AHMAD NADEEM ARSHAD, J. Through this petition filed under Article 199 of the Constitution of Islamic Republic of Pakistan, 1973 the petitioner calls in question the legality and validity of order dated 30.07.2008 passed by respondent No.2 whereby on the complaint of respondent No.3 he directed the petitioner to encash the performance bonds within thirty days and order dated 20.07.2009 passed by respondent No.1, whereby appeal filed by the petitioner under Section 130(2) of the Insurance Ordinance, 2000 against said order was dismissed.
2. Facts in brevity are that respondent No.3 filed a complaint against the petitioner before respondent No.2 (Federal Insurance Ombudsman) with the contentions that complainant (Bahawalpur Rural Development Project) is a Foreign Assisted Project which is financed by Asian Development Bank and Government of the Punjab for carrying out certain development projects including constructions of roads in the project area and complainant (respondent No.3) entered into agreements with various contractors for construction of roads and in this regard an agreement was made with M/S Consolidated Construction Company in respect of a contract for construction of road project No.11649 and another agreement was made with M/S Bawaqar Construction Company , in respect of construction of road project No.11654; that the petitioner insurance company (M/S Pakistan General Insurance Company) had executed irrevocable performance bonds dated 07.04.2005 and 14.04.2005 in respect of the said works, as guarantor for a total sum of Rs.8,17,000/- and Rs.6,02,581/- respectively and undertaken to pay upon the first written demand within limit of the sum specific in each bond; that since the contractors failed to execute the work in time, as such the contracts were terminated after serving due notice upon them and asked the petitioner to encash the performance bonds but petitio ner failed to encash which constrained respondent No.3/ complainant to file the complaint for redressal of his grievance before respondent No.2. Respondent No.2 after taking its reply/report and para-wise comments and providing opportunity of hearing decided the complaint vide order dated 30.07.2008 and declared that petitioner is liable to encash the performance bonds within 30-days from the date of receipt of this order and shall also pay the liquidated damages from the date of first demand till the amount of the performance bond is paid in full. Feeling aggrieved, petitioner preferred an appeal u/s 130 of the Insurance Ordinance, 2000 (hereinafter referred as "Ordinance" ) which was dismissed by respondent No.1 (Securities and Exchange Commission of Pakistan) vide order dated 30.07.2009. Being dissatisfied, petitioner challenged both orders of respondents No.1 and 2 through the instant writ petition.
3. Learned counsel for the petitioner maintains that under Section 122 of the Ordinance the Insurance Tribunal has the exclusive jurisdiction to adjudicate upon all matters relating to insurance claims and Section 124 of the Ordinance provides a remedy of appeal against order of the Insurance Tribun al; that the Federal Insurance Ombudsman (hereinafter referred as "Ombudsman" ) has been empowered to inquire and investigate into the allegations only with regard to mal practice on the part of insurance company and that powers are exercised by the Ombudsman u/s 127 of the Ordinance; that the respondent No.2 has no jurisdiction to examine and scrutinize the claim of respondent No.3 in the form of complaint and initiate any proceedings on the basis of same; that both impugned orders were passed without considering the facts and circumstances of the case in its true prospective and the law applicable thereto, therefore , both orders are against facts and law, result of mis-reading and non- reading of record and liable to be set-aside and while relying upon "M/s Capital Insurance Co. Ltd. Vs. Securities and Exchange Commission of Pakistan and 4 other" (2013 CLD 1075 ) prayed for acceptance of the writ petition and setting aside of the impugned orders passed by respondents No.1 and 2.
4. On the other hand, learned counsel for respondent No.1 submits that writ petition is not competent as statutory remedy of appeal under Section 33 of the Securities and Exchange Commission of Pakistan Act, 1997 (hereinafter referred as "Act, 1997" ) is available to the petitioner; that the performance bonds executed by the petitioner were unconditional, irrevocable, independent and autonomous in nature, therefore, the credibility cannot be put in question; that performance guarantee stands on the footing similar to an irrevocable letter of credit of Bank and must be honoured according to its terms irrespective of the fact whether the contractor is in default or not and prayed for dismissal of the writ petition.
5. We have heard the learned counsel for the parties at full length and perused the record available on the file and case law cited at bar by the petitioner .
