1988 PLP 1660 (CLC)

AJMAL MIAN, J.‑‑ By this common judgment, we intend to dispose of the above two appeals as they raise common question of law and are directed against two identical orders dated 17‑7‑1985, passed by the learned Presiding Officer, Special Court (Banking) for at Karachi in Suit No. 196 of 1984 which is covered by First Appeal No.47 of 1985 and Suit No.195 of 1984 which is covered by First Appeal No.48 of 1985. The parties in both the above suits and appeals are common.

2. The brief facts leading to the filing of the above appeals are that the appellants/plaintiffs, which is a Banking Company in terms of the Banking Companies (Recovery of Loans) Ordinance, 1979 (hereinafter referred to as the Ordinance), filed Suit No.195 of 1984 for the recovery of Rs.1,93,875 and Suit No.196 of 1984 for the recovery of Rs.2,62,486 impleading respondents 2, 3 and 1 as defendants 1 to 3 on the basis of the averments that respondent No.2 defendant No.l as the attorney of Messrs Opal Trading Company had opened L/C for import of goods namely medicines from Hong Kong on the guarantee of respondent No.3 defendant No.2 and that after the goods arrived at the Karachi Port respondent No.2/defendant No.l failed to retire the documents as a result of which the appellants/ plaintiffs had to pay the value of the goods alongwith mark up price to the foreign exporter and, therefore, the suits were filed for the recovery of the above amounts against respondent No.2/defendant No. 1, respondent No.3/defendant No.2 and respondent No.l/defendant No.3 the Insurance Company which had issued the Insurance Policy in respect of the goods which were to be imported against the above L/Cs. under the Ordinance before the Presiding Officer, Special Court (Banking). Upon the service of the summons of the above two suits respondent No.l/defendant No.3 raised the objection to the effect that the suit could not have been filed against them under the Ordinance as they were neither borrower nor a surety or an indemnifier in terms of clause (b) of Section 2 of the Ordinance. The above objection in both the above suits was sustained by the learned Presiding Officer by the two orders under appeal. The appellants being aggrieved by the above two orders have filed the above two appeals.

3. In support of the above appeals Mr. Inamul Haq learned counsel for the appellants has vehemently urged that the learned Presiding Officer erred in holding that respondent No.1 being the Insurance Company could not have been sued under the Ordinance. On the other hand Messrs Mohammad Salim and Jamil Khan advocates have contended that the orders under appeal are in consonance with law.

4. Mr. Inamul Haq in furtherance of his above submission has referred to the definition of the words "borrower" and "loan" given in clauses (b) and (d) of Section 2 of the Ordinance, which read as follows;

"(b) 'borrower' means a person who has obtained a loan from a banking company and includes a surety or an indemnifier; (d) 'loan' means loans, advances and credit as defined in the Banking Companies Ordinance, 1962 (LVII of 1962), and includes: (i) an advance, cash credit, overdraft, packing credit, a bill discounted and purchased or any other financial accommodation provided by a banking company to a borrower; (ii) a guarantee, indemnity, letter of credit or any other financial engagement which a banking company may give, issue or undertake on behalf of a borrower; (iii) a benami loan, that is, a loan the real beneficiary or recipient whereof is a person other than the person in whose name the loan is advanced or granted; (iv) any amount due from any borrower to a banking company under a decree passed by a Civil Court or an award given by an arbitrator; and (v) any loan due from any borrower to a banking company which is the subject‑matter of any pending suit, appeal or revision before any Court." A plain reading of the above‑quoted clause (b) indicates that "Borrower" means a person who has obtained a loan from a banking, company and includes a surety or an indemnifier, whereas under above-quoted clause (d) of section 2 the word 'loan' has been defined as means loans, advances and credit as defined in the Banking? Companies Ordinance, 1962 and includes inter alia the various items mentioned in sub‑clauses (i) to (v). It may also be noticed that the above clause inter alia mentions a guarantee, indemnity, letter of credit or any other financial engagement which a banking company may give, issue or undertake on behalf of a borrower. It was contended by Mr. Inamul Haq that the term "borrower" includes an indemnifier and since admittedly respondent No.l is an insurance Company is an indemnifier, it is covered by the definition of the word "borrower".

