1980 PLP 1919 (CLC)

(ii) has an amount in deposit to the credit of the propose or his agent sufficient to cover the full premium payable for the insurance; (iii) has a bank guarantee in Force `X' X guaranteeing the payment or' an amount sufficient to cover the amount of the frill premium payable, for the insurance in question and also previous insurance if any.. in respect of which the premium has net been paid: Provided that in the case of annual insurance "connected with aircraft hulls" and "connected with marine hulls" an insurer may cover the, risk in respect thereof if an amount not less than one fourth ref the premium payable has been paid car guaranteed try be paid in the manner lard down in this rule and a clause governing the payment of, the premium in instalments not exceeding, four in number is endorsed on the policy. Explanation I

In the cases governed by this rule, no risk shall be covered from a date of earlier than- (a) the date on which the premium has been delivered in cash or by cheque to the insurer to his agent or into a collecting Bank duly authorised in that behalf; (b) the date on which the premium has been remitted to the insurer or to his agent or into a collecting Bank duly authorised in that behalf, in cash or by cheque by either registered post or under a letter with certificate of posting, or by money-order. Explanation II--In the case of a request for insurance accompanied by a cheque or money-order, it will be permissible for the insurer retrospectively to commence the risk from the date of posting the cheque or the date of remittance of the amount by money-order, as the case may be; Explanation III.--Payment by cheque shall mean that the cheque is valid for encashment on the next Bank working its- receipts by the insurer and shall be so presented. Explanation IV.-Every agent shall deposit the full premium so collected with the insurer within 24 hours of the collection, excluding. Bank, and postal holidays. It would be sufficient compliance with this regulation if the agent despatches the premium by post within 24 hours of its collection." It may be noticed that under the above-quoted provisions of section 3-C(4), it has been provided that no insurer shall assume in Pakistan any risk in respect of general insurance policies (which will include fire insurance which was the subject-matter of the policies in question) unless and until the premium payable or such part thereof as may be prescribed has been received by him or has been guaranteed to be paid by such persons in such a manner and within such time as may be prescribed. Whereas rule 44(iii) contemplates furnishing of a bank guarantee in Form XIX for guaranteeing the payment of an amount sufficient to cover the amount of the full premium payable in lieu of cash payment. (b) it has been urged by Mr. Nur Mohammad learned counsel for the defendants that in the instant case according to averment in the plaint, no premium was received or guaranteed in terms of section 3-C(4) of the Act read with the rule 44 of the Rules and, therefore, the contracts of insurance were void ab initio. His further submission was that, even a bank guarantee for an amount of Rs. 9,000 referred to in the plaint has not been relied upon, "or the purpose of validating the insurance policies, but a general reference has been made and, therefore, no reliance can be placed on the aforesaid bank guarantee in order to validate souse of the insurance policies detailed is Annexure A to the plaint Exh. 7/8. In support of the above contention Mr. Nur Mohammad has referred to the case of Eastern Federal Insurance Co. Led. v. Bawany Industries (P L D 1971 Kar. 323), the case of M. Jamil Ahmed v. Commissioner of Karachi and another (P L D 1958 Kar. 56) the case of Government Clerk's Mutual Benefit Fund Nagpur v. F. Corporation and another (A I R 1946 Nag. 176). The Statutory Construction by Crawford, 1940 print p. 468, the Interpretation of Statutes, by Bindra, 1967 Edition at page 74, and Maxwell on tire Interpretation of Statutes, 145: print, page

376. On the other hand, Mr. Haider Ali Pirzada has referred to the case of Pamulapati Bhushayya v. Commareddy Chinnapareddi and another (A I R 1960 Andh. Pra, 39), the case of Herald. Jankibai Chawnilal v. Ratan Malu (1962 Madh. Pra. 117) and the ease of Herald Robert Henry Lind v. British Insulated Calendars Construction Co. Ltd. (P L D 1970 Kar. 315).. (c) (i) Reverting to 1979 Kar. case it may ire observed that in the above case the subject-matter of the controversy was section 3C of the Insurance Act and rule 44, after discussing the above provisions it has held ay me that the Insurance policies which were the subject-matter of the suit were enforceable as they were backed by the bank guarantees in terms of rule

