In the Matter of Malwa Punjab Lending & Trading Corporation

April 8, 2013 SEC ADMINISTRATIVE CASE NO. 04-12-149 IN THE MATTER OF MALWA PUNJAB LENDING & TRADING CORPORATION, ENFORCEMENT AND PROSECUTION DEPARTMENT , petitioner , FOR : Revocation of Corporate Registration DECISION This resolves the Petition, filed by the Enforcement and Prosecution Department ("EPD"), praying for the revocation of the Certificate of Registration of MALWA PUNJAB LENDING & TRADING CORPORATION ("Malwa Punjab") on the grounds of fraud in procuring its certificate of registration, pursuant to Sec. 6 par. (l) (1) of Presidential Decree No. 902-A (PD 902-A) and violations of Sections 4 and 5, in relation to Section 12, of Republic Act No. 9474 1 (RA 9474), and Rules 3 and 8 of its Implementing Rules and Regulations ("IRR"). Summons was personally served upon Malwa Punjab on 30 April 2012. No Answer was filed within the prescribed period of fifteen (15) days from notice. Thus, Malwa Punjab is considered as "in default" pursuant to Section 3-12 of the 2006 SEC Rules of Procedure, which reads: "Sec. 3-12. Effect of Failure to Answer. If the respondent fails to answer the complaint within the abovestated period, he shall be considered as in default. The Hearing Panel or Officer shall, motu proprio , proceed to render judgment granting the complainant such relief as the complaint may warrant, unless the Hearing Panel or Officer determines that the complainant should be required to submit ex parte additional evidence." Hence, we resolve the petition based on its allegations supported by substantial evidence. SaIHDA Malwa Punjab is a stock corporation duly registered with the SEC on 10 January 2007 under SEC Registration No. CS200700224. 2 The primary purpose of Malwa Punjab, as indicated in its Articles of Incorporation, is: ". . . to engage in the business of lending investor, lending money to persons and entities under the term and conditions allowed by law, provided that the company shall not engage in financing activities under R.A. 5980." 3 As stated in its Amended Articles of Incorporation, 4 the incorporators of Malwa Punjab with their respective addresses as follows: Name Nationality Residence Gurpreet Singh Gill Indian 1017 Panay Ave., St. Balic Balic, Sampaloc, Manila Gurjeet Singh Brar Indian 343 Prudencio St., Sampaloc, Manila Jiwanpal Singh Indian Pier 2, Fishport Complex, Navotas, M.M. Bella Quiambao Filipino 71 Baltazar III, Caloocan City Cristy B. Jagonos Filipino 1024 Roman St., Binondo, Manila Erlinda B. Dy Filipino B11 L29 Mabuhay Homes, 2000 Paliparan, Dasma, Cavite Reginald B. Dy Filipino B11 L29 Mabuhay Homes, 2000 Paliparan, Dasma, Cavite In a letter dated 03 August 2009, 5 the Corporation Finance Department ("CFD") of the Commission informed Malwa Punjab that it is required to secure a Certificate of Authority ("CA") within one year from effectivity of RA 9474 or until 12 June 2008 and directed it to show cause, within five (5) days from receipt thereof, why it should not be held liable for violation of Rule 10 of the IRR of RA 9474 and be subjected to fine of not less than Ten Thousand Pesos and not more than Fifty Thousand Pesos or imprisonment of not less than six months but not more than ten years or both, for doing lending business without the required CA. In an Order dated 20 January 2010, 6 CFD ordered Malwa Punjab to obtain its CA. The failure of Malwa Punjab to comply with CFD's directive prompted the latter to endorse to EPD the name of Malwa Punjab as one of the lending companies found to be operating without CA. 7 Thereafter, EPD formed an investigating team to determine if Malwa Punjab is still operating a lending company. The investigating team requested the Business Permits and License Office of the City of Manila for a certification stating whether or not Malwa Punjab has been issued a business permit to operate as such. The Bureau of Permits of the City of Manila issued a certificate 8 stating that aTEAHc "This is to certify that based on the available records of this Office, no business permit was issued to MALWA PUNJAB LENDING & TRADING CORPORATION located at 1017 Panay St., Balic Balic., Manila to operate any business in Manila for the CY 2011." However, the Business Information-Business Record 9 of Malwa Punjab with the