Law: Companies Ordinance, 1984

Section: 196,476

Companies Ordinance (XLVII of 1984)--Ss. 196 & 476---Reduction in property, plant and equipment and disposal of fixed assets of the company by the Directors unauthorisediy---Imposition of fine---Perusal of quarter accounts of the company for the relevant period, had revealed that its property, plant and equipment had been reduced to Rs.125.483 million from its previous balance of Rs.277.781---Company had also received an amount of Rs.51.550 million as proceeds from disposal of its fixed assets---No special business was proposed for approval from members of the company, however, the minutes of Annual General Meeting, submitted by the company revealed that special business of disposing of company's substantial assets was transacted under "any other business"---Company had submitted that during discussion for approval of accounts, it was pointed out by one of the share-holders that due to rising financial cost of loans, the company was facing huge losses and if liabilities were not adjusted, a stage would come where the loans would be more than the assets of the Company, so it was unanimously decided to take up the matter of sale of fixed assets to pay off the liabilities---Subsection' (3) of S.196 of the Companies Ordinance, 1984 had clearly provided that without the approval/consent of general meeting, Directors were not authorized to sell, lease or otherwise dispose of the undertakings or sizeable part thereof, unless the main business of the company comprised such selling or leasing---Directors having failed to clarify their position with respect, to compliance of requirement of subsection (3) of S.196 of the Companies Ordinance, 1984, an action was necessary under subsection (4) of 5.196 of the said Ordinance---Section 196(4) of the Companies Ordinance, 1984, not only provided a fine of one hundred thousand rupees against the Directors responsible for same but also made them individually and severally liable for losses and damages arising out of such action---Fact of the case warranted no sympathy for the Directors and required a stern action against them---Fine of Rs. 700,000 was imposed in aggregate of the company for contravening the provision of…

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