2004 PLP 239 (CLD)

Learned counsel of the respondents submits that insurance agreement relates to the goods which has no nexus with the finance facilities secured by the appellant from the respondent‑Bank. He further urges that no insurance policy was issued or agreement was executed between the parties qua the, loan secured by the appellant from respondent‑Bank, He, further submits that unreported judgment is distinguished or facts and law as the Division Bench of this Court decided the case qua the I6an facilities secured by the loanee for the purchase of vehicle under Citibank Car Scheme and the vehicle in the cited case was in the name of the Citibank. Learned counsel of the appellant in rebuttal submits that Insurance Company is proper and necessary party, therefore, the learned Banking Court erred in law to dismiss the application of the appellants to implead the Insurance Company as respondent in the suit of the respondent‑Dank. He summed up his arguments that Insurance Company is proper and necessary party in view of section 2(c) of the Banking Companies (Recovery of Loans, Advances, Credits and Finances) Act, 1997. We have given our anxious consideration to the contentions of learned counsel of the parties and perused the record ourselves. It is better and appropriate to reproduce the relevant clauses of sanctioned advice, finance facility agreement dated 26‑7‑1995, Insurance Fire Policy and section 2(c) of the aforesaid Act, to resolve the controversy between the parties:‑‑ (1) ‑-‑‑‑‑ (2) Stocks to be insured by an insurance company on the Bank's approved list against all necessary risks, with Bank's mortgage clause inserted therein. (5) The Customer hereby further covenants as follows:‑‑ (a) ‑-‑‑‑‑ (b) ‑-‑‑‑‑ (c) ‑-‑‑‑‑ (d) To keep the hypothecated/pledged goods duly insured with an insurance Company approved by the Bank for a sum not less than the amount of purchase price due and payable to the Bank and deliver to the Bank copies of receipts evidencing payment of premium." "Upon any moneys becoming payable under this policy the same shall be paid by the Company to the Bank and such part of any money so paid as may relate to the interest of other parties ensured hereunder shall be received by the Bank as agents for such other parties." Banking Companies (Recovery of Loans, Advances Credits and Finances) Act. 1997. 2(c) "Borrower" means a person who has obtained a loan under a system based on interest from a banking company and includes a surety or indemnifier. Mere reading the aforesaid clauses Insurance Company is not proper and necessary party, in view of the law laid down by the Honourable Supreme Court in Khan Abdul Wali Khan's case PLD 1976 SC

57. Order 1, Rule 10, C.P.C. was interpreted in similar circumstances by the Allahabad High Court in Oum Prakash Tewari v. State Bank of India and others AIR 1949 Allahabad

313. The relevant observation is as follows:‑‑ "It is significant that one of the very necessary principles in all these cases for impleading a party is that only such parties should be impleaded whose presence is necessary to settle all the questions involved in the suit. In the present case all the questions which will be raised between the Bank and the applicant, the Insurance Company will in no way be of any assistance or the person who would be required for adjudication between the two. The Bank, as per para. 8 of the Agreement, in case the decree is passed and the amount which is to be realized is not realized from the loanee, could realize the same from the said Insurance Company the amount which is realizable by the loanee from the said Insurance Company towards the loan advanced. The question of payment by the Insurance Company to the loanee is by way of separate contract which has nothing to do with the dispute between the applicant and the Bank arising out of a separate contract. In case the Insurance Company or the said loanee raises any dispute regarding the contract, then such dispute could not be decided in the present case." Section 2(c) of the said Act was interpreted by the Division of Karachi High Court in case Messrs United Bank Limited v. Adam Jee Insurance Company Limited reported in 1988 CLC 1660. This case was also reported in the following Law Journals:‑‑ Messrs United Bank Limited v. Messrs Alamgir Insurance Co. 1988 CLC 1660. United Bank Ltd. v. Adam Jee Insurance Co. Ltd. and others 1988 CLC 1660. in which principle was laid down that Insurance Company is not covered by definition of "borrower" in section 2(c) of the said Act. Relevant observation is as follows:‑‑ "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 L/C 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‑‑‑‑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.20,000 and not to the above amount of loan with interest thereon etc." The judgment of the Division Bench was also followed by this Court in EFU General Insurance Company's case reported as PLD 2001 Lahore

313. We are also fortified by the following judgments:‑‑ National Bank of Pakistan and 5 others v. Punjab Road Transport Board through Managing Director and 3 others 2003 CLD

653. Juna Bunder Joint Venture, Karachi v: Board of Trustees of Port of Karachi and others PLD 1982 Karachi

13. Para. (a) clause 1 of Insurance Fire Policy contained "upon any money become payable under this policy", which means the amount must be determined by a competent forum Mere submitting a claim by the appellant to the respondent- Bank does not entitle the appellant to claim the said amount be adjusted qua the outstanding liabilities of the appellants against the outstanding of the respondent‑‑Bank. In fact it is an independent agreement between the parties which has no nexus to discharge the liabilities of the respondent‑Bank by the appellants on the basis of loan agreement executed between the parties on 26‑7‑1995. The unreported judgment cited by learned counsel of the appellant is distinguished on facts and law which clearly reveals that finance agreement was executed between the Citibank and the loanee in pursuance of the Citibank Car Scheme with joint investment. The vehicle was purchased which undeniably stands in the name of the Bank whereas in the present case there is no joint investment, therefore, unreported judgment dated 13‑1‑2000 passed in Regular First Appeal No.264 of 1999 is distinguished on facts and law. It is settled principle of law that each and every case has to be decided on its own facts and circumstances, therefore, judgment relied upon by learned counsel of the appellant has no relevancy and nexus to resolve the present controversy between the parties. The appellant admitted liabilities of the respondent‑Bank on merits and learned counsel of the appellants did not raise any objection qua the merits of the case wherein the liabilities of the respondent‑Bank have been admitted by the appellants. In view of what has been discussed above, we do not find any infirmity or illegality in the impugned order of the Banking Court. The appeal has no merits and the same is dismissed. H. B.T./E‑41/L Appeal dismissed.