6. The execution of performance bonds has been admitted by the petitioner . The said guarantee is admittedly unconditional. The liability of the petitioner (Insurance Company/Guarantor s) to encash the guarantee unconditionally on first written demand, without cavil and arguments, without needing to prove or to show grounds or reasons for demand, for the sum spec ified therein, which is evident from the relevant paragraph in each bond, as under:- "M/s Consolidated Construction Company: "NOW THEREFORE we The Pakistan General Insurance Company Ltd, Gardee Trust Building, Thornton Road, Lahore hereby affirm that we are the Guarantor and responsible to you, on behalf the Contractor , upto a total of Rs.817,000/- (Rupees Eight Hundred Seventeen Thousand only) and we undertaken to pay you upon your first written demand and without cavil or argument, any sum or sums within the limits of Rs.2,321,800/- (Rupees Two Million three Hundred Twenty One Thousand Eight Hundred only) as aforesaid without your needing to prove or to show grounds or reasons for your demand for the sum specified therein."
M/s BA WAQAR Construction Company: "NOW THEREFORE, we The Pakistan General Insurance Company Limited, Gardee Trust Building, Thoronton Road, Lahore hereby affirm that we are the Guarantor and responsible to you as well as the Contractor , upto a total of Rs.602,581/- (Rupees Six Lac Two Thousand Five Hundred Eighty One only) and we undertake to pay you upon your first written demand without cavil or argument, any sum or sums with the limit of Rs.602,581/- (Rupees Six Lac Two Thousand Five Hundred Eighty One only) as aforesaid without your needing to prove or to show grounds or reasons for your demand for the sum specified therein, we hereby waive the necessity of your demanding the said debit from the Contractor before presenting us with the demand."
7. The only question for determination is whether the Ombudsman had the jurisdiction to deal with the matter , whether the matter of encashment of "Performance Bond" was not governed under the mal-administration on the encashment of "performance guarantee". Main thrust of the learned counsel for the petitioner is that the matter in hand was not covered under mal-adminis tration and was to be dealt with by the Tribunal and not by the Federal Insurance Ombudsman.
8. The question of jurisdiction was not raised specifically before the respondent No.2 at the time of filing of reply/report and para-wise comments but as this is a pure question of law and almost it is a fundamental question, therefore, same can be raised at any time and must be decided. There is no cavil with the proposition that no authority should exercise any jurisdiction in any manner brought before it until and unless such jurisdiction had been conferred upon it by the Constitution itself or under any law and where there is abuse of process and without lawful authority , the High Court has jurisdiction to set-aside the same. For reference "S.M. WASEEM ASHRAF versus FEDERA TION OF PAKIST AN through Secretary , M/O Housing and Works, Islamabad and others"
(2013 SCMR 338 ).
9. The complaint was filed before the Federal Insurance Ombudsman who was appointed u/s 125 of the Ordinance, 2000 by the Federal Government and the terms and conditions of Ombudsman are provided in Section 126 of the Ordinance. From perusal of the Ordinance it appears that Section 127 of the Ordinance provides the jurisdiction, function and powers of the Federal Insurance Ombudsman. For further discussion it is necessary to reproduce the Section 127 of the Ordinance, 2000, which is as under:- "127. Jurisdiction, functions and powers of Insurance Ombudsman.- (1) The Insurance Ombudsman may on a complaint by any aggrieved person undertake any investigation into any allegation of mal-administration on the part of any insurance company:- Provided that the Insurance Ombudsman shall not have any jurisdiction to investigate or inquire into any matters which -
(a) are within the jurisdiction of the Office of the Wafaqi Mohtasib under the Establishment of the Office of Wafaqi Mohtasib (Ombudsman) Order , 1983 (P .O. 1 of 1983); or
(b) are sub-judice before a court of competent jurisdiction or tribunal or board in Pakistan on the date of the receipt of a complaint, reference or motion by him.
