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.0.222/13(69)05 dated 24/07/2013 ("Notice") issued to Committee of NetSol Technologies Inc ("Respondent"), a beneficial owner of more than ten percent equity securities of NetSol Technologies 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 a beneficial owner of more than ten percent of its ordinary shares was required to file returns of beneficial ownership on Form 32, within the period stipulated under Section 222 of the Ordinance. However, it failed to file Form 32 within he stipulated time period, for the changes taken place in its beneficial ownership during the period from November 2012 to January 2013 (the "period"), which attract penal provisions contain in Section 224(4) of the Ordinance.
3. Section 222(2)(c) of the Ordinance stipulates the period within which the Form 32 is required 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. The Respondent filed two returns of beneficial ownership on Form 32 with this Commission on 23/01/2013, showing therein the following changes in its beneficial ownership, with the delay as mentioned against each:- {{TABLE}} Sr.
No Date of Transaction Number of Shares Nature Extend or Delay 1 07/11/2012 150,000 Purchase 62 2 08/11/2012 43,000 Purchase 61 3 12/11/2012 111,000 Purchase 57 4 19/11/2012 134,000 Purchase 50 5 20/11/2012 500 Purchase 49 6 22/11/2012 50,000 Purchase 47 7 23/11/2012 160,000 Purchase 46 8 26/11/2012 73,000 Purchase 43 9 27/11/2012 1,000 Purchase 42 10 30/11/2012 100,000 Purchase 39 11 03/12/2012 300,000 Purchase 36 12 04/12/2012 100,000 Purchase 35 13 05/12/2012 161,000 Purchase 34 14 06/12/2012 325,000 Purchase 33 15 07/12/2012 20,000 Purchase 32 16 01/01/2013 50,000 Purchase 19 17 02/01/2013 400,000 Purchase 18 18 15/01/2013 29,000 Purchase 5 {{TABLE}}
5. The aforesaid changes in beneficial ownership were reported to the Commission with delay ranges from 5 days to 62 days in contraventions of Section 222(2)(c) of the Ordinance, which prima facie attract penal provisions contain in 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 default and issued Notice to the Respondent under Section 224(4) of the Ordinance, calling upon it to explain through written reply along with documentary evidence, if any as to why action may not be taken against it pursuant to Section 224(4) of the Ordinance, for aforesaid contraventions of Section 222 of the Ordinance. Mr. Rashid Sadiq, Chief Executive Officer ("Authorized Representative"), filed written reply to the Notice vide letters dated 06/8/2013 and 1609/2013.
7. Furthermore, in order to provide an opportunity of being heard in person, hearing in the matter was fixed for 03/09/2013 at the Commission's Head Office, Islamabad. On the said date, the Authorized Representative appeared on behalf of the Respondent. The submissions made in writing as well as verbally on behalf of the Respondent by the Authorized Representative be summarized as under:- a. The Respondent is a foreign company based in United States (US) and it does not have any place of business in Pakistan. The purchase of shares is reported to the Respondent in US and the same is sent to Pakistan for preparation of returns which are again sent to US for signatures of its President. This movement of document between Pak --US and non-availability of President for signing of the Form 32 in fact resulted in minor delays in filing of these statutory forms. b. The Respondent is a law abiding and it has filed the Form 32 on its own.
The delays are minor ones which have not committed "wilfully" or "knowingly". c. The Authorized Representative assured that the Respondent will comply with the requirement of Section 222 of the Ordinance within the prescribed time period in future.
8. I have considered the aforesaid submissions made by the Respondent. The Respondent has admitted the default of late filing of.the return of beneficial ownership with the contention that the said default was not committed willfully and knowingly. The Authorized Representative contended that the default took place due to completion of certain formalities, i.e. the return was required to be signed by a person who is residing is USA. The Respondent has assured for timely filing of the returns of beneficial ownership in future and requested to condone the default in question.
Moreover, the Respondent has reported the said changes in beneficial ownership by its own.
Considering the submissions made by the Respondent, I intend to agree with the contention of the Respondent and of the view that the late filing of the under reference returns of beneficial ownership may not be willful. Therefore, a lenient view of the matter has been taken and the Respondent is hereby strictly warned to ensure timely compliance of Section 222 of the ordinance in future.
10. 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.