1988 MLD 316 (PLP)

This is a suit for recovery of Rs. 2,26,43.39. Case of the plaintiff is that defendant Ghulam Hussain Haidayatullah Textile Mills Limited had approached the plaintiff, National Security Insurance Company Limited, for facility in the payment of premium on insurance which it offered to place to the plaintiff. Consequently the plaintiff agreed to issue policies of insurance on the advice of the defendant on credit. In pursuance of the said agreement the plaintiff issued policies of fire, marine and accident in their name at the request of the defendant from time to time. The defendant also advised the plaintiff to pass endorsements in certain policies which reduced the premium of some of them and enhanced that of others. The plaintiff accordingly passed the necessary En~h)rslements ias the rc lc%;.i!it pohciL~: .:>nd gave the corresponding credit or debit. Hence a sum of Rs. 2,26,432.39 is due to the plaintiff as detailed in Schedule `A' of the plaint. The defendant has failed to pay the aco oisnt in spite of repeated notices, hence this suit with a prayer for decree on the above amount with costs and interest at 10 per cent.

3. The defendant contested the suit by filing written statement and denied that there was any such arrangement as alleged. It was averred that every policy amounts to a separate transaction under the law. The plaintiffs facility of credit was not denied but an evasive plea was taken stating that the plaintiff ought to have filed the insurance policies in Court. It was denied that any amount was due to the plaintiff from the defendant. It was also stated that the defendant had not derived any benefit from these policies and therefore, no question of estoppel has arisen. On the pleadings of the parties following issues were framed:‑‑ (1) Whether the parties entered into an arrangement as mentioned in para 2 of the plaint? (2) Whether each policy was a separate transaction? (3) Whether policies were issued by the plaintiffs in favour of the defendants and what was their premium? (4) Whether the defendants enjoyed the benefit of the policies issued? If so, are the defendants estopped from challenging their validity? (5) Whether the policies issued were void and illegal under section 3(c)(4) of the Insurance Act? (6) What amount, if any, is due to the plaintiffs from the defendants? My findings on the above issues with reasons, therefore are as under:‑‑ REASONS. Issues Nos. 1 to 6 Mr. Afsar Abadi Advocate who is appearing for the defendant gave a statement on 1‑3‑1988 when the suit was fixed for recording of evidence that he had already returned the file to his client and had also informed by notice to his client. However, a notice was issued to the defendant directly by the Court as well on the address furnished by the defendant himself but it was returned with endorsement that the office did not exist at the said address.

4. The plaintiff was therefore called upon to lead his evidence. The plaintiff has examined Muhammad Moin Senior Executive Vice‑President, National Security Insurance Company Karachi who has produced all 26 policies and endorsements, and has given the evidence on oath and supported the plaintiff's case. The next witness of the plaintiff is Muhammad Siddiq Khan Afridi, who is officer of PICIC. He has also produced a policy and the endorsement and has stated that the defendant company was mortgaged with them and at their directions the defendant got themselves mortgaged with the plaintiff.

5. The above evidence of the plaintiff has gone unchallenged and unrebutted. I am, therefore, satisfied about the claim of the plaintiff.

6. There is only one legal issue in this case which relates to the legality of the policies issued by the plaintiff, in view of the provisions to section 3(2) (4) of the Insurance Act. This section enjoins upon the insurance companies not to issue any policy without first receiving the premium. This point was dealt with by this Court in 1980 C L C 1919 M/s. Crescent Star Insurance Company v. S.M. Abdullah & Sons where Ajmal Mian, J. held as follows:‑‑ "(d) It is an admitted position that section 3C(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 provision providing penalty for non‑observance or contravention of any provisions. In this regard he has referred to sections 3(4) (f), 3(5), ‑8;A), 102 and 103, in order to support his contention that the Act itself provides penalty 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 insurance 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 thereunder 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 section 3‑C(2) and Rule 4 will not be illegal and unenforceable. I am inclined to agree with the view taken in the abovecited 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 will be construed in the absence of any other indication or contract intention expressed in the statute as implying a prohibition of the contract. On the other hard if the object of imposing penalty is merely the protection of the revenue, the contract will not be regarded as prohibited by implication. In the instant case, as observed by me earlier, the intention of section 4‑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 etc. The rulings cited by Mr. Nur Muhammad learned counsel for the defendants referred to hereinabove in my view have direct bearing on the point in issue, whereas the observations made in the above three books on the interpretation of statutes cited by Mr. Nur Muhammad 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 in the absence of express provision making the contract illegal or unenforceable, no such inference can be drawn by implication."

7. It is, therefore, clear that a breach of the directions contained in the above provisions would only entail the penalties prescribed m the Act itself which are not provided to protect the general public or any class thereof but have been provided merely to protect the revenue and the contract itself will not be F regarded as prohibited by implication. There being no express provision making the contract illegal or unenforceable, no such inference can be drawn by implication. Hence I am of the clear view that the objection raised by the, defendant in the Written Statement is without any substance.

8. I, therefore, decree the Plaintiff's suit with costs. I also allow interest at the rate of 6% per annum from the date of filing of the suit till the recovery of the decretal amount. AA./N‑122/K Suit decreed.