(2) For the purposes of this section "mal-administration" includes -
(a) a decision, process, recommendation, act of omission or commission which:
(i) is contrary to law, rules or regulations or is a departure from established practice or procedure, unless it is bona fide and for valid reasons; or
(ii) is perverse, arbitrary or unreasonable, unjust, biased, oppressive, or discriminatory; or
(iii) is based on irrelevant grounds; or
(iv) involves the exercise of powers, or the failure or refusal to do so, for corrupt or improper motives, such as, bribery , jobbery , favoritism, nepotism and administrative excesses; and
(b) corruption, nepotism, neglect, inattention, inordinate delay , incompetence, inefficiency and ineptitude in the administration or discharge of duties and responsibilities.
(3) Notwithstanding anything contained in sub-section (1), the Insurance Ombudsman shall not accept for investigation any complaint which is brought by or on behalf of an insurance company and which relates to a contract of reinsurance.
(4) Notwithstanding anything contained in sub-section (1), the Insurance Ombudsman shall not accept for investigation any complaint by or on behalf of an employee of an insurance company concerning any matters relating to the insurance company in respect of any personal grievance relating to his service therein.
(5) For carrying out the objectives of this Ordinance and, in particular for ascertaining the root causes of corrupt practices and injustice, the Insurance Ombudsman may arrange for studies to be made or research to be conducted and may recommend appropriate steps for their eradication."
10. From perusal of the above referred Section, it appears that the Ombudsman on a complaint by an aggrieved person has the authority to undertake any investigation into any allegation of mal administration on the part of Insurance Company and now it has to be seen whether the dispute between the parties is of an insurance claim and whether the non-fulfillment of petitioner 's obligation under the performance bond is a mal administration.
Admittedly the matter is not of insurance claim and complaint lodged by respondent No.3 was non-payment of the unconditional and irrevocable performance bonds executed by the petitioner . The petitioner repudiated the claim of the performance bonds without any lawfu l excuse. The performance guarantee, letter of credit and Bank guarantee are autonomous and independent contracts and the same are irrevocable in character . The petitioner has not denied the execution of the irrevocable and independent contracts of performance bonds. There is no dispute that the contractors had not completed their work/job within the stipulated period, even extended period more than actual/agreed time. According to the performance bonds and establish law in this regard, the petitioner was not righteous to raise any query about the terms and conditions or obligations in between the parties.
11. Admittedly , in case of mal-administrat ion on the part of Insurance Company , the Ombudsman has jurisdiction u/s 127 (1) to investigate and inquire into the matter whereas u/s 122(a), a Tribuna l has jurisdiction in respect of a claim filed by a policy holder against an Insurance Company in respect of a matter arising out of policy of insurance. Section 122 of the Ordinance reads as under:- "122. Powers of T ribunal.- (1) A Tribunal shall:
(a) in the exercise of its civil jurisdiction, have in respect of a claim filed by a policy holder against an insurance company in respect of, or arising out of a policy of insurance, all the powers vested in a civil Court under the Code of Civil Procedure, 1908 (Act V of 1908);
(b) in the exercise of its criminal jurisdict ion, try the offences punishable under this Ordinance and shall, for this purpose, have the same powers as are vested in the Court of Sessions under the Code of Criminal Procedure, 1898 (Act V of 1898);
(c) exercise and perform such other powers and functions as are, or may be, conferred upon, or assigned to it, by or under this Ordinance; and
(d) in all matters with respect to which procedure has not been provided for in this Ordinance, follow the procedure laid down in the Code of Civil Procedure, 1908 (Act V of 1908) or the Code of Crim inal Procedure, 1898 (Act V of 1898) as the case may be.
(2) The jurisdiction of a Tribunal shall not extend to appeals to which section 33 and section 34 of the SECP Act apply .
(3) No Court other than a Tribunal shall have or exercise any jurisdiction with respect to any matter to which the jurisdiction of a Tribunal extends under this Ordinance, including a decision as to the territorial limits and the execution of a decree, order or judgment passed by a T ribunal: Provided that for the purposes of this section a Small Claims Settlement Committee established under section 117 shall not be deemed to be a Court."
12. Now it has to be seen whether the controversy contained in the lis, which has been decided by the Ombudsman does fall u/s 127(1) or the same comes under the ambit of Section 122(a) of the Ordinance where a Tribunal has the jurisdiction.
13. A plain reading of provisions reveals that under Section122 of the Ordinance, Insurance Tribunal is empowered to hear claims filed by a policy holder against an Insurance Company in respect of or arising out of a policy of insurance, whereas u/s 127 of Ordinan ce, the Ombudsman is competent to decide matters agitated through complaints of any aggrieved person on any allegation of mal administration on the part of any Insurance Company .
