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Petitioner: PAKISTAN CHROME MINES LTD. VS Respondent: ENQUI RY OFFICER, WAR RISKS. INSURANCE JUDGMENT
Court Name: Sindh High Court Judge(s): Abdul Hafeez Memon, Mir Khuda Bakhsh Marri Title:PAKISTAN CHROME MINES LTD. vs ENQUI RY OFFICER, WAR RISKS. INSURANCE
JUDGMENT
Reported As: PLD 1977 Karachi 978 Result: Order accordingly Judgment JUDGMENT JUDGMENT ' Mlik KRUM BAUCHI MARA j-The Petitioners through the titutional Petitions Nos. 1289/14, 329/75, 330/75, 1295/74, 1399/74, 394/75, 487/75, 850/75, 851/75, 325/75, 1101/75, 553/75, 1580/74, 655/75, 1123/75, 1173/75, 1247/75 and 1259/75 filed under Article 199 of the Constitution of Islamic Republic of Pakistan, 1973 seek to challenge assessment orders of different dates passed by respondent No, 2, the Enquiry Officer, War Risks Insurance, Government of Pakistan, and in these cases where appeals have been filed the appellate orders of respondent No, 1 Government of Pakistan through its Secretary, Ministry of Commerce, Islamabad. The impugned orders in all the petitions have been passed under the same law, that is, War Risks Insurance Ordinance, 1971 (hereinafter called 'the Ordinance') Rules, Schemes and instructions issued thereunder. Except for slight variation of facts and grounds in some petitions the main grounds of challenge of the impugned orders are the same, so are the respondents. I, therefore, propose to decide all the petitions by this single judgment. 2. Before proceeding to discuss the contentions raised on behalf of the petitioners and the law involved it is necessary to give very briefly the facts of each case as under :- ' In Petition No, 1289 of 1974, the petitioners, Messrs Pakistan Chrome Mines Ltd , are engaged in the business of Exploiting and Mining Chrome Ore at a place called "Hindu Bigh" now "Muslim Bagh" in Province of Baluchistan where they employed different machineries such as compressors, water pumps and generating sets above the ground. After coming into operation of the War Risks Insurance Ordinance and Rules on 5th December, 1971 all factory owners were required under
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sections 8, 9 and 10 to compulsorily take out the insurance policies against War Risks with regard to their goods, factories and buildings. The sections being relevant for our purposes are given as under s - "Section 8. Compulsory Insurance of goods.-(1) On or after such date as the Central Government may, by notification in the official Gazette specify, every owner of any goods or goods in transit insurable under this Ordinance shall take out a policy of insurance against war risks issued in accordance with the Scheme relating to such goods or goods in transit. (2) The provisions of subsection (1) shall not apply- (i) to goods insurable under this Ordinance, other than goods in transit referred to in subclause (11) of clause (h) of section. 2, if and so long as the value of such goods does not exceed such amount as the Central Government, by notification in the official Gazette, specify in this behalf ; or (11) to goods of any description which the Central Government may, by notification in the official Gazette, specify in this behalf. Section 9. Compulsory Insurance of factories.-(1) Every owner of a factory or a factory under construction exceeding in value such amount as the Central Government, by notification in the official Gazette, specify in this behalf, except a factory belonging to the Central Government or of Provincial Government or a factory exempted under subsection (2), shall by such date as the Central Government may, by a like notification, specify in this behalf, take out a policy of insurance against War Risks issued in accordance with the Scheme whereby he is insured in respect of all property which appertains to the factory for a sum not less than the insurable value of such Property Provided that, where the owner of the factory is not himself the occupies of the factory, the occupier of the factory shall unless the owner has already taken out a policy of insurance as required by this subsection, himself take out a policy and in such a case the occupier shall be deemed to act as the agent of the owner and shall be entitled to receive from the owner all sums paid as premiums on the policy. (2) The Central Government may, by notification in the official Gazette, exempt from the operation of subsection (1) any factory, or any description of factories, belonging to or managed by a corporation established by or under any law for the time being in force. Section 10. Compulsory insurance of buildhsgs.-Every company which owns a building, or a building under construction exceeding in value such amount as the Central Government may, by notification in the official Gazette, specify in this behalf, shall, by such date as the Central Government may, by a like notification, specify in this behalf, take out a policy of insurance against War Risks issued in accordance with the Scheme whereby the owner is insured in respect of all property insurable under this Ordinance which appertains to the building for a sum not less than the insurable value of such property." ' The petitioners took insurance policy under the Ordinance for plants and machineries for Rs, 15 laes for period from 5th December, 1971 to 16th December, 1971 and paid a premium of Rs, 3,266.13. Having failed to take out a compulsory policy beyond 16th December, 1971 he was served with a notice