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P L D 1999 SC 1126

NEW JUBILEE INSURANCE COMPANY LTD., KARACHI
V/S
NATIONAL BANK OF PAKISTAN. KARACHI

Per Ajmal Mian, C.J.(a) Constitution of Pakistan (1973) Art. 18

Freedom of trade, business or profession—Insurance Company issued Fire Insurance Policy in favour of Bank as mortgagee of the stock in the factory premises of the mortgagors—Insurance Company received an intimation of loss from the Bank on account of fire—Bank got the alleged loss surveyed by a surveyor under S. 44-A, Insurance Act, 1938—Surveyors, through their report, rejected the Bank’s claim—Contention of the Bank was that rejection of its claim by the surveyors was not justified—Matter of claim having not yet been resolved, Bank delisted the Insurance Company from the list of its approved Insurance Companies with immediate effect—Contention of the Insurance Company was that before delisting the name of the Company from the list of approved Insurance Companies, Bank should have obtained adjudication as to the genuineness of its claim against the Insurance Policy—Validity—Bank was not supposed to obtain adjudication as contended by the Insurance Company—Basic question was as to whether there was material available on record on the basis of which a reasonable unbiased person could have concluded that there was no basis for rejection of the claim—Bank, in circumstances, could have invoked S. 44-B, Insurance Act, 1938 and if the second surveyor had given report to the effect that the rejection of the Bank’s claim was unjustified/unwarranted by law, it would have been justified to delist the company’s name from its approved Companies—Bank failed to opt to get an independent surveyor appointed by the Controller of Insurance under S. 44, B (1) of the Act, nor it had recourse to the remedies provided under the Insurance Policy, namely, arbitration, nor invoked the jurisdiction of a competent Court of law and thus became a Judge in its own cause and delisted the company’s name and in consequence thereof Company carried with it a stigma to the effect that the Company did not honour its legal obligation under the Insurance Policies— Fall-out of the delisting of the Company was to prevent the Company from the privilege and advantage of entering into lawful relationship with the Bank for the purpose of gain which was violative of Art. 18 of the Constitution —If an Insurance Company fulfilled the required conditions and became eligible to be enlisted as approved Insurance Company, Bank could not arbitrarily refuse the enlistment for reason which had no nexus with the eligibility to be enlisted—Principles—Order/action of the Bank, therefore, could not be sustained in law—Delisting of Company was ordered to be quashed by the Supreme Court with direction that the name of the Company be included in the list of approved Companies and to notify the same to the parties to whom the delisting was notified.

Before delisting the name of the Insurance Company from the list of approved Insurance Companies, the Bank was not obliged to obtain adjudication as to the genuineness of its claim against the Insurance Policy. The basic question was as to whether there was material available on record on the basis of which a reasonable unbiased person could have concluded that there was no basis for rejection of the present case if the Bank would have invoked section 44-B of the Insurance Act, and if the second Surveyor would have given report to the effect that the Insurance Company’s rejection of the Bank’s claim was unjustified/unwarranted by law, it would have been justified to delist the Company from the list of the approved Insurance Companies. Bank did not opt to get an independent surveyor appointed by the Controller of Insurance under subsection (1) of section 44-B of the Act, nor it had recourse to the remedies provided under the Insurance Policy, namely, arbitration, not it invoked the jurisdiction of a competent Court of law. The Bank had itself adjudicated upon the question of genuineness and correctness of its claim. In other words it had become a judge in its own cause and delisted the Company’s name from the list of approved Insurance Companies, and in consequence thereof it carried with it a stigma to the effect that the Company was an Insurance Company which did not honour its legal obligation under the Insurance Policies. The Bank not only delisted the Company from the list of approved Insurance Companies, but circulated the copy of the same inter alia to all of their offices and branches. [p. 1134] B

When an act or order inflicts civil consequences on a person in respect of his reputation or property which is harmful to his interest, he is entitled to be heard before such an action or order is taken or passed. In the present case though there was no formal show-cause notice issued, but the Insurance Company inter alia was served with the notice, whereby it was called upon to review its decision with regard to repudiation of the claim within seven days and settle the claim amicably failing which the Bank was to have no option but to delist the Company from the Bank’s approved list of Insurance Companies. This letter was received and replied to by the Company. This had been sufficient compliance of the principle of natural justice. [p. 1138] H

The Bank was owned by the State and therefore, under the Constitutional mandate, it should act fairly, justly, without any discrimination, and without adopting unfair procedure. If an Insurance Company fulfilled the required conditions and became eligible to be enlisted in the list of approved Insurance Companies, the Bank could not arbitrarily refuse enlistment for the reasons which may have no nexus with the eligibility to be enlisted. However, a company, listed in the list of the approved Insurance Companies had no right to force the Bank to enter into a contract of Insurance. It could at the most claim that it may be treated alike with the other Insurance Companies, placed in the same/similar position/situation. In other words, it was entitled that its offer to insure may be considered alongwith the other similar offers. The Bank was free to accept or not to accept any particular offer. So long the Bank acted in good faith, acceptance of a particular offer or non-acceptance of the same would not ensue any justifiable cause of action. [p. 1137] E

The fall-out of the blacklisting of the Company was to prevent it from the privilege and advantage of entering into lawful relationship with the Bank for the purpose of gain which was violative of Article 18 of the Constitution, which provided that subject to such qualifications, if any, as may be prescribed by law, every citizen shall have the right to enter upon any lawful profession or occupation, and to conduct any lawful trade or business. The blacklisting of a company/firm/person, also tarnished the reputation of it/his, as to its/his credibility to honour its/his commitments which may dissuade other parties from entering into contracts with the former. Thus the consequences of blacklisting a company/firm/person are of great magnitude, which warrant that before taking such an action, there should be material on record prima facie to indicate that the delinquent Insurance Company’s refusal to pay claim was not warranted in the circumstances of the case. [p. 1137] F

The order of delisting the Company was quashed and the Bank was directed to include the name of the Company in the approved list of the Insurance Companies and to notify the same to the parties to whom the delisting was notified. [p. 1139] I

(b) Constitution of Pakistan (1973) Arts. 2A, 18, 25 & 27

Constitution is to be read in conjunction with inter alia Arts. 2A 18 & 25 of the Constitution.

Article 27 of the Constitution is to be read in conjunction with inter alia Article 2-A 18 and 25 of the Constitution. Article 25 of the Constitution guarantees that all citizens are equal before law and are entitled to equal protection and that they shall not be discriminated on the basis of sex alone. Inter alia the above Articles of the Constitution are designed, intended and directed to bring about an egalitarian society based of Islamic concept of social justice. [p. 1136] D

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