MUHAMMAD ALI MAZHAR, J. - This is a suit for declaration and permanent injunction with the following prayer:-
(i) Declare that the Impugned Directive dated May 25, 2009 issued by the defendant is arbitrary, illegal, having been issued without lawful authority, contrary to the principles of natural justice and of no legal effect; (ii) Permanent Injunction restraining the defendant, its agents, servants or any other person(s) acting on its behalf from taking any coercive action against the plaintiff as ' threatened in the Impugned Directive dated May 25, 2009, and/or giving effect in any manner whatsoever to the Impugned Directive;
(iii) Cost of the suit; and (iv) Any other/better/further relief that this Hon'ble Court may deem fit and appropriate in the circumstances of the present case may also be granted.
In the plaint, it is inter alia contended that the plaintiff is carrying on the business of insurance for the last many years .With a network of 30 branches and enjoying good reputation in the market.
The plaintiffs current paid up capital is Rs. " 120 million. The defendant is a regulatory Authority, established under the Securities and Exchange Commission of Pakistan Act, 1997 (XLU of 1997). The plaintiff was required to increase the minimum paid up capital to Rs. 120 million for the. 2007 and Rs. 160 million for the year 2008 vide notification issued by the Ministry of Commerce. The plaintiff had increased the minimum paid up capital to Rs. 120 million as required, however, further increase of minimum paid up capital to Rs. 160 million was contested by the plaintiff and it was explained to the defendant that on account of market conditions prevailing in the country and more particularly the closure of the Stock Exchanges, it was not possible for the minimum paid up capital to be increased to Rs. .160 million and such requirement for increase of minimum paid up capital was extremely harsh and unjustified. The plaintiff addressed a letter on October 31, 2008 to the defendant stating that the requirement to increase the minimum paid up capital to Rs. 160 million was completely unjustified and requested the Defendant to extend the requirement of minimum paid up capital by one year. No response was given by the defendant to the aforesaid letter. A follow up dated November 25, 2008 was also sent in which the defendant's attention was brought to the news-item appeared on 25.11.2008 in the. Newspaper 'Business Recorder' whereby the defendant had extended the time for compliance of the minimum equity requirement for Non Banking Finance Companies. No response to the plaintiffs letter was given by the defendant and it was understood that the time required to increase the minimum paid up capital was extended.
Suddenly, by a letter dated May 25, 2009, the defendant issued a directive under Section 63(1) of the Insurance Ordinance, 2000 to cease entering into new contracts of insurance. The impugned Directive required the plaintiffs to cease its business within one month from the date of the direction, unless the requirements as mentioned in the impugned directive are complied with. The plaintiff has been condemned unheard and the impugned directive is violative of the principles of natural justice and any action in furtherance of the impugned directive shall result in closure of the entire business of the plaintiff,, causing not only loss of reputation and goodwill of the plaintiff but also huge loss of revenue to the government. The impugned directive is clearly violative of the fundamental rights of freedom of trade, business and profession guaranteed under Article 18 of the Constitution as well as it negates the very functions of the defendant for which it has been established. The proper course for the defendant before taking such a drastic step was to issue a Show-Cause notice to the plaintiff whereby an opportunity would have been afforded to the plaintiff to explain and clarify his position on the baseless allegations made by the defendant but the defendant straightaway issued the impugned directive having effect of closure of entire business of the plaintiff which action is ex facie mala fide and amounts to gross negligence on the part of the Defendant's functionaries.
The defendant filed the written statement in which it- was inter alia contended that the injunctive relief sought by the plaintiff* if issued, will amount to interference in the performance of statutory duties by the Defendant. This would also result in a complete breakdown of the functions of control and regulation of the corporate sector. The present suit is based on directives dated May 25, 2009, which were issued by the defendant in accordance with Section 63(1) of the Insurance Ordinance, 2000. The suit is also barred by Section 42 and Section 56 of the Specific Relief Act, 1877. The Federal Government in exercise of its. Powers under Section 28(2)(b) enhanced the minimum paid up capital for insurers carrying on non-life insurance business. The notification issued by the Ministry of Commerce was issued in exercise of power conferred by Section 28(2) of the Insurance Ordinance and the aforesaid enhancement in minimum paid up capital was also communicated by the Defendant to all concerned vide Circular No. 3 of 2007. The plaintiff is therefore, aware of its obligation to enhance the paid up capital since early 2007. The minimum paid up capital requirements are fixed by the Federal Government and cannot be changed or waived by the defendant. No indication for extension in time was communicated to the plaintiff, which in any case is not within the powers of the defendant. If the plaintiff is allowed to operate without complying with the mandatory statutory requirements, such action will adversely affect the public interest and will also amount to discriminatory treatment against other insurance companies. Although, it was the plaintiffs obligation to meet' the statutory requirements, however, the defendant one again reminded the plaintiff to meet the statutory requirements. The plaintiff has filed this suit with ulterior motives and to avoid the consequences of its miserable failure in meeting with statutory requirements of the Insurance Ordinance, directions of the Federal Government and the Defendant issued under the Insurance Ordinance.
