SHAHID BILAL HASSAN J. Succinctly, the respondent No.1 filed an application under section 75, 76 and 122 of the Insurance Ordinance, 2000 for the recovery of Rs.326,293,052/- against the appellant before the Insurance Tribunal, Lahore contending therein that the respondent No.1 is a Private Limited Company duly incorporated under the Companies Ordinance, 1984; that the respondent No.1 is a "Policies Holder" as defined in section 2(xiv) of the Ordinance and the present appellant is a registered Insurer as enshrined in section 2(xxxi) of the Ordinance. It is alleged that the appellant has committed default and is not fulfilling its obligations with regards to the insurance supported by the statement of Insurance Claim Denial; that the respondent No.1 had been using the insurance facility of the appellant since 1992-93; that the respondent No.1 paid a total amount of Rs.13,000,000/- approximately as premium to the appellant/Insurance Company; that on 5th October, 2006 when fire broke out in the dyeing unit of the respondent No.1 and the machinery, building and stock of cloth lying therein was destroyed by fire, the respondent No.1 suffered huge loss of millions of rupees; that the incident of fire was immediately reported to the Fire Brigade Station and Town Municipal Administration, Faisalabad, who extinguished the fire; that the incident was also abruptly reported to the police on 05.10.2006, who incorporated the same against Rapt No.32 dated 13.10.2006. Allegedly, thereafter, the respondent No.1 lodged insurance claim with the present appellant on 10.10.2006; that as a result of fire incident, purportedly the machinery installed at the dyeing unit of the respondent No.1 including the machinery which was owned by the respondent No.1 as well as obtained on lease from Askari Leasing was damaged. It was further averred that after the fire incident, the survey team of the appellant visited the dyeing unit firstly on 16.10.2006 and secondly on 17.10.2006 and they demanded certain documents through letter dated 27.12.2006 which was duly replied by the respondent No.1 vide letter dated 28.12.2006, thereby provided all the relevant/necessary documents but despite that the present appellant unnecessarily delayed the matter and did not pay the insurance claim to the respondent No.1. It was further maintained that the respondent No.1 intimated the appellant about the loss occurred to the respondent No.1 due to stoppage of work but the appellant did not fulfill their obligation of making payment of insurance claim; that the appellant was intimated through letter dated 02.12.2006 that due to delay in claim the entire process of export shipment has stopped, which has caused heavy operational losses to the respondent No.1 amounting to Rs.5 to 10 million per month; hence, the respondent No.1 made the following prayer:-
(i) Insurance Claim Rs.148,513,052/-
(ii) Operational Losses Rs.10.00 million p/m till date
(iii) Loss suffered due to cancellation of agreements with C.I.CARCECO S.A. Textiles= US $ 515,000
(iv) Loss suffered due to cancellation of agreements with G.O. Traders=US $448,000 Total: Rs.326,293,052/- Therefore, it was prayed that the application of the respondent No.1/applicant may be accepted against the present appellant.
The appellant hotly contested the application by filing its written reply and raised certain preliminary and legal objections as well as resisted the same on facts and prayed for dismissal of the said application.
The divergence in pleadings of the parties was summed up into following issues:-
1. Whether the claim of applicant is not maintainable in its present form? OPR
2. Whether the petition is bad for misjoinder and non-joinder of necessary parties and the HBL have any nexus with the plant and machinery lying in the dyeing unit and got damaged in the fire broke out on 05.10.2006? OP Parties
3. Whether the claim of applicant is in violation of Section 75 of Insurance Ordinance, 2000 and Sections 51/52 of Contract Act, 1872? OPR
4. Whether the applicant has not fulfilled his part of the agreement with the respondent enabling him to file the claim? OPR
5. Whether survey report is biased, prejudiced and based on mala fide? OPA
6. Whether the applicant has no cause of action? OPR
7. Whether the respondent is not duly authorized to contest the application? OPA
8. Whether the fire occurrence took place in the premises of Ikram Fabrics (Pvt.) Ltd. and the machinery, building alongwith stocks burnt in fire was also in the name of Ikram Fabrics (Pvt.) Ltd.?