Bureau of Permits of the City of Manila show that it was issued a business permit no. 2010-40532 on 06 April 2010 for the tax year 2010. The investigating team conducted surveillance on 02 March 2011 at 1017 Panay St., Balic Balic, Sampaloc, Manila, which is the business address of Malwa Punjab. EPD's Field Investigation Report 10 shows that a certain Ms. Neir Kamal confirmed that the said address is the office of Malwa Punjab and that it is currently operating or engaged in lending activities. The investigating team also verified with the Company Registration & Monitoring Department ("CRMD") of the Commission the corporate filings of Malwa Punjab. 11 The Certification 12 dated 22 March 2011 issued by the CRMD shows that since its registration on 10 January 2007, Malwa Punjab failed to file financial statements from 2007 to 2009 and General Information Sheets from 2008 to 2010. On 10 March 2011, a notice of conference 13 scheduled on 22 March 2011 was sent by the investigating team to the directors of Malwa Punjab and none of the directors of Malwa Punjab appeared on the scheduled conference. A second notice of conference 14 scheduled on 05 May 2011 was sent by the investigating team to the directors of Malwa Punjab on 29 April 2011 and again, none of the directors appeared on the scheduled conference. TEHDIA Thereafter, EPD issued subpoenae duces tecum/ad testificandum 15 to Malwa Punjab and its directors in their principal place of business requiring their appearance before the EPD on 18 May 2011 and still, none of the directors of Malwa Punjab appeared on said date. Subpoenae duces tecum/ad testificandum 16 were thereafter issued to the directors of Malwa Punjab in their respective residences requiring them to appear before the EPD on 15 August 2011 and still, none of the directors appeared. On 24 August 2011, Ms. Erlinda B. Dy, one of the named incorporators/directors of Malwa Punjab, appeared before the investigating team and submitted an affidavit 17 stating that she has not participated in the incorporation of Malwa Punjab nor took part in its operations. She further denied that the signature appearing over and above her name in the Articles of Incorporation is her signature. As proof thereof, she presented various government-issued identification cards 18 bearing her true signature. She also submitted an affidavit 19 executed by her son, Reginald Dy, one of the named incorporators/directors, in Dubai where the latter denied his participation in the incorporation of Malwa Punjab since he has been working in Dubai since December 2006. Proof 20 bearing his true signature was likewise submitted. Thus, EPD filed the instant Petition. The ultimate issue to be resolved in this Petition is whether there is sufficient ground to revoke Malwa Punjab's Certificate of Registration. IESDCH Section 6, paragraphs (l) (1) and (3) of PD 902-A, as amended, expressly provides that fraud in procuring a certificate of registration and defiance of any lawful order of the Commission restraining commission of acts are some of the grounds for revocation of the certificate of registration of corporations, viz. "Sec. 6. In order to effectively exercise such jurisdiction, the Commission shall possess the following powers: . . . l) To suspend, or revoke, after proper notice and hearing, the franchise or certificate of registration of corporations, partnerships or associations, upon any of the grounds provided by law, including the following: THaDAE Fraud in procuring a certificate of registration; . . . 3. Refusal to comply or defiance of any lawful order of the Commission restraining commission of acts which would amount to a grave violation of its franchise; . . ." In the present case, Malwa Punjab was incorporated on 10 January 2007 primarily to engage in the business of lending money to the public. On 22 May 2007, R.A. 9474 was passed and signed into law mandating that all companies engaged in lending activities or business shall secure a Certificate of Authority from the Commission and comply with the minimum capital requirement of one million pesos (Php1,000,000.00). Under said law, existing companies engaged in lending activities at the time of its effectivity are given such time as determined by the Commission to comply with the minimum capitalization