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. SMD/BOW/222/18(617)14 dated 01/07/2014 ("Notice") issued to Mr. Furqan Hussain ("Respondent"), a beneficial owner of more than ten percent ordinary shares of Quice Food Industries 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 its beneficial owner of more than ten percent ordinary shares was required to Form 31 as first disclosure of beneficial ownership and Form 32 for the following changes in beneficial ownership, within the period stipulated under Section 222 of the Ordinance:- {{TABLE}} Sr. No. Date No. of Shares Bought No. of Shares Sold 1 02-08-2011 1,550 5,689 2 03-08-2011 7,000 3 08-08-2011 102,002 196,749 4 09-08-2011 396 5 15-08-2011 500 501 6 16-08-2011 1,290 24 7 17-08-2011 301 800 8 22-08-2011 2,060 9 09-09-2011 985 10 12-09-2011 2,000 11 21-09-2011 50 12 21-03-2012 49,719 13 22-03-2012 72,448 14 26-03-2012 30,500 15 28-03-2012 1,352,177 16 16-04-2012 5,000 5,000 17 30-04-2012 195,824 18 02-05-2012 1,148,615 19 03-05-2012 115,281 20 04-05-2012 157,500 21 07-05-2012 100,000 22 10-05-2012 12,102 23 11-05-2012 200,000 24 14-05-2012 75,000 25 15-05-2012 43,475 26 16-05-2012 136,385 27 17-05-2012 103,000 28 18-05-2012 2,535,972 29 22-05-2012 246,168 30 23-05-2012 10,000 31 24-05-2012 295,000 32 25-05-2012 94,790 33 28-05-2012 5,000 238,000 34 29-05-2012 10,000 35 08-08-2012 91,500 36 13-08-2012 272,500 37 15-08-2012 175,000 38 16-08-2012 182,000 39 23-08-2012 75,500 40 24-08-2012 97,000 41 27-08-2012 5,000 42 30-08-2012 62,000 43 03-09-2012 52,000 44 04-09-2012 100,000 45 05-09-2012 40,000 46 06-09-2012 10,000 47 07-09-2012 90,000 48 10-09-2012 60,000 49 11-09-2012 84,500 50 12-09-2012 250,000 51 13-09-2012 200,000 52 14-09-2012 406,500 53 18-09-2012 200,000 54 20-09-2012 556,000 55 24-09-2012 465,000 56 25-09-2012 290,000 57 26-09-2012 I 308,000 58 27-09-2012 39,500 59 28-09-2012 100,500 60 01-10-2012 375,000 61 02-10-2012 104,000 62 03-10-2012 72,500 63 05-10-2012 42,000 64 08-10-2012 120,000 65 09-10-2012 946,000 66 10-10-2012 534,500 67 11-10-2012 122,000 68 12-10-2012 4,000 69 15-10-2012 242,000 70 16-10-2012 35,000 71 17-10-2012 295,500 72 18-10-2012 49,000 73 19-10-2012 293,000 74 22-10-2012 94,000 75 25-10-2012 35,000 76 30-10-2012 21.000 77 01-11-2012 50,500 78 02-11-2012 99,500 79 05-11-2012 71,000 80 06-11-2012 859,000 81 07-11-2012 100,000 82 12-11-2012 58,500 83 13-11-2012 21,500 84 14-11-2012 96,000 85 15-11-2012 64,000 86 16-11-2012 714,500 87 19-11-2012 240,500 88 20-11-2012 330,000 89 21-11-2012 7,000 90 22-11-2012 50,000 91 28-11-2012 25,000 92 30-11-2012 100,000 93 05-12-2012 50,000 94 10-12-2012 159,000 95 11-12-2012 50,000 96 13-12-2012 19,000 97 14-12-2012 500 98 19-12-2012 282,500 99 20-12-2012 116,500 100 21-12-2012 255,000 101 24-12-2012 290,000 102 26-12-2012 425,000 103 27-12-2012 455,500 104 31-12-2012 85,500 105 01-01-2013 22,000 106 03-01-2013 34,500 107 04-01-2013 6,000 108 08-01-2013 37,000 109 29-01-2013 50,000 110 01-02-2013 175,000 I 1 1 04-02-2013 67,500 112 06-02-2013 53,500 113 07-02-2013 144,500 114 08-02-2013 164,500 115 11-02-2013 22,500 116 14-02-2013 64.500 .-.e.-..., 117 20-02-2013 3,000 118 21-02-2013 8.000 119 22-02-2013 7,500 120 25-02-2013 289,500 121 26-02-2013 100,000 122 28-02-2013 350,000 123 16-06-2014 600,000 124 04-04-2014 300,000 {{TABLE}}
3. Section 222(2)(b) and Section 222(2)(c) of the Ordinance stipulate the period within which the Form 31 and Form 32 respectively are to be submitted as under:- 222(2)0) "in any other case, including a case where the company is listed on the stock exchange after the commencement of this Ordinance or after the person has occupied the position or office specified in sub-section (1) or has acquired interest as beneficial owner of securities as aforesaid, within thirty days of occupying the office in the company or acquisition of interest as beneficial owner requiring submission of the return aforesaid or listing of the company on the stock exchange, as the case may be"; 222(2) (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".
