1. This order shall dispose of Appeal No. 34 of 2014 filed under section 33 of the Securities and Exchange Commission of Pakistan Act, 1997 (SECP Act) against the order dated 19/06/14 (the Impugned Order) passed by the Respondent No.1 wherein case was remanded to Respondent No.2 for re-examination.
2. The facts leading to this case are that the additional registrar of companies, CRO Lahore filed a petition for winding up of the Saleem Sugar Mills Limited (the Company) before Lahore High Court (the Court) on the grounds that the Company had ceased its operation for several years and had not filed any statutory return with the Securities and Exchange Commission of Pakistan (the Commission) as required under the provisions of the Companies Ordinance 1984 (the Ordinance).
However the management, who were the major shareholders and major creditors, presented a revival plan before the Court that they will revive the operations of the Company within one year.
Based on the revival plan and assurance made therein, the Court decided vide its order dated April 23, 2013 that the Company should not be wound up, and that it was salutary that an industrial project be revived rather than scavenged.
3. In compliance with the above stated court order, the chairman of the Company made a quarterly review report on August 19, 2013. Meantime the Company initiated the proceedings of Creditors Voluntarily Winding up (CVW) in September 2013 within less than four (4) months of the court order. The liquidator was appointed for the purpose of CVW, which completed the whole process within a period of three months and submitted necessary documents with Companies Registration Office, Lahore for approval. The Deputy Registrar of Companies, CRO, Lahore (Respondent No.2) refused to accept the documents under section 468 of the Ordinance filed by the liquidator for CVW of the Company vide order dated 10.03.14 (Original Order).
4. The Appellant, being aggrieved by the Original Order filed an appeal under sub section (4) of section 468 of the Ordinance before the Registrar of Companies (Respondent No.1). After detailed hearings, the Respondent No.1 remanded the case to the Respondent No.2 vide the Impugned Order to re-examine and dispose the matter in accordance with the relevant provisions of law and to call comments from the Liquidator with respect to the following observations: a. The manners in which the liquidation proceedings were conducted cast doubts on the duty of the liquidator to proceed in the interest of all the shareholders/members. b. The Respondent No. 2 can exercise its powers within ambit of grounds provided under section 468 of the Ordinance. c. The Respondent No.2 had failed to mention in Original Order the provisions of law, contravened by the Company during and CVW proceedings. The Respondent No.2 had mentioned in the Original Order issues of non-verification of loan amount and non- valuation of assets, but failed to mention that which provision of law was contravened in consequence. d. The findings of Respondent No.2 regarding CVW proceeding and submitted documents are material in nature and cannot be ignored.
5. The Appellant, being aggrieved with the Impugned Order preferred an appeal before the Appellate Bench on the following grounds: a) The Impugned Order is violation of law laid down by the august Supreme Court of Pakistan in a case titled "Chairman WAPDA, Lahore etc. Versus Gulbat Khan" wherein it has been held that in the matters where the issue is of legal character, the same should not be remanded. Therefore the Respondent No.1 should have decided the matter, himself along with interpretation of Section 468 of the Ordinance read with Regulation 11 of the Companies (Registration Offices) Regulations, 2003 (the Regulations). b) The orders passed by Respondent No. 1 and 2 under section 468 of the Ordinance are bad in law and against the facts of the case of CVW of the Company under section 358 read with section 372 of the Ordinance. c) The Impugned Order failed to appreciate this legal aspect of the matter that the documents once tendered under section 468 of the Ordinance are final and cannot be rejected by the CRO but for reasons contained therein. The order passed by Respondent No. 2 is in complete negation to the mentioned section. d) The Impugned Order takes into account matter extraneous to the proceedings which were never raised or agitated before the Respondent No.2. e) The Impugned Order passed by Respondent No.1 is not only bad in law but is illegal as the documents for winding-up after final meeting were filed on 23.12.2013. The Impugned Order is also contrary to the regulation No.9 of the Regulations under which said documents were required to be recorded within three (3) days of receipt by the concerned Registrar. f) The Respondent No.1 has completely ignored the proper and error-free documents filed with the CRO, Lahore under various provisions of the Ordinance. The Original Order as well as the Impugned Order were result of misreading of documents and the respondents have totally erred in raising doubts as to the genuineness of CVW process completed by the liquidator and requisite returns and documents filed with the CRO, Lahore without any matter contrary therein, therefore, the action under section 468 of the Ordinance and regulation 1(2) of the Regulations was illegal and void. g) The Respondent No.2 have erred in law in rejecting the contents of letters addressed to them including a letter dated March 03, 2014 in response to letter no. ARL-/ 18178 dated February 17, 2014 without pointing out and defect, error or omission or any matter contrary to law. h) The respondents especially Respondent No.2 has erred in law by rejecting the documents filed under section 468 of the Ordinance on the basis of the show cause notice issued by the Enforcement Department of Securities and Exchange Commission of Pakistan under section 492 of the Ordinance to the appellant. i) The order passed by Respondent No.2 is bad in law as the same is based on subsection 6 of section 370 of the Ordinance which is applicable to member's voluntary winding up where as liquidation of the Company was carried out under CVW u under section 372 to 382 of the Ordinance. Authenticated, complete and satisfactory documents and clarifications was provided to the respondents however the order impugned herein does not take into account the grounds agitated by the Appellant. Thus the same is bad in law and hence liable to be struck down. It is trite law that all statutes are to be applied fairly and justly; the public functionaries are under a constitutional mandate to be just and fair. The impugned orders have been issued in complete negation to the constitutional mandate. j) The respondents have erred in law by holding that the winding up has been conducted in a non- transparent manner. No violation of any provision of law in the process of winding up has been specified in the Impugned Order and Original Order. The orders deliberately ignore the provisions of section 358, 375(1), 385, 387 and section 405 of the Ordinance. Verification of the claims of Creditors was the task of the Committee of Inspection which was carried out systematically strictly in compliance with the law. Every opportunity was given to the creditors and final selection was made after scrutiny of documents etc.
