This order will dispose of the proceedings initiated against M/S Kaiser Arts and Krafts Limited (the "Company"), its directors and Chief Executive for non-compliance with the mandatory provisions of the Companies Ordinance, 1984 (the "Ordinance") pertaining to holding of Annual General Meeting ("AGM"), presentation of balance sheet and profit and loss account before the Company in AGM and preparation, transmission and filing of half yearly accounts.
2. The relevant facts of this case, briefly stated, are that the Company was required to hold its AGM for the calendar years 1999 and 2000 and to lay therein its balance sheet and profit and loss account for the year ended June 30, 1999 and June 30, 2000 on or before December 31, 1999 and December 31, 2000 as required under Sub-section (1) of Section 158 and Sub-section (1) of Section 233 of the Ordinance. The Company was also required to prepare and transmit to its members and the relevant stock exchanges, a profit and loss account and the balance sheet (the "half yearly accounts") as at December 31, 1999 and 2000 on or before February 29, 2000 and 2001 respectively under Clause (a) of Sub-Section (1) of Section 245 of the Ordinance. The Company was also required to file with the Registrar and the Commission three copies of said half yearly accounts simultaneously, with the transmission to its members.
3. The Company failed to hold its AGM for the calendar years 1999 and 2000 and to lay therein its balance sheet and profit and loss account for the years ended June 30, 1999 and June 30, 2000 within the time frame prescribed by the law. The Company also failed to prepare, transmit and file its half yearly accounts for the periods ended December 31, 1999 and 2000 within the prescribed time provided in the Ordinance. The aforesaid non-compliance of the mandatory provisions of the Ordinance called for an action against the Company, its directors and Chief Executive.
4. Consequently, a notice dated April 11, 2001 was issued to the Chief Executive of the Company calling upon him to show cause in writing within fourteen days as to why penalties as provided under Clause (a) of Sub-section (4) of Section 158 and Sub-section (3) of Section 245 read with Section 476 of the Ordinance may not be imposed and prosecution proceedings may not be initiated under Sub-section (6) of Section 233 read with Sub-section (7) of Section 230 of the Ordinance.
5. The Chief Executive failed to respond to the aforesaid show cause notice. In order to provide an opportunity of personal hearing, the case was fixed on May 10, 2001, May 21, 2001, June 12, 2001, November 31, 2001 and finally on June 26, 2002 but neither the Chief Executive nor any of his representative appeared to argue the case before me.
6. Before proceeding to decide this case, I consider it necessary to highlight the importance of the strict observance of the aforesaid mandatory provisions by the Companies. The protection of the investors is one of the primary objectives of the Ordinance. It is the investors who provide seed for capital formation. If the interest of the investors is protected they will save and invest more. Their interest is protected by transmission of timely and adequate information to them. It is the annual and half yearly accounts, which provide information to the investors about the affairs of the companies. This is necessary for making sound investment decisions by the investors. AGM is a forum where the investors can freely discuss, speak and vote on important matters concerning approval of accounts, appointment of auditors, election of directors etc. It has unfortunately been noted that the Company has not observed these compulsory requirements of law. It is the duty of the Commission, which is the regulator to ensure the enforcement of the law to adequately safeguard the interests of the shareholders.
7. In the circumstances, I am of the view that the Company and its directors and Chief Executive have completely disregarded the provisions of law. Moreover, these irregularities are of serious nature and non-holding of AGM alone could lead to winding up of the Company in terms of Section 305 of the Ordinance.
8. From the aforesaid discussion, it is quite obvious that the Chief Executive of the Company has failed to take necessary steps to carry his statutory obligations; therefore, I consider the default so committed as willful and deliberate.
9. In view of the foregoing, the default under Sub-section (1) of Section 158 and Clause (a) of Sub- section (1) of Section 245 of the Ordinance is established and the Company, its directors and Chief Executive have made themselves liable under Clause (a) of Sub-section (4) of Section 158 and Sub-section (3) of Section 245 of the Ordinance. As the Chief Executive has completely disregarded the provisions of law, therefore, the question of taking any lenient view does not arise. I, therefore, taking a serious view of the default, impose a fine of Rs. 20,000/- (Rupees twenty thousand only) for each period on the Chief Executive for default for non-compliance with the provisions of Sub- section (1) of Section 158 of the Ordinance for the years June 30, 1999 and 2000 and for the continuous default, no further fine is imposed on the Chief Executive which is prescribed @ Rs.
2,000/- per day. I give an opportunity to the Company, its Chief Executive and directors to rectify the irregularity by holding overdue AGM immediately and hope that they would react honestly and reasonably. For the default under Sub-section (1) of Section 245 of the Ordinance for period ended December 31, 1999 and 2000, I impose a fine of Rs. 25,000/-for each period on the Chief Executive of the Compan.
10. The Chief Executive of the Company is hereby directed to deposit the fine amounting in aggregate to Rs. 90,000 (Rupees ninety thousand only) within 30 days of the receipt of this order in the bank account of Securities and Exchange Commission of Pakistan, maintained with Habib Bank Limited and submit a copy of the receipted challan to the Commission.