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.222/12(344)04 dated 17/10/2011 ("Notice") issued to Mr. Muhammad Shakir ("Respondent"), Director of Metropolitan Steel Corporation 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 Director was required to file return of beneficial ownership on Form 31 and the return of change in beneficial ownership on Form 32, within the period stipulated under Section 222 of the Ordinance. However, the Respondent failed to discharge the said obligations which attract penal provisions contained in Section 224(4) of the Ordinance.
3. Section 222(2)(c) of the Ordinance stipulate the period within which the said returns on Form 31 and Form 32 are 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. It is worth mentioning that in order to provide an opportunity to directors/beneficial owners of listed companies to file their over due returns of beneficial ownership without facing penal action, the Commission through Notices dated 07/09/2009 and 21/09/2010 asked them to file their returns of beneficial ownership with Head Office of the Commission by 31/10/2009 and 31/10/2010 respectively and to ensure timely compliance of Section 222 of the Ordinance in future. The aforesaid Notices were sent to all listed companies and were also disseminated through stock exchanges and print media.
5. On account of scrutiny of record of this office, it was observed that the Respondent has failed to report certain changes in his beneficial ownership. The Respondent was, therefore, asked vide letter dated 18/08/2011 followed by reminder dated 15/09/2011 to file Form 32 alongwith reasons for non- filing of the same, within the period stipulated in Section 222 of the Ordinance. But, the Respondent neither responded the matter nor filed the returns of beneficial ownership. The said contraventions attract penal provisions 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, 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 defaults and issued Notice to the Respondent under Section 224(4) of the Ordinance, calling upon him to explain through written reply alongwith documentary evidence, if any as to why action may not be taken against him pursuant to Section 224(4) of the Ordinance, for aforesaid contraventions of Section 222 of the Ordinance. Furthermore, in order to provide an opportunity of being heard in person, hearing in the matter was fixed for 26/10/2011 at Commission's Office, Karachi. But neither written explanation was received in the matter nor the Respondent attended the said hearing. Moreover, no request for adjournment of the said personal hearing was received. However, taking a lenient view, the hearing was re-fixed for 04/11/2011 at the Head Office of the Commission, Islamabad. Meanwhile, the Company Secretary of the Company vide letter dated 31/10/2011 informed that the under reference returns will be filed soon after Eid holidays. He also requested that personal hearing in the matter may be held at Commission office at Karachi instead of Islamabad. The request was accepted and the matter was re-fixed for 30/12/2011.
7. On the given date, Mr. Sharifful Muzaffar, General Manager Finance & Company Secretary of the Company ("Authorized Representative") appeared before me on behalf of the Respondent. The Authorized Representative stated that "due to oversight and the absence of the Respondent from the city, the under reference lapse has occurred and requested to condone it". The Authorized Representative presented incomplete returns of beneficial ownership in respect of Respondent.
Since the returns were lacking basic and necessary information, therefore the said returns could not be accepted. The Authorized Representative was advised to ask the Respondent to submit duly filled in/complete returns of beneficial ownership i.e. showing therein details of all changes taken place in his beneficial ownership.
8. The Respondent filed Form 32 with the Commission on 28/02/2012, showing therein the following changes in the beneficial ownership, which have been reported to the Commission, with a delay as mentioned against each:- {{TABLE}} Date No. of Shares Nature I Delay in Days 22/12/2006 500 Purchase T1,879 05/01/2007 12,500 Purchase I 1,865 The aforesaid changes in beneficial ownership have been reported to the Commission with delay ranges from 1,879 days to 1,865 days, in contraventions of Section 222(2)(c) of the Ordinance.
9. I have considered the submissions made on behalf of the Respondent by the Authorized Representative in writing as well verbally during the course of hearing and my findings in this regard are as under:- a) Concerning the plea that the default in question was due to oversight, it is worth mentioning that in order to engender awareness and provide an opportunity to the specified officers and more than ten percent shareholders of listed companies, for filing of overdue returns, the Commission carried out exercise twice as mentioned in detail in para 4 of the Order, but the Respondent failed to discharge his liability entailed under Section 222 of the Ordinance, until, the same was pointed out by this office through letter dated 11/04/2011, followed by reminders, the Notice and correspondence referred above. b) With reference to the request that the aforementioned defaults committed by the Respondent may be condoned, I am of the view that Sections 220 to 224 of the Ordinance speak about a Scheme. Under the said Scheme such beneficial owners/persons are required to report their shareholding as well as changes in shareholding at the same time to the Company, Registrar of Companies and the Commission. The said officers and beneficial owners of more than ten percent equity securities of a listed company are required to fulfill their statutory requirements within the time period provided in the law. The inevitability of the filing of the return of beneficial ownership with the Commission may be adjudged from the fact, that it enables the Commission to monitor the trading activities of the returnee. In the instant case, two changes in beneficial ownership interest of the Respondent were taken place at different dates. Pursuant to the provisions of Section 222 of the Ordinance, each change in beneficial ownership was required to be reported within the 15 days of the change. c) It is important to note that in the instant case, the Respondent did not respond to this office letters dated 18/08/2011, and 15/09/2011, wherein he was asked for filing of returns of beneficial ownership. The Respondent also did not submit written reply to the Notice dated 17/10/2011.
Moreover, the Respondent or any of his authorized representative failed to attend the personal hearing fixed at Commission Office at Karachi for 04/11/2011. It is abundantly clear from the above narration that the Respondent filed Form 32 because of continuous pursuance of the matter by this office.
10. In view of the foregoing discussion, it is evident that the Respondent has admittedly contravenes the provisions of Section 222 of the Ordinance. However, the Respondent has filed the return of beneficial ownership and his Authorized Representative assured for timely filing of the returns of beneficial ownership in future. Taking a lenient view of the defaults, in exercise of powers conferred under Section 224 (4) of the Ordinance, I hereby impose fine of Rs. 5,000 (five thousand rupees only) for late reporting of aforementioned changes in beneficial ownership while no further fine for continuous default is imposed.
11. The Respondent is directed to deposit the fine of Rs. 5,000 (five thousand rupees only) 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, to the effect.
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.