SHAMIM AHMAD KHAN, MEMBER.-1. The annual general meeting of Messrs Hyesons Sugar Mills Limited, a listed company, for the year ended 30th September, 1987 was not held within time prescribed in sub-section (1), section 158, Companies Ordinance, 1984 (hereinafter termed as the Ordinance), viz., by 31st March, 1988. Mr. Aziz Hussain, its Chief Executive was, therefore, upon a complaint from the Registrar of Companies, Pakistan, in terms of section 474 of the Ordinance, called upon by me to show cause as to why fine as prescribed under sub-section (4) (a) of section 158 of the Ordinance, be not imposed on him for the prima facie violation of the provisions of sub- section (1) of that section.
2. Initially, 26th October, 1988 was fixed as the date of hearing, which was adjourned to 12th November, 1988 on the request of the Chief Executive. Mr. M. Farid-ul-Haq, Advocate intimated in writing that he would be representing Mr. Aziz Hussain, and submitted a written statement on behalf of the defendant with the request to drop the proceedings on the basis of submissions made in the statement. As his explanation was not found to be satisfactory, Mr. Aziz Hussain was given another opportunity to show cause and appear in person or through his counsel on 21st January, 1989, as the hearing was fixed for that date.
3. The main arguments contained in the written statement of Mr. Aziz Hussain are summarised below:--
(a) That the Registrar of Companies allowed the company to hold the delayed annual general meetings for the years ending on 30th September, 1984, 30th September, 1985 and 30th September, 1986 within 90 days from the date of communication of letter dated 2nd December, 1987.
(b) That the annual general meetings for the years 1984,1985 and 1986 were held on 16th February, 1988 and the audited accounts for the years ended on 30th September, 1984 were presented and approved in the meeting.
(c) That at the annual general meeting, the audited accounts for the years ending 30th September, 1985 and 30th September, 1986, could not be presented due to the fact that in the previous annual general meeting, the appointment of auditors was made only for one year i.e. 30th September, 1984.
(d) That the meeting held on 16th February, 1988 was adjourned and would be held soon to consider the accounts for the years ended 30th September, 1985 and 30th September, 1986.
(e) That the order of the Registrar for holding of many annual general meetings without following the statutory provisions relating to the appointment of auditors as laid down in section 252 of the Ordinance was bad in law which was responsible for creation of legal hurdles in holding the annual general meetings in regular legal manner.
(f) That it is not the intention of law makers that all the annual general meetings should be held at one time, because the law as laid down under section 173 (2) of the Ordinance, requires holding of the succeeding meeting and not a number of meetings.
(g) That in view of the aforesaid reasons, the alleged default in not holding the annual general meeting was not "knowingly and willingly", and the law relating to the contravention of section 158(4) of the Ordinance, is not applicable to the case of the defendant.
(h) Offence under section 158(4) is committed only if failure to hold the meeting is due to act of a company which may be established to be wilful.
(i) That the non-holding of annual general meeting for the year ended 30th September, 1987 within time was beyond the control of the defendant in the circumstances mentioned above and therefore, the alleged default was not wilful.
4. On the date of hearing, the following points were emphasised by the learned counsel of the defendant:--
(1) That the direction of the Registrar of Companies issued under section 170, for holding the overdue u annual general meetings for the years ended 30th September, 1984, 30th September, 1985 and 30th September, 1986 was bad in law because the said section does not permit for issuing a directive to the company for holding more than one annual general meeting.
(2) That above directive for holding more than one meeting makes the compliance of section 252 impracticable, as sub-section (1) of the said section provides that every company shall at each annual general meeting appoint an auditor or auditors to hold office from the conclusion of that meeting until the conclusion of the next annual general meeting.
(3) That the alleged default under section 158 (4) had not been committed "knowingly and wilfully".
5. I have considered this case. I shall briefly discuss in the following sub-paragraphs, the main arguments of the learned counsel.
(1) Section 170, inter alia, provides that if default is made in holding the statutory meeting, annual general meeting or any extraordinary general meeting, the registrar may, notwithstanding anything contained in this Ordinance or in the articles of the company, either of his own motion or on the application of any director or member of the company, call, or direct the calling of, the said meeting of the company in such manner as the registrar may think fit, and give such ancillary or consequential directions as the registrar thinks expedient in relation to the calling, holding and conducting of the meeting and preparation of any document required with respect to the meeting.
