Law: Companies Ordinance, 1984

Section: 265

Companies Ordinance (XLVII of 1984)---S.265---Securities and Exchange Commission of Pakistan Act (XLII of 1997), S.33---Appointment of Inspector to investigate the affairs of company---Commissioner, after giving appellant-Company an opportunity of hearing, proceeded to pass impugned order whereby an Inspector was appointed under S.265 of Companies Ordinance, 1984--Appellant had contended that Commissioner had based his decision of appointment of Inspector solely on central issue, namely, sale of appellant-Company of certain obsolete machinery in year 1999 which consisted of 18,700 spindles having a book value of Rs.120 million, but was sold by appellant-Company for Rs.27 million only---Claim of appellant-Company was that machinery was not just obsolete, but was scrap and that sale of machinery was authorized by the Board of Directors and was approved by share-holders in the Annual General Meeting---Validity---Appellant-Company had itself admitted that agreement of sale of said machinery was executed about five months prior to approval given by shareholders and that actual sale of machinery had commenced before their approval---Sale of machinery amounted to disposal of a sizable part of the assets for which approval was required under cl.(a) of subsection (3) of S.196 of Companies Ordinance, 1984---Sale of machinery was not only the sole reason for appointment of Inspector, but there were number of other matters which necessitated a fact finding exercise to establish that affairs of appellant-Company were being run in accordance with sound business principles and in a prudent manner and not to the detriment of shareholders---Appellant-Company had admittedly not laid down annual accounts before shareholders since 2001 and it had also not filed its quarterly accounts as required by law, which itself was a grave violation of the rights of share-holders guaranteed by law---Accounts of the year 2001, had depicted a sorry state of affairs of appellant-Company---Accumulated losses for year ending September 30, 2001 stood at Rs.422.072 million resulting in negative equity of Rs.342.580 million and its current liabilities exceeded the current assets by Rs.167.767…

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