Securities and Exchange Commission of Pakistan's (SECP's) attention has been drawn to tax evasion to the tune of Rs 119 billion and deceptive market practices in Margala Enclave project against Bahria Town by Transparency International Pakistan (TI Pakistan).
In a letter sent to SECP Chairman Mohammad Ali on December 17, Advisor, TI-Pakistan, Syed Adil Gilani pointed out to action to be taken on two counts under SECP law against Bahria Town due on account of tax evasion by a director, determined by Federal Tax Ombudsman (FTO) and Bahria Town, adjudicated by SECP as guilty of deceptive market practices in Margala Enclave project.
He referred to TI-Pakistan's letter to CDA dated October 22, addressed to the CDA Chairman, copy of which was also forwarded to the SECP Chairman, with request that action be taken by CDA against Bahria Town on account of SECP investigation conducted under the Supreme Court of Pakistan orders in the HRC No 38671-S/2011 which found Bahira Town guilty of deceptive market practices in Margalla Enclave Project on March 12, 2012.
The order by Executive Director (C&CD) SECP, Nazir Ahmed Shaheen on account was upheld on October 17 by the SECP which rejected the appeal filed by Bahria Town against orders of Executive Director (C&CD) ECP, of March 12, 2012.
The Chairman CDA was requested to take action as per the following SECP findings: 'SECP had found Bahria Town (pvt) Limited guilty of deceptive market practice and its Chief Executive, Directors and Company Secretary were penalised for fraudulent sale of Bahria Town Margalla Enclave and fined a total Rs 1,000,000. The break-up of penalty imposed is as follows: Chief Executive/Director, Ahmed Ali Raza Malik Rs 500,000, Director Malik Riaz Hussain Rs 400,000, Director Bina Riaz Rs 50,000, and Company Secretary Shabbar Hussain Rs 50,000. SECP had started investigations against Bahria Town on the directives of CJP Iftikhar Muhammad Chaudhry.
The Chief Executive, Directors and Company Secretary of Bahria Town (Pvt) Limited are, hereby, directed to deposit the aforesaid penalty amount in the designated bank account maintained in the name of SECP with MCB Bank Limited within 30 days from the receipt of this Order and furnish receipted Challans to the Commission failing which proceedings for recovery as an arrears of land revenue will be initiated. The management of the Company is also directed in terms of section 472 of the Ordinance to clarify their position with regard to the aforesaid project in the print media within seven days positively'
Further to this case, according to the Federal Tax Ombudsman inquiry commission report submitted in the SCP on the Suo Motu case, on December 6, in the matter of Malik Riaz Hussain, tax evasion by Malik Riaz Hussain as Chairman/Director of Bahria Town of over Rs 119 billion has been reported.
Based on the determination of the massive tax evasion, Transparency International Pakistan on December 8, requested the FBR Chairman to make recovery of over Rs 119 billion from Malik Riaz, and a copy of the letter was also sent to the SECP Chairman.
Adil Gilani said that now, as the two serious defaults of Bahria Town/director of Bahria Town had been adjudicated by SECP and Federal Tax Ombudsman, Transparency International Pakistan request the SECP Chairman to take immediate action for winding up process as well as the persecution proceedings against the guilty due to tax default allowed, under the following sections of Companies Ordinance, 1984.
305. Circumstances in which company may be wound up by Court. - A Company may be wound up by the Court (iv) run and managed by persons who fail to maintain proper and true accounts, or commit fraud, misfeasance or malfeasance in relation to the company;
230. Books of account to be kept by company. - (1) Every company shall keep at its registered office proper books of account with respect to -
(a) all sums of money received and expended by the company and the matters in respect of which the receipt and expenditure takes place; (b) all sales and purchases of goods by the company; (c) all assets of the company; (d) all liabilities of the company;
(7) If a company fails to comply with any of the requirements of this section, every director, including chief executive and chief accountant, of the company who has knowingly by his act or omission been the cause of such default shall,-
(a) in respect of a listed company, be punishable with imprisonment for a term which may extend to one year and with fine which shall not be less than-1-[twenty] thousand rupees nor more than 2-[fifty] thousand rupees, and with a further fine which may extend to 3-[five] thousand rupees for every day after the first during which the default continues; and (b) in respect of any other company, be punishable with imprisonment for a term which may extend to six months and with fine which may extend to 4-[ten thousand] rupees.
TI Pakistan is striving to have transparency in procedures and Rule of Law in Pakistan, which is the only way to eliminate corruption and have good governance in country, he said.
Copy of the letter have been forwarded for action to be taken under the rules and regulations to: Chairman Public Accounts Committee, Islamabad; Federal Tax Ombudsman, Islamabad; Dr Abdul Hafeez Shaikh, Federal Minister of Finance, Islamabad; Auditor General Pakistan, Islamabad, Registrar, Supreme Court of Pakistan, Islamabad, and NAB Chairman, Islamabad.