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Official Citation: 2025 SHC 540
Court / Jurisdiction: Sindh High Court
Year of Decision: 2025
Decision Date: 2025-03-22
Parties: Securities & Exchange Commission of Pakistan vs Adnan Faisal & another
Ruling Summary: This decision was rendered by the Sindh High Court on 2025-03-22, officially reported as 2025 SHC 540. In this matter between Securities & Exchange Commission of Pakistan and Adnan Faisal & another, the court adjudicated key questions of statutory construction, procedural regularity, and legal precedent under Pakistani law.
Core Holding: The honorable bench evaluated governing statutory provisions and judicial authorities to establish the rights of the parties, delivering the binding reasoning set out below.
Case cited as 2025SHC540
Court Name: Sindh High Court Judge(s): Amjad Ali Sahito Title: Securities & Exchange Commission of Pakistan vs Adnan Faisal & another Case No.: Criminal Misc. Original Application No.02 of 2008 Date of Judgment:2025-03-22 Reported As: 2025 SHC 540 Result: Application Dismissed
JUDGMENT
JUDGMENT AMJAD ALI SAHITO, J -- Through this Crl. Misc. Original Application, complainant/Securities & Exchange Commission of Pakistan prayed for the following relief: "It is therefore, humbly prayed that this Hon'ble Court may be pleased to register the complaint and after trial, punish the accused persons/respondents under Section 282- K/282 M(2) of the Companies Ordinance, 1984 read with Section 34/109 PPC and other enabling provisions of law." 2. The pertinent facts necessary for the adjudication of the instant Criminal Miscellaneous Application are that the Securities and Exchange Commission of Pakistan (hereinafter referred to as "the Complainant") instituted the present Criminal Original Complaint under Sections 282 K and 282-M of the Companies Ordinance, 1984 against Accused No. I, Adnan Faisal, and co- accused Sanan Faisal. 3. The primary allegation against accused Adnan Faisal is that, in his capacity as an officer of a Non-Banking Finance Company (NBFC), he unlawfully utilized confidential information by disclosing the same to his brother, co-accused Sanan Faisal, for personal gain. 4. During the pendency of the said complaint, an application under Section 265-K of the Code of Criminal Procedure, 1898, was filed by co-accused Sanan Faisal. After hearing the parties, this Court, vide order dated 27.10.2011, allowed the application and acquitted the said co-accused. The Complainant, being dissatisfied with the said order, preferred HCA No. 15/2012 before this Court, which was dismissed vide order dated 02.08.2018. As no further appeal was preferred by the
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Complainant, the said order has attained finality. Consequently, the instant Criminal Miscellaneous Application remains pending solely against accused Adnan Faisal. 5. This Court proceeded to frame the charge against accused Adnan Faisal, to which he pleaded not guilty and claimed trial. In support of its case, the prosecution examined a total of five (05) witnesses and thereafter closed its evidence. 6. The statement of the accused was recorded under Section 342 of the Code of Criminal Procedure, 1898, wherein he categorically denied the allegations leveled against him and professed his innocence. The accused opted not to testify on oath under Section 340(2) Cr.P.C. However, in his defense, he produced certain documents and examined two defense witnesses: DW-1, Sanan Faisal Kundi (his brother), and DW 2, Abdul Hakeem Khan (his father). 7. Learned counsel for the complainant submitted that the Securities and Exchange Commission of Pakistan (SECP), being the regulatory authority for Non-Banking Finance Companies (NBFCs), filed the instant Criminal Original Complaint under Sections 282-K and 282-M of the Companies Ordinance, 1984, on 04.12.2008 through its duly authorized officer, who qualifies as a public servant. It was further contended that while the accused has, to an extent, admitted the commission of the act, he has asserted that the alleged offence falls within the ambit of "Insider Trading" as defined under Section 15-A of the Securities and Exchange Ordinance, 1969. However, such assertion is misplaced and legally untenable. 8. Learned counsel argued that Section 15-C of the Securities and Exchange Ordinance, 1969, defines an "Insider" as a person having a nexus with the "Issuer." In the present case, the accused has been charged in his capacity as an officer of an NBFC engaged in the business of purchase and sale of shares and has not acted as an issuer of securities. Therefore, he does not fall within the definition of "Insider" under the said Ordinance. It was further submitted that the accused filed an application under Section 488 of the Companies Ordinance, 1984, seeking exemption from liability on the grounds of alleged negligence, default, breach of duty, or breach of trust. However, a plain reading of the complaint, along with the statements of prosecution witnesses and their cross-examination, demonstrates that the prosecution has successfully established the culpability of the accused, who is liable to be awarded the maximum punishment as provided under Section 282-K of the Companies Ordinance, 1984, now incorporated under the Companies Act, 2017. 