Sub-section (2) of Section 127 of the Ordinance elaborates the meaning of mal administration to include any decision, process, recommendation, act of omission or commission which is contrary to law, rules or regulations; or is of a departure from established practice or procedure; or is perverse, arbitrary or unreasonable, or unjust, biased, aggressive, or discriminatory . As can be seen, to approach a Tribunal under Section 122 of the Ordinance the applicant has to be a policy holder having a claim against the Insurance Company , whereas before the Ombudsman any aggrieved person can make a complaint alleging an arbitrary , unreasonable or unjust decision of the Insurance Company which falls within the meaning of mal administration.
14. The case law referred by the learned counsel for the petitioner is not relevant to the facts and circumstances of the case. The Hon'ble Division Bench of this Court while defining the "Insurance" and "contract of guarantee" observed that "contract of insurance" and "contract of guarantee" are dif ferent contracts by observing as under:- "The definition of "Insurance" shows that it includes "entering into" "Carrying out policies or contract" against the payment of premium Insurance Company promise to make payment to insured person of their nominee, in case of happening of any agreed, event, specified in the contract, whereas in contract of guarantee the beneficiary is third party , meaning thereby the Insurance Policy or contract are two different subjects, the Insurance company can enter into a contract of Insurance or some other contract and the consideration is the premium, whereas in a contract of guarantee or performance bond the purchaser to pay commission and that commission does not cover the entire amount of contract. In case of encashment of guarantee, the purchaser is bound to pay the amount of guarantee to the guarantor , but in the case of Insurance Policy it is not, in case of death of insured the Insurance Company is bound to pay the insured amount irrespective of the payment of only one or two installments. In case the insured paid the entire premium and the Insurance Policy is matured, the Insurance Company is bound to pay the insured amount to the insured. In a contract of insurance against different type of loss, the Insurance Company is bound to pay the insured amount without payment of any further premium. In the contract of guarantee, the purchaser of the guarantee is not the beneficiary , and in case of payment of guara ntee amount the purchaser has to reimburse the Insurance Company , hence the contract of Insurance and contract of guarantee are different contracts."
It was further observed that contract of guarantee was covered under the definition of "or contract" in the following manner:- "The contract subject matter of the present petition is not a contract of Insura nce, but is covered under the definition of "or contract". The contract of performance bond/guarantee is an independent contract which the Insurance Company entered into with the respondent No.4 for a specific act."
While answering to the question, whether non-payment of guarantee falls within the purview of mal-administration or not held that element of dishonesty is necessary to prove mal-administration and where the omission is under some bona fide act it will not fall within the definition of mal-administration in the following words:- "The question arose whether the petition er's act refusal to honour the respondent No.4's claim is an act of mal administration or not, the petitioner's contention is that claim was not received within 15 days of the expiry of the period of guarantee and the respondents Nos.4 to 5 contract was not terminated. The argument of learned counsel for respondent No.4 is that respondent No.4's case falls under section 127(2)(i) as the words used are "act of omission". The dictionary meaning of "omission" are a failure to do something - a neglect of duty - something that is left out, under , and if we read the dictionary meaning of word mal administration, element of dishonesty is necessary , so where the omission is under some bona fide act it will not fall within the definition of mal administration."
While concluding held that the claim lodged period under the guarantee was within 15-days after expiry and claim was lodged after the expiry period and the dispute whether claim was lodged by the beneficiary is within time or not required recording of evidence and the Ombudsman is not a court who can call evidence and held that Ombudsman has wrongly assumed the jurisdiction in the following manner:- "Admittedly the performance bond/guarantee was valid up to 30-11-2005 and claim lodgment period under the said guarantee was within 15 days after expiry . The respondent No.4 allegedly lodged its claim on 14-12-2005 which allegedly received in the office of petitioner on 15-12-2005. The respondent No.4 filed the complainant on 27-5- 2008. The petitioner raised the objection that till July, 2006, no claim was received to petitioner , the dispute is thus whether claim lodged by the beneficiary is within time or not required recording of evidence and the Ombudsman is not a Court who can record evidence, hence, the argument of learned counsel has no force.