requirement, to wit: "Section 4. Form of Organization. A lending company shall be established only as a corporation, Provided that existing lending investors organized as sole proprietorships or partnerships shall be disallowed from engaging in the business of granting loans to the public one year after the date of effectivity of this Act. No lending company shall conduct business unless granted an authority to operate by the SEC. cEaACD Section 5. Capital. The minimum paid in capital of any lending company which may be established after the effectivity of this Act shall be One million pesos (P1,000,000.00): Provided, however, That lending companies established and in operation prior thereto shall comply with the minimum capitalization required under the provisions of this Section within such time as may be prescribed by the SEC which time shall, in no case, be less than three years from the date of effectivity of this Act and: Provided, further, That the SEC may prescribe a higher minimum capitalization if warranted by circumstances." Notwithstanding CFD's Letter dated 03 August 2009 and Order dated 20 January 2010, Malwa Punjab continued to operate without first securing the necessary CA from the Commission in violation of Section 4 of RA 9474, as evidenced by its Business Information-Business Record with the Bureau of Permits of the City of Manila and EPD's field investigation report. Also, for three years since the effectivity of RA 9474, Malwa Punjab has not filed any amendment to its Articles of Incorporation to increase its authorized capital, which is only Two Hundred Thousand Pesos (P200,000.00), and its paid-up capital, which is only One Hundred Thousand Pesos (P100,000.00), to One Million Pesos (P1,000,000.00) as required by RA 9474. Thus, it is clear from the foregoing that Malwa Punjab did not only violate the provisions of RA 9474 and its IRR but continues to violate the same as well as the lawful Order dated 20 January 2010 of the Commission. Accordingly, the numerous violations committed and continuously being committed by Malwa Punjab warrants the revocation of its Certificate of Registration pursuant to Sec. 6 par. (l) (3) of PD 902-A. Moreover, the affidavits 21 and copies of government-issued identification cards 22 such as SSS I.D., TIN I.D., Postal I.D. and passport submitted by Erlinda B. Dy and her son, Reginald B. Dy, who are named incorporators of Malwa Punjab, undoubtedly shows that Malwa Punjab committed fraud in the procurement of its Certificate of Registration by making it appear that Ms. Erlinda B. Dy and Mr. Reginald B. Dy participated in the incorporation and signed the Articles of Incorporation of Malwa Punjab. A careful perusal of the submitted government issued identification cards reveals that the signatures of Erlinda B. Dy and Reginald B. Dy appearing on Malwa Punjab's Articles of Incorporation are not their true and real signatures. The foregoing acts of Malwa Punjab clearly show fraud in procuring its Certificate of Registration warranting the revocation of the same pursuant to Sec. 6 par. (l) (1) of PD 902-A. WHEREFORE, foregoing premises considered, the instant Petition is GRANTED. Accordingly, the Certificate of Registration of MALWA PUNJAB LENDING AND TRADING CORPORATION is hereby REVOKED. Let a copy of this Decision be furnished to the Company Registration and Monitoring Department, the Corporation Finance Department and the Enforcement Prosecution Department for their information and appropriate action. SO ORDERED. April 4, 2013, Mandaluyong City, Philippines. * (SGD.) TERESITA J. HERBOSA Chairperson (SGD.) MA. JUANITA E. CUETO Commissioner on official leave MANUEL HUBERTO B. GAITE Commissioner on official leave ELADIO M. JALA Commissioner (SGD.) ANTONIETA FORTUNA-IBE Commissioner Footnotes 1. Lending Company Regulation Act of 2007. 2. Records, page 52. 3. Id. , p. 50. 4. Id. , p. 49. 5. Id. , p. 43. 6. Id. , p. 42. 7. Id. , p. 41. 8. Records, p. 35. 9. Id. , p. 34. 10. Id. , pp. 32-33. 11. Id. , p. 31. 12. Id. , p. 28. 13. Id. , pp. 26-27. 14. Id. , pp. 24-25. 15. Id. , pp. 22-23. 16. Id. , pp. 12-21. 17. Records, p. 11. 18. Id. , p. 10. 19. Id. , p. 8. 20. Id. , p. 7. 21. Records, pp. 8 and 11. 22. Id. , pp. 3, 7 and 10. * Presented and signed by the Commission En Banc on 08 April 2013.