9. Conversely, learned counsel for accused Adnan Faisal (Accused No.1) argued that the prosecution has failed to establish, beyond reasonable doubt, that the accused, in his capacity as an officer of an NBFC, misused his position to derive direct or indirect benefits, thereby contravening Section 282-K of the Companies Ordinance, 1984. It was further submitted that at the relevant time i.e., during the years 2006-2007, when the accused joined NAFA the governing special legislation dealing with the offence of insider trading was the Securities and Exchange Ordinance, 1969. 10. Learned counsel emphasized that Section 15-A of the said Ordinance governs insider trading and confers powers upon SECP to take cognizance of such offences. Moreover, as per Section 24 of the Ordinance, the only penalty prescribed is that of a fine, which may be imposed following the issuance of a Show Cause Notice. No such proceedings under the said Ordinance were ever initiated against the accused. It is a well-established principle of law that the provisions of a special law override those of a general nature. It was also argued that co-accused (Accused No.2) was acquitted pursuant to an application filed under Section 265-K, Cr.P.C., which order was upheld by this Court in HCA proceedings and has since attained finality. It was contended that the case of the present accused stands on identical footing, and he is, therefore, similarly entitled to the benefit of acquittal. In conclusion, learned counsel prayed that, in view of the foregoing, the accused is entitled to be acquitted of the charges.
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11. I have heard the learned counsel for the respective parties and have perused the record available before the Court. 12. The Securities and Exchange Commission of Pakistan (hereinafter referred to as "the Complainant") instituted the instant criminal complaint against Accused No. 1 and Accused No. 2 under Sections 282-K and 282-M of the Companies Ordinance, 1984, alleging violations of the said statutory provisions. Accused No. 1, Adnan Faisal, was employed as the Head of Equity Research at M/s National Fullerton Asset Management Limited (NAFA) from 08.02.2007 to 10.12.2007. By virtue of the nature of his official duties, he had access to confidential and price-sensitive information relating to the trading of securities. It is alleged that he misused such information to obtain personal gains. 13. Specifically, Accused No. 1 was aware that NAFA intended to acquire a substantial quantity of shares in a particular listed company, which would likely lead to a rise in the market value of those shares. With such advance knowledge, Accused No. 1 orchestrated the purchase of the said shares through his brother, Sanan Faisal (Accused No. 2, who was subsequently acquitted), and later sold them for profit. It is alleged that Accused No. 1 intentionally and knowingly obtained direct and indirect benefits for himself and for his brother, thereby violating the aforementioned provisions of law. 14. It is an admitted position that Accused No. 2, Sanan Faisal, who was alleged to be the primary beneficiary of the impugned transactions, was acquitted by this Court under Section 265-K of the Code of Criminal Procedure, 1898, vide order dated 27.10.2011. The Complainant, being dissatisfied with the said order, filed an appeal, which was also dismissed by this Court vide order dated 02.08.2018. No further challenge was preferred by the Complainant before the Hon'ble Supreme Court of Pakistan. As such, the aforementioned orders have attained finality. 15. Upon query by this Court to the learned counsel for the Complainant as to whether any direct evidence exists on record connecting the accused to the commission of the alleged offence, the learned counsel conceded that the prosecution's case rests solely on documentary and circumstantial evidence. It is a well-settled principle of criminal jurisprudence that direct evidence plays a central and decisive role in establishing guilt and proving charges beyond reasonable doubt. Where direct evidence is found to be insufficient, contradictory, or inconsistent, such evidence cannot sustain a criminal conviction. 16. Although circumstantial evidence is generally considered to be of a weaker nature compared to direct evidence, this alone does not constitute a valid basis for acquittal. The administration of justice in such circumstances calls for heightened scrutiny, care, and caution by the courts while evaluating the evidentiary record. In this regard, the guiding principle for reliance upon circumstantial evidence, and the standard required to sustain a conviction based thereon, has been reaffirmed by the Hon'ble Supreme Court of Pakistan in the case titled Azeem Khan and another v. Mujahid Khan and others (2016 SCMR 274), wherein it was held as follows: "31. As discussed earlier, the entire case of the prosecution is based on circumstantial evidence. The principal of law, consistently laid down by this Court is that different pieces of such evidence has to make on chain, an unbroken one where one end of it touches the dead body and the other the neck of the accused. In case of any missing link in the chain, the whole chain is broken and no conviction can be recorded in crimes entailing capital punishment." 