereby impol.Ze fine of Rs, 10000 (rupees one hundred thousand only) on each director. This will be paid by Chief 1.,.(felitive and directors in Ole following, manner, S. No. Name Mr. Naseem Saigot, Chief Executive 2 Mr, vt., {trans Saigol. Diredor Mr. Shahid Sethi, Director 4 Mr. Muharnmaci Omer rarooll, Director Mr. Rashid Ahmed lavaid, Director Mr, tvluharnmod Ather Rafig, Director 7 Mr. Muhammad Asif "aiwa. Director Total Penalty (Rupees)
10. 1000111 I 00,000 100,00() 100,000 100,000 100,000 100,000 700,000 l'he Chief Executive and directors of the Company arc hereby directed to deposit thq aforesaid fines aggregating to R.5,700030/- Mures 'Pn hundred thousand only) in the designated bank account maintained in the name of Securities and ExL'harige Commission of Pakistan with MCI5 Bank Limited within thirty days from the receipt of this Order and furnish receipted vouchers or pay by a DDipav order issued in the name of Commission for information and record, failing which proceedings under the Land Revenue /\d.1967 will be initiated which may result in the attachment and sale tlf movable and immovahi FIT0p121-kr. It may also be noted that the said penalties are imposed on the .Chief :xecutive and other directors in their personal capacity and are required tn pay the said amount from their 013rcet;.