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Case decided on 21st October. 1987.

---Ss. 158 & 474--Annual general meeting--Default in holding of--Words "knowingly" and "wilfully" in S.158--Meaning and connotation--Company proceeded against contending in its written statement, inter alia, that boo's of account and other relevant record of the company had been taken away by F.I.A. in connection with certain cases of evasion of central excise duty, that such circumstances made it impracticable to call annual general meeting of the company within the statutory period and that the Chief Executive of the Company had not made any default knowingly and wilfully in complying with S.158 and he was not, therefore, liable for any fine--Expenditure having continued to be incurred and income having continued, to accrue, Chief Executive could have asked permission of F.I.A. to have photostat copies of books of account and other relevant record got made by his staff and in case of refusal by F. I . A. could at least have caused fresh., books of account to be opened by his company which could be provisionally but Chief Executive failing to do any of those things--Omission by Chief Executive to call annual general meeting of the Company, held, would fall within ambit of meanings /connotations of words "knowingly" and "wilfully --Chief Executive being a highly talented and experienced industrialist, such an omission could not have been without intention--Default in complying with provisions of S.158(1) having been established fine of Rs. 10,000 imposed on Chief Executive to, be paid from his personal resources.--[Words and phrases].

Khalid Mahmood Khan, Registrar of Companies, Pakistan for the Complainant.

M. Faridul Haq for Defendant.

Date of hearing: 27th August; 1987.

The annual general meeting of Messrs Tobacco International Ltd., a listed company, for the year ended December 31, 1985 was not held within the time prescribed in subsection (1), section 158, Companies Ordinance, 1984 (hereinafter termed as the Ordinance), viz. by June 30, 1986. Mr. K.M. Muneer, its Chief Executive was, therefore, upon a complaint from the Registrar of Companies, Pakistan, in terms of section 47-1 of the Ordinance. called upon by me to show cause as to why fine, as laid down under subsection (4) (a) of section 158 of the Ordinance, be not imposed on him for the prima facie violation of the provisions of subsection (1) of that section.

2. Initially August 11,1987 was fixed as the date of hearing. Mr. M. Faridul Haq, Advocate intimated in writing to the effect that he would be representing Mr. Muneer, and requested for a fresh date for hearing. The hearing was then fixed for August 27,1987.

3. Prior to the fresh date of hearing, Mr. Faridul Haq, Advocate, submitted a "vakalatnama" as well as a written statement. The contents of the latter were to the following effect:-

(1) Tobacco International Ltd. is not a listed company. Therefore the Corporate Law Authority has no jurisdiction to issue a show-cause notice.

(2) The books of account and other relevant records of this company, which had been taken away by the F.I.A. in 'connection with certain cases of evasion /avoidance of central excise duty, have not so far been returned to the company.

(3) The company's factory was closed down after the said documents were taken away by the FIA, and no "business activity" has since then taken place. Criminal cases are pending in Courts.

(4) Financial institutions have filed a winding-up petition, against the company, under section 305 of the Companies Ordinance, 1984, before the Hon'ble Sind High Court, as the company was unable to pay its debts.

(5) The winding-up proceedings before the Hon'ble Sind High Court have been completed and judgment is awaited by next month.

(6) The above circumstances make it clear that it was not possible, either for the company or for its directors to hold the company's annual general meeting. These special reasons made it impracticable to call the annual general meeting of this company within the statutory period.

(7) Mr. Muneer has not made any default knowingly and wilfully in not complying with the provisions of section 158. Therefore, he is not liable for any fine of the nature contemplated in subsection (4) (a) of section 158. The circumstances for holding the annual general meeting were beyond his control.

(8) Default under the said section is punishable only if the default is committed knowingly and wilfully.

(9) Intention is the gist and essential ingredient for the constitution of an offence and for its punishment. There is no definition of the terms "default", "knowingly" and "wilfully" in the Ordinance. These expressions, therefore, will have to be construed in their ordinary natural meaning.

Mr. Faridul Haq then proceeds to quote meanings and definitions of these words from various dictionaries and law books. He then gives quotations from judgments of the Hon'ble Lahore and Sind High Courts. Finally, he gives quotations from certain British cases. And then he concludes that in view of the foregoing analysis of the law and the law laid down by the Sind High Court to the effect that a mere "default" committed by an officer of the company without "knowingly" and not doing it "wilfully" is not punishable under the provisions of law". Thereafter he requests that, therefore, "the proceedings against Mr. K. M. Muneer may kindly be dropped as there is (sic) material or evidence against him to the effect that he was wilfully and knowingly responsible for the default in not holding the Annual General Meeting of the Company".

4. On the date of hearing Mr. M. Fardul Haq appeared on behalf of Mr. Muneer. He dropped point (1) from his arguments, reiterated the other points, and made the following additional points:-

(a) The hearing with the Hon'ble High Court has concluded, and judgment has been reserved.

