MERCANTILE MUTUAL INSURANCE COMPANY OF PAKISTAN Ltd. Versus THE STATE LIFE INSURANCE CORPORATION OF PAKISTAN
By this common judgment, I intend to dispose of the above two appeals, which are directed against a common judgment dated 22-1-1980 passed by the learned Insurance Appellate Tribunal, Karachi (hereinafter referred to as the Tribunal) in Application No.1 of 1977 (hereinafter referred to as the application)
2. The brief facts leading to the filing of the above two appeals, namely, Miscellaneous Appeal No.12 of 1980 (hereinafter referred to as the First Appeal) which has been filed by the appellants (who were respondents Nos.1 to 9 and 118 in the application), whereas Miscellaneous Appeal No.15 of 1980 (hereinafter referred to as the Second Appeal) has been filed by the State Life Insurance Corporation (hereinafter referred to as the Corporation), which was the application in the application. It may be observed that the Corporation filed the application under Article 22 of the Life Insurance (Nationalisation) Order, 1972 (hereinafter referred to as the Order), claiming therein 8 ' different items against the present appellants in the first appeal and the other private respondents, which claim was resisted, inter alia, by the appellants in the first appeal. On the basis of the pleadings of the parties the Tribunal framed the following issues:-
(1) Is the Applicant entitled to reimbursement of Rs.10,281 from respondents Nos.1 to 9 jointly as well as severally with future interest @ 15% per annum w.e.f. 31-12-1958 till realization, as claimed in Para 8 of the application?
(2) Is the applicant entitled to receive a sum of Rs.12,000 from respondents Nos.1 to 9 and 118 jointly as well as severally with future interest at 15% per annum w.e.f. 1-11-1972 till realization, as claimed in Para 9 of the application?
(3) Is the Applicant entitled to receive a sum of Rs.14,891.74 from respondents Nos.1 to 9 and 118 jointly as well as severally with future interest @ 15% per annum w.e.f.1-11-1972 till realization, as claimed in Para 10 of the application? '
(4) Is the Applicant entitled to recover a sum of Rs.50,000 from respondents Nos.1 to 7 jointly as well as severally with interest @ 15% per annum w.e.f. 14-10-1970 till realization, as claimed in Para 11 of the application?
(5) Is the Applicant entitled to adjust the gratuity and provident fund of respondent No.7 amounting to Rs.71,238.69 from his claim of Rs50,000 with interest, referred to under issue No.4 above, and as disclosed in ,, Para 12 of the application?
(6) Is the Applicant entitled to receive a sum of Rs.40,000 from respondents Nos.1 to 7 and 10 jointly as well as severally with future interest @ 15% per annum till realization, as claimed in paras. 13 and 14 of the application?
(7) Is. the Applicant entitled to receive Rs.27,833.65 from respondents Nos.1 to 7 and 11 jointly as well as severally with future interest @ 15% per annum till realization,. as claimed in Para 15 of the application?
(8) Is the Applicant entitled to receive from respondents Nos.1 to 9 jointly as well as severally a sum of Rs.35,045.15 with future interest @ 15% till realization alongwith respondents Nos.12 to 117 individually to various sums of money as shown against each of them in Annexure `A` to the application as per claim made in Para 16 of the application? .
(9) Is the Applicant entitled to recover a sum of Rs.4,59,363 from respondents Nos.1 to 9 jointly as well as severally with future interest @ 15% till realization ?
It seems that in support of the application the Corporation examined P.W. Yousuf Bhai (Ex-1) and P.W.2 Muhammad Fareed (Ex.54), whereas the present appellants Nos.1 to 7 and respondent No.118 examined DW.1 Ahmed Hassan (Ex.57). The learned Insurance Tribunal after hearing the parties allowed a decree in respect of the items mentioned in issues Nos.1, 2, 4, 6, 7 and 8, sum of Rs.25,000 under issue No.9 without any interest, whereas issue No.5 was decided against the Corporation. The 10 appellants in the first appeal and the Corporation in the second appeal have filed the above two appeals.
