This matter before us arises from an appeal filed under section 33 of the Securities and Exchange Commission of Pakistan Act, 1997 ("Act") by Mrs. Naela Turab Ali against an Order dated June 21, 2002 ('Impugned Order') passed by the Commissioner (Securities Market), SEC.
1. Brief facts leading to this appeal are that Mrs. Naela Turab Ali filed a complaint before the Commission against Mian Nusrat-ud-din alleging that his brokerage house sold shares belonging to her without her knowledge or permission and she has suffered a heavy loss on that account. The Commissioner (SM) after providing an opportunity of hearing to the parties, rejected Mrs. Naela Turab Ali assertions against Mian Nusrat-ud-din vide the Impugned Order. However, the Commissioner imposed a penalty of Rs.100,000/- on Mian Nusrat-ud-din for violation of Rule 4(4) of the Securities & Exchange Rules 1971 for not delivering the trade confirmations to Mrs. Naela Turab Ali. The Commissioner further imposed a fine of Rs.100,000/- on Mian Nusrat-ud-din for violation of section 18 of the Securities & Exchange Ordinance, 1969 for making a false statement before the Commission.
2. Being aggrieved, both Mrs. Naela Turab Ali and Mian Nusrat-ud-din filed appeals against the Impugned Order. The appeals were initially fixed for hearing on August 27, 2002 and thereafter on other days, however both the parties sought constant adjournments in the appeals. The appeals finally came up for hearing before the Bench on November 19, 2002. No one appeared on the said date on behalf of Mrs. Naela Turab who was also a Respondent in appeal No.46 of 2002 filed by Mian Nusrat-ud-din. Consequently, Appeal No.46 of 2002 filed by Mian Nusrat-ud-din was heard and order was announced accordingly whereas the present Appeal filed by Mrs. Naela Turab Ali was dismissed for non-prosecution. Later on, the counsel of Mrs. Naela Turab Ali filed an application for restoration of the present appeal, which was accepted by the Appellate Bench and hearing was first fixed on January 16, 2003. However, the Appellant has been seeking adjournments in the case. The appeal finally came up for hearing on July 03, 2003 when the parties mentioned above appeared before the bench and argued their cases.
3. Mr. Assad Ullah Javied, the counsel for Mian Nusrat-ud-din ("Respondent No.2") raised some preliminary objections and contended that after the final adjudication of both the appeals, the present appeal cannot be heard by the Bench as that would amount to review of the order announced earlier by the Bench in Appeal No.46 of 2002. He further argued that the application for restoration of the present appeal should not have been accepted by the Bench without hearing Respondent No.2. He said that the ex-parte order passed in Appeal No. 46 of 2002 has not been challenged by Mrs. Naela Turab Ali ("Appellant"), which has consequently attained finality. He argued that the present appeal is directly connected to Appeal No. 46 of 2002 and a decision in this Appeal would adversely affect the order announced in that Appeal.
4. Mian Ashiq Hussain, the counsel for the Appellant arguing on the main appeal, contended that Commissioner (SM) did not consider the material fact that SEC had directed the Managing Director LSE vide letter dated May 02, 2001 to investigate the facts alleged in the Appellant complaint and prepare a detailed report of the results thereof. It was particularly required that the violations of the Rules and Regulations of the Lahore Stock Exchange, the Central Depository Act, 1997 and other applicable law, and /or a failure by Respondent No. 2 to act within the ambit of the authority given by the Appellant should be looked into by the Bench. The Managing Director LSE, instead of undertaking an objective investigation, directly sought written comments of Respondent No.2. Thus the directions issued for investigations into the complaint under Section 20(1) and (4) of the Act were not complied with. No investigation was undertaken, which resulted in miscarriage of justice.
He further said that glaring violations have been made of Rule 4 (4) of Securities and Exchange Rules 1971 by Respondent No.2. He further stated that the Commissioner (SM) had rendered the decision on the basis of presumption that since the Appellant had paid the amount to Respondent No.2, she had endorsed the transactions. This finding he contended was vitiated for want of necessary inquiry and evidence. The counsel for Appellant once again requested adjournment, which was not allowed by the Bench keeping in view that thirteen adjournments have already been allowed in the matter.
