' On the start of Indo-Pakistan War of 1971 an Ordinance known as War Risks Insurance Ordinance (Ordinance XXXII of 1971) was promulgated on the 5th of December, 1971 providing for war risks insurance of buildings, Companies, factories and goods. Section 4 of the Ordinance authorises the Central Government to prepare one or more war risks insurance schemes to undertake in relation inter alia to any property insurable under the Ordinance, the liabilities of insuring against war risks subject to the provisions of, and to the extent provided by or under the Ordinance. It provided in section 4(2) that any scheme so prepared, shall secure that the liability of the Central Government as insurer shall not exceed such percentage of insurable value of the goods or property as may be prescribed in relation to any goods or property or any class of goods or property ; (b) that in respect of each claim insurer shall bear such percentage of loss or damage as may be prescribed in relation to inter alia any property or any class of property or such other amount as may be fixed with reference to the insurable value of the property in accordance with the prescribed scale, whichever is greater, and (c) that any liability of the Central Government as insurer in relation to any goods or property is determined by the policy of insurance issued by a person acting on behalf of the Central Government in such form and for such period as may be prescribed in relation to such goods or property under different circumstances.
' Clause (d) of subsection (2) provided that the premium would be payable at such rate as might be prescribed.
2. In accordance with this provision the Government framed a scheme known as War Risks (Buildings) Insurance Scheme and obligated every Company owning a building to take out a policy of insurance insured under the scheme and pay the premium provided therefor. It also provided for entitling the owner of the building to the payment of compensation admissible to him under the Ordinance. Rules and Policy by the Central Government. Para. 6 provided for the manner of calculation of the amount of premium and its being payable in advance. The amount of premium according to it, was liable to be calculated at the rate of 1/4th of 1 per cent. Of the sum insured per calendar month in respect of a building or a building under construction.
3. Section 10 of the Ordinance provided that every Company shall insure the building "for a sum not less than the insurable value of such property." Section 25 conferred upon the Central Government the power to make rules for carrying out the purposes of the Ordinance by Notification in the official Gazette. It was in exercise of this power that War Risks Insurance Rules, 1971 were enforced on the 5th of December, 1971 providing in its rule 7 that the insurable value in the case of a building would be an amount equal to 40 times the annual rental value of the building as assessed by the appropriate assessing authority.
4. The petitioner-Company owns two properties at Napier Road, Lahore bearing No, S-62-R-2-B (I) and S-62-R-2-B(H). The petitioner Company got the two properties insured with American Insurance Company Limited, an agent of the Government for the period from 5th December to 31st December, 1971 for the insurable value of Rs, 5,00,000 and Rs, 7,C0,000 respectively. As provided by section 18 of the Ordinance, the Inquiry Officer, War Risks Insurance (respondent No, 2) issued notice, Annexure 'H', to the petitioner to furnish within 14 days of the receipt of the notice the information in the pro forma attached to the notice supported by attested copies of documentary evidence.
5. The petitioner submitted reply, Annexure H/1' on the 26th of February, 1973 that the required information had already been supplied on the 12th of January, 1973. The Inquiry Officer sent another letter for the same purpose to the petitioner. In reply to that letter the petitioner submitted the necessary pro forma of building duly filled in (the covering letter is Annexure 'H/2' while the pro forma is Annexure H/3').
6. On scrutiny of the information so received, a show-cause notice Annexure 'H/4', was served upon the petitioner by respondent No, 2 proposing to determine the insurable value of the first property from the period 3-12-1971 to 31-7-1972 as Rs, 94,67,128 and for the second property as Rs, 1,08,67,238.
7. In reply (Annexure `J') the petitioner-Company protested against this demand and stated that the actual cost of the building as per Company's Balance Sheet as on 30th of September, 1971 was Rs, 18,29,499.98 and its net income had already been determined by the Income-tax Officer as Rs, 1,24,320 on the basis of gross annual letting value of Rs, 3,07,503 minus the charges for repair and Property Tax. Reference was also made to the War Insurance Policies of 1965 which were for a much lesser amount.