44. The question as to whether an insurance policy which is not supported by a bank guarantee can be enforced, was not in issue, and, therefore, the facts of the above case are distinguishable from the instant case in respect of the insurance policies which were not backed by the aforesaid guarantee of Rs 9,000: (ii) Reverting to 1958 Karachi vase, it may be stated that the question before a Division Bench of the earstwhile High Court of West Pakistan Karachi Bench was as to whether the action of dissolving of the Karachi Municipal Corporation under section 280 of the Karachi Municipal Act 1933 was valid or not. It was held that the decision to dissolve the Karachi Municipal Corporation was outcome of quasi-judicial rendered the above action liable to be set aside by a writ of certiorari. It was further observed that in every case the object of the status must be looked at before deciding whether a statutory provision is merely of a directory or mandatory character and that a bleach of a mandatory provision always entails legal consequences vitiating all the proceedings taken in regard of it. With reference to the above case, it may be observed that it was pointed out by Mr. Heider Ali Pirzada that the above case was the subject-matter of an appeal before the Supreme Court. The Judgment of the High Court was reversed by the Supreme Court, the judgment of which is reported in Chief Commissioner of Karachi v. Jamil Ahmed and another (P L D 1961 S C 145). The majority view of the Supreme Court was that the main notification under section 280 of the Act satisfied the requirements of that provisions and that the manner and details of publication were merely directory. (iii) Reverting to 1946 Nagpur, it may be observed that In the above case it was held that a company having failed to obtain registration certificate in terms of section 3 of the Companies Act, was obliged to stop business from 1-10-39 and that the contributions from the members from 1-10-39 did not form the assets of the company and could not be claimed legally as part of the company's assets. (iv) Reverting to Crawford on the Construction of statutes, it may be stated that the learned author of the above book has inter alia observed at pages 267 and 268 that a statutory grant of a power, privilege or property carried with it by implication necessary to its enjoyment or exercise and that the creation of new duty or obligation or the prohibition of an act formerly lawful, carries with it by implication a corresponding remedy to assure its adherence and that an act performed in contravention to a prohibitory statute is by implication void. (v) With reference to interpretation of statutes and General Clauses Act by Bindra 1957th Edition, it may be stated that the author at page 74 of the above book has observed that a contract which involves its per formance either directly or collaterally the doing of something which would be in contravention of statute of the kind referred to in the book the contract would be invalid and unenforceable. (Vi) Whereas Maxwell in 10th Edition at page 376 has observed that a strong line of distinction may be drawn between the cases where the prohibition of the Act affects the performance of a duty and where they relate to privilege or power and that where the power, rights or immunities are granted with the direction that certain regulations, formalities or condi tions shall be complied with, it seems neither unjust nor inconvenient to exact a rigorous observance of authority as essential to the acquisition of the right or authority conferred. (vii) Reverting to 1960 Andhra Pra, it may be stated that while considering the effect of a partnership entered into in contravention of the provisions of the Central Excise and Salt Act, a Division Bench of the Andhra Predesh High Court was pleased to observe that apart from the fact that under the rule there is distinction, cases under the Abkari, Opium or .Forest Act have no application in determining the validity of the partnership made in contravention of the provisions of the Central Excises and Salt Act as the prohibition is for protection or convenient collection of revenue and that where statute merely imposes a penalty without declaring it to be illegal or void, the imposing of penalty by itself does not have the effect of making airy contract made in contravention of specific provisions of the statute illegal or void. (viii) With reference to 1962 Madhya Pradesh it may be stated that it is a case of Full Bench in which while considering the effect of non-registra tion of a money lender under the C. P. and Berar Money-Lenders Act- (13 of 19:34), it has been held that when an enactment merely imposed a penalty without declaring a contract made in contravention of it to be illegal or void, the 'imposition of the penalty, by itself and when no mores does not necessarily imply a prohibition of the contract. In such case the question always is whether the Legislature intended to prohibit the contract which question is to be derided upon a construction of the statute and that if the object of the enactment of one of its objects an imposing penalty is to protect general public or any class thereof, it will be construed in the absence of any other indication of contrary intention expresseo in the statute, as implying a prohibition of the contract, but on the other hand, if the object of imposing a penalty is merely the protection of the revenue, the contract will not be regarded as prohibitory by implication. (ix) Reverting to 1970 Karachi case, it may be observed that the question before a Single Judge of this Court was as to whether non-registra tion of foreign companies under section 277 of the Companies Act will make the contract entered into by such Companies with the third parties invalid or illegal. It was held that under section 277 every company incorporated outside Pakistan has to register itself with the Registrar of Companies and to supply to the Registrar information prescribed under the section and the section imposes a fine on any foreign company which fails to comply with any of the requirements of section