5. Mr. Assad Ullah Javied, the counsel for the Respondent No.2 in his reply to the assertions of the Appellant contended that business in the Appellant's account was conducted strictly in accordance with her telephonic instructions. He denied that the Respondent No.2's office ever gave any wrong information to the Appellant or handled her trading account carelessly. He further said that Appellant had given express instructions to the Respondent No.2 not to send any communication at her residential address, as she would be collecting these trade confirmations through her driver. The counsel of Respondent No.2 invited the attention of the Appellate Bench to the statement of the Appellant in her complaint where she had stated, "We worked with the understanding that Mian Nusrat 's agent would sell in my account as soon as they registered profit". He sated that without conceding to this statement of the Appellant, it is clear that her intention at entering the market was for gains from speculative trading. He further argued that the Appellant has admitted in her complaint that in her trading, "bad luck prevailed and shares started dropping drastically". He contended that Market conditions are never in control of any person, therefore the broker cannot be held responsible for the losses suffered by a person taking chances.
6. Syed Aamir Masood, Director (SM) appearing on behalf of Commissioner (SM) stated that the letter dated May 08, 2001 of Respondent No.2 was received in response to Commissioner (SM) letter dated May 02,2002 sent directly to Respondent No.2. He further said the Commissioner (SM) did take cognizance of the fact that the Respondent No.2 provided no trade confirmation slips to the Appellant and imposed fine on him for this violation of law. He stated that the Appellant is an educated lady and appears to be well conversant with the trade as well as the terminology used in Securities Market. She had installed a Wavetech Information System at her house, which provides ample proof of the fact that she was not nave in investing in shares and securities. The correspondence of the Appellant with the Commission also proves her upto date knowledge and information about trading in Securities Market. However as for as the Appellant's plea regarding unauthorized trading is concerned it is obvious form the ledger statement of the Appellant's trades that she was depositing money with Respondent No.2 to make good the losses. He further said that if the Appellant was of the opinion that the transactions were unauthorized, she should have stopped further trading with Respondent No.2 and lodged a complaint with the LSE or the Commission. As the Appellant continued to trade and made payment for her transactions to the broker even after that i.e. till October 2000, it shows her consent for the transactions executed in her account. As for as the matter regarding purchase of shares of PSO is concerned, it is evident from the record that there was no force or coercion on her by Respondent No.2 to execute these transactions. Syed Aamir Masood further added that the Appellant had taken huge positions where by her purchases and sales were to the tune of Rs.235 million and Rs.232 million respectively, and she continued to trade aggressively in PSO and made payments to Respondent No.2 with a hope to make good her loss. Mr. Masood pleaded that the instant appeal should be dismissed accordingly.
7. We have heard both the parties and considered their arguments. We do not agree with the preliminary objection raised by Respondent No.2 that adjudicating on the present appeal would amount to review of the order announced in Appeal No.46 of 2002 filed by Respondent No.2. The matters raised in appeals No.46 & 49 are different to each other. The Commissioner (SM) had framed three issues in the Impugned Order. Respondent No.2 had pleaded against the penalty imposed on him in his appeal No.46 of 2002, consequent to the third issue framed by Commissioner (SM). Whereas, this appeal is against the findings of the Commissioner on the first two issues. Also, we are of the opinion that the decision to restore this appeal, which was earlier dismissed for non-prosecution is in the discretion of the Bench and this decision was taken in the interest of justice in order to decide this appeal on its merits.
8. The Appellant's assertion that LSE instead of conducting a proper inquiry, sought Respondent No.2 comments has been considered by us. However, as is clear from the reply by Commissioner (SM), the decision of Commissioner (SM) is not based on any response or findings of LSE. Instead the Commission had itself written directly to Respondent No.2 vide its letter dated May 02, 2002 and the Impugned Order is based on the response received from Respondent No.2 and the hearing conducted by Commissioner (SM) in which the Appellant also took part. The Appellant's contention that the failure of Respondent No.2 to deliver trade confirmations leads to the conclusion that the trades were done without her authority cannot be accepted. The documents on record, which include the ledger statement show that the Appellant did endorse the trades subsequently by depositing money to make good her losses. The Appellant also does not deny that she used to give permission for trading to Respondent No.2 on the telephone. The Appellant cannot therefore be allowed to argue that as far as the trades, which resulted in profit were authorized by her and those which did not result so were not authorized. It is accepted that Respondent No.2 was required by law to provide trade confirmations to the Appellant within 24 hours, and Commissioner (SM) had taken cognizance of this fact. However, this itself does not mean that all the transaction conducted by Respondent No.2 were illegal.
In light of the submissions made by the parties and examination of the available record, we find no reason to interfere with the order of Commissioner (SM), which is hereby maintained. This appeal is dismissed accordingly.