The said section gives wide powers to the registrar, overriding other provisions of this Ordinance and anything contained in the Articles of Association of the Company. If a certain company has not held a meeting or meetings within the prescribed period, remedy has been provided under section 170 which empowers the registrar to call or direct the calling of such overdue meeting or meetings. Under the repealed Companies Act, 1913 such powers were vested in the High Court. In the corresponding sections 76 (3) and 79(3) of the said Act, the word "meeting" has, likewise, been used in singular form. There are numerous case laws where the High Court in exercise of the powers vested under sections 76 (3) and 79(3) of the repealed Companies Act, 1913 ordered the calling of more than one annual general meetings within the specified period. For example, in the matter of Fazal Vegetable Ghee Mills Limited (Case No. 10 of 1978), the Honourable Lahore High Court, vide order dated 14th March, 1978 directed the company to hold its two annual general meetings namely, 9th and 10th, before 1st of May, 1978 and the company reported the compliance accordingly. Another example is of Federal Chemicals and Ceramics Corporation Limited (Case No. 41/ 1983) to whom Honourable Lahore High Court vide order dated 21th December, 1983 directed to hold its six overdue annual General meetings, and the company reported compliance by holding of these meetings in one day with short intervals.
(2) Section 252 (1) provides that every company shall at each annual general meeting appoint an auditor or auditors to hold office from the conclusion of that meeting until the conclusion of the next annual general meeting. The corresponding section 144 (3) of the repealed Companies Act, 1913 contains identical provisions. As pointed out above, the Honourable Courts in several cases directed the companies to hold more than one meetings within the limited given time. In compliance with the direction of the registrar, the company should have convened three meetings separately for considering the accounts of respective years on the same day with intervals or on different dates within the prescribed period of 90 days. In this way, the auditors could be appointed in one meeting for the purpose of the accounts to be presented in the next meeting. However, the company convened one meeting to consider accounts of all the three years fully knowing the fact that the accounts for one year only (as on 30th September, 1984) were ready for presentation.
Hence the plea of the learned counsel that directive of the registrar under section 170 for holding the three overdue meetings has made the compliance of section 252 (1) impracticable, is not tenable.
(3) From the records of the company and other evidence produced, it has been noticed that--
(a) the previous record of the company is not satisfactory. Its annual general meetings for the years ended 30th September, 1982 and 30th September, 1983 were not held within the prescribed period and were held late on 30th December, 1984 and 31st December, 1985, and that too under the directions of the High Court;
(b) an application dated 14th November, 1987 was submitted by one of the directors of the company, named Mr. K.M. Usman, to the Registrar of Companies requesting for issue of direction for holding the annual general meeting for the year ended 30th September, 1984. It indicates that the accounts for the subsequent years were not ready by that time, otherwise the director should have applied for holding the meeting for the subsequent years also. It leads to the conclusion that the accounts for the years ended 30th September, 1985 and 30th September, 1986 were not ready for presentation in the meeting, held on 16th February, 1988 and plea of non appointment of the auditors appears to be only an excuse. Moreover, no justification has been brought on record for failure to compile the accounts for the said years.
(c) The adjourned meeting of 16th February, 1988 is not reported to have been convened so far, though a period of more than one year has elapsed. No justification for this extraordinary delay has been given.
(d) As the accounts for 1985 and 1986 were not ready, their presentation seems to have been included in the agenda of the meeting held on 16th February, 1989 merely to circumvent the law.
6. I, therefore, hold that there was a default in compliance with the provisions of sub-section (1) of section 158 of the Companies Ordinance, 1984, and that Mr. Aziz Hussain in his capacity of Chief Executive of Hyesons Sugar Mills Ltd., is knowingly and wilfully a party to the default.
7. Clause (a) of sub-section (4) of section 158 of the Companies Ordinance, 1984 lays down for such cases a minimum fine of ten thousand rupees. I, therefore, impose on Mr. Aziz Hussain a fine of ten thousand rupees. He shall pay this fine from his personal resources and not from the resources of the company.