1. In terms of sub-section 3(b) of section 254 of the Companies Ordinance, 1984, a person who is indebted to the company shall not be appointed as auditor of that company. Further, sub-section 5 of section 254 of the Companies Ordinance, 1984 says that if, after his appointment, an auditor becomes subject to any disqualification specified in sub-section 3 of section 254, he shall be deemed to have vacated his office as auditor with effect from the date on which he becomes so disqualified.
2. M/s. Bilwani & Co. (owned by Mr. Abubker Bilwani) have been the statutory auditors of International Investment & Financial Services Limited (IIFSL) since inception of the company.
3. Mr. Akram Ghanchi, Chief Executive of IIFSL had recorded and signed a statement at the time of hearing held on 28th May, 2001 in the matter of IIFSL wherein he stated that Mr. Bilwani of Bilwani & Co., Chartered Accountants has opened an account with the IIFSL and an amount of Rs. 0.227 million is outstanding as receivable against Mr. Bilwani since 2000 due to trading loss.
4. The chief executive of the compay was asked to provide documentary evidence in support of his statement vide letter No. SC/MF-JD(MS)/301/2001 dated 14th June, 2001 and again reminded vide letter No. SC/MF-JD(MS)/311/2001 dated 22nd June, 2001. Responding to our letter, the chief executive furnished the documentary evidence in the form of customer ledger report duly attested by him vide his letter dated 29th June, 2001. Various transactions have been shown in the ledger report during the period from 26th January, 2000 to 19th July, 2000 and an amount of Rs. 0.227 million is outstanding against Bilwani & Co. since 19th July, 2000.
5. After receipt of documentary evidence from the company, a show-cause notice dated 4th July, 2001 was issued to the auditors M/s. Bilwani & Co. to explain in writing as to why the auditors did not vacate their office when they were deemed to have been disqualified to act as auditors with effect from the date on which they became indebted to the company. Further, they were also required to explain as to why a fine may not be imposed on them as provided under sub-section 6 of section 254 of the Companies Ordinance, 1984.
6. Responding to our show cause notice, Mr. Abubaker Bilwani vide his letter dated 6th July, 2001 stated that he has never involved himself in any trading or business with the company except providing services as Chartered Accountant and denied having opened an account with IIFSL and also denied the payable amount of Rs. 0.227 million. He also requested to be heard through his authorized representative.
7. In view of his request for hearing, Mr. Abubaker Bilwani was provided an opportunity of being heard vide letter No. SC/MF-JD(MS)/332/2001 dated 10th July, 2001 as laid down under sub section
(3) of section 476 of the Companies Ordinance, 1984 and hearing in this case was fixed on 18th July, 2001. Mr. Abubaker Bilwani or his authorized representative did not appear for hearing on the fixed date. However, a letter dated 12th July, 2001 was received subsequently from Mr. Abubaker Bilwani requesting us to provide him a copy of the customer ledger report enabling him to defend himself and prepare an appropriate reply/clarification with consultation of his legal adviser.
8. On the basis of this letter, another opportunity of being heard was given to him and hearing in this case was again fixed on 23rd July, 2001 vide our letter No. SC/MF-JD(MS)/344/2001 dated 18th July, 2001. It was also notified that if he failed to avail the last opportunity of being heard, the decision would be taken as per records available with the Commission. A copy of the ledger report was also provided to him as requested by him. Again no one appeared on the fixed date i.e. on 23rd July, 2001 to defend the charges involved.
9. Mr. Bilwani was given opportunity of being heard twice but he failed to avail these opportunities which shows that he has nothing to offer in his defence. In view of the circumstances, I have reasons to believe that Mr. Abubaker Bilwani of M/s. Bilwani & Co., Chartered Accountants, has committed violation of sub-section 3(d) read with sub-section 5 of section 254 of the Companies Ordinance, 1984. Therefore, I, hereby, impose a fine of Rs. 25,000/- (Rupees twenty five thousands only) on him as provided under sub-section 6 of section 254 of the Companies Ordinance, 1984.
10. Mr. Abubaker Bilwani of Bilwani & Co., Chartered Accountant, is hereby directed to deposit a fine of Rs. 25,000 (Rupees twenty five thousands only) in the designated Bank Account of Securities & Exchange Commission of Pakistan with the Habib Bank Ltd., within thirty days of the receipt of this Order.
11. Issued under my hand and seal on this 23rd day of July 2001.