This order will dispose of the proceedings initiated against M/S Quice Food Industries 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 year 2000 and to lay therein its balance sheet and profit and loss account for the year ended June 30, 2000 on or before 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, 1997, 1998 and 1999 on or before February 28, 1998, 1999 and 2000 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 such half yearly accounts simultaneously, with the transmission to its members.
3. The Company failed to hold its AGM for the calendar year 2000 and to lay therein its balance sheet and profit and loss account for the year ended June 30, 2000 within the time frame prescribed by law. The Company also failed to prepare, transmit and file its half yearly accounts for the periods ended December 31, 1998, 1999 and 2000 within the prescribed time provided in the Ordinance. The aforesaid non-compliance of the mandatory provisions of the Ordinance called for action against the Company, its directors and Chief Executive.
4. Consequently, a notice dated March 12, 2001 was issued to the Company, its directors and Chief Executive calling upon them to show cause in writing 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 response to the aforesaid show cause notice was received through the Company's letter dated June March 17, 2001 attributing the failure for non-compliance of the mandatory provisions of the Ordinance to some difficulties with bankers as a result of which the factory was sealed for sometime and access to the books of accounts was restricted. It was also submitted that now the matters have been resolved and the control over the factory and record has been obtained and the operation has started normally. It was further informed that they sought permission of the Registrar to hold the AGM before the end of May 2001. In order to provide an opportunity of personal hearing, the case was fixed on May 21, 2001 but adjourned at the request of the Company and re- fixed on May 30, 2001. In the meantime the directors of the Company submitted an undertaking that the AGM will be held by July 16, 2001, which was within 90 days time allowed by the Registrar concerned vide his letter dated April 18, 2001. But the Company failed to follow the directions of the Registrar and held its AGM for the year ended June 30, 2000 on May 18, 2002. The case was finally fixed on June 26, 2002 wherein Mr. Muhammad Afaq Shamsi, Chief Executive appeared before me and argued the case. During the course of hearing he admitted the default and submitted that on account of difficulties faced by the Company, as a result of a court order, the operation of the Company remained suspended and all the documents at the factory could not be obtained during the period of closure.
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 some companies has not observed these requirements of law.
7. Having considered the arguments of the Company, I am of the view that it was the responsibility of the directors to timely prepare the annual and half yearly accounts and hold AGM. This was, however, not done and the Company also failed to honour its commitments. The default therefore, is deliberate and intentional. From the aforesaid discussion, it is quite obvious that the Chief Executive and directors of the Company have failed to take necessary steps to carry their statutory obligations. As Mr. Afaq Shamsi failed to give any valid reason in this regard, therefore, I consider that the default was committed willfully and deliberately.
8. In view of the foregoing, the default under Sub-section (1) of Section 158 and Clause (a) of Sub- 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 Company has held the overdue AGM and the Chief Executive of the Company has undertaken to observe the compliance of the law in future I, therefore, taking a lenient view, impose a fine of Rs. 20,000/- (Rupees twenty thousand) on the Company and every director including its Chief Executive for default in complying with the provisions of Sub-section (1) of Section 158 of the Ordinance for the year June 30, 2000 and for the continuous default, no further fine is imposed on the Company, its Chief Executive and directors, which is prescribed @ Rs. 2,000/- per day. For the default under Sub-section (1) of Section 245 of the Ordinance for period ended December 31, 1997, 1998 and 1999, I also take a lenient view and instead of imposing a maximum fine of Rs. 100,000 for each period on each of the directors and Chief Executive, impose a fine of Rs. 10,000 (Rupees ten thousand only) on each of the director including Chief Executive of the Company for each period. In case the Company, its Chief Executive and directors do not respond positively to the aforesaid leniency and failed to observe the requirements of law, they will find themselves in difficulty in getting any lenient view in future.
9. The Company, its directors including Chief Executive of the Company are hereby directed to deposit the fine amounting in aggregate to Rs. 370,000 (Rupees three hundred and seventy thousand only) within 30 days of the receipt of this order and submit a copy of the receipted challan to the Commission in the following order: