Law: Companies Act, 2017

Section: 256,257

Companies Act (XIX of 2017)--- ----Ss. 256 257---Affairs of company, investigation of---Filing of complaint---Locus standi company assailed show cause notice issued by Securities and Exchange Commission of Pakistan to appoint inspectors to investigate its affairs---Validity---If at all Securities and Exchange Commission of Pakistan (Commission) was to investigate into the affairs of a company on an application, it must be an application made by one of the persons or entities mentioned in S. 256 of Companies Act, 2017 and none else Banks were not entitled to make an application under S. 256 of Companies Act, 2017---Cognizance of matter relating to investigation could not be taken by a circuitous route, that is, by firstly receiving a complaint and thereafter (upon finding it to be outside the ambit of S. 256 of Companies Act, 2017) invoking its powers under S. 257 of Companies Act, 2017, whimsically and unreasonably, to serve a notice on petitioner company---Power to be exercised by the Commission under S. 257 of Companies Act, 2017 had to be preceded by formation of an opinion and thereafter a show cause notice giving the company an opportunity of hearing could be issued---No formation of opinion by the Commission against petitioner company which was conspicuous by its absence---High Court set aside the show cause notice as the Commission acted mechanically on a complaint filed by creditors of the company which was reflexively treated and did not apply its mind while forming an opinion--- Constitutional petition was set aside, in circumstances. JUDGMENT SHAHID KARIM, J.--- This constitutional petition challenged the show cause notice under section 257 of the Company Act, 2017 issued by the Executive Director/Authorized Officer to require the petitioner-company (Hira Textile) to show cause as to why Inspectors may not be appointed to investigate the affairs of the company. 2. The show cause notice firstly refers to the audit report made by the statutory auditor of the petitioner-company for the year ended June 30, 2020 and alludes to some purported adverse opinion which has been reproduced in the initial part of the show cause notice. All of these observations…

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