OPR
9. Whether the assets of Ahsan Yousaf (Pvt.) Ltd. were transferred in the name of Ikram Fabrics which was not insured by the respondent and as such the respondent was justified in repudiating the whole claim? OPR
10. Whether extent of damage to machinery, building and stocks lying therein was destructed by fire which was neither accidental nor natural, rather the applicant deliberately set on fire the insured building, machinery and stocks? OPR
11. Whether the applicant is entitled to the decree alongwith liquidated damages as prayed for?
OPA
12. Relief.
Both the parties adduced oral as well as documentary evidence in support of their respective stances. On conclusion of trial, the learned Judge, Insurance Tribunal vide impugned judgment dated 11.11.2011 accepted the application filed by the respondent No.1 and held him entitled to Insurance Claim/Policy Proceed amounting to Rs.148,513,052/- alongwith liquidated damages from 10.10.2006 at the prevailing rate till its realization. Hence, the instant appeal has been preferred.
2. Syed Ali Zafar (ASC), the learned counsel for the appellant has argued that the impugned judgment is illegal and bad in the eyes of law; that the same is result of misreading and non- reading of evidence on record; that in actual no fire incident occurred in the premises, subject matter of the policies, rather it was a jumping fire incident in the premises owned by Ikram Fabrics (Pvt.) Limited; that despite demands of surveyors, the respondent No.1 failed to provide necessary documents, so non-provision of all information and documents disentitles the respondent No.1 to grant of any claim being in violation to section 51 and 52 of the Contract Act, 1872 and Policies Conditions No.1, 4, 8, 11 and 13; that evidence of the appellant especially report of surveyors Ex.P7 has not been considered by the learned Insurance Tribunal while passing the impugned judgment; that the learned Insurance Tribunal has misinterpreted and misread the Policies Ex.A2 and Ex.A3 germane to keeping of any hazardous inside the insured building; that the impugned judgment is against law and facts, the same suffers from inherent defects; that the said is illegal, arbitrary and unjust as no consideration has been paid to the averments of the appellant; that the impugned judgment has been passed in a slip-shod manner without appreciating the proved facts on record; that the learned Insurance Tribunal has failed to consider that the application was not maintainable as the claim was not filed by the respondents No.2 & 3 who had a charge/lien on the insured properties/assets and even they had not assigned any right to the respondent No.1 for filing such claim, therefore, the same is not sustainable on this score; that a party has to stand on its own legs and cannot take benefit of the shortfalls or shortcomings in the opposite party but this basic principle has been defiled by the learned Insurance Tribunal; that the entire proceedings are Coram non judice because Insurance Tribunal was not properly constituted as in such matters which involve insurance claims particularly whether fire was deliberate or accidental, require interpretation of insurance law which therefore provides that there must be insurance experts in the Insurance Tribunal; however, in this case learned Tribunal was based on Single Judge who did not have requisite expertise in the matter; that a huge amount has been awarded while passing the impugned judgment, that too, without any cogent and trustworthy evidence; that under condition No.18 of the Policies the matter has to be referred to arbitrator in case of any differences as to the amount of any loss or damage, so the learned Insurance Tribunal has wrongly assessed the quantum of alleged loss; that learned Insurance Tribunal has failed to appreciate that the machines, their value, quantity and conditions etc. were nowhere proved or established but even then the respondent No.1 was awarded such a huge amount while passing the impugned judgment; that the impugned judgment has been passed on the foundation of pick and choose methodology, which is not warranted under law, because at one hand the report of surveyors has been rejected but on the other some parts of the same have been relied upon; that the learned Insurance Tribunal has wrongly decided that the Habib Bank Limited and PICIC Commercial Bank Limited had no nexus with the dispute; that the evidence of A.W.1 has wrongly been accepted by the learned Insurance Tribunal because the same was beyond the claim forms as in evidence he deposed that fire was caused by a short circuit in the electric box but in claim form the reason was narrated as unknown; that the impugned judgment is based on surmises and conjectures; therefore, the same is not sustainable in the eye of law and liable to be set aside by allowing the appeal in hand.