6. The Respondent No.1 raised preliminary objection that the Appellant cannot file appeal under section 33 of the Securities and Exchange Commission of Pakistan Act by virtue of S.R.O No. 659(1)/2009 dated July 14, 2009 wherein it has been provided that the person aggrieved by an order passed by the officer of the Commission, can file an appeal to the next appellate authority, which was the Commissioner in the case. As matter of fact, The Respondent No.1 neither upheld nor set aside the Original Order, rather it was remanded to review and to get certain clarifications/documents and further information from the Company and the liquidator.
7. The Respondent No.1 replied and rebutted the grounds taken by the Appellant as follows: a) The case law referred by the Appellant provides that "if the documents and material on record are insufficient to pass a judgment, then the Court may remand the case." In the instant case complete set of required record was not available with the Respondent No.1 and to avoid miscarriage of justice by relying on the insufficient record, case was remanded to the Respondent No.2. Instant case law further provided that, "in cases of lack of bona fide, bias, prejudice and arbitrariness, it will not be safe to remand the case to the same authority for re-writing the judgment or rehearing." As matter of fact the Appellant has failed to attribute any male fide and bias on part of the Respondent No.2. Therefore instant case law does not bar the Respondent No.1 to remand the case. b) By virtue of section 372 of the Ordinance provision from section 373 to 382 both inclusive shall apply to CVW. The proviso of sub-section(6) of section 382 provides that if on scrutiny the registrar considers that the affairs of the company or the liquidation proceedings have been conducted in a manner prejudicial to the interest of its creditors or its members or any actionable irregularity has been committed, he may take action in accordance with the provision of the Ordinance. c) The Respondent No.2 has decided the matter and refused to accept the documents under section 468, however Respondent No.2 has not mentioned other relevant provision, therefore the Respondent No.1 was not in position to decide the matter due to lack of necessary record, so matter was remanded to the Respondent No.2 to decide the issue after summoning further record from the Appellant. d) Remand order was based on different other factors including the complaints received from the shareholders regarding the CVW, therefore matter was remanded to the Respondent No.2 so that he can consider all necessary facts and circumstances for the just decision of the case. e) Regulations are meant for regulating the internal working of the registrars performing duties under the Ordinance and it is directory in nature and not mandatory. Further the time frame provided in the Regulations is only for those cases where no irregularities were found. In the instant case, the auditor had provided qualified report especially with respect to creditor's loan; therefore instant matter cannot be proceeded in accordance with the timeline mentioned in the Regulations. f) Sub-section (6) of section 382 provides that the registrar shall register the documents filed by the company after scrutiny and in the instant case the loan amount was unverifiable from the record of the Company and in this regard a qualified report was submitted by the auditors from the year 2000 to 2004. Therefore, Respondent No. 2 after taking into account the submissions made by the representatives of Appellant and in exercise of the powers under section 468 of the Ordinance refused to accept the documents. Furthermore it is important to mention that Respondent No. 2 vide its letter dated February 17, 2014 demanded documents from the Appellant.
The appellant replied vide letter dated March 03, 2014, however required documents were not provided by the Appellant. The Appellant, failed to comply with Regulation 11(2) of the Regulations. g) Liquidator had failed to provide the evidence of receipt of creditor's loan in the company account as demanded by the Respondent No.2. The evidence was necessary to decide the case because the loan balance remained unverified during the year 2000 to 2004. Moreover M/s. Haider Bhimji & Co., the statutory auditor of the company has also qualified the audit report for the year ended March 31, 2013. h) The basis of rejection of documents was sub section (6) of section 382 which provides that the registrar shall register the documents filed by the company after scrutiny and in the instant case the loan amount was unverifiable from the record of the Company and in this regard a qualified report was submitted by the auditors with respect to the loan amount. Therefore, The Respondent No.2 after taking into account the submissions made by the representatives and in exercise of the powers under section 468 of the Ordinance refused to accept the documents. i) The objection raised by the Appellant is valid to the extent of non-application of section 370(6) to CVW. The Original Order was passed after detailed analysis of available record, however Respondent No.2 wrongly mentioned the above section, therefore matter was remanded to decide afresh, by keeping in view relevant provisions and by calling further record from the Appellant, which was not provided earlier. j) Sub-section (6) of section 382 clearly states that the registrar can register the documents after such scrutiny as he may deem fit. In the instant case, the qualified report of the auditor with reference to the creditor's loan was on record and on the other end the Court vide its Order dated 23-04-2013 directed that the management of the company shall ensure that all qualification of the auditor in the audit report for the year ended 30-092012 are addressed and no such adverse opinion is contained in the audit report for the year ended 30-09-2014."
