' MAMOON KAZI, J.--:The appellant has called in question the judgment passed by the learned Single Judge of this Court dated 17-3-1980 decreeing the respondent's suit for a sum of Rs,40,392.55 with 9% simple interest from the date of the suit till payment thereof.
2. The respondent, which is an insurance company, filed a suit for the recovery of a sum of Rs,40,392.55 which had allegedly fallen due on account of premium for certain insurance policies issued by the respondent in favour of the appellants from time to time. According to the respondents, there was a mutual arrangement between the parties under which it was agreed that the respondents on the request and advice of the appellants would issue policies and undertake risk thereunder notwithstanding the payment of premium in advance.
3. The suit filed by the respondents was resisted by the appellants. A legal objection was also raised in regard to the validity of any policies issued under such arrangement as the same, according to the appellants were issued in contravention of the relevant law and as such the same were illegal, null and void.
4. The Court on the basis of the aforesaid pleadings of the parties framed consent issues as follows:---
(1) What was the mutual arrangement, if any, entered into between the parties and whether the arrangement actually entered into was contrary to law, null and void and of no legal effect?
(2) Whether the plaintiff did not enforce the bank guarantee because the defendant had given an understanding to pay the premiums in due course and the plaintiff relied on the understanding?
(3) Whether the defendant got issued policies under the arrangements mentioned in issue No,1 above and, if so, whether such policies or any of them were null and void and of no legal effect?
(4) Whether the benefit of Rs,4,29,000.00 or thereabouts were given by the plaintiff to defendant under the arrangement mentioned in issue No,1 above and whether the defendant is thereby estopped from challenging the said arrangement?
(5) Whether Rs,40,392.55 or any sum is outstanding as premium of policies issued by the plaintiff to the defendant and whether all or any of such policies were issued contrary to law and were null and void and of no legal effect and, if so, what is the effect?
(6) Whether the admission of liability to the extent of Rs,l0,000.00 was made by the defendant under mistake of facts and whether the same is revocable, disclaimable and disputable?
(7) Whether the defendant is entitled to claim Rs,20,000.00 or thereabouts from the plaintiff and, if so, what is its effect on the plaintiff's claim in the suit?
5. The learned Single Judge who decided the case on the basis of the evidence respectively adduced by the parties decided all the issues in favour of the respondents and therefore, the suit of the respondents was decreed in their favour as pointed out earlier.
6. We have heard Mr. Gulzar Ahmed, learned counsel for the appellants and Mr. Muhammad Ahsraf Bhatti, learned counsel for the respondents.
7. The main attack of Mr. Gulzar Ahmed was directed against the findings arrived at by the learned Single Judge in respect of Issue No,5. The contention of Mr.Gulzar Ahmed has been that any policy of insurance issued without receiving premium from the insurer cannot qualify as a valid contract under the law. Reference in this respect has been made to section 3-C(4) of the Insurance Act, 1938 and Rule 44 of the Insurance Rules, 1958 framed under the said Act. Section 3-C which embodies provisions relating to collection of premium provides in subsection (4) thereof as follows: -- "(4) No insurer shall assume in Pakistan any risk in respect of general insurance business unless and until the premium payable on such part thereof as may be prescribed has been received by him or has been guaranteed to be paid by such person in such manner and within such time as may be prescribed."
' Rule 44 which is also relevant in the said context provides as follows:-- "44. Collection where premium can be ascertained in advance.--- Where the premium in respect of any insurance can be ascertained in advance, no insurer shall assume any risk in respect of general insurance business unless the insurer---
(i) has received in cash or by cheque or by money order the full premium payable for the insurance;.
(ii) has an amount in deposit to the credit of the proposer or his agent sufficient to cover the full premium payable for the insurance;
(iii) has a bank guarantee in Form 'XIX' guaranteeing the payment of an amount sufficient to cover the amount of the full premium payable for the insurance in question and also previous insurance if any, in respect of which the premium has not been paid: ' Provided that in the case of annual insurance "connected with aircraft hulls" and "connected with marine hulls", an insurer may cover the risk in respect thereof if an amount not less than one-fourth of the premium payable has been paid or guaranteed to be paid in the manner laid down in this rule and a clause governing the payment of the premium in instalments not exceeding four in number is endorsed on the policy."
8. It may be pointed out that a similar argument was advanced before the learned Single Judge on behalf of the respondents. The learned Judge after reference to the relevant case-law and the aforesaid provisions of the Insurance Act and the said Rules came to a conclusion that nothing could be spelled out from section 3-C (4) to indicate that any contract entered in breach of the aforesaid provisions of law would be rendered void or illegal. The learned Judge further observed that the Act itself provides for various penalties for non-observance or contravention of the provisions thereof and contravention of any of the provisions of the Act would have no effect upon the validity of the contract entered into between an insurance company and a third party.