3. In support of the first appeal Mr. Abdul Rauf, learned counsel for the appellants apart from dealing with the issues decided against the appellants on merits has urged that since appellant No.1 was a Mutual Insurance Company it could not have been sued under Article 22 of the Order as neither the shareholders nor the Directors received any amount out of the business profits. However, he has not been able to cite any law in support of his above submission that a Mutual Insurance Company cannot be sued under the Order. It may be observed that Article 22 and other Articles of the Order do not make any distinction between a Mutual Insurance Company and the other Life Insurance Company. Additionally the definition of the "Insurance Company" given in clause of section 2 of the Insurance Act, 1938 (hereinafter referred to as the Act) provides that it "means any insurer being a company, association or partnership which may be wound up under the Companies Act, 1913 or to which Partnership Act, 1932 applies. "It is, therefore, evident that there is no distinction between a mutual insurance company and any other insurance company under the Act". In this view of the matter no immunity could be claimed on the ground that the appellant No.1 was a Mutual Life Insurance Company.
4. Adverting to the merits of the case I would take up each of the issues separately.
(a) ISSUE N0.1: Under this issue the Corporation has claimed reimbursement for a sum of Rs.10,281 from the present appellants Nos.1 to 9 jointly and serverally with future interest at 15% per annum w.e.f. 31-12-1958 in terms of para.8 of the application. It has been averred in para.8 of the application that on 31-12-1958 the appellant No.1 transferred a liability of the above sum of Rs.10,281 to the life business from the general insurance business. The defence of the above appellants was that the Company had transferred all the assets and liabilities of the general business to the life insurance business on the above date, resulting into monetary gain to the life insurance business. It has been brought on record that on 31-12-1958 the assets of the life insurance business reflected in Ex.50 which is the balance-sheet were to the extent of Rs.1,13,112.01, whereas; after the above transfer of the assets and liabilities of the general insurance' business the assets of the life insurance on record, particularly of the appellants' witness, it appears that the above position is correctly stated. 1n the cross- examination nothing has been brought on record to adversely reflect on the credibility of the above witness as to the above statement. On the contrary this position is reflected in the documents brought on record, inter alia in Exts.50 and 51. 1 am, therefore, of the view that in the absence of evidence on record to the effect that the above transfer of the liabilities and the assets on 31-12-1958 of the general life insurance business to the life insurance business has resulted into a loss, the above amount could not have been decreed by the Tribunal. I would, therefore, reverse the finding of the Tribunal on the above issue and disallow the claim of the Corporation. ,
(b) ISSUE NO.2: This issue relates to a sum of Rs.12,000 which was due and payable by respondent No.118 to appellant No.1 in respect of two items mentioned in para.9 of the application. This is so reflected in the documentary evidence, inter alia, in the balance sheet. However, Mr. Abdul Rauf, learned counsel for the appellants in the first appeal has vehemently contended that since the appellant No.1 was using the office premises and the other facilities including electricity and telephone of respondent No.118, this amount was paid by appellant No.1 to respondent No.118 in order to compensate for the use of the above facilities. It will suffice to observe that the above submission is not supported by any documentary evidence to indicate that there was any arrangement between appellant No.1 and respondent No.118 as to the payment of any amount for the use of the office, telephone and electricity etc. This was not shown as a payment towards the above stems. The above contention in fact of Mr. Abdul Rauf is contrary to the documentary evidence on record. I would, therefore. maintain the,, above finding of the Tribunal on the above issue.
(c) ISSUE N0.3: This issue pertains to a sum of Rs.14,891.74 which amount was over paid by appellant No.1 to its sister concern respondent No.118. Mr. Abdul Rauf has advanced the above arguments in relation to the above issue which were advanced by him on above issue No.2. I have already held hereinabove that there is no documentary evidence in support of Mr. Abdul Rauf's above submission and, therefore, this finding of the Tribunal on the above issue is also in consonance with the evidence on record.
(d) ISSUE N0.4: This issue relates to a claim of Rs.50,000 arising out of the payment made by the appellant No.1 to M/s. Amritsar Paper Mart for getting the rented premises vacated from them. It is the case of the appellants that since appellant No.1 wanted to raise a new building on Frere Road and as the substantial portion of the building owned by it was in possession of M/s. Amritsar Paper Mart, they had entered into a compromise with them and paid a total sum of Rs.95,000 as compensation for vacating the premises, through the above firm and passed on a receipt for Rs.45,000 only. Barring the ocular evidence of DW. I there is no documentary evidence to support the above averment, on the other hand the documentary evidence is contrary to it, namely, the receipt for Rs.45,000 only. I am inclined to concur with the finding of the Tribunal that the appellant had no justification to pay a sum of R>.50,04) from the assets of the life insurance business without obtaining a receipt.