17. In the present case, the complaint was initially filed by Mr. Muhammad Noman Akhtar, an officer duly authorized by the Securities and Exchange Commission of Pakistan (SECP). During the pendency of proceedings, Mr. Noman Akhtar was transferred to the National Accountability Bureau (NAB) for a certain period. Consequently, Mr. Qaiser Iqbal was authorized by the competent authority at SECP to represent the Commission before this Court and to tender evidence on its behalf. It is pertinent to note that at the time of filing the complaint, Mr. Muhammad Noman Akhtar
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had submitted a verification affidavit, affirming under oath that he was duly authorized by the SECP to institute the complaint and that the contents of the complaint were true and correct to the best of his knowledge and belief. 18. In support of the prosecution's case, Mr. Qaiser Iqbal, who was neither the original complainant nor cited as a witness in the list of prosecution witnesses, appeared before the Court as PW-1 pursuant to subsequent authorization by SECP. His statement was recorded, and he produced documentary evidence exhibited as Exh: C/1 to C/16. His testimony largely reiterated the facts as narrated in the original complaint. However, during cross-examination, the witness admitted that "I do not know whether, at the time of the appointment of Mr. Adnan Faisal, any declaration was obtained by NAFA, the employer of the accused... I do not know whether any complaint was ever lodged by NAFA with SECP against Mr. Adnan Faisal... It is a fact that the inspection team did not share the facts and figures with Adnan Faisal and Sanan Faisal prior to the filing of the complaint by SECP... It is not within my knowledge, nor can I point to any document on record, that NAFA ever initiated proceedings against the accused in respect of the alleged misuse of official authority." 19. To further substantiate the version of the prosecution, PW-2 Mr. Muhammad Aslam Memon, Senior Manager, Risk and Compliance at Al-Falah Securities, was examined. He produced documentary evidence marked as Exh: C/18 to C/29. In his deposition, he stated that an account in the name of accused Sanan Faisal was opened on 08.02.2007. The account reflected an investment of Rs. 795,000/- and Rs. 1,500,000/-, aggregating to Rs. 2,295,000/-. Between 19.06.2007 and 01.11.2007, Al-Falah Securities returned the entire principal investment of Rs. 2,295,000/- along with a profit amounting to Rs. 5,270,524/-, resulting in a total payout of Rs. 7,565,524/- to Sanan Faisal. During cross-examination, the witness admitted that "It is correct that a complete breakup/history of the transactions made by Sanan Faisal is not exhibited in the documents produced by me. I am not in a position to specify the dates of transactions leading to the last transaction... It is correct to suggest that all transactions, as referred, were made by Sanan Faisal and there is nothing on record to indicate that any other person appropriated the investment or the profits." 20. Muhammad Ibrahim Salman, Assistant Manager Trading, Pakistan Stock Exchange (PSX), appeared as PW-3. In his deposition, he supported the version advanced by the complainant and stated that, according to the PSX record, from March 2007 to October 2007, NAFA purchased a substantial quantity of the selected shares. Furthermore, it was revealed that Sanan Faisal had also purchased the same selected shares through Al-Falah Securities, as evidenced by Exhibit C/32. During cross-examination, the witness candidly admitted that "It is a fact that I personally do not know the facts of the case". 21. Sajjad Anwar, Chief Investment Officer, NBP Fund Management, was examined as PW-4. He submitted a written statement, which was treated as his examination-in-chief. In cross- examination, he acknowledged that "It is correct to suggest that I did not observe any communication whether classified or unclassified through which privileged information was allegedly shared by Adnan Faisal with his brother Sanan Faisal." He voluntarily added: "When SECP initiated its inquiry/action, I became aware of this issue in my capacity as the head of the department." 22. The prosecution also examined Mr. Nadeem-ul-Haq Khan as PW-5. He produced bank account details reflecting that, as per the record, Accused No. 1 transferred Rs. 2,300,000/- from his account maintained at UBL, Nursery Branch, Karachi. Additionally, two further transactions amounting to Rs. 800,000/- and Rs. 1,500,000/-, respectively, were made and credited into the account of Sanan Faisal at MCB, DHA Branch, Lahore. Subsequently, Sanan Faisal returned the amounts received to Adnan Faisal via cheque. Other similar transactions were also conducted between both brothers.