277. But the section does not contain any provision which would have the effect of invalidating or rendering illegal any contract by a foreign company which has failed to comply with the provisions of the aforesaid section. (d) 1t is an admitted position that section 3-C(4) does not provide that a contract entered into in breach of the above provision shall be void, or illegal. Mr. Haider Ali Pirzada has invited my attention to the various provisions of the Act, including the provisions providing penalty for non observance or contravention of any provisions. In this regard be has referred to sections 3(4)(f ), 3(5), 48(A) sections 102 and 103, in order to support his contention that the Act itself provides penslty for contravening any provisions of the Act, and that the effect of non-observance of any of the provisions has no bearing on the validity of the contract entered into between an insur ance company and a third party. The object of section 3-C(4) seems to be to ensure the recovery of premium and not to provide any protection to the public from any act of insurance companies. In my view the Act and the rules framed there under is a complete code providing penalty for non-observance or contravention of any provision of the Act or the Rules and that an insurance policy issued in deviation or contravention of sec tion 3-C(4) and rule 44 will not be illegal and unenforceable. I am incline to agree with the view taken in the above cited cases of 1960 Andhra Pradesh and 1962 M. P. that in order to determine the validity of a contract one will have to see the object of the enactment or the provision which is in issue and that if the object of the enactment or one of the objects in imposing penalty is to protect general public or any class thereof, it wilt be construed in the absence of any other indication or contrary intention expressed in the statute as implying a prohibition of the contract. On the other hand, if the object of imposing penalty is merely the protection of the revenue, the contract will not be regarded as prohibited by implica tion. In the instant case, as observed by me earlier, the intention of section 3-C(4) seems to be to ensure the recovery of such premium. The insurance policies in question cannot be termed as illegal being against the public policy etc. The rulings cited by Mr. Nur Mohammad learned counsel for the defendants referred to hereinabove in my view have no direct hearing on the point in issues, whereas the observations made in the above three books on the interpretation of statutes cited by Mr. Nur Mohammad provide general propositions of law, to which there cannot be any cavil. But as I pointed out hereinabove that the basic question in the present case is to ascertain the object of section 3-C(4), and if the object was merely to ensure the recovery of the premium to the absence of express provision making the contract illegal or unenforcable, no such inference can be drawn by implication. (e) It may be observed that it was 'urged by Mr. Haider Ali Pirzada that if it is to be held by this Court that the insurance policies in question were void, in that event, section 63 of the Contract Act can be pressed into service and that the plaintiffs will be entitled to recover the premium on the basis of the above section. Ian this regard reliance was placed on the case of Thakurain Hurnath Xuar v. Thakur Indar Bahadur Singh (A I R 1922 P C 403) the case of Bagu Raja Mohan Afanucha and others v. Babu Manzoor Ahmed Khan and others (AIR 1943 P C 29) the case of Province of West Pakistan rind another v. Messrs Asghar Ali Muhammad Ali & Co. (P I. Ta 1968 Kar 196) and the case of Alazir Mimed Khan and 2 others v. Muhammad Ashraf Khan and ,3 others (P L D 1975 Kar. 598). Where as it was urged by Mr. Nur Mohammad, learned counsel fir the defendants that though section 65 will be attracted if it' is to be held that the insurance policies were void, but no relief can be granted to the plaintiffs as alleged benefit received by the defendants cannot be assessed in terms of money as too defendants have not received any claim under the insurance policies in question and that the suit has not been framed in terms of section 65 of the Contract Act Whereas Mr. Pirzada pointed out that as the defendants under the terms of the pledge with . their bankers were obliged to keep the goods (i.e. bales of cotton) insured, they have received the benefits, which can be assessed in terms of premium. (f )'The parties ace on issue on the question .of the number of policies in respect of which premium has not been paid. The plaintiffs have filed a statement annexed to the plaint as Annexure A containing the details of the insurance policies, the dates and .the premium payable his above statement has been exhibited as Exh. 7/8 anti has been proved through P. W.

