P L D 1988 Karachi 140 (PLP)

The brief facts leading to this application are that the Plaintiff .is an Insurance Company incorporated in 1983 and is carrying on business of insurance under due licence. Defendant No.1 is established under the Pakistan Insurance Corporation Act, 1952 (hereinafter called the Act) and the Defendant No.2 is an employee of Defendant No.l.

2. Under the provisions of Section 26 (1) of the said Act every Insurance Company had to re‑insure with the Defendant No.1, 30 per cent on any individual risks and the sums insured on all the policies. In exercise of power under Section‑46 of the Act, the Board of Directors of the Corporation/ Defendant No.1 framed certain regulations called "Pakistan Insurance Corporation (Compulsory Reinsurance) Regulation., 1956 (hereinafter called the Regulations). After settlement of accounts in accordance with the method Laid down in the Regulations, the Insurance Company had to pay the amount due to Defendant No.1 under subsection (2) of Section 26 of the said Act. Under Regulation 4 of the said Regulations the plaintiff had to submit certain quarterly statements mentioned in the said Regulation 4.

3. The plaintiff's case is that they had been submitting the quarterly statements in accordance with the prescribed Regulations and the accounts submitted by the Plaintiff to Defendant No.1 under these statements were accepted by the Defendant No.1, who issued them demand notice of the amounts payable to the Defendant No.1, which amount also was mostly paid by the Plaintiff.

4. There appears to be no dispute between the parties as far accounts pertaining to the year‑, 19K) and 1984 are concerned, Also the fact that the plaintiff submitted the statement for each quarter of 1985 and 1986 is not denied by the Defendant No.1 The averment of the Plaintiff that on the basis of these statement, the Defendant No.1 made demands of certain payments, Is also not denied‑ However, the Defendant has denied the contention of the plaintiff that by making demands on the basis of these statements the accounts between the parties for the years 1985 and 1986 stood settled and could not be reversed by the Defendant.

5. It appears that one Khalid Mateen had moved an application to the Prime Minister of Pakistan on 26‑12‑1986 wherein allegations were made against the Plaintiff that they have been filing bogus claims with the Pakistan Insurance Corporation and thereby have caused loss to the Corporation. A copy of this application was also sent to the Defendant No.1, who thereafter called upon the plaintiff to submit certain more particulars and details with regard to the claims settled and paid by the Plaintiff to the assured in the years 1985 and 1986. They specially called upon the Plaintiff to produce the copies of F.I.R. and the Fire Brigade Reports with respect to the claims in question. It is alleged by the Defendant that the Plaintiff did not submit the requisite statement whereupon the Defendant No. 1 re‑assessed the accounts on the basis of statement submitted by the Plaintiff and found a balance of Rs,49,03,371.08 payable by the Plaintiff to Defendant No.1 and therefore called upon the Plaintiff to pay the same. On the failure of the Plaintiff to pay the said amount, the Defendant No.2, who is the Recovery Officer of Defendant No.1, issued a notice to the Plaintiff on 20‑8‑1987 calling upon them to pay the said amount within fifteen days, failing which the same would be recovered as arrears of land revenue. The Plaintiff, therefore, filed this suit praying, amongst other prayers, for declaration that the said notice was illegal and also for permanent injunction restraining the Defendants from recovering the said amount as arrears of land revenue. 6.????? During the pendency of the suit the Plaintiff has filed this application under Order XXXIX Rule 1 and 2, C.P.C. Praying _for interim injunction against the Defendants restraining them from A recovering the said amount from the plaintiff as arrears of land revenue or by any coercive methods except through Court of law till the final disposal of the suit.

7. The main contention of Mr. Amanullah Khan learned counsel for the Plaintiff is that the amount claimed fly the Defendant was not determined by any competent authority and as such no proceedings under Land Revenue Act for recovery as land revenue arrears could be taken. In support of his contention he has relied upon number of decisions of the Superior Courts. The leading decision of this points 'is the case of Abdul Latif v. Government of East Pakistan (P L D 1962 S.C. 384). In the reported case the appellant was Treasury Contractor. At the end of his term of contract, a deficiency of Rs.7484‑3‑3 in the stamp of treasury was found which was sought to be recovered by the Tehsildar, at the instance of the Deputy Commissioner on a certificate of the Treasury Officer, by bringing into operation the coercive provisions (section 69) of the Punjab Land Revenue Act, without serving any show‑cause notice on appellant. It was held by their Lordships "the action taken by the Deputy Commissioner against the appellant could not vatidly have been taker without giving him an opportunity of being heard." It was further Held "before the operation of the machinery section for realisation of the arrears, the authority concerned must decide whether there is an arrear due or not". This decision was followed in the case of West Pakistan v. Abdul Majeed and another P L D 1963 (W.P.) Kar.