3. Mr. Waqar A. Sheikh (ASC), Advocate while representing the respondent No.1 has controverted the above said submissions and further argued that in terms of section 112(3)(c) of the Insurance Ordinance, 2000 read with Rule 22(2) of the Insurance Rules, 2002, the survey report has to be prepared and signed by natural persons. However, the joint survey report under reference carried no name of the alleged surveyors, which is conspicuous from its absence and the same cannot be termed as a survey report in terms of the foregoing mandatory provisions of law and hence, it is inadmissible in evidence and non-mentioning of name of the surveyors under the report is admitted by R.W.3 during cross examination; that Rule 22(4) of the Insurance Rules, 2002, demands that the report shall be finalized as early as possible but within the period of ninety days, however, in the present case, the fire incident took place on 05.10.2006 while the survey report was prepared on 10.08.2007, after considerable lapse of the mandatory period, especially when the technical expert hired by the surveyors i.e. Electro-Tech Engineers (Electrical, Mechanical, Air Conditioning Engineers & Contractors) on whose findings the surveyors have relied upon, gave its technical report on 24.11.2006; that the respondent No.1 provided required documents to the surveyors in time; that rule 22(2) of the Rules, 2002 is mandatory provision of law, consequence of non- compliance whereof are provided in section 118 of the Insurance Ordinance, 2000; that the alleged survey report blatantly violates the mandatory requirements of law/rules and the same can neither be termed as a survey report nor is admissible in evidence, hence, it has rightly been discarded by the learned Insurance Tribunal; that under section 118 of the Insurance Ordinance, 2000 statutory presumption of truth has been attached to the claim raised under the insurance policy by the legislature and consequences in the form of payment of liquidated damages have also been provided in case where the claim is not satisfied within the stipulated time; that the survey report has been presented in evidence under objection by R.W.3 as neither the alleged surveyor for the Insurance Survey Company nor any other surveyor or expert hired by the surveyors has been produced in support of the survey report; that the survey report is biased, prejudiced and lacking in material; that the respondent No.1 by producing cogent, unimpeachable, trustworthy and confidence inspiring evidence, oral as well as documentary, has proved and established his claim.
Lastly, prays for dismissal of the appeal in hand. Relies on Postal Life Insurance (PLI) and others v.
Muhammad Ishaque Butt (2022 CLD 309-Lahore), Lasania Oil Mills v. Silver Star Insurance Company Limited and others (2021 CLD 659-Lahore), Mst. Riffat Asghar v. State Life Insurance Corporation of Pakistan and others (2010 CLD 1123-Lahore) and Ghulam Raza Sajid v. State Life Insurance Corporation of Pakistan and another (2010 CLD 792-Lahore).
4. Heard.
5. Section 121 of the Insurance Ordinance, 2000 deals with constitution of the Tribunal and it would be advantageous to reproduce the same here, which reads:- '121. Constitution of the Tribunal. --- (1) The Federal Government shall constitute a Tribunal or Tribunals in consultation with the Commission and shall in respect of each Tribunal so constituted specify the territorial limits within which, or the class or classes of cases in respect of which each such Tribunal shall exercise jurisdiction under this Ordinance: Provided that the Federal Government may by notification in the official Gazette confer all or any of the powers of the Tribunal on any District or Additional District and Sessions Judge of an area where for any reason it may not be expedient to constitute a separate Tribunal, and in doing so the Federal Government shall also specify the composition and pecuniary and territorial limits of such a Tribunal.
(2) The Tribunal shall consist of a Chairperson who shall be serving or retired Judge of the High Court and not less than two members being persons of ability and integrity who have such knowledge or experience of life insurance, non-life insurance, actuarial science, finance, economics, law, accountancy, administration or other discipline as would, in the opinion of the Federal Government, enable them to discharge the duties and functions of members of the Tribunal.
(3) To constitute a sitting of a Tribunal the presence of the Chairperson and at least one other member shall be necessary.
(4) A Tribunal shall not merely by reason of a change in its composition, or the absence of any member from any sitting, be bound to recall and rehear any witness who has given evidence, and may act on the evidence already recorded by or produced before it.
(5) A Tribunal may hold its sitting at such places within its territorial jurisdiction as the Chairperson may decide from time to time.