In the injunction application, the plaintiff has prayed that the defendant be restrained from taking any coercive action against the plaintiff as threatened in the directive dated 25.5.2009. The defendant filed the counter-affidavit in' which, almost, the same defence was taken as narrated in the written statement.
While I was hearing injunction application, both the learned counsels jointly made a request that the suit is based on documentary evidence, therefore, let this matter be treated as short cause and be disposed of on the basis of arguments with the aid and assistance of documentary evidence available on record. On the joint request, I treat this matter short cause and will dispose off the whole suit on the basis of documentary evidence and provisions of law. Under Order 14, Rule 2, C.P.C., two types of issues are provided, one is the issue of law and another is issue of facts. The bone of contention between the parties can be easily recapitulated and summarized in the following issue of law which goes to the roots of the case:- Whether the defendant was required to give the plaintiff an opportunity to be heard before issuing directives to the plaintiff under sub-section (1) of Section 63 of the Insurance Ordinance, 2000?
Both the learned counsel addressed their arguments on the" aforesaid issue of law. Mr. Amel Kansi, learned counsel for the plaintiff argued that the impugned, directives were issued to the Managing Director of the plaintiff in contravention and violation of Section 63 of the Insurance Ordinance, 2000. He further argued that no directives could be issued without giving the insurer an opportunity to be heard. He referred to clause (d) of sub-section (2) of Section 63 of Insurance Ordinance, 2000 which provides that the commission shall issue a direction to cease entering into new contracts of insurance if the insurer has failed to comply with a directive issued under the Ordinance concerning and contravention of the Ordinance, or the rules made thereunder, within the time specified in the Ordinance, or if hot specified, within the time specified in the directives or three months, whichever is longer and the directives had stated that type failure to comply would lead to directions to cease entering into new contracts of insurance. Provided, that a direction shall not be issued under clause (d) without giving the insurer an opportunity to be heard. He further referred to sub-section (3) which provides that a direction to cease entering into new contracts of insurance shall have effect one month from the date of direction unless a later date is specified in the direction and sub-section (4), provides that a direction of cease entering into new contracts of insurance shall be accompanied by' a statement of the reasons for the directions. The crux of the arguments is that the directive issued on 25.5.2009 are illegal and against the provisions of Section 63 of the Insurance Ordinance, 2000 as neither any show-cause notice was issued nor the plaintiff was provided any opportunity of hearing but the defendant directly issued the directives which is not only against the relevant provisions of law as referred to above but also against the principle of natural justice. The learned counsel relied upon the following judgments:-- 1.1971 SCMR 681 [Collector Sahiwal & 2 others v. Muhammad Akhtar. In this case, the Hon'ble Supreme Court has held that an order affecting the rights of a party cannot be passed without an opportunity of hearing and where the giving of a notice is necessary condition for the proper exercise of jurisdiction then the failure to comply with this requirement renders the order void and the entire proceedings which follow also become illegal. The principle, so far es this country is concerned, is accordingly well-settled that where notice required to be given by the statute is mandatory notice, then the failure to comply with such mandatory requirement of the statute would render the act void ab-initio as being an act performed and disregard of the provisions of the statutes. Furthermore, any further action taken on the basis of such void order would also be vitiated and the defect at the initial stage would be incurable by hearing at subsequent stage.
