NASREEN RASHID, EXECUTIVE DIRECTOR (INSURANCE).---This order shall dispose of Appeal No,1 of 2010 filed under section 130 of the Insurance Ordinance, 2000 (the "Ordinance") against the order dated 18-12-2009 (the "Impugned Order") passed by the Federal Insurance Ombudsman ("the Ombudsman").
2. Facts of the matter briefly are as follows:-- ' The appellant entered into an agreement with a company, Messrs Allah Hoo Holding Limited ("the Company") and invested a sum of Rs,200 million on an annual profit at the rate of 20 per cent payable quarterly for the next five years. The company as per the contract furnished a Performance Guarantee by its own choice from the respondent. As per the requirements of the Guarantee, dated 27-6-2008, the insurance company was required to pay the appellant, on the first written demand, the sum limited to the liability of Rs,20 million on a claim made within the validity period without any objection.
3. The company defaulted to pay the agreed amount of profit to the appellant. It failed to offer interest payment as per due dates as the bank cheques handed over to the appellant bounced.
On the last two instalments in December 2008 and March, 2009 the holding company made requests for postponement of the payments. The requests were not granted yet the company made no payment at all. Thus the company fell short of making two payments in the first year of the contract.
4. Getting wary of the company's repeated failures; the appellant terminated the contract by invoking the clause 3.1 of the Preference Share Subscription Agreement with the Company. As the Guarantee period covered one year, effective 10-3-2008 to 9-3-2009, some half a dozen notices to this effect starting from October, 2008 to May, 2009 were served upon the respondent. The respondent however turned down the claim summarily, taking the following pleas:--
(a) That the Guarantee was a time limit type which expired on 9-3-2009.
(b) That any valid claim had to be filed within the validity period.
(c) That the Messrs Allah Hoo Holding Ltd. Co. Should have satisfied the claim, if any, and the Insurance Guarantee was not encashable ipso facto.
(d) That the GoB had not exhausted any remedy available under the law for the recovery of the amount due, if any, against the Principal i,e, the A H (Pvt.) company.
(e) That the GoB did not raise any valid claim before the termination of the one year contract with the A H (Ltd.) Co.
(1) And that the GoB was not to be the sole and final judge of its own cause.
5. On not getting the desired response, the Finance Department of GoB lodged a complaint with the Ombudsman office on 22-6-2009 against the respondent, yet without following the mandatory due procedure of filing a complaint under section 129 of the Ordinance, that is, without submitting the oath, without intimation in writing to the respondent prior-to making any complaint and expressing its intention of filing a complaint etc. Meanwhile the respondent filed a civil suit numbering 15784/9 titled Messrs United Insurance Company of Pakistan Limited v. Government of Balochistan, Finance Department and Messrs A.H. Holding Limited on 27-6-2009 in the court of Senior Civil Judge Lahore wherein they have prayed B for a declaration that a demand by GoB against the plaintiff for payment of amount of Rs,20 million along with unpaid quarterly profit was absolutely illegal, unlawful and for permanent injunction restraining the defendant to take any coercive measures against the plaintiff to enforce the said demand.
6. Notwithstanding the argument offered by the appellant before the Ombudsman that the above suit had been filed by the respondent on 27 June, four days after the lodging of their, complaint on 22 June, the Ombudsman recorded that the complaint filed by the appellant on 22-6-2009 was incomplete.
' Hence the Ombudsman Office vide its letter dated 30th June, 2009 advised the complainant to observe the requirements laid down under section 129 before filing of complaint. Thus another complaint was received by the Ombudsman office on 7th July, 2009. By that very reason, the lodging of the so called first incomplete complaint by the appellant vis-a-vis the filing of the civil suit by the respondent immediately afterwards attracted he bar contained under section 127(1)(b) which ousts the jurisdiction of the Ombudsman relating to the sub-judice matters as has been observed by the Ombudsman in his order dated 18th December, 2009. Consequently, noting the above observation, the Ombudsman closed the file without undertaking the proceedings on the points complained against.
7. Aggrieved by the Ombudsman's order, the appellant filed the instant appeal before the Commission on 13 January, 2010, praying therein for reviewing the Impugned Order. They still maintained that the date of the filing of the very first complaint before the Ombudsman be considered i,e, 22 June, 2009, well before the filing of the civil suit by the respondent on 27 June, 2009.