3. Whereas the defendants have also filed a statement containing t-.e details of the insurance policies issued by the plaintiff i.e. Exh. 8(

19. It has also been urged by W. Nur Muhammad on the basis of the deposition of D. W. 1 Fazl-ur-Rehman that an adjustment of a sum of Rs. 11,480-95 which was paid by Standard Bank of Pakistan on behalf of the defendant, has not been given in Exh. 7/8. Whereas it was urged Lay Mr Pirzada that tire defendants have not given the break up of the insurance policies or the premium in respect of which the above amount was paid. It may be pertinent to point out that in reply to para. 5 of the plaint the defendants have not specifically denied the issuance of any of the insurance policies listed in Exh. 7/8. They have averred that the details and statements contained in the schedule marked as Annexures A to the plaint are not admitted and the plaintiffs are gut to strict proof of each and every item thereof: It may be noted that no cross-examination was directed in order to demonstrate that any one of the insurance policies mentioned in Exh. 7/8 teas no issued of that any premium was wrongly claimed therein. D. W. 1 in his cross-examination at page 10 has deposed that:

"be Refund Premium Endorsement numbers given at pages 2 and 3 of Exh. 8N relates respectively to Policy Nos. 2054, 2071, 2063, 2060, 2061, 2075 and 2062. 1 have riot checked the corresponding policy numbers and of the refund endorsement numbers given on page 3 of Exh. 8/9. These policies are included in Annexure A to the plaint lit tiny boots of accounts specific entries relating to premium paid on these policies sin not appear for a sum of Rs. 11,480 was paid by the Nink to the plaintiffs on our behalf which was adjusted against the .premium due under these policies. I cannot give the details of the policies in respect of which the bank debited us the sum of Rs. 11,480.95. In my view in the absence of any specific denial about the correctness of Exh. 7/8, in the absence of any cross-examination to the plaintiff's witness in order to challenge the veracity of the above statement and in the absence of any definite evidence from the defendants' side, it cannot be concluded that the plaintiffs have not given the adjustment to any of the amount against the amount of premium mentioned in Exh. 7/8. To may be observed that D. W. 1 has admitted in his cross--examination that the defendants did not receive full particul4n from their bank and., therefore, were not in a position to produce a statement reflecting the correct position: The burden of proof to, show that the plaintiffs have net liven adjustment of any amount or rebate against the premium mentioned 'in Exh: 7/8 was on the defendants; which they have failed to discharge, In view of my above discussion my., finding on first part of issue No. 1 is in the affirmative and on the second part of the above issue is in the negative. Whereas as regards the Ist part of Issue No. 3 my finding is in the affirmative ;and whereas on the second part of the above issue is in, the negative. Furthermore, my finding on the first part of Issue No. 5 is in the affirmative and on the second part of the above issue is in the negative.

5. Issue No 1.

.'There is no documentary evidence produced by the plaintiffs in support of their assertion that they did not enforce the bank guarantee of Rs. 9,000 because of the assurance given by the defendants to the effect that they would make the payment of the outstanding amount in due course. The only evidence on the record is of P. W.