2. PLD 1999 Supreme Court 1126 (New Jubilee Insurance Company Ltd. v. National Bank of Pakistan).
This matter also pertains to Insurance Act 1938 in which the Hon'ble Supreme Court considered the norms of justice and held that one of the cardinal principles of such basic norms is that one cannot be a judge of his own cause. The breach of said cardinal principle of jurisprudence will in fact be violative of the rights of access to justice to all which is a well- recognized invaluable right enshrined in Article 4 of the Constitution. This right is equally founded in the doctrine of due process of law. The right of access to justice includes the right to be treated according to law, the right to have fair and proper trial and the right to have an impartial Court or Tribunal. The term "due process law" can be summarized as (1) a person shall have notice of proceedings which affected his right, (2) he shall be given reasonable opportunity to defend, (3) that the Tribunal or Court before which his rights are adjudicated if so stated as to give reasonable assurance of its honesty 'and impartiality and (4) that it is a Court of competent jurisdiction. These are the basic requirements of doctrine of "due process of law" which is enshrined, inter alia, In Article 4 of the Constitution, It is intrinsically linked with the right to have access to justice, which is a fundamental right. This right, inter alia, includes the' right to have a fair and proper trial and trial to have an impartial Court or Tribunal, A person cannot be said to have been given a fair and proper trial unless he is provided a reasonable opportunity to defend the allegations made against him.
3. 2000 MLD .145 (Miss Rukhsana Soomro v. Board of Intermediate & Secondary Education, Larkana). In this judgment, the learned division bench of this Court has held that there is a clear distinction t between two situations, one where the right of hearing is statutory and the other where such right is claimed on the principle of natural justice, In the former case, statutory right was almost absolute while the right claimed as principle of natural justice was not so and exclusion or such right could be expressed or implied. Reverting to the facts of the case, it is clear that there was no statutory right Subsisting in favour of the petitioners but they have attempted to set up such claim on the principle of natural justice.
In rebuttal, learned counsel for the defendant Mr. Ijaz Ahmed, advocate argued that the directives were issued in sub-section (1) of Section 63 of Insurance Ordnance, 2000 and he drawn a distinction that sub-section (1) is not regulated by sub-section (2), therefore, directives were rightly issued without any Show-Cause notice or affording an opportunity of hearing under the proviso attached to clause (d) of sub-section (2) of the Insurance Ordinance, 200Q. He further argued that clause (d) of Sub-section (2) has no nexus with the directives issued, under sub-section (1) of Section 63. He also referred to clause (a) of Section ,11 of the Insurance Ordinance, 2000 which imposes an obligation upon the insurers registered under the 'Ordinance that they shall at all times ensure the provisions of this Ordinance relating to minimum paid up capital requirements a|, complied with and since the plaintiff failed fo comply with the requirements envisaged under Section 1 % of the Insurance Ordinance, 2000, therefore, the directives were issued-on 25.5.2009 in accordance with law and the direction to cease entering into new contracts of insurance was accompanied by a statement of the reasons for the direction as envisaged under sub-section (4) of Section 63 of the Insurance Ordinance; 2000. Learned counsel further argued that sub-section
(1) and sub-section (2) of Section 63 of the Insurance Ordinance, 2000 have different premise. The directives referred to in sub-section (1) are independent and cannot be linked or read in conjunction with sub-section (2). He laid much emphasis that sub-section (2) may apply for the other directions as mentioned in Sections 60, 61 and 64 of the Insurance Ordinance, 2000 and for issuing the directives in question, there was no need to issue any show- cause notice or affording an opportunity of, being heard. Learned counsel argued that it is the prerogative of the Federal Government to enhance paid up capital for non-life insurance business under clause (b) of sub- section (2) of Section 28. The notification issued by the Ministry of Commerce in exercise of powers conferred under subsection (2) of Section 28 was fully communicated by the defendant to all concern and the plaintiff is also aware of its obligation. The requirement of minimum paid up capital neither can be changed nor waived by the defendant and if the plaintiff is allowed to run the business without complying with the requirement of law, the public-at-large will be affected.
He concluded that the suit is not maintainable and liable to be dismissed with special cost, In support of his arguments, the learned counsel for the defendant relied upon the following!