(6) No act or proceeding of a Tribunal shall be invalid by reason only of the existence of a vacancy in, or defect in the constitution of the Tribunal.' (Emphasis supplied)
When the above provision of law is, accumulatively, gone through and interpreted, we observe that the Tribunal, in the peculiar facts and circumstances of the case in hand, has not been constituted as per mandate of law because sub-section (2) of section 121, ibid, provides that, 'The Tribunal shall consist of a Chairperson who shall be serving or retired Judge of the High Court and not less than two members being persons of ability and integrity who have such knowledge or experience of life insurance, non-life insurance, actuarial science, finance, economics, law, accountancy, administration or other discipline as would, in the opinion of the Federal Government, enable them to discharge the duties and functions of members of the Tribunal.' and sub-section (3) ibid demands that, 'To constitute a sitting of a Tribunal the presence of the Chairperson and at least one other member shall be necessary.' By using word "shall" the legislators have made it mandatory and any deviation therefrom would make the verdict of such Tribunal illegal and not sustainable in the eye of law. However, in the present case, the Tribunal was consisting of only one Judge (Addl. District & Sessions Judge) and no member having experience of life insurance, non- life insurance, actuarial science, finance, economics, accountancy, administration or other discipline has been included as provided under sub-section (2) of section 121 ibid; meaning thereby the impugned judgment has been rendered by Tribunal, not constituted as per mandate of law and hence, the same is not sustainable in the eye of law.
6. In addition to the above, section 111 of the Insurance Ordinance, 2000 provides that who will be permitted to act as Insurance Surveyors, which reads:- '111. Persons permitted to act as insurance surveyors. - (1) Subject to sub-section (2), it shall be unlawful for any person to act for remuneration as a surveyor, loss adjuster, or loss assessor (by whatever titled called) unless such person is:
(a) an adjuster of aviation or maritime losses; or
(b) a person licensed as a surveyor under this Ordinance.
(2) Nothing in this section shall prevent -
(a) the performance in the course of his employment by an employee of an insurer of activities of the nature of insurance surveying for that insure; or
(b) the expression in the course of his general professional practice of an expert opinion on the nature, cause or quantum of an insurance loss by an advocate, solicitor, accountant, actuary or other professional person engaged in a profession other than surveying.'
Section 112 of the Ordinance, 2000 provides:- '112. Licensing of insurance surveyors. - (1) The Commission may, on application by a person, grant of that person a licence, having a term of not more than twelve months, to act as a surveyor where the Commission is satisfied that person is qualified under this section to be granted such a licence.
(2) A licence granted under the preceding sub-section (or renewed under this sub-section) may be renewed for a term of not more than twelve months on application made by the holder of the licence prior to expiry of the licence, where the Commission is satisfied that such person is qualified under this section to be granted such a licence.
(3) No person shall be entitled to apply for or to hold a licence as a surveyor under this Ordinance unless the following conditions are fulfilled at the date of the application and at all times during which the licence is held:
(a) the person is a company with a prescribed minimum share capital;
(b) the person carries professional indemnity insurance at such level as may be prescribed;
(c) reports issued in respect of surveys conducted by the person are signed by natural persons, registered under section 113 as authored surveying officer;
(d) reports issued in respect of surveys conducted by the person contained such information and comply with such conditions as may be prescribed;
(e) the person is a member of such approved professional association as may be prescribed; and
(f) the person complies with such other conditions as may be prescribed: Provided ------------- Provided ------------- Provided ------------ Provided -------------
(4) -----------
(5) ----------
(6) ----------
(7) ----------.'
Rules 22 of the Insurance Rules, 2022 deals with surveys and reports of insurance surveyors, which enunciates:- '22. Surveys and reports of insurance surveyors. - (1) Pursuant to clause (d) of sub-section (3) of section 112 the report of an insurance surveyor shall be subject to the conditions as laid down in sub-rule (2).
(2) Every report given by an insurance surveyor shall be signed by a natural person who is, at the date of the report, registered as an authorized surveying officer for the class of insurance surveyors to which the loss being surveyed relates, and shall include the following, namely: ---
(a) A description of the property or interest which constitutes the subject-matter of the survey report, sufficient to identify the property or interest;
(b) the terms of reference given to the insurance surveyor by the person engaging him;
(c) any instructions given to the insurance surveyor by the person engaging him, as to facts to be assumed or other assumptions to be made by the insurance surveyor;
(d) a description of the procedures carried out by the insurance surveyor in the conduct of the survey;
(e) the opinion of the insurance surveyor on the matters contained in the term of reference; and
(f) a declaration that neither the insurance surveyor, nor any director, employee, associate or partner of the insurance surveyor, nor any related party of any of those persons, has any interest directly or indirectly by way of insurance, ownership, agency commission, repairs, disposal of salvage, or in any other way whatsoever, other than as an insurance surveyor in the property or interest which constitute the subject-matter of the survey report.
