This Order shall dispose off the proceedings initiated against M/s. Haseeb Waqas Sugar Mills Limited (hereinafter referred to as the "Company") and its Directors for default made in complying with the provisions of Section 158 of the Companies Ordinance, 1984 ("Ordinance").
2. The facts leading to this case, briefly stated, are that in terms of the provisions of Sub section (1) of Section 158 of the Ordinance, the Company was required to hold its Annual General Meeting (the "AGM") for the year ended September 30, 2005 on or before January 31, 2006. The Company, its Chief Executive and directors, however, failed to hold the said AGM within the time period. A show cause notice dated July 06, 2006, therefore, was served on the directors including Chief Executive of the Company for the violation of Sub-section (1) of Section 158 of the Ordinance.
3. The Company did not hold AGM even for the calendar year 2004, thus depriving the shareholders of their fundamental rights for continuously last two years. The Company fixed the Annual General Meeting for January 31, 2005, the agenda of which, among other ordinary business, included election of directors. However, a day before the date of AGM, Company published notice in the newspaper for postponement of AGM in the newspapers. The reason given was that the majority shareholders (present management) had requested for postponement of meeting as five nominees who were contesting for directorship had acquired 39% shares of Company in violation of Listed Companies (Substantial Acquisition of Voting Shares and Takeover) Ordinance, 2002 (hereinafter referred as take-over Ordinance).
4. The present management of the Company lodged compliant with Commission, Securities Market Division against the acquisition of 39% shares of the Company by acquirers in violation of the Takeover Ordinance. The Company was of the opinion that the acquirers have acted in concert and have violated Takeover Ordinance by purchasing the aforesaid shares.
5. Enforcement Department on December 08, 2005 passed order against the Company for non- holding of AGM and its Directors cannot holdup the AGM. The non-holding of AGM deprived shareholders to exercise their powers envisaged in the statute. The distress of the shareholders required redressal and the Company was directed by the Commission on December 08, 2005 under Section 170 of the Ordinance to hold its AGM within thirty days of the issue of the direction.
However, Company did not comply with the directions of the Commission under Section 170. An order was passed imposing penalty on the Chief Executive of the Company for non-compliance with the directions of the Commission.
6. An organization's annual general meeting is the forum where the board, executives and shareholders are all in attendance for deliberating the important affairs of the Company. The companies lays annual accounts and appraises the shareholders about performance. Moreover, Auditors of the companies are appointed by the Shareholders and if required, various stautory powers are also exercised. These are fundamental requisite which necessitated holding of the AGM in the given time frame. The Company has failed to comply with the mandatory provisions of the Ordinance, consequently a show cause notice u/s 158 of the Ordinance was issued on July 6, 2006 to the Directors, Chief Executive and the Company for not complying with mandatory requirement of the Commission.
7. In response to the aforementioned show cause notice the Company replied that That the Mr. Ilyas Mehraj and family is major shareholder of the Company and Mehraj family is running and managing the Company since its incorporation very smoothly and successfully. That since its incorporation the management of the Company is committed for compliance of all the legal formalities which include but not limited to holding of Annual General Meetings and filing of all statutory documents with SECP as required by Companies Ordinance, 1984. Furthermore company is fulfilling all legal requirements of KSE and LSE listing regulations and other ancillary laws applicable to the Company. That all AGMs of the Company are being held regularly since its incorporation and there has been no other violation of the Companies Ordinance, 1984. The corporate record of the Company has been maintained strictly in accordance with law. That the AGM of the Company for year ended September 30, 2004 was fixed for January 31, 2005.
The Notice of AGM was published in newspapers on January 10, 2005 and sent to the all members, SECP, KSE, and LSE in accordance with the requirement of Section 158(3) of the Companies Ordinance, 1984 and listing regulations of stock exchanges. That notice of the said AGM laid down the agenda for the AGM which, inter alia, included election of the directors. It is evident from publications of notices and other arrangements for AGM that the management of the Company had good intention to hold the AGM on its due date and performed all the legal requirements in this regard. That on January 13, 2005 the Company Secretary received the nomination papers from the following persons (hereinafter referred to as "the acquirers") who intended to contest the election of directors in the forthcoming AGM.