3. Since he was not present when the alleged assurance was given by the defendants, it cannot- be concluded that in fact there was any such assurance held out by the defendants. However, from the correspondence which is on the record, namely, Exhs. 7/ 11 to 7,121, it seems that when the defendants were pressed to clear the dues they had come out with the reply Exh. 7/22 admitting therein that they were liable to pay Rs. 10,000 only. There is not a single document can the record to indicate that at any stage prior to the filing of the present suit the defendants had challenged the legality of the insurance policies in question or had denied their liability to pay any amount. From the course of dealings between the parties, it appears that the defendants were causing the payment from time to time through the bank. My finding on this issue is that though the plaintiffs have failed to prove any express assurance on the part of the defendant to the effect that they would clear the dues and that the bank gurantee could not be encashed, but it is probable that the plaintiffs had not encashed the bank guarantee on the assumption that the payment would be made by the defendants in the- due course.

6. Issue No. 4.

It is an admitted position from the record that the plaintiffs had not paid Rs. 4,29,000 or any part thereof in respect of any of the policies mentioned in Exh. 7/8. The above payment was made it respect of some other insurance policies. The fact that the plaintiffs had paid a sum of Rs. 4,29,000 in respect of other insurance policies issue according to them under the same arrangement indicates that the insurance policies issued by the plaintiffs under the arrangement pleaded were honoured It may be observed that it is not the case of the defendants that too plaintiffs have failed to make payment under any of the insurance policies in spite of the receipt of a claim. No such averment has been made either in the written statement or by D. W.

1. However, the question which required consideration for the purpose of deciding the present issue is as to whether the payment of a sum of Rs. 4,29,0110 in respect of other insurance phones shall constitute estoppel for the purpose of the present insurance policies Mr. Nur Mohammad has urged the following two points (ii) Whether the alleged payment of Rs. 4,29,000 under some other insurance policies cannot be pleaded as estoppel in respect of the policies in question, (ii) that no estoppel can be pleaded as the question that the policies were illegal or void is a question of law:- Since I have already held that the insurance policies were legal and valid no finding is required on the issue. However, it will suffice to observe that the payment of Rs. 4,29,000 by the plaintiff-Company to the defendant will indicate that the arrangement pleaded was adhered to by the plaintiffs and no plea about the illegality or invalidity of the insurance policies was raised. However, in my view the above payment would not have constituted estoppel for the purpose of validating the policies in question, and therefore, the contention of Mr. Nur Mohammad in this regard appear to be correct.

7. Issue No. 6. -Exhibit. 7/22 is relevant for the purpose the above issue, Exh. 7,122. is the defendant's letter dated 17-4-69, in reply to the plaintiffs' letter dated 25-3-69, Exh. 7/19, wherein the defendants have stated that according to their record an amount of about Rs. 10,000 was payable by them for which a bank guarantee was already in possession of the plaintiffs anti not a sum of Rs. 40,392.55, D. W. 1 in his statement has deposed that the above letter was written by the defendants when they did not have complete information. However, it has not been explained by D. W. 1 on what basis the figure of Rs. 10,000 was arrived at. It may further be observed that D. W. 1 has also tiled Exh. 819 referred to by me earlier, a statement containing the detail of certain insurance policies and showing a sum of Rs. 6.169-91; was due and payable by the defendants to the plaintiff's. Except the oral statement of D. W. there is no evidence on the record to support the contention of the defendants that they had admitted their liability of Rs. 10,000 on the basis of some mistake. Be that as may, in view of my fining on Issues Nos. 1. 3 and 5 the finding on this issue has become insignificant. However, it will suffice to observe that there is no reliable evidence on the record to conclude that the defendants admitted their liability to the extent of Rs. 10,000 on the basis of some mistake.

8. Issue No. 7.

This issue was not pressed by the learned counsel for the defendants and, therefore, it does not require any discussion.

9. As a result of the discussion on the various above issues I decree the suit for a sum of Rs. 40,392.55 with 9 % simple interest thereon from the date of the suit till payment, but there will be no order as to costs. M. Y. M. Suit decreed.