(e) ISSUE V.5: This issue involves the question as to whether the Corporation was entitled to adjust the above sum of Rs.50,000 which was withdrawn by the appellant No.8 from the bank alongwith the above amount of Rs.45,000 i.e. he had withdrawn a sum of Rs.95,000 from the Bank. The Tribunal has held that the Corporation was not entitled to adjust the above sum of Rs.50,000 against the provident fund and gratuity payable by the Corporation to the appellant No-8 in the first appeal. Mr. Fazle Ghani Khan, learned counsel for the Corporation has vehemently submitted, that since this amount is due and payable by the above appellant No.8 to the Corporation, it was entitled to recover the same in terms of clause (v) of Article 22 of the Order, which provides that any amount due to the Corporation in pursuance of an order of the Tribunal under clause (iii) or an order of the High Court under section 106 of the Act, it may be set off against any compensation, liability or any money due by the Corporation to the Insurer, or its share-holders or Directors under the provisions of the Order including the amount of compensation payable under Article 39 of the Order. On the other hand Mr. Abdul Rauf has contended that in order to invoke the above Article there should be determination of the liability either by the Insurance Tribunal under the Order or by the High Court in terms of section 106 of the Act and secondly, since amount of Rs.71,000 was payable by the Corporation to respondent No.8 on account of provident fund and gratuity, the same could not have been adjusted. In this behalf, it may be pertinent that in, para.12 of the application it has been averred that the above amount has already been adjusted. The above averment is contrary to clause (v) of Article 22 of the Order inasmuch as the set off could be claimed in relation to an amount adjudicated upon by the Insurance Tribunal or by the High Court either under clause (iii) of Article 22 of the Order or under section 106 of the Act respectively. g Before any adjudication by the Tribunal or by the' High Court the alleged adjustment was illegal as has been rightly held by the Tribunal. Additionally section 3 of the Provident Fund Act, 1925 expressly provides that the amount of provident fund cannot be the subject-matter of any attachment/ burden/ liability.
As regards the gratuity, he has invited my attention to Regulation No.69 of the State Life Employees (Service) Regulations, 1973, which have been framed 'in exercise of Article 49 of the Order and which provides that the employees leaving the service of the Corporation shall be entitled to gratuity on such conditions and subject to such terms as approved by the Board from time to time. The finding of the Tribunal on the above issue seems to be in consonance with law and, therefore, does not call for any interference.
(f) ISSUE N0.6: This issue relates to a sum of Rs.40,000 paid by the appellant No.1 to one Ch. Abdul Rahim of Gujrat in alleged excess to his entitlement. It appears that appellant No.1 issued a life insurance policy (Ex.35) on 20-9-1965 for a sum of Rs.40,000. It also contained an endorsement (Ex.35/1) covering accidental death for a sum of Rs.40,000. The insured met with an accident on 24-9-1965 while riding a motor-cycle and succumbed to the injuries on 25-9-1965. The Tribunal passed decrees of the above sum of Rs.40,000 paid in excess against respondents Nos.1 to 9 in the application (who are appellants Nos.1 and 3 to 10 in the first appeal).
Mr. Abdul Rauf has contended that appellant No.1 had paid the sum of, Rs.40,000 against the endorsement pertaining to accidental death by motor-cycle was not covered for the reason to inspire confidence in the public as to the , fairness of working of appellant No.1. It has been further submitted by him that factually the above risk was partly covered by re-insurance under section 26 of the Act and partly was under-written by a foreign insurance company and factually the appellant No.1 had not suffered any loss on account of above payment in respect of the accidental death. It is evident from the perusal of Ext.35/1 that it has been expressly provided that the endorsement relates to the death but excluding inter alia, accidental death by motor-cycle and, therefore, it is apparent that the above payment was made though the appellant No.1 was not obliged to make payment.