Judgments:-
1. 1971 SCMR 681 (Collector Shalwar v. Muhammad Akhtar). This is the same judgment, which the learned counsel for the plaintiff has also relied upon but the learned counsel for the defendant .Has emphasized on the observation of Hon'ble 'Supreme Court that if the statutory provisions of notice fee a mandatory nature then an order without notice would be wholly void but if there be no such provision or if the provision be merely of directive nature, then wherever this principle of natural justice is alleged, the Court may call upon the party to prove prejudice before it set aside the order, In fact the Hon'ble Supreme Court has quoted the above portion from the judgment reported in PLD 1959 Karachi 669 (Muhammad Ishaq v. Dr. Saiduddin Swaleh), but in the nutshell, the Hon'ble Supreme Court held that there can be no dispute about the mandatory nature of the notice which was required to be given to a person sought to be removed from the service and in this case, it was further held that notice was given to employee but the case was taken up and decided v before the period fixed by the notice to show-cause had expired. The respondent was therefore, clearly denied the opportunity of showing cause. If this condition precedent was not fulfilled, the action was void ab-initio and therefore, not only the initial Order but every Subsequent order founded upon such void order also become void.
2. PLD 2009 Karachi 327 (Qurban Ali Abbasi v. Province of Sindh), In this judgment, the learned division bench of this Court relying upon an earlier decision in case of Rukhsana Soomro v. Board of Intermediate & Secondary Education (2000 MLD page 145) . Has drawn the distinction between the cases which the right of hearing is statutory and the cases where the right is based on principle of natural justice and ^finally concluded, that in cases where the right was statutory it was almost absolute whilst in the cases of natural justice it can be excluded expressly or by implication.
3. 2009 CLC 1473 (Humayun Muhammad Khan v. Province of Sindh), In this judgment, the learned division bench of this Court has held that there is a clear distinction between the two situations, one where the right is claimed on the basis of principle of natural justice, In the formal case, the right is absolute and its violation makes the order illegal and not sustainable in the law while in the later case, it is not so and exclusion of such right could be expressed or implied and whenever the violation of principle of natural justice is alleged, the 'Court may call upon the party to establish prejudice caused it before striking down the order.
According -to. My understanding, the entire controversy between the parties is roaming around Section 63 of the Insurance Ordinance, 2000. For the convenience and Ready reference, Section 63 of the Insurance Ordinance, 2000 is reproduced as under:-
63. Power of Commission to issue direction to cease entering into new contracts of insurance.-
(T) The Commission may issue a direction to cease entering into new contracts of insurance if it believes on reasonable grounds that an insurer registered under this Ordinance has failed, or is about to fail, to comply with the conditions of registration set out in Section 11.
(2) The Commission shall issue a direction to cease entering into new contracts to insurance if:-
(a) a petition is presented for the winding UP of the insurer and has not been withdrawn or vacated within a period of sixty days;
(b) the whole of the business of an insurer has been transferred to any person;
(c) the Tribunal has made an order that a direction be given to that insurer to cease entering into new contracts of insurance; or
(d) the insurer has failed to comply with a directive issued under this Ordinance concerning a contravention of the Ordinance or, the rules made there under, within the time specified in the Ordinance or, if not so specified, within the time specified in the directive or three months whichever is longer, and the directive had stated that the failure to comply would lead to a direction to cease entering into new contracts of insurance: Provided that a direction shall not be issued under clause (d) without giving the insurer an opportunity to be heard.
(3) A direction to cease entering into new contracts of insurance shall have effect one month from the date of the direction unless a later date is specified in the direction.
(4) A direction to cease entering into new contracts of insurance shall be accompanied by a statement of the reasons for the direction.
(5) A direction to cease entering into new contracts to insurance shall only be revoked if the reasons for the directions as given in the statement required to be given by the preceding sub- section shall have ceased to exist.
(6) An insurer shall not be in contravention Of a direction to cease entering into new contracts of insurance by reason only that the insurer continues to carry out its obligations under contracts of insurance entered into before the direction came into effect.