653. In this case certain dues of Sind Food Grains Nationalisation Board were being recovered from one Abdul Majeed, who filed a suit against 'the Government against the recovery of such dues. The learned trial Judge framed preliminary issue as to whether the Government was entitled to determine the dues under the agreement and if so were they entitled to recover the same as arrears of land revenue? The issue was decided against the Government who filed appeal and in appeal a Division Bench of Karachi Bench held, that "dues claimed by Government from the other party are not fixed, determined and established, they cannot be recovered as arrears of land revenue from such party. Besides, the statement of account filed by Government was at most a statement of a claim made by Government upon the party. This claim having been denied and disputed by the party cannot amount to a certificate such as is envisaged by section 149 of the Sind Land Revenue Code 1879". 8.???? In the case of Province of West Pakistan v. Muhammad Ayoob Khoro P L D 1967 Kar. 673 it was held that claims can be recovered as arrears of jand revenue only when they are converted into established dues. It was further held that claims can be converted into dues after determination in accordance with law or justice.

9. In the case of Tariq Molisin Siddiqui v. Province of Sind PLD 1976 Kar. 728 a Division Bench of this Court had observed that the function of determining amount due to the Government under Forest Act was a quasi‑judicial function and proceedings must be conducted in accordance with the principles of natural justice. Person proceeded against neither served with notice of demand nor given opportunity to make representation against correctness of amounts claimed by Forest Department as dues. Notices issued by Recovery Officer under Land Revenue Act in respect of such amounts were held to be illegal and without jurisdiction".

10. It. is further contended by Mr. Amanullah Khan learned counsel for the plaintiff that there was no provision under the Act under which the Defendant No.1 could recover its dues as arrears of Land Revenue.

11. Mr. Ibrahim Peshori learned counsel for the Defendants has relied upon section 29 of the Act which is reproduced as, under: ‑ (2) 1129. Recovery of unpaid premium. (1)??? Without prejudice to the provisions of subsection (5) of section 26, where any insurer has failed to re‑insure up to the full amount required by this Act, and has thereby evaded the payment by way of premium of any amount which he would have had to pay but for such evasion, such amount together with interest, if any, accrued thereon, under subsection (2) of that section) upon that; determination, thereof by a person authorised in this bena ' If by the Central Government shall be payable by such insurer to the Corporation and shall be a first charge (on such property of the insurer as does not form part of his life insurance business). An insure against whom a determination is made under subsection (1) may within the prescribed period appeal against such determination to the Central Government whose decision shall be final." ????

12. It is submitted by Mr. Anianullah Khan learned counsel for the plaintiff that this provision does not empower the Defendant No. 1 to recover‑ the amount as arrears of land revenue and furthermore it requires the amount to be determined by a person authorised by the Central Government. It is contended? that no such determination has been made by any unauthorized person in accordance with the principle of natural justice viz. after service of notice upon the plaintiff,

13. It is further submitted by Mr. Amanullah Khan that even after service of this notice dated 20‑8‑1987, another letter dated 93‑8‑1987 was.,, written by the Defendant No.? to the Plaintiff calling .upon him to reconcile the accounts and confirm the dues mentioned in the letter. It was further stated in the letter that it, cast confirmation was not received within a fortnight of the receipt of tile letter, it will be presumed that the account rendered by the Defendant No.1 had been agreed by the plaintiff. He has also referred to Annexure 25 annexed by the Defendant No.1 to his counter‑affidavit. It is a letter issued by the Defendant No.1 to the plaintiff and is dated 10‑9‑1987. Its subject‑matter shown is as under:‑ "Your claim papers in respect of fire losses of 1985 and 1986 (30% compulsory Cession)." Under this letter the Defendant No.1 had called upon the plaintiff to substantiate the claims in question by furnishing certain papers and documents mentioned therein. It is argued by Mr. Amanullah Khan, that these two letters, which are admittedly issued by the Defendant No.1, after the issuance of notice dated 20‑8‑1987, clearly show that the amount claimed by the Defendant No.1 in the notice was not determined amount, but was still being reconciled and considered.

14. Mr. Ibrahim Peshori learned counsel for the Defendants on the other hand contends, that on the receipt of copy of application of Mr. Khalid Mateen, the Defendant No.1 further investigated the claims of the Plaintiff and came to the conclusion, that these claims were not sustainable. In para 22 of the counter‑affidavit the Defendant No.1 has alleged that the Plaintiff had played fraud and the particulars of fraud are given therein as under:‑ "(a)?? Plaintiff issued fake fire policies. (b)??? Plaintiff created imaginary fire‑losses. (c)??? Plaintiff appointed their own Surveyors to obtain collusive ?? report. (d)??? Plaintiff /Surveyor did not obtain F.I.R. or Fire Brigage report. (e)??? Plaintiff alleged settlement of alleged fire loss claim without obtaining Loss Vouchers or supporting documents. (f)???? Plaintiff failed to produce proof of payments. (g)??? Plaintiff failed to submit explanation, information, documents called for from them. (h)??? Practically all alleged losses were surveyed by the same surveyors. (i) Most of the survey reports are unsigned. (j) Few random cases of alleged fire loss when physically investigated by officer of Defendant No.1 proved bogus. (k)??? Letter of Mr. Khalid Mateen.11