As regards the factum that no loss was suffered by appellant No.1 on account of the above payment, it may be observed that I have perused the relevant documentary and ocular evidence on the above point. It seems that a sum of Rs.32,500 was received from a foreign company in relation to the above Life Insurance Policy but no amount was apparently received in respect of the payment made against the above endorsement pertaining to accidental risk. From the evidence of appellant No.8, who was respondent No.7 in the application and 'who was the solitary witness produced by the appellants, it is evident that in the cross-examination, he was unable to deny the suggestion that only above sum of Rs.35,500 was received in respect of the life insurance policy. The relevant portion of the evidence reads as follows:
"I do not remember that a sum of Rs.35,500 was paid by the re-insurance against the life cover and nothing was paid towards the accidental cover:"
Though little earlier in the cross-examination, he had made the averment that the payment in respect of accident cover was also received. I am inclined to concur with the finding of the Tribunal on the above issue that there was no legal justification for the appellant No.1 to have paid the above sum of Rs.40,000 against the accidental risk, though the endorsement in respect thereof expressly excluded accidental death by motor-cycle.
(g) ISSUE N0.7: This issue relates to a sum of Rs.43,000 which was advanced as loan to, one Ghulam Fareed Awan an employee of appellant No.1 for purchasing a conveyance against which he had paid back some amount as per statement of DW.1. The Tribunal has passed the decree in respect of the balance amount against Ghulam Fareed Awmi respondent No.12 in the first appeal. However, Mr. Fazle Ghani Khan, learned counsel for the Corporation has contended in support of the second appeal that a decided for the above amount should have been passed against appellants Nos.1 to 7 and respondent No.12 jointly and severally as there was breach of the obligation on the part of appellant Nos.1 to 7 inasmuch as they had no obtained the mortgage to terms of clause (c) of subsection (8) of section 29 of the Act, which authorises an insurance company to grant loan for the purchase of conveyance to its employees, insurance against or employer of meats provided the conveyance purchased is mortgaged to the insurance company. ;fn the other hand Mr. Abdul Rauf, learned counsel for the appellants has urged that under sub-clauses (ii) and (iii) of clause (d) of subsection (8) of section 29 of the Act the loan could have been given without obtaining any mortgage, and secondly, that since the life insurance business was nationalise and all the assets and liabilities and records were taken over by the Corporation the mortgage in respect of the conveyance in question could not be executed.
As regards the first limb of Mr. Abdul Rauf's above argument that under subsections (ii) and (iii) 'clause (d) of subsection (8) of section 29 of the Act, there is no requirement of getting a mortgage deed executed against the loan for the purchase of conveyance, it may be observed that the pertinent clause to the controversy in issue is clause (c) of subsection (8) of section 29 which expressly provides for execution of a mortgage, and which has been relied upon by Mr. Fazale Ghani Khan and not sub-clauses (ii) and (iii) of clause (d) of subsection (8) of section 29 of the Act relied upon by Mr. Abdul Rauf.
Adverting to this second limb of the above argument, it may be stated that Mr. Abdul Rauf in furtherance to his above submission has pointed out that the loan in question was advanced on 24th August, 1971, whereas the life insurance was nationalised in March, 1972 and, therefore, sufficient time had not lapsed between the date of the loan and the nationalisation' of the life insurance business and because of that a mortgage in relation to the purchase of conveyance was not obtained, to re-enforce his above submission he has also submitted that in sub-clause (ii) of clause (c) of subsection (8) of section 29 of the Act no period for obtaining a mortgage has been prescribed and, therefore, the judgment of the Tribunal on the above issue fixing the liability on respondent No.12 alone is in consonance with the evidence on record and the law. It is true that no period has been provided for obtaining a mortgage of the purchased conveyance under sub clause (ii) of clause (c) of subsection (8) of section 29 referred to hereinabove but in the absence of any prescribed period a reasonable period is to be implied. From the evidence on record, it seems that the appellants' witness who has appeared as the sole witness has not given any explanation, as to why the mortgage was not obtained, he has stated that the loan was given against the security of a promissory note. At the same time no question was put by the Corporation's counsel m the cross-examination for soliciting the explanation, as to way the above provision of section 29 was not complied with. In this regard it has been submitted by Mr. Fazle Ghani Khan that the burden of proof was on the appellants to have explained the reason for failure to comply with the above statutory requirement and since the explanation was offered in the examination in-chief, there was no obligation on the part of the Corporation's counsel to cross-examine the appellants' above witness on the above aspect. I am inclined to agree with the above Mr. Fazle Ghani Khan's submission that the burden to explain the above failure was on the appellants and, therefore, in the absence of any explanation brought on record in the examination-in-chief, the Corporation's counsel was not required to touch upon the above aspect in the cross -examination. I am also inclined to hold that m the absence of a specified period in sub-clause (ii) of clause (c) of subsection (8) of section 29 of the Act a reasonable period is to be implied, which may be a month or two months but it cannot be six months. I would, therefore, modify the decree of the Tribunal to the extent of making Ghulam Fareed Awan; respondent No.11 in the application jointly and severally liable for the above decretal amount with respondents Nos.l to 9 in the application (who are the appellants Nos. 1 and 3 to 10 is the first appeal.