Reference in this regard was made to the following cases:---
(1) Eastern Federal Insurance Co. Ltd. v. Bawany Industries PLD 1979 Kar. 323, (2) M. Jamil Ahmed v.
Commissioner of Karachi PLD 1958 Kar. 56, (3) Government Clerks' Mutual Benefit Fund, Nagpur v. F.
Corporation AIR 1946 Nag. 196, (4) Pamulpati Bhushayya v. Commareddy Chinnapareddi AIR 1960 Andh. Pra. 39, (5) Jankibai Chunnilal v. Ratan Melu AIR 1962 Madh. Pra. 117 and (6) Herald Robert Henry Lind v. British Insulated Calendars Construction Co. Ltd. PLD 1970 Kar.
315. In the case reported in PLD 1979 Kar. 323 section 3-C and Rule 44 themselves came under focus and it was held that insurance policies which were subject-matter of the suit were enforceable as they were backed by bank guarantees in terms of Rule 44. However, the question, whether an insurance policy which is not supported by a bank guarantee can be enforced, was not in issue in the aforesaid case. In the case reported in PLD 1958 Karachi 56 the question before the Court was whether dissolution of the Karachi Municipal Corporation under the provisions of section 280 of the Karachi Municipal Act, 1933 was valid. It was held that the decision to dissolve the said corporation was an outcome of a quasi-judicial act and non-compliance with the statutory provisions rendered such action liable to be set aside by a writ of certiorari. It was further observed that in every case the object of the statute must be looked into before deciding whether a statutory provision is merely of a directory or mandatory character and the breach of mandatory provision always entails legal consequence vitiating all the proceedings taken in regard to the same. It is pertinent to point out that the judgment in the aforesaid case was reversed by the Supreme Court and the case is reported as Chief Commissioner of Karachi v. Jamil Ahmed PLD 1961 SC 145. In the case reported in AIR 1960 Andh. Pra. 39 while considering the effect of contravention of the provisions of a statute, it was held by the High Court that in cases where the statute merely imposes a penalty without declaring the transaction to be illegal or void, the imposition of penalty by itself would not have the effect of rendering a contract made in contravention of any specific provision of the statute as illegal or void. In AIR 1962 Madh. Pra. 117, it was held that the question whether the legislature intended to prohibit a contract, can be decided only on construction of the statute itself and if the object behind imposition of penalty is to protect general public or any class thereof, it would be construed in absence of any other indication to the contrary as implying a prohibition. of the contract. It was further held that the object of imposition of penalty, on the other hand, is merely the protection of revenue, the contract would not be regarded as prohibitory by implication. In the case reported in PLD 1970 Karachi 350, the question before a learned Single Judge of this Court was, whether non-registration of a foreign company under section 277 of the Companies Act would render a contract entered into by such company with a third party as invalid or illegal. It was held that although the law provides for imposition of fine on any foreign company in case of failure to comply with the requirements of section 277, but the section does not contain any provision which would have the effect of invalidating or rendering illegal any contract by a foreign company which has failed to comply with the provisions of the aforesaid section.
9. The consensus of the cases referred to by the learned Judge clearly appears to be that intention of the legislature is to be gathered from the provisions of the statute itself and if the statute does not provide for rendering of a contract entered into in contravention of breach of any of its provisions void or illegal the same by implication cannot become void merely on account of non- observance of certain provisions of the statute. In the present case, reference may be made to sections 102 and 103 of the Insurance Act, 1938 which provide for penalties in case of contravention of any requirement of the said Act. We, therefore, fully agree with the observations made by the learned Single Judge that the object behind section 3C (4) appears to be only to ensure recovery of premium and the same, in our opinion, cannot have the effect of rendering a contract entered into by an insurance company with the insurer null and void. Mr.Gulzar Ahmed has laid much stress on the observations made in the cases reported in PLD 1958 Karachi 56 and AIR 1946 Nagpur 196 but in our opinion, the said cases are distinguishable as has already been observed by a learned Single Judge in his judgment impugned before us.
10. Since Mr. Gulzar Ahmed has not raised any other grounds and we are unable to find ourselves in agreement with the contentions raised by him, we find no force in this appeal. The judgment passed by the learned Single Judge, therefore, is not open to interference by us.
11. .
' In the result, this appeal is dismissed. The parties arc left to bear their own costs.