15. It is argued by Mr. Amanullah Khan that these allegations are vague, as no particular instances of the fraud or the names of cases in. which the fraud is alleged to have been committed, are mentioned u in the counter‑affidavit. He has relied upon the case of Pakistan Banking Council and another v. Ali Mohtaram Naqvi and others 1985 S C M R 714 wherein it is held by their Lordships that "fraud and collusion are matters of strict proof and the law relating to pleading of such cases requires full particulars of alleged fraud or collusion or to be specifically pleaded". It is contended that no specific particulars‑ of the cases in which the alleged fraud has been practised by their plaintiff, are given Mr. Amanullah Khan, however, conceded that their counter‑affidavit was not pleading in the strict sense, but contended,[, that for the purpose of decision of interim application, it will have to be considered as pleadings, as it is also verified on oath.

16. Mr. Amanullah Khan learned counsel for the plaintiff has. referred to Regulation No. 6 of the Regulations which reads as under: ‑ ‑ ?

6. Settlement of Claims and Losses.‑‑M Every insurer shall settle all claims including adjusted, compromised, arranged or? exgratia settlements and all payments in respect thereof shall be binding on the Corporation in proportion to the amounts for which the relevant risk are re‑insured with the Corporation: Provided that the insurer shall refer to the Corporation every case involving a payment of twenty thousand rupees or more in respect of any one loss occurrence where a claim not payable e in the strict sense of the policy conditions but is adjusted compromises, arranged or settled by an exgratia payment, , before recovering the proportion of the loss due from thee Corporation. If the Corporation is not satisfied with thee settlement as such and withholds its consent or if the insurer r fails to refer the case to the Corporation, the insurer shall not be entitled to be reimbursed by the Corporation for its proportion of the loss."

17. It is contended by Mr. Amanullah Khan learned counsel for the plaintiff, that bare reading of this regulation would show that only claims for Rs.20,000 and above are to be referred to thee Corporation, whereas claims under Rs.20,000 had to be settled by the Plaintiff and such settlement and payment is binding upon thee Corporation/ Defendant No.

1. He further pointed that as per the lists 5 of the claims annexed by him with his plaint, application and, rejoinder, the total claims under Rs.20,000 for the years 1985 and 1986 come to Rs. 39,78,931 whereas the alleged claim of the Defendant No. 1 is for r Rs.49,03,371.08.

18. Mr. Ibrahim Peshori learned counsel for the Defendant contends, , that under section 29‑B of the Act for the purpose ' s of satisfying 3,r itself that the provisions of this Act have been or are being duly complied with or for verifying the? correctness of the claims, declarations, returns, statements, or other information submitted to it, the Corporation may, whenever it may consider necessary, call for or examine or cause to be examined any accounts books, documents, ,memoranda or other records of any insurer or his agent." It is contended, that the plaintiff has not submitted to the Defendant No.1 the F.I.Rs. and Fire Brigade Reports of the claims paid by him as required under pro forma of Defendant No.1 which is produced as Annexure 'WW by the Plaintiff alongwith the plaint. This pro forma gives details of the documents and particulars that have to be submitted by the insurer to the Defendant No.1 alongwith R.L.A. (PreliminaryLoss Advice). At item No.3 it is written "Police investigation report, if any", and at No.4 it is written "Fire Brigade Report, if any".

19. It is argued by Mr. Amanullah Khan learned counsel for the Plaintiff, that the words "if any" signifies that it was not necessary that in every case there should be 'Police Investigation Report' or there should be 'Fire Brigade Report, but in case where there are such reports, the copies of the same are to be sent to the Defendant No.l. It is contended, that mere fact that there was no investigation report or Fire Brigade Report, would not necessarily raise presumption that the claim was bogus or false. He contends, that the burden of proof of fraud is upon the party, who raises this plea and till such F fraud is proved by the Defendant with respect to the claims preferred by the plaintiff, the claim of the plaintiff would be presumed to be correct. It is further contended that in view of Regulation 6 which has been reproduced above, the settlements and the payments of the claims by the plaintiff for amount less than Rs.20,000 which accounts for about thirty‑nine lacs of rupees (Rs.39,00,000) is binding upon the Defendant No.1 and with respect to the claims of above Rs.20,000 which accounts for about ten lacs or Rs.10,00,000 the same had been accepted as correct by the Defendant No.1, who had issued Demand Letters for their share in the profit for the period in question, it 1: further submitted that the correctness of the claims or the account F of the plaintiff cannot be considered as incorrect, bogus or fraudulent? under these circumstances, unless they are so proved by the Defendant No.1 before some competent authority.