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During cross-examination, the witness admitted that "The account statement produced by me pertains to a dormant account." 23. Thereafter, the prosecution closed its side through a formal statement dated 08.04.2021, which was exhibited as Exh: C/45. 24. The statement of Accused No. 1 was recorded under Section 342 of the Code of Criminal Procedure, 1898, wherein he categorically denied all allegations leveled by the prosecution and professed his innocence. The accused also opted to record his statement on oath under Section 340(2) Cr.P.C. In his defense, he examined three defense witnesses: DW-1: Sanan Faisal (his brother) DW-2: Abdul Hakeem Khan (his father) DW-3: Zeeshan Saeed 25. The instant complaint was filed by the Securities and Exchange Commission of Pakistan under Sections 282-K and 282-M of the Companies Ordinance, 1984. For the sake of clarity and proper appreciation, the relevant statutory provisions are reproduced hereinbelow: "282K. Penalty for making false statement, etc. - (1) Notwithstanding anything contained in any other provision of this Ordinance, if any person, being the chairman, director, chief executive, by whatever name or called, or a person not being a professional advisor in accordance with whose directions or instructions the directors are accustomed to act;] or official liquidator or any officer of a NBFC or a notified entity] in any document, prospectus report, return, accounts, information or explanation required to be . furnished in pursuance of this Ordinance or the rules or regulations] made thereunder, willfully makes a statement which is false in material particular knowing it to be false, or affairs willfully omits to make material statement, mismanages the NBFC [or a notified entity) or misuses his position or direct or indirect benefit or himself or any of his family members, he shall be punishable with imprisonment for a term which may extend to three years and shall also be liable to fine which shall be not less than one hundred thousand rupees, and shall be ordered by the Court trying the offence, to deliver up or refund within a time to be fixed by the Court any property acquired or gained by him in his own name or in the name of his family members by so mismanaging the affairs of the NBFC 2[or a notified entity] or misusing his position or, in . default, to suffer imprisonment for a term which may extend to three years. (Emphasis Highlighted). (2) Any officer, director or chief executive of a NBFC 2[or the notified entity who is either directly or indirectly owned, controlled or managed by the Federal Government or a Provincial Government who extends, or adds in extending, a loan, advance, or any financial facility to a borrower or customer on ) the verbal instruction of a holder of a public officer without reducing the terms of the instructions into writing and drawing them to the attention of his superior officer, or the board of directors, shall be guilty of an , offence punishable with imprisonment of either description which may extend to one year, or with fine, or with both, in addition to such other action which may be taken against him in accordance with law. (3) If any company which is not a NBFC or a notified entity, or a company which does not hold a licence under section 282C or the license granted to which has been cancelled, or which has not been registered under section 282C or its registration has been cancelled, any individual or association or body of individuals, transacts the business specified in section 282A, the chief executive, by whatever name called, of the company and every director, manager, and other officer of the company, and the individual and every member of the association or body of individuals, shall be deemed to be guilty of such contravention and shall be punishable with imprisonment of either description for a term which may extend to seven years and with fine the amount of which shall not exceed one million and shall be ordered by the Court trying the offence
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to pay the fine within a time to be fixed by the Court or in default to suffer further imprisonment for a term which may extend to five years. Explanation. For the purposes of this section a director or chief executive or other officer shall be deemed to have acted knowingly if he departed from established NBFC business practices and procedures or circumvented the regulations or directions/ restrictions laid down by the Commission from time to time. 282L. Procedure for amalgamation of NBFCs.