4. Since the Respondent failed to discharge his aforesaid obligations, within the prescribed time limit, therefore, he was asked vide letter dated 07/09/2012, followed by reminder dated 15/09/2012 for filing of Form 31 and Form 32. In response, the Respondent vide letter dated 23/01/2013 stated that "---I have a dual nationality and for the last few months I had been Canada. Now on returning to my homeland, the first thing I am doing is to file Form 31 and Form 32, 1 would request you to kindly allow 30 days for collecting the trading data from the concern house ". The said request was accepted vide letter dated 04/02/2013 with the advice to file the said returns latest by 23/02/2013.
But, despite said pledge as well as reminders dated 20/06/2013 and 20/12/2013, the Respondent did not file the returns of beneficial ownership, in contraventions of Section 222(2)(c) of the Ordinance.
The said contraventions attract penal provision of 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, noncompliance 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".
5. The Commission took cognizance of the aforesaid default and issued Notice to the Respondent under Section 224(4) of the Ordinance, wherein he was:- a) directed to file Form 31 (as first disclosure of beneficial ownership) and Form 32 showing therein details of subsequent changes in beneficial ownership with this Commission (including the aforementioned), within 14 days of the of the issue of this Notice, and b) called upon to show cause and explain through written reply along with documentary evidence, if any, within the above stipulated period as to why action may not be taken against him in pursuance of Section 224(4) of the Ordinance, for aforesaid contraventions of Section 222 of the Ordinance.
6. Neither the Respondent replied the Notice nor filed the returns of beneficial ownership.
In order to provide an opportunity of being heard in person, hearing in the matter was fixed on 08/08/2014 at the Commission's Head Office, Islamabad, Mr. Muzaffar Hussain, ("Authorized Representative") appeared on behalf of the Respondent and requested for adjournment of the hearing and extension in time for filing of the returns of beneficial ownership, with the plea that the same could not be filed earlier due to unavailability of the record. The request of the Respondent was accepted. The Respondent filed Form 31 and Form 32 with this office on 10/09/2014. The said returns of beneficial ownership/documents received from the Respondent showed as under:- a. The Respondent acquired status of more than ten percent beneficial owner of the Issuer Company on 26/02/2011 and 5,383,131 ordinary shares were beneficially owned by him. Thus, he was required to file the said return latest by 28/03/2011, but the same has been filed on 10/09/2014, with delay of 1,262 days. b. The returns filed on Forms 32, showed that Respondent purchased 115,097 shares, acquired 31,711,000 shares as other than right and sold 27,280,520 shares from 02/08/2011 to 04/04/2014. Thus, he was required to file Form 32 for each change in beneficial ownership, within fifteen days of the change. Hence, Form 32 for said changes have been filed on 10/09/2014 with delay ranging from 1120 days to 71 days.
7. The hearing in the matter was scheduled for 30/10/2014 at Commission's Karachi Office.
The Authorized Representative appeared on behalf of the Respondent. The submissions made by the Authorized Representative in writing as well as verbally during the course of hearing be summarized as under:- a) Such a long delay in filing of Form 31 and Form 32 was due to unavailability of concerned data.
The entire transactions were made, when shares of the Issuer Company were handled in physical form. b) The entire details of all purchase and sale of shares has been held with the concerned brokerage house and their computer system/server was too faulty to provide any sort of information. c) The default may not be considered intentional, because in the absence of relevant data, the Respondent was unable to file the returns of beneficial ownership. Thus, the same may kindly be condoned
8. I have considered the aforesaid submissions made in writing as well as verbally by the Authorized Representative during the course of hearing. The Respondent has admitted the default of late filing of the returns of beneficial ownership with the contention that the same could not be filed within the stipulated time period, due to non-availability of data from the respective brokerage house. It is important to note here that on the same plea, the Respondent sought extension in time for filing of the said returns twice i.e. in January 2013 and August 2014. In my view, the plea of the Respondent does not seem to be plausible, because, each client receives confirmation memo from brokerage house upon execution of orders/trades. Furthermore, no detail of purchase and sale was required for filing of Form 31.
9. In order to arrive at decision, I have reviewed the record of this office, which reveals that the Respondent was asked vide letter dated 07/09/2012 followed by reminder dated 15/11/2012 for filing of Form 31 as first disclosure of beneficial and Form 32 for subsequent changes in his beneficial ownership. Upon his request, vide letter dated 23/01/2013, the Respondent was allowed to file the said returns latest by 23/02/2013. But, despite pledge made by him vide letter dated 23/01/2013 and Commission's letters/reminders dated 07/09/2012, 15/11/2012, 04/02/2013, 20/06/2013 and 20/12/2013, he did not file the returns, until the Notice was issued. This behavior signifies that the Respondent did not take the matter seriously and was not desirous in discharging his legal obligations. Such disobedience of law by a beneficial owner of a listed company is a matter of deep concern and highly disappointed. The returns of beneficial ownership filed by him in response to the Notice involve delay ranging from 1262 days to 71 days.
10. In view of the above, I am of the considered opinion that the Respondent has contravened the provisions of Section 222 of the Ordinance. Therefore, in exercise of powers conferred under Section 224 (4) of the Ordinance, I hereby impose a fine of Rs. 691,000/- (six hundred ninety-one thousand rupees only) on the Respondent, as under:- {{TABLE}} Nature of violation Requirement of the law Fine imposed (Rs.)
Section 222(2)(b) Filing of Form 31, with 30 days of the acquisition of beneficial ownership 30,0001 Section 222(2)(c) Filing of Form 32, with 15 days of the change in beneficial ownership 30,0001 For continue contravention, non-compliance, Rs. 500 per day, which continued for 1262 days 631,000 Total Rs. 691,000 {{TABLE}}
11. 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.
12. 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.