This is a case of violation of Clause (b) of Sub-section (1) of Section 160 of the Companies Ordinance, 1984 (the "Ordinance"), which requires that a statement of material facts shall be annexed to the notice of general meeting where any special business is to be transacted.
2. The relevant facts for the disposal of this case are very simple. M/s. Quality Steel Works Limited (the "Company") issued a notice on July 08, 2002 for its 46th Annual General Meeting (the "AGM") to be held on July 30, 2002. The Enforcement and Monitoring Division of the Securities and Exchange Commission of Pakistan (the "Commission") noticed that the disposal of immovable property not required for the undertaking of the Company was proposed to be considered at the AGM. The objective of this was stated to be the settlement of banks dues and other liabilities from the sale proceeds of immovable property. The agenda also indicated clearly that an "Ordinary Resolution" was proposed to be passed for transacting this business.
Considering that the sale of property was a "Special Business" and not an ordinary one in terms of Clause (b) of sub-section (1) of Section 160 of the ordinance and that a statement of material facts was required to be annexed to the aforesaid notice of AGM for this business, the Enforcement and Monitoring Division sought a clarification from the Company for not annexing the statement of material facts in response to which Dr. Muhammad Azam Chaudhry, acting on behalf of the Company, stated through his letter dated July 22, 2002 that the Company was not going to transact any "Special Business" at its 46th AGM. He further stated that the matter will be discussed and an "Ordinary Resolution" will be passed, therefore, statement of material facts was not needed.
It was also contended that in the 44th AGM of the Company, the shareholders had approved the disposal of property not required for the main business of the Company. Therefore, statement of material facts was not required to be annexed to the notice of the AGM. On perusal of the minutes and agenda of the 44th AGM, it was transpired that disposal of the property was not on the agenda of the notice of 44th AGM. The minutes of 44th AGM, however, included the approval of the shareholders to the sale of properties. This proposal came up during the course of the 44th AGM and was approved by the shareholders present in the said meeting. Obviously, the other shareholders who were not present in the meeting were not aware of this business as no notice or information was sent to them prior to the meeting. The resolution passed in the 44th AGM, therefore, was not in accordance with the provisions of Clause (b) of sub-section (1) of Section 160 of the Ordinance.
3. As the Company has not annexed an explanatory statement to the notice of AGM as required under Clause (b) of Sub-section (1) of Section 160 of the Ordinance, therefore, the notice of meeting, prima facie, was defective and suffered from legal infirmities. In the circumstances, the Enforcement and Monitoring Division of the Commission decided to take up this matter with the Company and its directors/Chief Executive.
4. Consequently, a notice dated July 24, 2002 was issued to the Chief Executive and directors of the Company to show cause as to why fine may not be imposed as provided under Clause (a) of Sub- section (8) of Sub-section 160 of the Ordinance.
5. In response to the show cause notice, Dr.Azam Chaudhry, advocate through his letter dated August 01, 2002 informed that the notice was received on July 27, 2002 which was the due date for the reply of the notice. He, therefore, requested for 15 days time for the said reply. The reply to the show cause notice was received through letter dated August 15, 2002. In order to provide an opportunity of hearing, the case was fixed on August 19, 2002. Mr. Farooq Akhtar, advocate represented the Chief Executive and directors in these proceedings.
6. In the written submissions as well as at the time of hearing of this case, the Learned Counsel for the Company has contended that the Company has not transacted any "Special Business" in its 46th AGM. He further submitted that the notice of meeting clearly stated that an ordinary resolution would be passed. On this basis, the Learned Counsel concluded that a statement of material facts was not required to be annexed to be annexed to the notice of the meeting, which included in the proposed agenda the consideration of the sale of property.