(3) Every survey conducted by, and report given by, an insurance surveyor shall comply with the relevant professional standards of any professional body of which the insurance surveyor is a member.
(4) Every survey conducted by, and report given by, an insurance surveyor shall be conducted and given with due diligence and skill, and in good faith and the report shall be finalized as early as possible but within the period of thirty days, after receipt of all related information/documents.
(5) If the Commission has reason to believe that a survey performed has not been performed with due diligence or skill, or in good faith, or that it otherwise does not comply with the conditions of this rule, such that the report does not present a fair opinion on the matters contained in the terms of reference, the Commission may direct that the insurer arrange for an additional survey of the subject matter of the survey report to be performed by one or more licensed insurance surveyors who shall be approved by the Commission.
(6) An additional survey under sub-rule (5) shall be performed at the expense of the insurer and a copy of the report on the additional survey shall be provided to the Federal Government.' (Emphasis supplied)
In the present case, the respondent No.1 allowed the bringing of report Ex.R7 on record "under objection . The learned Tribunal did not ponder upon and decide the point of admissibility of the said report at the relevant time, which otherwise ought to have been decided then and there instead of deferring the same till the end of trial and even at the time of passing the impugned judgment, the objection raised by the respondent No.1 was not decided. In a judgment reported as Hayatullah v. The State (2018 SCMR 2092), the Apex Court of the country has pondered upon this legal issue and has invariably held:- 'We have also observed that although sometime objection was raised by either party regarding the inadmissibility of such piece of evidence but the court while admitting the evidence at that time reserves the question of law as to its admissibility till the end of the trial and while delivering the judgment no such question of admissibility is usually decided. It is the duty of the trial court to decide the objection then and there and not to defer the same till the end of the trial.'
Though the said judgment pertains to a criminal case, but the legal point decided by the Apex Court, which has probative value and the ratio of the same can be applied in civil side, too.
Moreover, when the respondent No.1 and the learned Tribunal were not satisfied with the survey report Ex.R7, the Tribunal must have adhered to proceedings provided under Sub-rule (5) of Rule 22, Insurance Rules, 2002, as has been referred above but no such proceedings have been carried out which otherwise must have been done in order to reach a just decision of the case especially when the appellant/ Insurance Company has been denying the fire incident, allegedly occurred in `Ehsan Yousaf Textile Private Limited/respondent No.1 and claims that such incident took place in `Ikram Fabrics', which is not insurer with the appellant/ Insurance Company.
Section 122 of the Insurance Ordinance, 2000, provides that in all matters with respect to which procedure has not been provided for in the Ordinance, the Tribunal shall follow the procedure laid down in the Code of Civil Procedure, 1908 or the Code of Criminal Procedure, 1898, as the case may be. For ready reference, the said provision is reproduced as under:- '122. Powers of Tribunal.--- (A) Tribunal shall:
(a) in the exercise of its civil jurisdiction, have in respect of claim filed by a policy-holder against an insurance company in respect of, or arising out of a policy if 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 jurisdiction, 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 mattes 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 Criminal Procedure, 1898 (Act V of 1898) as the case may be.
(2) --------------
(3) -------------- Provided that ------------.'
Moreover, the learned Tribunal without bifurcating, assessing and giving details of damages as to machinery, building, articles, etc., caused to the respondent No.1, proceeded to pass the impugned judgment dated 11.11.2011, giving an accumulative policy proceed/claim, which otherwise ought to have been referred to the Arbitrator because condition No.18 of the Policies stipulates that the matter as to the quantum of the alleged loss has to be referred to the Arbitrator, which factum has also been ignored by the learned Tribunal, while accepting the application filed by the respondent No.1. For ready reference the condition No.18 is reproduced infra:- 'If any difference arises as to the amount of any loss or damage such different shall independently of all other questions be referred to the decision of an arbitrator, to be appointed in writing by the parties in difference or, if they cannot agree upon a single arbitrator ---------------.'
7. For the foregoing reasons, the appeal in hand is allowed, impugned judgment dated 11.11.2011 is set aside and matter is remanded to the Insurance Tribunal with the observation that Tribunal should be constituted as per mandate of law, where-after the proceedings should be carried out by adhering to the above said provisions of law keeping in view the above observations and case be decided afresh on merits in accordance with law. No order as to the costs.