(i) Major Gen. Retd. Shujat Ali Khan
(ii) Syed Akbar Naqi Zaidi
(iii) Air Commodore Retd. Pervaiz Akhtar
(iv) Mr. Iqbal Latif and
(v) Mr. Taufiqee Habib. Subsequently, Company Secretary received the proxies having voting shares to the tune of 39% of total shareholding in favor of above nominees. That upon inquiry by the Company and the majority shareholders it is transpired that the acquisition of 39% shares of the Company by the acquirers fall in the ambit of Listed Companies (Substantial Acquisition of Voting Shares and Takeovers) Ordinance, 2002 (hereinafter referred to as "the Takeover Ordinance"). WHEREAS clause (a) of Sub section 1 of Section 2 of Takeover Ordinance defines "acquirer" and "person acting in concert" as follows; "acquirer" means any person who, directly or indirectly, acquires or has proceeded to acquirer voting shares in the target company, or acquires or has proceeded to acquirer control of the target company, either by himself or through any person acting in concert; "person acting in concert" means a person who co-operates with the acquirer to acquire voting shares of control of the target company; That aforesaid individuals "acting in concert" with a group of investors illegally acquired 39% shares of the Company in stark violation of Section 4 and Section 5 of the Takeover Ordinance.
Section 4 and Section 5 of the Take Over Ordinance provides; Section 4 "Any acquirer who acquires voting shares which ('taken together with voting shares, if any, held by the acquirer) would entitle the acquirer to more than ten percent voting in a listed company, shall disclose the aggregate of his shareholding in that company to the said company and to the stock exchange on which the voting shares of the said company are listed"
Section 5
(1) No person shall, directly or indirectly, acquire-
(a) voting shares which (taken over together with voting shares, if any, held by such person) would entitle such person to more than twenty five percent voting shares in a listed company; or
(b) control of a listed company unless such person make a public announcement of offer to acquire voting shares or control of such company in accordance with this Ordinance That in such circumstances, Mian M. Ilyas Mehraj having more than 10% voting shares in the Company file a complaint dated January 26, 2005 with SECP under Section 21 of the Takeover Ordinance and it was informed to the SECP that a group of persons "acting in concert" has secretly acquired 39 % voting shares of the Company in direct violation of Section 4 and 5 of the Takeover Ordinance. That majority shareholders having more than 52% voting shares in the Company filed a complaint on January 28, 2005 with the Company and demanded as follows;
(i) to restrain the above persons from contesting the election of the office of the directors of the Company to be held in the forthcoming AGM,
(ii) to postpone the AGM till the decision of the SECP on the complaint dated 26 01-2005 filed by Mian M. Ilyas Mehraj, and
(iii) to take the necessary action in accordance with the provisions of the Ordinance ibid. That on January 29, 2005 the Board of Directors in its scheduled meeting held to consider the first quarterly accounts for the period ended December 31, 2004, sought legal opinion and after considering the penal provisions given in Section 26(2) of the Takeover Ordinance decided to postpone the AGM on the request of the majority shareholders. Whereas Section 26 (2) of the Takeover Ordinance provides; The other issue raised by the Company is violation of Listed Companies (Substantial Acquisition of Voting Shares and Takeovers) Ordinance, 2002 (hereinafter referred to as "the Takeover Ordinance") by certain group of people and filing of application dated February 18, 2005. The above referred complaint is looked into by the Security Market Division and the Company is well aware of the development taking place on the case. The Directors of the Company are mixing up the issue of holding AGM with Takeover Ordinance.