The other aspect of the case is that preamble of Ordinance 2000 will show that it regulates the business of Insurance Industry to ensure the protection of interest of policy holders and for matter connected therewith and incidental thereto. Thus the jurisdiction of Insurance Ombudsman is restricted to the Insurance Business only. The dispute between the parties is factual which could only be resolved after recording the evidence, hence, the respondent No.2 wrongly assumed the jurisdiction on the respondent No.4 complaint."
Whereas in the present case all the facts pleaded in the complaint are undisputed and the petitioner did not raise any objection which required further inquiry. The act of the petitioner with regard to non-performance of bonds is not an act of bona fide and certainly element of dishonesty is involved.
15. It will be imperative to go through the definition of mal- administration. In Blacks' Law Dictionary which is as under:- "Mal [Law French "bad; wrong; against"] Bad; wrong;, In Law French, mal as a separable word, equivalent to the Latin Male ("badly"). In its modern uses, mal is a prefix in terms such as maladministration and malpractice.
Mal-administration . Poor management or regulation, esp. in an official capacity .--Also termed misadministration.
Maladministration means poor management or regulation and regulation means rule, bylaw , directive and guideline. So in plain words, it can be defined as departure from bylaw or rule in official capacity .
Mal-administration . Inefficient or dishonest administration; mismanagement.
Maladministration Definition & Meaning- Merriam-W ebster The meaning of MALADMINISTRA TION is corrupt or incompetent administration (as of a public office).
Maladministration definition and meaning- Collins Online....
Maladministration is the act or process of running a system or organization incorrectly .
Maladministration Definition & Meaning/Dictionary .com. bad, inefficient, or dishonest management of the affairs of an organization, such as a business or institution."
The case of respondent No.3 squarely falls within ambit of mal-administration as the petitioner without any justification denied to encash the performance bonds.
16. In the present case petitioner never took a plea in its reply/report and para-wise comments that matter required further investigation or recording of evidence. The stance taken by the petitioner in its reply/para-wise comments was that the construction company has approached the court and got stay order and the party was also negotiating for settlement; that with reference to M/S Bawaqar Construction Company , it was stated that the validity of contract and performance bonds were extended up till 30.06.2007 and have also been cautioned by the petitioner to complete the work by the extended date. It is matter of fact that the contractor desp ite having been granted time by extending the period of contract failed to complete the work assigned even during extended period. The suits instituted by the contractors were dismissed before lodging the complaint. It is evident from the perusal of bonds that the petitioner had undertaken to pay on first written demand and without cavil or argument and without needing to prove or to show grounds or reasons for demand of encashment. The petitioner cannot take benefit of the above-referred judgment as there is no factual controversy present between the parties which required recording of evidence. The petitioner is not justified in repudiating the claim, which appears to be an act of dishonesty and mal- administration on its part.
17. It is also noteworthy that the petition er under the same hierarchy , also filed an appeal against the order in original, wherein they did not raise any objection upon the jurisdiction, which is now being agitated in writ-petition.
The petitioner failed to avail alternate remedy in the form of Appeal against the order of Executive Director SECP before the Commission, comprising not less than two Commissioners under Section 33(1) of the SECP Act, 1997 and the ultimate Appellate Jurisdiction also rests with the High Court under Section 34(1) of the Act, 1997. The law on the subject' s very specific as held in Khalid Mehmood' s case "KHALID MEHMOOD versus COLLECT OR OF CUST OMS, CUST OMS HOUSE, LAHO RE" (1999 SCMR 1881 ) that there is a statutory bar in exercis e of jurisdiction under Article 199 of the Constitution in case of adequate alternate remedy and where High Court itself or Supreme Court is the repository of ultimate appellate, revisional or referable powers conferred by relevant statutory . In case "SECURITIES AND EXCHANGE COMMISSION OF PAKIST AN versus Mian NISAR ELAHI and others" (2009 CLD 1442 ), the Hon'ble Apex Court observed that before approaching the High Court, respondents should have waited for alternate remedies available under Ss. 33 & 34 of SECP Act, 1997.
18. In view of above detailed discussion, the writ petition is hereby dismissed for want of merits and due to having statutory bar in exercise of jurisdiction under Article 199 of the Constitution.