8. The Inquiry Officer determined the insurable value on the same amount as expressed in the show-cause notice (Annexure H/4) on the basis of 40' times the annual rental value as provided by rule 7 of the War Risks Insurance Rules, 1971 which has already been referred to above.
9. The petitioner filed an appeal to the Government against the order of assessment on the 15th of March, 1975. This appeal was dismissed by order (Annexure `M') dated 30th of May, 1975 since the order of assessm ent was in accordance with the formula laid down by rule 7.
10. Hence this writ petition.
11. The learned counsel for the petitioner submitted that -
(1) since the risks were due to war, which ended by the cessation of hostilities at the most by the 31st of December, 1971, the period of the policy could not be extended by the Government to the 31st of July, 1972 ;
(2) Rule 7 of the War Risks Insurance Rules is ultra vires of the Act since it did not carry out the purposes of the Act which was to ascertain the insurable value and not to fix it. It is also unreasonable since the premium exceeds the annual profits. It also suffers from excessive delegation of power, and
(3) that the order I n appeal was passed without hearing the petitioner.
12. The first and third points do not require consideration. The question whether the hostilities should be taken as having ceased for the purposes of the Ordinance on the 31st of December, 1971 or later, is for the Executive Government to decide and not for the Courts. It is purely a political question. This is supported by M. M. Mansur All v. Arodhendu Shekhar Chatterjee (1) and Malik Muhammad Suleman v. Islamic Republic of Pakistan (2). In these cases similar point was raised about the proclamation of emergency. The reasoning, however, fully applies to the present case.
This question was also considered in Pakistan Chrome Mines Ltd., Karachi v. The Inquiry Officer, War Risks Insurance and another (3) which relates to this Ordinance. It was held for the same reason that liabilities to take out war risk insurance policy, came to an end only on or about 1-8-1972, when scheme under the Ordinance was rescinded.
13. It was admitted that having regard to the provisions of rule 7, the insurable value was rightly assessed by respondent No, 2 in his assessment order, on the basis of 40 times the annual rental value. Even if the petitioner had been given an opportunity of being heard by the Central Government, the appellate order could not have been different. It will, therefore, be futile to allow this petition merely on the ground that the petitioner had not been given an opportunity of being heard personally.
14. It was argued by the learned counsel for the petitioner that the Ordinance provides for the ascertainment of value of the property since the expression "insurable value" is defined in section 2( j) as meaning the value of the goods or property as ascertained for the purposes of insurance under this Ordinance, but rule 7 provides not for ascertainment but for fixation of the value as being 40 times of the annual rental value. As such rule 7 is in excess of the rule-making authority and is ultra vires.
(1) PLD 1969 SC 37
(2) PLD 1976 Lah. 125Q
(3) PLD 1976 Kar. 673
15. This argument is without merit since despite the principle of rule 7, it will be necessary for the assessing Officer to ascertain in each individual case the annual rental value of the property and then multiply it by 40 to arrive at the insurable value. The exercise of ascertainment has to be done by him. Rule 7 provides a formula for an easy ascertainment and determination of the rental value.
Since there is no other provision in the Act laying down any formula for ascertainment of the insurable value, I c was open to the Central Government to make rules regarding it. Such rules would be necessary for carrying out the purposes of the Ordinance. The objection is, therefore, overruled.
16. It was then argued that some guidelines should have been provided for the exercise of power of framing rules. This argument is incomprehensible under the circumstances of this case. The provision about ascertainment itself provides sufficient guideline.