(h) ISSUE N0.8: The Corporation had claimed a sum of Rs.35,045.15 with future interest against respondents Nos.1 to 9 in the application jointly and severally with respondents Nos.12 to 117 on the ground that the advances given by respondent No.1 to the insurance agents and its employees, were against the provisions of section 29 of the Ad. In this regard, Mr. Abdul Rauf has invited my attention to clause (d) of subsection (8) of section 29 of the Act which relates to temporary I advances to employees/agents and has pointed out that the Corporation has not brought on record any material to indicate that the prescribed limits had been exceeded to in any of the above cases, and therefore, the Tribunal was not justified in decreeing the above amount against the appellants Nos.1 and 3 to 10 and respondents Nos.12 to 117 in above application. There seems to be no material on record to indicate that the amounts prescribed in sub-clauses (i) to (iv) of clause (d) have been exceeded to in any of the cases referred to in para.16 of the application. On the contrary the Schedule indicates that meagre amounts were advanced as advances. I would, therefore, reverse the finding of the Tribunal on the above issue and set aside the decree in respect thereof.
(i) ISSUE N0.9: This pertains to a claim of Rs.4,59,363 being the amount of alleged excess management expenses incurred by the applicant No.1 in the first appeal mentioned in Annexure 'B' to the application. It has been contended by Mr. Abdul Rauf that from the statement of P.W.2 Muhammad Fareed, it is evident that all the Insurance Companies including the Corporation incur more annual expenses on the management than those prescribed under Schedule framed under section 40 of the Act. It may be observed that Muhammad Fareed has admitted in his cross-examination that the excess expenses in relation to the Corporation come into crores of rupees. It has also come on the record that normally the Controller of Insurance condones such excess management expenses. The Tribunal itself was of the view !hat Corporation was not entitled to recover the total amount of Rs.4,59,363 in this regard and awarded a sum of Rs.25,000 only. I am inclined to hold that in view of the factual position which has emerged from the evidence on the record, it was the practice m the life insurance business that the annual management expenses used to exceed the prescribed limits, which apse on the part of the life insurance companies used to be condoned by the Controller of Insurance as a matter of course, the Tribunal was not justified in awarding the above sum of Rs.25,000 which figure has not been arrived at on any concrete basis. After having concluded that the Corporation was not entitled, the above sum of Rs.4,59,363- it was not proper to apportion the above amount without having any reliable -material on the record.
5. This leads to the last submission made by Mr. Fazle Ghani Khan, the learned counsel for the Corporation that the Corporation was entitled to recover interest on the decretal amount from the date when the various amounts were illegally given/spent in violation of the provision of the Act as according to him under section 29 of the Act all the moneys of the life insurance were to be invested in the specified securities/investments. It has been, therefore, further urged by him that since admittedly the Corporation had been deprived of the profits, which would have accrued on the aforesaid decretal amounts by the aforesaid investment, the Tribunal should have awarded the amount of interest which was claimed. To this regard, it may be pointed out that there seems to be no expenses provided in Act 22 of the Order for awarding interest. However, it has been submitted that since Article 22 speaks of compensation damages, the same would include the amount of interest. Even if I were to agree. with the above contention of Mr. Fazle Ghani Khan that under Article 22 the Tribunal has the power to grant interest on the decretal amount, the fact remains that the grant interest is always a discretionary matter for a Court or Tribunal. Furthermore, a Court can grant interest from the date of suit under the Code of Civil Procedure and not prior to the date of suit in the absence of an express agreement or a provision of law. I am inclined hold that the Tribunal by not granting interest as was prayed for has not acted illegally/improperly as to warrant interference by this Court in the above appeal.
6. For the aforesaid reasons both the above appeals are allowed to the extent mentioned hereinabove. However, there will be no order as to costs.
M.Y.H./M-509/K Appeals accepted.