Karachi, In a significant move on June 6, 2023, Registrar Modaraba passed an order against Awwal Modaraba Management Limited, the manager of various Modarabas including First Prudential Modaraba, First Pak Modaraba, KASB Modaraba, and Awwal Modaraba. The action follows a Show Cause Notice dated February 28, 2023, and initiates proceedings against the Directors of the company, including its Chairman and CEO.

The proceedings were initiated under regulation 34A for the contravention of regulation 9, read with regulations 2 (1) (v) & (x) and 3 of the Modaraba Regulations, 2021. Key findings noted defaults in compliance with Modaraba Regulations, specifically the manner of conduct of transactions, disclosure in financial statements, and the responses provided to the Commission. As a result, it was determined that regulation 9 of the Modaraba Regulations has been violated. This consequently led to the establishment of a contravention of regulation 3 of the Regulations as well.

While the Regulations stipulate fines for contraventions, at the time of the contraventions in question, the Regulations did not specify the amount for such a fine. Thus, no monetary penalty can currently be imposed for these contraventions. However, the absence of a penalty provision does not exempt the company from being accountable for the offence.

The Show Cause Notice is deemed an interim order, not a final one, as the case has yet to be decided. It has been stated that the Notice does not violate any individual rights protected by the Constitution of Pakistan. Furthermore, the Modaraba Ordinance explicitly holds the directors of a Modaraba Company liable for any offences committed and states that the company can sue and be sued in its own name.

While the Show Cause Notice has been issued, the final decision on the case is pending. The management and directors of Awwal Modaraba Management Limited will have to respond to the allegations and could potentially face penalties as stipulated in the Modaraba Regulations and the Modaraba Ordinance of 1980.