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Initializing Secure Chambers
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Initializing Secure Chambers
Petitioner: KHAWAR ALMAS KHAWAJA, CEO VS Respondent: COMMISSIONER (SMD), SECP
2017 C L D 1580 [Securities and Exchange Commission of Pakistan] Before Tahir Mahmood, Commissioner (CLD) and Zafar Abdullah, Commissioner (SCD) KHAWAR ALMAS KHAWAJA, CEO and 6 others---Appellants Versus COMMISSIONER (SMD), SECP---Respondent Appeal No. 22 of 2016, decided on 11th November, 2016. Securities Act (III of 2015)--- ----Ss. 100 & 160---Securities and Exchange Commission of Pakistan Act (XLII of 1997), S.33---Failure to pay two years' annual listing fee and join "Central Depository System (C.D.S.)"---Company (broker) was placed on default counter of Pakistan Stock Exchange (P.S.X.) due to its failure to pay two years' annual listing fee and join Central Depository System (C.D.S.)---Trading in company shares was suspended---Commissioner (S.M.D.) of Commission, issued a direction to the Directors of the company under S.100 of the Securities Act, 2015 to take immediate steps to undo said two defaults within 14 days, but they failed to comply with said direction---After issuing show-cause notice to the Directors of the company, case was fixed for hearing, but despite many adjournments, no one appeared on behalf of the company, and Commissioner (S.M.D.) being dissatisfied with the conduct of the Directors of the company, proceeded ex parte and imposed penalties on each Directions---Appellant Bench, found or appropriate to provide a final opportunity of fair trial to the Directors of the company---Appellant Bench was of the view that technical knockout would not serve the purpose of substantial justice---Impugned order was set aside, subject to payment of cost and matter was remanded to the Commissioner (S.M.D.) of the Commission with direction to provide a final opportunity of hearing to the Directors of the company who were also directed to appear on the day and time fixed for hearing---Order accordingly. Muhammad Aslam Awan, F.C.A. and Tauqeer Hussain for Appellant. Ms. Ayesha Riaz, Additional Director (CSD), Haroon Abdullah Abbas, Deputy Director (CSD) and Zeeshan Rehman Khattak, Deputy Director (SMD) for Respondents. Date of hearing: 20th October, 2016. ORDER TAHIR MAHMOOD COMMISSIONER, (CLD).---This order shall dispose of the appeal No.22 of 2016 filed under section 33 of the Securities and Exchange Commission of Pakistan Act, 1997 against the order dated 05/04/2016 (the Impugned Order) passed by the Respondent under section 160 read with section 100 of the Securities Act, 2015 (the Act). 2. Brief facts of the case are that Hamid Textile Mills Limited (the Company) was placed on defaulter counter of Pakistan Stock Exchange (the PSX) on 06/08/97 due to its failure to pay two years annual listing fee and its failure to join Central Depository System (the CDS). Thereafter, trading in Company shares was suspended on 01/08/12. The Respondent issued a direction to the Appellants on 01/09/15 (the Direction) under section 100 of the Act to take immediate steps to undo the defaults of the Listing Regulations of PSX within 14 days. However, they failed to comply with the Direction. In view of above, a Show Cause Notice (the SCN) dated 16/10/15 under section 160 read with section 100 of the Act was served on the Appellants. The first hearing in the matter was fixed on 17/12/15 and second hearing was fixed on 20/01/16, however the CEO of the Company vide letter dated 19/01/16 sought adjournment and submitted that the Company has never received the Direction issued on 01/09/15 under section 100 of Securities Act 2015, therefore, he requested to provide a copy of the Direction. The desired copy of Direction was sent to the Appellants and thereafter case was fixed for 26/01/16, 09/02/16 and 03/03/16 however, no one appeared on behalf of the Company or Appellants. The Respondent being dissatisfied with the conduct of the Appellants imposed a penalty of Rs.500,000 on each of the directors of the Company in the following manner:
S. No.
Name of Respondents
Amount Rupees
1.
Mr. Khawar Almas Khawaja, CEO
500,000
2.
Mr. M. Shahzad Sharif
500,000
3.
Mrs. Nighat Khawar
500,000
4.
Mr. M. Alamgir
500,000
5.
Mr. M. Idrees Khan
500,000
6.
Mr. Abid Hussain
500,000
7.
Mr. Mian Haseeb Iftikhar
500,000
Total
3,500,000
3. The Appellants have preferred this appeal inter alia on the ground that matter was decided ex parte by the Respondent, which is against the law and natural justice. The Respondent, has rebutted that ample hearing opportunities were provided to Appellants, however they deliberately failed to appear and plead the case. 4. The Appellate Bench (the Bench) has heard the parties i.e. Appellants and Respondent and perused the record of appeal. As per record, five hearing opportunities dated 17/12/15, 20/01/16, 26/01/16, 09/02/16 and 03/03/16 were provided to the Appellants however, no one appeared before the Respondent to plead the case. Therefore, case was decided ex parte. The record of the case illustrates unprofessional conduct of the Appellants, as they were fully aware of hearings but they never appeared to join the proceedings before the Respondent. The adjournment request of the Company chief executive officer for hearing dated 20/01/16 is on record. The previous conduct of the Appellants cannot be appreciated, however, the Bench finds it appropriate to provide a final opportunity of fair trial to the Appellants. The Bench is of the view that technical knockout would not serve the purpose of substantial justice. Furthermore, the apex courts have also observed in numerous verdicts that law favours adjudication on merits rather than technicalities. 5. In view of above discussion and subject to payment of cost Rs.70,000 (Rs.10,000 imposed on each of the Appellants) we hereby set aside the Impugned Order and remand the matter to the Respondent to decide it afresh, on merit. The Appellants are directed to deposit the amount of cost in the designated bank account maintained in the name of Securities and Exchange Commission of Pakistan with MCB Bank Limited within 10 days from the receipt of this order and furnish the challan to the Respondent, as evidence of deposit of cost. The Respondent is directed to provide a final opportunity of hearing to the Appellants who are also directed to appear on the day and time fixed by the Respondent for hearing. Therefore, in the circumstances, the appeal is disposed of. HBT/7/SEC Case remanded.