The complaint under the Takeover Ordinance has no implication on the AGM and the management of the Company should have given due regard to the statutory provisions. The earlier directions under section 171 very clearly put forward our stance on the issue and in case of ambiguity in any issue, the Company should have sought advice of the Commission. We need to protect and look after interest of the 72.67% shareholders of the Company. The Commission had given due consideration to the written submissions of the directors as well as the arguments advanced by the representatives of the Directors at the time of hearing but none of them justified the default in the holding of AGM. The plea of the representative that the AGM could not be held due to request of majority shareholders and the disputed takeover cannot be made a reason for not holding AGM.
10. The Directors was neither allowed by the shareholders nor by the Commission to holdup the AGM and have acted in total disregard of the rights of the shareholders. They have not been given any powers in the Ordinance to delay the AGM. The Directors, CEO, their spouse and minor children hold 27.33% shareholding (disclosed in the financial statement of the Company as at September 30, 2005) and are not allowing the shareholders having 72.67% shareholding to exercise their powers. This constitutes gross abuse of rights and powers of the shareholders of a public listed company. Certain approvals / authorization were required from shareholders have not been obtained which included approval for appointment of the auditors. The directors who are running the operations are appointing the auditors of their own choice instead of being appointed by the shareholders as per the statute. These kinds of issues are emanating from non-holding of AGM on which the Directors does not seem to be bothered and the consequential non-compliances are arising.
11. In view of the above and the fact that the Company has not so far held its due AGM for the year ended September 30, 2005, the default under Sub-section (1) of Sections 158 of the Ordinance is established and it is considered willful. I have given due consideration to the written submissions of the directors as well as the arguments advanced by the representatives of the Directors at the time of hearing but none of them justified the default in the holding of AGM. The plea of the representative that the AGM could not be held due to request of majority shareholders and the disputed takeover is not reasonable ground for not holding AGM. Section 158 requires the Company to hold AGM by January 31, 2006 or get an extension from Commission. Any violation of take-over laws does not allow the Company and its Directors to postpone the AGM and not to hold it within prescribed time limit The Directors of the company are therefore, responsible for not holding AGM with in the prescribed time limit. The default attracts the Provisions of Sub-section (4) of Section 158 of the Ordinance. However, instead of imposing the maximum fine of Rs. 50,000 on every director and a further fine of Rs. 2,000 per day for the continuous default, I, in exercise of powers conferred upon me under Sub-section (4) of Section 158 read with Section 476 of the Ordinance, impose a fine of Rs. 50,000 (Rupees fifty thousand only) each on the Company, its Chief Executive and each of the Directors in the following manner: - {{TABLE}} S/No. Name Penalty 1 Mian Muhammad Illyas Mehraj, Chairman Rs. 50,000 2 Mian Waqas Riaz, Chief Executive Rs. 50,000 3 Mrs Shahzadi Illyas, Director Rs. 50,000 4 Mrs Bano Mehraj, Director Rs. 50,000 5 Mrs Zainab Waqas, Director Rs. 50,000 6 Mst. Maiza Riaz, Director Rs. 50,000 7 Hafiz M. Irfan Hussain Butt, Director Rs. 50,000 8 M/s Haseeb Waqas Mills Limited Rs. 50,000 Total Rs. 400,000 {{TABLE}}
12. The Company, its Chief Executive and Directors are hereby directed to deposit within thirty days of the date of receipt of this Order the aforesaid fines totaling to Rs.400,000 (Rupees Four Lacs only) in the Commission's designated bank account No. 75010-6 maintained at Habib Bank Limited, Central Branch, 102/ 103, Upper Mall, Lahore or pay by a DD/Pay order issued in the name of Commission and send a copy of the receipted vouchers to the Commission for information and record, failing which proceedings under the Land Revenue Act, 1967 will be initiated which may result in the attachment and sale of their movable and immovable property. It should also be noted that the said penalty is imposed on the Chief Executive and the Directors in their personal capacity; therefore, they are required to pay the said amounts from their personal resources.