(b) That default did occur is conceded, but it was neither "knowingly nor wilful".

(c) Mr. Muneer was chief executive for the period to which the default relates.

5. Presenting his arguments, the Registrar of Companies, Pakistan stated as follows: -

(i) Mr. Muneer knew that the annual general meeting had to be held. Therefore, the default was committed knowingly.

(ii) The previous history of defaults also is relevant. It also shows that the default was "knowingly".

(iii) As for wilfulness, intention is relevant. And Mr. Muneer should have shown his good intention by at least informing the concerned quarters of the difficulty in the way of holding the annual general meeting. Since he did not so inform, wilfulness is proved.

6. Exercising right of reply, Mr. M. Faridul Haq made the following points:

(d) It was not mandatory on Mr. Muneer to so inform the quarters concerned, including the shareholders.

(e) Even if he had informed them, it would have not made any difference because he could not have laid the annual accounts before the annual general meeting.

7. On a (further) written query, Mr. M. Faridul Haq informed this Authority that two raids had been conducted by the FIA in coordination with the Central Excise Department, viz. on September 5, 1982 and in December 1983; in the first raid all the books of account of the company had been taken away; in the second, these agencies took away the remaining record.

8. I have considered this case. I shall first discuss the facts. Mr. Faridul Haq has stated that in the raid of September 5,1982, all the books of account of the company had been taken away, and that in the raid of December, 1983, the remaining record had been taken away. In such cases, and even if no production whatsoever is being carried on, some expenditure always does go on being incurred. For example, in this very matter, cases are being contested in the Courts by this company, and, therefore, salaries and wages of at least whatever skeleton staff the company is maintaining are certainly being paid. In the same way, from a perusal of the last published audited annual accounts, it is clear that financial expenses certainly are being incurred and some expenditure must also be taking place on utilities. As for the income, from a perusal of the same source, it becomes clear that certainly some income is accruing, say from loans and advances due from officers and employees considered good, from advances to associated undertakings considered good, from sales of fixed assets, and from interest from associated undertakings. In the last published audited annual accounts, finished goods at year-end of the value of Rs. 5,09,717 were shown, and, therefore, at least some of these must have been sold. To put it briefly, since expenditure is no doubt being incurred and income is no doubt accruing, Mr. Muneer could have asked permission of the F.I.A. to have photostat copies (of the accounts and other relevant record taken away by the F . I . A .) got made by his staff in the F. I. A.'s officers' presence. He could at least have caused in the case of refusal by F.I.A.--fresh books of account to be opened by his company; these could have been started provisionally, and could, on the return of original books of accounts and other record, have been made final. But Mr. Muneer did not, as Chief Executive, do any of these things.

9. I shall now come to the points raised by Mr. M. Faridul Ha regarding the meanings and connotations of the words "knowingly' and "wilfully". He argues that "wilful" /"wilfully" means intentional) or deliberately; that a default will be considered as wilful when, under ordinary circumstances, the person making the default or committing negligence could have refrained from making or committing the same; and that a wilful failure occurs when somebody purpose fails to comply with (legal) provisions or intentionally avoids to comply with them, knowing full well that he is duty-bound to do so, i.e., he knows that he has to do a certain act but intentionally persists in following a different course. From the facts of this present case it is evident that the omission by Mr. Muneer falls within the ambit of these meanings /connotations. Mr. Muneer, as Chief Executive, was duty-bound to call the annual general meeting in question, but did not call such a meeting. The requirements of section 158 are independent of those of section 233. But even if it is argued, as Mr. M. Faridul Haq did, that it would have been useless to call an annual general meeting without presenting to it the annual accounts, enough has been said in para 8 above to show that such accounts, though provisional, could have been prepared and so presented. To say this is not to imply that an annual general meeting cannot, or should not, be called except to present annual accounts to it; it has been said only to answer Mr. M. Faridul Haq's argument. Mr. Muneer could have certainly refrained from this omission. As for whether his omission was intentional/deliberate, this can only be inferred from circumstances. Mr. Muneer is a highly talented and experienced industrialist and business administrator, and it is obvious that such an omission could not have been without intention.

10. As for Mr. Muneer knowing that these omissions were taking place, it is obvious that he did so know.

11. I, therefore, hold that there was a default in complying with the above-discussed provision of subsection (1), section 158, Companies Ordinance, 1984, and that Mr. K.M. Muneer in his capacity of Chief Executive of Tobacco International Ltd. , knowingly and wilfully a party to the default.

12. Clause (a) of subsection (4) of section 158, Companies Ordinance, 1984, lays down for such cases a minimum fine of ten thousand rupees. I, therefore, impose on Mr. K. M. Muneer a fine of ten thousand rupees. He shall pay this fine from his personal resources and not from the resources of the company.

S. Q. /38-M Fine imposed.

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