An appellate bench of Securities and Exchange Commission of Pakistan (SECP) has set aside an order of SECP against Pakistan Sugar Mills Association (PSMA) and endorsed a valid meeting was held by the said association.
In a recent order issued by the SECP appellate bench comprising Commissioner Securities Market Division and Commissioner Insurance, it was observed that keeping in view the fact no member objected to the decision and the same was later ratified by a meeting of CEC of PSMA on 12/10/09, the bench is of the view that a valid meeting was held, hence a procedural lapse in passing a resolution or holding a meeting of CEC of PSMA does not invalidate the resolution. The impugned order is set aside with no other order, SECP added.
According to the order, in terms of article 39 (iii) of the articles of association of PSMA, the secretary of the Association is required to issue notices of all general meetings and meetings of the committee, standing committee, sub-committee, however, it has been noted that no such notice was served for the meeting held on 09/09109.
The statement of K Ali Qazilbash, Secretary to PSML before the Additional Registrar of Companies that no meeting of CEC of PSML was held on 09/09/09 and the meeting was in fact of the ''Zonal Committee of Punjab'' of PSML, which was endorsed by another member namely Muhammad Shahid Shafi that cannot be ignored. However, the fact that majority of directors stated meeting was held and the decision was later ratified by a duly convened and held meeting of CEC of PSMA on 12/10/09 holds sufficient ground.
The issue of procedural formalities and lapses in passing a resolution or holding a meeting of CEC of PSMA does not invalidate a resolution, SECP said. The facts leading to the case are that the Supreme Court vide its order dated 02/10/09 passed in Constitutional Petition No. 1709 of 2009 titled PSMA vs. Federation of Pakistan through Secretary Finance & others, directed the Commission to conduct an inquiry and thereafter submit a report along with note of action on the matter with regard to the passing of so-called resolution approved by the Central Executive Committee (the "CEC") of Pakistan Sugar Mills Association ("PSMA") in its meeting allegedly held on 09/09/09. SC also directed the Commission to proceed against the individuals or against PSMA as the case may be. The Constitutional petition was filed in the Supreme Court by PSMA on appeal with regards to order dated 03/09/09 passed by Lahore High Court (LHC) in W.P No. 16096/2009 & W.P No. 15744-Suo Motu 2009.
The bench concluded that in the instant case, since no director objected to the directors'' resolution dated September 9, 2009 to file an appeal before the Supreme Court and since, for avoidance of doubt, the full-strength of the CEC ratified the said resolution, there was no legal justification whatsoever to question or challenge the authenticity of the directors'' meeting or resolutions passed therein on September 9, 2009. Being the apex corporate regulator, it was responsibility of the commission to have presented the true legal status, powers and discretions of company directors'' to the Honourable Supreme Court in light of the Companies Ordinance, 1984, legal precedents, business judgment rule, indoor management rule, and other elements of corporate jurisprudence. However, the Commission instead chose to rely purely on minor technical issues with the aim of declaring the meeting "invalid", which was an incorrect statement of law.