Law:

Section:

Companies Ordinance (XLVII of 1984)-------Ss. 188, 189, 193, 208, 214, 215, 216 & 217---Securities and Exchange Commission of Pakistan Act, (XLII of 1997), S.33---Investments in associated companies and undertakings--Disclosure of interest by Directors of company---Declaring a Director to be lacking fiduciary behavior---Imposition of penalty---Appeal to the Appellate Bench of the Commission---Examination of annual accounts of the company of which appellants were Directors showed that short term borrowings including bank credit facilities had been transferred by Associated Companies to the company of the Directors---Said associated company suffered a severe set back with respect to its business venture, which caused severe liquidity crunch and said associated company and Directors of the appellant/Company were unable to pay back their loans to various banks---Two companies had entered into a conveyance through which the loan liability was transferred from associated company to the company for consideration, including quota for exports of textile products, margin of trading business transfer and good-will etc.---Commission issued show-cause notice to six Directors of the company under provisions of Ss.193(1), 214, 215(1), 216 & 217 of the Companies Ordinance, 1984, to which reply was submitted---Authorities decided to proceed on the basis of the record since, appellants/Director's counsel failed to appeal before the authority despite numerous opportunities having been afforded to him---Authority passed impugned order imposing penalties on appellants/Directors of the company---Contravention of the appellants came to light on examination of annual accounts of their company and the Commission took the action in the best interest of the shareholders and the creditors of the company---Commission was duty bound to protect the interest of the investors and in the present case rightly issued show-cause notice without any complaint from the shareholders or the creditors---Appellants holding common directorship on the Board of Directors of the company, had acted in their personal interest and transferred the liability of bank loan from associated company to the…

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