8. The appeal was fixed before the Appellate Bench on 06.04.15 at Islamabad and parties were heard at length. The Respondent No.1 raised a preliminary objection regarding the maintainability of the appeal before the Appellate Bench under section 33 of the Securities and Exchange Commission of Pakistan Act 1997, rather it should be filed before Commissioner Company Law Division by virtue of S.R.O No. 659(1)/2009 dated July 14, 2009. We have gone through the SRO aforementioned, relevant part is reproduced below: " POWERS AND FUNCTIONS OF THE COMMISSION DELEGATED TO THE COMMISSIONER, COMPANY LAW DIVISION (REGISTRATION DEPARTMENT)
468(4)(b) To hear the appeal against the order passed under section 468(1) in case of order of refusal passed or upheld in appeal by the Registrar.
It is clear from the bare readings of the above mentioned abstract of the SRO, that if Registrar has passed an order of set aside or upheld, then appeal shall lie before the Commissioner Company law Division (CCLD). In this case we believe that the Respondent No.1 has neither set aside nor up held the original order, therefore appeal cannot be heard by the CCLD, therefore Appellant has rightly invoked the jurisdiction of Appellate Bench under section 33 of the SECP Act. Respondent No.1 has admitted before the Appellate Bench that through the Impugned Order, the Original Order was neither upheld nor set aside, therefore in view of admission of the Respondent No.1 and in the light of express delegation of Section 468(4) (b) the preliminary objection of the Respondent No.1 finds no ground to sustain, hence rejected.
9. We have heard the parties and the perused the pleadings/record and judgment of the Supreme Court cited by the Appellant. We understand from the above discussion that the there is only one issue to decide i.e. whether the Respondent No.1 has rightly remanded the case or he has to decide the appeal as prayed by the Appellant.
10. Our finding on important issues are as follows: a. The Appellant has cited a case law to establish that the instant case involves question of law which has to be decided by the Respondent No.1, rather to remand. As per record we are of the view that many factual controversies were not addressed in the Original Order due to non- availability of relevant record and information, therefore Respondent No.1 has rightly remanded the case to Respondent No.2, to consider all unresolved facts by calling record from all the concerned.
Facts of the case referred by the Appellant are distinguished from the instant case, however principal of "remand of case" elaborated in the judgment has been followed by the Respondent No. 1 in true letter and spirit. b. The Respondent No.2 has rightly refused to register the documents tendered under section 468 of the Ordinance; however relevant provision under which such rejection was made should have been incorporated in the Original Order. Whole proceedings conducted by the liquidator are shrouded in mystery because without verification of creditors winding up proceedings cannot be initiated and no distribution of the assets could be made among creditors. c. The Respondent No.2 has rightly refused to accept the tendered documents being contrary to law as per available record and information, therefore no illegality has been committed by the Respondent No.2. d. The Appellant has not come with clean hands to seek the remedy under section 33 of the SECP Act, because the Appellant failed to provide the required documents including evidence of receipt of creditor's loan to the Respondent No.2. The Appellant had not shared necessary documents for the reasons best known to him, therefore the Respondent No.1 acted as per available record and information. e. Respondent No.2 has wrongly referred section 370(6) in the Original Order, however due to wrong reference of law, opportunity of escape could not be provided to the Appellant, and therefore the Respondent No.1 has rightly remanded the case to consider all relevant facts in issue. f. Without removal of the qualification of the auditor, creditors and their claims could not be verified; therefore proceedings conducted by the Committee of Inspection were undesirable. g. The Bench has noted the fact with great concern that the Appellant has not complied with the order dated 23-04-2013 passed by the Court with regard to submission of quarterly review report with the Commission except a single report dated August 19, 2013. Further the management of the Company has initiated CVW in September 2013 within less than four (4) months of the court order, which is contrary to the direction of the Court wherein the Company was provided time to revive itself till September 30, 2014. Initiation of CVW indicates the deceptive intention of the Appellant and it amounts to contempt of court.
11. In the light of above discussion and our findings on different issues which came on record through pleadings, we direct the Appellant to appear before the Respondent No.2 with all required record. The Respondent No.2 is directed to entertain the grievances and issues of Appellant with utmost care and in accordance with law. in case Appellant fails to comply with order, the relevant department is directed by this order to initiate the proceedings in accordance with the Court order dated 23-04-2013.
12. In view of the aforesaid, there being no reason to interfere with the Impugned Order dated 19/06/14 passed by the Respondent No. 1, wherein case was remanded to the Respondent No.2 with appropriate directions to ensure the ends of justice, therefore appeal is dismissed.
13. Parties to bear their own cost.