' It appears that the object of the learned counsel in raising this objection was to challenge the reasonableness of the rule which he has more clearly challenged on another ground. He argued that it would be unreasonable to force the petitioner to pay in premium more than the annual profits of the property earned by him. He submitted that in the present case, the annual assessm ent is 2.1-2 per cent. Of the value, out of which he would also have to pay income-tax and incur other expenses, while the premium alone (being 1/4th of 1 per cent. Of the value per month) would amount to 3 per cent per annum. The learned counsel further argued that there is no justification for fixing the insurable value at 40 times the annual rental value.
17. I have considered these arguments. I am firstly of the view that the principle that a bye-law can be struck down by Court for unreasonableness, cannot be applied to a rule. The rule can be held ultra vires only I it is in excess of the rule-making power granted by the legislation. In the present case, however, there is no data for holding the formula of 40 times 'E of the annual value or the premium of 1/4 per cent. Per month as being unreasonable. The Government had undertaken a liability of War Risk Insurance which on account of the immense risks involved, is not undertaken by the Insurance Companies. The formula for determining the insurable value, is not a new formula. It was used for determining the value of the property under the Displaced Persons (Compensation and Rehabilitation) Act, 1958. Similar formula was also sometimes applied by Courts in determining the values of properties acquired under the Land Acquisition Act. In view of the fact that the Government has tried to maintain the rental value of the property at a very low level of rent as obtaining in 1941 with very little addition under the West Pakistan Urban Rent Restriction Ordinance, 1959 the formula G of 40 times of the annual rental value cannot be said to be excessive. In these circumstances rule 7 cannot be deemed to be unreasonable. While making a rule, the rule-making authority has to take into consideration only the generality of the situation and not the exceptions.
There is no unreasonableness if it omits from consideration the cases where the landlord has not stuck to the principle of fair rent as provided in the West Pakistan Urban Rent Restriction Ordinance, 1949.
18. In view of the considerable risks undertaken by the Government in the payment of compensation for damages accruing to the insured on account of war, it will not be unreasonable to make the premium exceed the annual rental value particularly when the premium is payable for only a short period, the period being less than 8 months in the present case. In fact the war risk includes many actions by the Government which requires finance in addition to the finance required for assessm ent of the premium and it recovery. Clause (b) of section 2 defines war risks as meaning "risks as may be prescribed" arising from :-
(i) action taken by an enemy or action taken in combating an enemy or in repelling an imagined attack by an enemy ;
(ii) any explosion or fire which involves any explosives or munitions or other dangerous things required for war purposes and which happens, or is caused by, through or in connection with the manufacture, storage or transportation of any such explosives, munitions or other dangerous things ;
(iii) measures taken under proper authority to avoid the spreading of, or otherwise to mitigate, the consequences of damage occurring (whether accidentally or not) as the direct result of any such action as is described in sub-clause (ii) or of any such explosion or fire as is described in sub- clause (ii) ;
(iv) precautionary or preparatory measures taken under proper authority with a view to preventing or hindering the carrying out of any attack by an enemy, being measures involving risks to property
(v) precautionary or preparatory measures involving the doing of work on land and taken under proper authority in any way in anticipation of enemy action, being measures involving risks to property ;
(vi) precautionary or preparatory measures taken under proper authority with a view to denying facilities to an enemy, being measures involving damage to or diminution of the value of property ; and
(vii) capture or seizure by the enemy of any ship, aircraft, vehicle or goods.
' These risks have been undertaken by the Government by rule 3 of the War Risks Insurance Rules, 1971 which virtually reproduces the above definition.
' These damages are, therefore, not restricted to damages which are a direct result of enemy action but are also a result of repelling an imagined attack by the enemy, damages occurring as a direct result of measures taken to avoid the spreading of or otherwise to mitigate the consequences of such damage as aforesaid and damages occurring on account of precautionary or preparatory measures taken by the proper authority.
19. In view of such considerable risks involved and undertaken by' the Government, the amount of premium even though in excess of the annual rental value, cannot be said to be unreasonable. I find no ground to interfere with the impugned orders and dismiss this petition with costs.