KASHMIR POLYTEX LIMITED: In the matter of Versus KASHMIR POLYTEX LIMITED: In the matter of

ORDER

1. TAHIR MAHMOOD, EXECUTIVE DIRECTOR (ENFORCEMENT).--- This Order shall dispose of the proceedings initiated against Kashmir Polytex Limited (hereinafter referred to as the "Company") and its directors for default made in complying with the provisions of subsection (1) of section 158 of the Companies Ordinance, 1984 (the "Ordinance").

2. The facts leading to this case, briefly stated, are that in terms of the provisions of subsection (1) of section 158 of the Ordinance, the Company was required to hold its Annual General Meeting (the "AGM") for the year ended June 30, 2006 on or before October 31, 2006. The Company failed to hold the aforesaid AGM within the prescribed time period. The failure of the Company to comply with the aforesaid mandatory requirements necessitated action against the Company and its directors in terms of subsection (4) of section 158 of the Ordinance. Consequently, a show-cause notice dated March 30, 2007 was served on the Company and its Directors including the Chief Executive calling upon them to show cause as to why penalties as provided under subsection (4) of section 158 read with section 476 of the Ordinance may not be imposed on them. No response was received to the aforesaid notice.

3. In order to provide an opportunity of personal hearing, the matter was fixed for May 7, 2007. On the date of hearing, Mr. Tanveer Ahmed, Financial Advisor/authorized representative, appeared before me to argue the case on behalf of all the Directors of the Company. During the course of hearing, Mr. Tanveer contended that the Company is registered in Azad Jammu and Kashmir; therefore, the Commission does not have jurisdiction over the Company. He further submitted that during the period under review, the Company faced financial constraints, however, now they are in the revival process and have paid all liabilities to PICIC. He informed that the Company has also started exports. Request was also made for a lenient view in the matter and assured to be compliant in future.

4. I have given due consideration to the arguments advanced by the representative of the directors at the time of hearing but none of them justify the default in the holding of AGM. The plea of the Company that being registered in Azad Jammu and Kashmir, the Company does not fall within the C jurisdiction of the Commission is not a cogent excuse for non holding of AGM and non circulation of annual accounts to the shareholders. As per requirement of section 158 of the Ordinance, every listed Company is required to hold annual general meeting, once at least in every calendar year within a period of four months following the close of its financial year and not more than fifteen months after the holding of its last preceding annual general meeting. The Company however failed to hold the AGM within the prescribed time and the same has been held on April 14, 2007 involving a delay of 5 months and 13 days. Since the representative of the directors has failed to furnish any cogent reason to justify the default, therefore, the same is considered wilful and deliberate.

5. However, before proceeding to decide this case, I consider it necessary to highlight the importance of the strict observance of the aforesaid mandatory provisions of the law. The protection of the investors/shareholders is one of the primary objectives of the Ordinance. It is investors/shareholders who provide seed for capital formation. If the interest of the investors is protected, they will save and invest more. Their interest is protected by transmission of timely, adequate and meaningful information to them. It is the annual and interim accounts, which provide information to the investors about the affairs of the companies. AGM is a forum where the investors can freely discuss, speak and vote on important matters concerning approval of accounts, appointment of auditors, election of directors etc. It has unfortunately been noted that the directors of the Company are not observing these compulsory requirements of law.

6. In view of the foregoing, the default/delay regarding holding of AGM for the year ended June 30, 2006 stands established. However, instead of imposing the maximum fine of Rs.50,000 on the Company and every director and a further fine of Rs.2,000 per day for the continuous default, I impose penalty of Rs.30,000 (Rupees thirty thousand only) on the Chief Executive and each of the Directors of the Company under subsection (4) of section 158 of the Ordinance in the following manner:--

2. S. No.

3. Name

4. Penalty in Rs.

5. 1.

6. Mr. Muhammad Ashraf Khan, Chief

7. 30,000

8. 2.

9. Mr. Mushtaq Ahmed, Director

10. 30.000

11. 3.

12. Dr. Mrs. Yasmin Ashraf, Director

13. 30,000

14. 4.

15. Mr. Muhammad Younus Khan, Director

16. 30,000

17. 5.

18. Mrs. Hareem Ara Hashmi, Director

19. 30,000

20. 6.

21. Mr. Muhammad Shehzad Akram, Director

22. 30,000

23. Total:

24. 180,000

7. However, no penalty is imposed on Mr. Shahid Mahmood, Director (Nominee ICP). The Chief Executive and Directors of Kashmir Polytex Limited are hereby directed to deposit within thirty days of the date of receipt of this Order, the aforesaid fine aggregating to Rs.180,000 (Rupees one hundred and eighty thousand only) in the Commission's designated Bank Account No. 10464-6, Habib Bank Limited, Central Branch, 2-Habib Bank Plaza, I.I. Chundrigar Road, Karachi and send a copy of the receipted vouchers to the Commission for information and record, failing which proceedings under the Land Revenue Act, 1967 will be initiated which may result in the attachment and sale of their movable and immovable property. It should also be noted that the said penalty is imposed on the Chief Executive and the directors in their personal capacity; therefore, they are required to pay the said amounts from their personal resources.

25. H.B.T./21/SEC Order accordingly.