- (1) Without prejudice to the provisions contained in Part IX of this Ordinance, NBFCs may be amalgamated with each other provided a scheme containing the terms of such amalgamation has been placed in draft before the share-holders of each of the NBFC concerned separately, and approved by a resolution passed by a majority in number representing two thirds in value of the shareholders of each of the said NBFCs, present either in person or by proxy at a meeting called for the purpose. (2) Notice of every such meeting as is referred to in sub-section (1) shall be given to every shareholder of each of the NBFC concerned in accordance with the relevant articles of association, indicating the time, place and object of the meeting, and shall also be published at least once a week for three consecutive weeks in not less than two newspapers which circulate in the locality or localities where the registered offices of the NBFCs concerned are situated, one of such newspapers localities being in a language commonly understood in the locality or localities which the registered offices of the NBFCs concerned are situated, one of such newspapers being in a language commonly understood in the locality or localities. (3) Any shareholder, who has voted against the scheme, of amalgamation at the meeting or has given notice in writing at or prior to that he to dissents the NBFC from the concerned scheme or of the amalgamation, presiding officer shall of be the entitled, meeting in meeting". 26. In order to attract the provisions of Sections 282-K and 282-M of the Companies Ordinance, 1984, it was incumbent upon the Commission to first establish that Accused No.1 had misused his official position to derive direct or indirect benefits in his capacity as an officer of the NBFC. This fundamental element of the prosecution's case was subjected to scrutiny during the evidentiary proceedings. However, the Commission failed to substantiate this core allegation that Accused No.1, Mr. Adnan Faisal, had misused his position as an officer of NAFA. 27. The complainant's witness, Mr. Qaiser Iqbal (PW-1), appeared before the Court and produced documentary evidence marked as Exhibits C/1 to C/16. However, his deposition was limited to a reiteration of the assertions contained in the original criminal complaint and did not introduce any independent or corroborative material to substantiate the charge. During cross-examination, PW-1 conceded that in cases of violations committed by employees of NAFA, the entity itself was authorized to take disciplinary action. He further acknowledged that he had no knowledge of any complaint lodged by NAFA to SECP against Accused No.1. More significantly, he admitted his inability to refer to any document on record indicating that NAFA, at the relevant time, had initiated any proceedings against the accused for alleged misuse of official authority. 28. With respect to Exhibit C/11 which purportedly compared the share purchases made by NAFA with the trading activity of Accused No.2, Sanan Faisal PW-1 admitted that this comparative analysis had been prepared by the SECP's Inspection Team, of which he was a part. However, he expressed complete ignorance as to the source documents from which the figures in Exhibit C/11 were derived, and was thus unable to identify or refer to any supporting material. Furthermore, PW-1 admitted that the Commission had disclosed only a selective portion of Sanan Faisal's trading activity in its complaint. He acknowledged that during the same period, Sanan Faisal had also invested in or traded shares of other companies including Soneri Bank, Bank Islami, Pace, and Crescent Steel, none of which were referenced in Exhibit C/11. He further conceded that he could
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not ascertain the entirety of Sanan Faisal's trading activity and that, in some instances, transactions may have occurred where Sanan Faisal purchased shares while NAFA was simultaneously offloading shares on the market. 29. Crucially, PW-1 admitted during cross-examination that the figures presented in Exhibit C/11 were not supported by KATS (Karachi Automated Trading System) data from the Pakistan Stock Exchange for the relevant period. He also affirmed that, at the relevant time, SECP was of the opinion that the matter pertained to a case of insider trading. 30. Mr. Muhammad Aslam Memon, Manager Risk and Compliance at Al-Falah Securities, was examined as PW-2. It is pertinent to note that Sanan Faisal (Accused No.2), who maintained a trading account with Al-Falah Securities, was acquitted by this Court vide order dated 15.12.2011. During his testimony, PW-2 produced two cheques issued in favor of Al-Falah Securities marked as Exhibits C/1 to C/21, which were photocopies. 31. PW-2 confirmed that Sanan Faisal had independently opened a trading account and had invested a total sum of Rs. 2,295,000/-. Between 19.06.2007 and 01.11.2007, Al-Falah Securities returned to Sanan Faisal the entire principal amount along with a profit of Rs. 5,270,524/-, aggregating to Rs. 7,565,524/-. The witness did not attribute any unlawful or irregular conduct to either Sanan Faisal or Adnan Faisal. 32. During cross-examination, PW-2 admitted that he had neither produced nor referred to any detailed history or breakdown of the trading activity carried out by Sanan Faisal. He was unable to provide specific dates of individual transactions or establish a timeline from the first to the last transaction. He also acknowledged that both cheques submitted were photocopies and were issued by Sanan Faisal as part of his investment with Al-Falah Securities. The witness further stated that he was not the author of the summary presented and admitted that no objections regarding the legality of the transactions were raised by any party, including SECP, during the relevant period. PW-2…
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