20. Mr. Ibrahim Peshori learned counsel for the Defendant admitted, that some enquiry was conducted by the Government on the aforesaid letter of Mr. Khalid Mateen, but he does not know of the result of the enquiry. .21. Mr. Amanullah Khan learned counsel for the Plaintiff has referred to the letter of the Deputy Controller of Insurance dated 15‑11‑1987 intimating the Plaintiff, that the Insurance Department had addressed a letter to Mr. Khalid Mateen, but the same was a received back under livered. It is contended that Mr. Khalid Mateen is a fictitious person and on his allegations alone the Plaintiff cannot? be victimised. Mr. Amanullah Khan has further argued that in respect[ of the claim of more than Rs.20,000 the plaintiff was a co‑insurer alongwith other Insurance Companies in respect of the policies and the claims of the other Insurance Companies for the loss with regard to the. same policies have been accepted by the Defendant No.1 and, therefore, they could not reject the claim of the Plaintiff in respect of the same policies. It is also submitted, that for the purpose of recovery of the dues from the defaulters, the defendant No.1 is adopting discriminatory procedure. Mr. Amanullah Khan has cited two Suits bearing Nos.494 of 1987 and 495 of 1987 filed by the Defendant No.1 for the recovery of the dues without taking any? proceedings under coercive procedure against the defendant in those suits.

22. Mr. Ibrahim Peshori learned counsel appearing for the Defendant submitted that both the options were open to the Defendant No.1 and they could opt to invoke any procedure as they chose. ?

23. It is not claimed by the Defendant No.1 that their dues have been determined or ascertained by any authority, but it is contended, I that they have recalculated the dues on the basis of the accounts] already submitted by the Plaintiff.

24. As already pointed, even after the issuance of the impugned notice, the plaintiff was asked to reconcile the accounts and to submit certain documents and it is contended by Mr. Amanullah Khan, that the amount still remains undetermined. In the case of Messrs Pakistan Pipe and Construction Co. Ltd. v. City Mukhtiarkar, Karachi East and others P L D 1984 Kar. 28 a Division Bench of this Court has held that the disputed claim cannot be recovered as arrears under section 81 of the Land Revenue Act unless determined and established. It was further held "notice under section 81 issued to the petitioner was declared to be without lawful authority as the claim was admittedly disputed on several grounds".

25. It is contended by Mr. Amanullah Khan learned counsel for the plaintiff that the plaintiff has been able to show that he has made out a good prima facie case and if a huge amount of Rs.49 lacs is recovered from him by coercive process before the decision of the suit, he will suffer irreparable loss. He has relied upon the case of Mian Muhammad Latif v. Province of West Pakistan and another PLD 1970 S C 180 wherein their Lordships have held; "in a case where temporary injunction is claimed the plaintiff has only to make out that he has a good prima facie case meaning thereby that a serious question is to be tried in the suit and that in the event of success if the injunction is not issued, he will suffer irreparable injury. Where these conditions was satisfied injunctions can rightly be issued. by Courts." Reliance is also placed on the case of Sahibzada Sharafuddin and others v. Town Committee, Pindigheb and others 1984 C L C 1517 wherein a learned Single Judge of Lahore High Court granted temporary injunction against the levy of tax by the Town Committee holding that "recovery of tax besides being apparently illegal, might involve inconvenience including issue of distress warrants etc. entailing payees' detention. As no recompense being available in money for any such eventuality balance of inconvenience to weigh in favour of plaintiff in the circumstances .

26. Considering all the facts, circumstances and law discussed above, in my opinion, it is a fit case for issuance of temporary injunction. Mr. Ibrahim Peshori has contended, that if temporary K injunction is issued, the plaintiff may be asked to furnish bank guarantee. Mr. Amanullah Khan submits that it will not be possible for the plaintiff to submit bank guarantee in such huge amount, which would in fact amount to refusal of the grant of temporary injunction and he submits, that the facts and circumstances of the case entitle the plaintiff to get temporary injunction without any condition. Out of about Rs.49,00,000 claimed by the defendant No.1 about Rs.39 ' 00,000 pertain to the claims of less than Rs.20,000 paid and settled by the Plaintiff to the insured persons, which payment and settlement is binding upon the defendant until they prove that the alleged payments are fraudulent. 1, therefore, grant temporary injunction as prayed subject to furnishing of surety by the Plaintiff in the sum of Rs.10,00,000 to the satisfaction of the Nazir of this Court within one month. M. B.A. /E‑10/ K?????????????????????????????????????????? Temporary injunction granted.