Though, under sub-section (1) of Section 63, the commission may issue a direction to cease entering into new contract of insurance if it believes on reasonable ground that an insurer registered under this Ordinance has failed, or is about to fail to comply with the condition of registration set out in Section 11 but simultaneously, sub-section (2) of Section 63 provides the conditions in which the commission may issue directions. Clause .(d) of sub-section (2) clearly stipulates reasons for issuing directives, if the insurer has failed to comply with director issued under the Ordinance concerning a contravention of the Ordinance or, the 'rules made thereunder, within the time specified in the Ordinance or, if not so specified, within the time specified in the directives or three months whichever is longer and the directives had stated that failure to comply would lead to a direction to cease entering new contracts of insurance. The proviso attached to this clause clearly provides that the direction shall not be issued under clause (d) without giving the insurer an opportunity to be heard. So in my view subsection (1) of Section 63 cannot be read in isolation but it has to be read alongwith sub-section (2), particularly clause (d) in which the legislature has provided a procedure and mechanism to deal with the situation when the commission deems it fit and proper to issue directives and noncompliance of the directives may result farther repercussions which may include the direction to cease entering into ;re contracts of insurance but this can only be done after giving insurer an opportunity to be here. In the impugned directives dated 25.5.2009, the commission in paragraphs to 7 provided the reasons as required to be assigned under sub-section (4) of Section 63, but in paragraph 8, without complying with the requirements of clause (d) of sub-section (2) of Section 63 of the Insurance Ordinance, 2000, The Executive Director, Insurance Division, Securities I Exchange Commission of Pakistan issued directives to the plaintiff to cease entering into new contract of insurance to the reasons set forth in the earlier part of directives, It is no where mentioned in the impugned directives that the plaint was ever issued any show-cause notice or any opportunity of hearing, was afforded prior issuing the directives. Th judgment cited by learned counsel for the plaintiff on and of age golden principle of natural justice are quite the preset circumstances of the case. Under the Insurance Ordinance itself, before issuing any directives, an opportunity of herein was to be afforded to the plaintiff which has not been dope this case, In the judgment reported in 1971 SCMR 681, the Hon'ble Supreme Court has already held that an order affecting the rights of the party cannot be passed without an opportunity of hearing and failure to comply with this requirement renders the order void and the entire proceeding which follow also become illegal. Where, the notice required to be given by the statute is mandatory, then the failure to comply with the said mandatory requirement of the statute would render the act void ab-anitio. In another judgment reported in PLD 1999 Supreme Court 1126, the Hon'ble Supreme Court has also held that the right of access to justice includes the rights to be treated according to law. A person cannot be said to have been given a fair and proper trial unless he is provided a reasonable opportunity to defend the allegations made against him. In another judgment reported in 2000 MLD 145, the learned division bench of this Count has held that there is a clear distinction between the two situations, one where the right of hearing is statutory and the other where such right is claimed on the principle of natural justice, In the former case, statutory right was almost absolute where, the right claimed on the principle of natural justice was not so and exclusion of such right could be expressed or implied. The learned counsel for the defendant has relied upon the case-law out of which, one case-law in the same as relied upon by the learned counsel or the plaintiff. While in other case-law also the same distinction has been drawn, one is the statutory right of hearing while the other bright of hearing is claimed on the basis of principle of natural justice, In my view the plaintiff is not claiming the right of audience on the principle of natural justice but it is claiming the right of hearing as statutory right as provided under the proviso attached to clause (d) of subsection (2) of Section 63 of the Insurance Ordinance, 2000.
Bare bones of the controversy lead me to a conclusion that sub-section (1) of Section 63 of the Insurance Ordinance, 2000 cannot be read or applied in isolation but it will be read in conjunction with sub-section (2) , which provides that a Commission may issue directions to cease entering into new contracts on happening of some -events or pre-conditions, which are mentioned in sub- clause (a) to clause (d) in sub-section (2) and the proviso attached to clause (d) makes it mandatory that directions shall not be issued under clause (d) without giving the insurer an opportunity to be heard. Since the plaintiff was allegedly found guilty for non-compliance of the directives issued under Section 11, therefore, it will deem to have violated or failed to comply with the said directives under this Ordinance, therefore, the imposition of directives shall come within the purview and ambit of clause (d), in which prior issuing directions, a right of hearing should have been afforded which has not been done in this case and the directives were issued without affording any opportunity of hearing to the plaintiff.
Keeping in view the aforesaid circumstances, in all conscience, I feel no hesitation to hold that directives were issued without complying with the requirement of proviso, therefore, the impugned directives dated 25.05.2009 is bad in law and declared to have been issued without any lawful authority and has no legal effect. The issue of law is answered m affirmative. However, it is clarified that the defendant is a regulatory authority and this judgment will be without prejudice to the right of defendant to initiate action and issue directives to the plaintiff for non-compliance, if any, after providing an opportunity of hearing to the plaintiff as envisaged under the proviso attached with clause (d) of sub-section (2) of Section 63 of the Insurance Ordinance, 2000.
Suit decreed in the above terms. The listed application has become infructuous.