5. In order to support his contention that an Insurance Company is an indemnifier, he has referred to A . K . Bhattacharjee, on the Insurance Act, 1938 and the Law of Insurance, 1954 Edition at page 521 and Arnould on Marine Insurance, Twelfth Edition, Vol. 1 at pages 4 and 5, which read as follows:‑

"A.K. Bhattacharjee on the Insurance Act, 1938. A Contract of Marine Insurance, according to Halsbury, is a contract whereby the Insurer undertakes to indemnify the assured, in manner and to the extent thereby agreed, against marine losses, that is to say, losses incident to marine adventure. The instrument in which the contract of marine insurance is generally embodied is called a policy. The insurer is commonly called the underwriter, because he subscribes the policy. The thing of property insured is called the subject? matter of insurance, and the interest of the assured in such subject‑matter is called his insurable interest. The consideration for which the insurer undertakes to indemnify the assured is called the premium. That which is insured against is the loss arising from maritime perils and casualties, and these are called the perils insured against, or the losses covered by the policy." Arnould on Marine Insurance, Twelfth Edition, Volume I: "

3. The very essence of the contract of Marine Insurance is that it is a contract of Indemnity; its sole and exclusive object is to procure for the assured indemnity, in the strictest sense of that word, for any losses he may sustain through the agency of those sea‑risks against the effect of which the underwriter by the terms of his policy stands pledged to protect him. To prevent the assured from suffering loss by means of the perils insured against is the single aim of a contract Marine insurance, and its whole spirit would be violated if could make the occurrence of any such casualties a means gain, for this would be to give him an interest in procuring sea‑losses, which would be opposed to every principle of commercial policy. Hence an interest in the subject‑matter insured is of the very essence of the right to recover upon the contract. In the absence of such an interest the plaintiff is not damnified, although there may have been a total loss of the thing insured." There cannot be any cavil with the proposition that a marine Insurance Policy or for that matter any' other Insurance Policy other than life is a contract of indemnity. However, the point in issue is as to whether the definitions of the terms "borrower" and "loan" as given in the Ordinance cover an Insurance Company which may have issued a Marine Insurance Policy against the goods which were imported against the L/Cs opened by a banking company on behalf of the borrower. In this behalf, we may observe that the Ordinance is a special statute containing special provisions for the recovery of loans against the borrowers as defined in the Ordinance inasmuch as Section 4 contemplates the extension of period of limitation in terms thereof in respect of the loans which were outstanding on the commencement of the Ordinance, whereas Section 6‑A of the Ordinance provides that a suit for the recovery of a loan other than loan referred to in section 4 may be entertained by a Special Court within 2 years of the expiration of the period of limitation applicable to such suit if the Special Court is satisfied that the Banking Company filing the suit had sufficient cause for not filing it within the said period. In our view the provisions of the Ordinance are to be construed strictly and the same cannot be extended to a case unless it is covered by the provisions of the Ordinance. We are inclined to hold ‑that an Insurance Company, which may have issued a Marine Insurance Policy in respect of the goods, which were to be, imported against the LIC opened by a banking company on behalf of a ,borrower is not covered by the definition of "borrower" as given in clause (b) to Section 2 of the Ordinance. It is true that the Insurance Company is an indemnifier but it is not an indemnifier in the sense in which it has been, used in the definition of the word, 'borrower' in above‑quoted clause (b). The Insurance Company is an indemnifier for any losses, the insured may sustain through the agency of the sea risks insured against i.e. any loss occurring by means of any of the perils insured against and not in relation to the loan contract. The Insurance Company is to be sued on the Insurance Policy, and not on the contract of loan or contract of indemnity in relation to the loan. We may point out that the defences, which may be available to an Insurance Company in a regular suit before a Civil Court if sued upon a Marine Insurance Policy cannot be the subject‑matter of a suit under the Ordinance to which Order XXXVII, C.P.C. has been made applicable, for example the defence that the Insurance Policy was void on account of mis?representation on the part of the insured or that Insurance Policy had become unenforceable on account of breach of any of the conditions on the part of the insured. Furthermore, the liability of an Insurance Company is not co‑extensive with the liability of a borrower. If the borrower had obtained a loan of rupees five lacs from a banking company for opening L/C and say that the goods in transit were damaged resulting into loss say of Rs.20,000 only, the Insurance Company would be liable under the Marine Insurance Policy to the extent of Rs.20,00o and not to the above amount of loan with interest thereon etc.

6. We are, therefore, of the view that the orders under appeal seem to be in consonance with law. The appeals have no merits and, C therefore, there are dismissed but there will be no order as to costs. A.A./U‑33/K ????????????????????????????????????????????????????????????????????????????????????? Appeals dismissed.