8. On 30 April, 2010, a hearing before the Executive Director (Insurance) was conducted at the Commission's office at Lahore wherein the parties argued as follows:-- ' The appellant asserted that:--
(a) Earlier the GoB had invested Rs, 100 million in preference shares at 20% interest per annum. The promises under that investment were kept by Messrs Allah Hoo and the principal was repaid along with the interest. However, in the present matter, they have grossly violated the terms of the agreement.
(b) A courier receipt is on record to prove that the complaint dated 22-6-2009 had been received in the Ombudsman's office on 23-6-2009. A copy of the receipt has been provided to the Commission.
(c) A huge sum of government treasury is involved so the Commission should review the decision to protect the wastage of public money. The respondent submitted:--
(a) Section 127(1)(b) considers "the date of receipt" and not "the date of complaint" for placing the bar on Ombudsman's jurisdiction. As per record of the Ombudsman's office, the complaint was received on 29 June whereas the matter had become sub judice on 27 June, 2009.
(b) Even if the complaint dated 22 June is accepted to have been received in the Ombudsman's office on 23 June, 2009 that complaint was not a proper complaint under section 129 which requires:-- "(1) A complaint shall be made on solemn affirmation or oath in writing addressed to the Insurance Ombudsman. The complaint shall set out the full particulars of the transaction complained of and the name and address of the complaint.
(2) Prior to making a complaint the complainant shall intimate in writing to the concerned insurance company his intention of filing a complaint and if the insurance company either fails to respond, or makes a reply which is unsatisfactory to the complaint, within a period of one month, the complainant may file a complaint at any time thereafter within a further period of three months"
A number of case-laws are on record to prove that where a requirement is placed with the word "shall" the required procedure must be followed. Case-laws presented were as follows:--
(i) Mst. Riffat Yasmeen v. S. Hanif as reported in 2003 YLR 565
(ii) Gliulam Rabbani v. A. Qayyum as reported in 1990 MLD 1871
(iii) Wali Muhammad v. Zainab as reported in 1996 MLD 869
(iv) H. Mansha v. The State as reported in 2007 YLR 2933
(v) Atique-ur-Rehman v. Mst. Sadia as reported in 2010 MLD 470
(vi) DM Rahimoon v. AR Rahimoon as reported in 2009 CLC 795 ' The second complaint was received in Ombudsman's office on 7 July, 2009 whereas the matter had already become sub judice on 27 June, 2009 resulting in jurisdiction question.
(c) Government is like any other litigant in the eyes of law.
' Case-laws presented to prove the point as follows:--
(i) Ramzan Ali v. Chairman Zakat as reported in 2003 YLR 2632.
(ii) (Income-tax Appellate Tribunal Pakistan) as reported in 2008 PTD (Trib.)1942
(d) Even the premiur cheques given to the respondent by Messrs Allah Hoo were dishonoured for which an application for F.I.R. Has been lodged so the respondent is also a victim of Messrs Allah Hoo.
9. Keeping in view the arguments of the parties, the facts and documents on record, and the decision of the learned Ombudsman, the Commission has observed that:--
(a) Public money has been mishandled because, as the appellant has accepted during the hearing, the guarantee obtained from the respondent was not backed by any collateral, reinsurance arrangement, undated cheques and counter guarantee. The guarantee obtained was not a performance guarantee but a financial guarantee for which the appellant did not have the reinsurance arrangement.
(b) The point raised by, the respondent that Government is like other litigants is correct. However, non receipt of premium is not a valid justification for avoiding a liability under a contract of insurance because according to Rule 35 of the Securities and Exchange Commission G (Insurance)
Rules, 2002:-- "No insurance policy shall be liable to be avoided on the ground that the premium has not been paid."
(c) Performance guarantees do not hold conditional provisos like the one we see in the instant guarantee, which reads:-- "The said guarantee shall be secured by the Counter Guarantee of Messrs A H Holding Limited and being principal i,e, Messrs A H Holding Limited shall first satisfy the claim of GoB and the Insurance Guarantee shall not be ipso facto encashable."
' A condition of this sort in the Guarantee .Undoubtedly defeats the very purpose for which they are drawn. The appellant in his own interest should not have accepted a conditional guarantee.
(d) The courier receipt confirms that the complaint was filed on 23 June but it was not in compliance with the requirements of section 129 of the Ordinance.
(e) The second complaint filed under section 129 was on 7 July, 2009 when the matter had already become sub judice thus placing a bar on the Ombudsman's jurisdiction as given in section 127(1)
(b) of the Ordinance.
10. Accordingly, the Commission upholds the Order passed by the Insurance Ombudsman in this regard. The appeal therefore, stands dismissed.