' UMAR ATA BANDIAL, J.---This appeal is directed against the impugned order passed by Appellate Bench No,1 Securities and Exchange Commission of Pakistan under section 33 of the Securities and Exchange Commission of Pakistan Act (XLII of 1997) whereby the appellant has been directed to deposit an amount of Rs,10 million as a liquidity reserve pursuant to the requirement of section 29(2) of the Insurance Ordinance, 2000 ("Ordinance"). The only question of law raised by the learned counsel for the appellant is that the requirement of the said liquid deposit to be made with the State Bank of Pakistan under section 29(3) of the Ordinance, is meant for insurance companies formed with paid-up capital and not for mutual insurance companies that as a matter of law are incorporated without such capital and are limited by guarantee. According to section 2(xxix) of the Ordinance a mutual insurance company is defined to have no share capital as all its policy- holders are its members. He relies on that definition to claim that section 29(2)(a) ibid which enjoins the requirement of a cash deposit makes reference to paid-up capital as a criterion. The said requirement of deposit cannot apply to a mutual insurance company as that does not by definition have paid-up capital, wherefor the impugned order is illegal.
2. Learned counsel for the respondents explains that an insurance company. Must have liquid funds or assets available with it to meet claims raised by its policy-holders. He has referred to the requirement of section 36 of the Ordinance that lays down the statutory criterion of minimum solvency requirement of insurance companies engaged in non-life insurance business. These provisions are meant to exclude the event of total default by an insurer by installing in it some liquid financial capacity to discharge its obligations under claims that may be raised by its policy- holders. The statutory provision has a salutary purpose which cannot be negated by the definition relied.
3. Heard. Record perused. The point raised by the learned counsel for the appellant ignores that section 29(2)(a) specifies the required minimum amount of deposit to be the higher of Rs,10 million or 10% of the insurer's paid-up capital. The lack of paid-up capital of a mutual insurance company means that it has to deposit, Rs,10 million. The sole basis of the appellant's challenge is the meaning attributed to the expression 'mutual insurance company' in the definition section of the Ordinance. That definition cannot control the substantive provisions of the Ordinance. These provisions namely section 36 for non-life insurers and in particular section 29 for all insurers across the board impose specific qualifying financial criteria that are meant to establish their financial and business credibility. These provisions create clear and definite obligations that cannot to be avoided by resort to statutory interpretation.
4. The learned counsel for the appellants has shown a set of unaudited accounts of the appellant- company for the year, 2004*hick reflect a cash balance in the amount of Rs,7.7 million or so. He submits that the said amount is sufficient to cover claims made against the. Appellant. These accounts do not contain any entry showing the amount of claims paid by the appellant.
Accordingly, the appellant may, if so advised, move the said funds to the State Bank of Pakistan along with additional funds in order to meet the deposit required under law under section 29(3)
(ibid). As such the statutory requirement for a cash deposit by the appellant with the State Bank of Pakistan is binding and must be complied by the appellant. The present appeal has no merit and is therefore dismissed.