under section 18 of the Ordinance by the Enquiry Officer, respondent No, 2, to furnish necessary information. Ho issued a show-cause notice as provided by rule 10, War Risks Insurance Rules, 1971 following the detailed procedure provided under IIIrd Schedule made under Rule No, 10. Petitioners' counsel and the Secretary of the company appeared before the Enquiry Officer and after hearing them the Enquiry Officer having no other alternative and basis for accurate assessm ent of the insurable value except the information supplied by the petitioners themselves fixed unpaid premuim plus interest and surcharge to Rs, 46,027, giving at the same time the benefit paid premium of Rs, 2,266.13. A time. Barred appeal was filed by the petitioner which was dismissed by respondent No, 1 by his order dated 17-9-1974. ' Apart from the main common grounds in all the petitions which will be discussed later on it was contended that Notification No, S. R. O. 582(1)/71, dated 5th December, 1971 issued by the Central
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Government although extended the provisions of the Ordinance to machinery above the ground floor appertaining to Mines as defined in Mines Aot, 1923, yet it does not apply to the machinery and equipment of the mines above the ground as it is not deemed to be a factory and in the alternative it was submitted that the petitioners' machinery and equipment located on different mine cannot be treated as factory because the value of the equipment at each mine was much less than Re. 3 lace each, if so, they were not liable to be insured under the Ordinance in terms of S. R. 0. 577 (1)/71, dated 5-12-1971. ' Petitions Nos. 329 of 1975 and 330 of 1975 by the same petitioners "Central Food Industries Ltd.", relate to non-insurance of goods and the factories under the Ordinance. After following the usual procedure under section 18 of the Ordinance and Rule 10, stated above, and hearing the representative of the petitioners the Enquiry Officer accepted General Fire Insurance Policies taken out by the petitioners as the basis and fixed the insurable value of the stock, after giving benefit of premium already paid, to Rs, 11,226.39 as unpaid premium which included interest and surcharge. An appeal was filed which was, however, dismissed by respondent No, 1 by his order dated 5-10- 1974. ' The facts of Petition No, 330/75 by the same petitions "Central Food Industries Ltd.," are not at variance with the above petition in the sense that they failed to insure their factory under the Ordinance although they had taken a Fire Insurance Policy for. Re. 21,80,000 during the month of December 1971 but failed to pay a premium of the subsequent months. After Issuing usual notice and hearing the representative of the petitioners the Enquiry Officer in the absence of necessary and detailed information based his assessment order on the Fire Insurance Policy taken out by the petitioners and as such fixed Rs, 56,853.75 as unpaid premium including surcharge and interest. He unsuccessfully challenged the above order in appeal which was dismissed by respondent No, 1 on 5-10-1974. ' Additional ground taken out by the petitioners was enhancement of insurable value of his factory of Rs, 12 lace eighty thousand whereas the petitioners had obtained insurance on their declared value of Rs, 21,80,000. ' Petition No, 1295 of 1974 is by Haji Moula Buz & Sons, a partnership firm dealing in plywood and purchase and sale of Glass sheets. As usual they also have not taken out compulsory Insurance Policy, therefore, necessary notices were issued to them by the Enquiry Officer and after hearing the representative and considering the document a General Fire Insurance Policy taken out by the petitioners the Enquiry Officer assessed unpaid premium to Rs, 8,628.f0 which included interest and surcharge. An appeal was filed but it was rejected by respondent No, 1 on 4-10.1974. ' As an additional ground the petitioners seek protection under chaise III, subsection (2), War Risks (Goods) Insurance Scheme which empowers the Central Government to remit interest and surcharge where it as satisfied that the insurer was unable to take out the policy for the reasons beyond his control and here it was claimed that the Income-tax Authorities have found the petitioners financially incapable to bear extra burden of War Risks Insurance premium due to financial difficulties. ' In Petition No, 1399 of 1974, Messrs Central Cotton Mills Ltd., have not taken out compulsory insurance policy under the Ordinance. They were served with usual notice and giving the chance of hearing the Enquiry Officer found that during the relevant period goods of petitioners were covered under Fire Insurance Policy of Queensland Insurance Company Ltd. For a total sum of Rs, 25 lees. He, therefore, taking the Fire Insurance Policy as a basis passed an assessment order of evaded and unpaid premium to Rt. 64,948.48 followed by usual demand notice. The petitioners instead of filing the appeal as required by section 7 of IIIrd Schedule through the Enquiry Officer approached the appellate authority directly which having been improperly filed was not entertained and returned to the appellant by an order dated 31-12-1973. Thereafter on 12-3-1974 the petitioners filed
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an appeal but this was rejected by the respondent No, 1 on the ground that it is beyond 30 days limitation period. It may be noted that the demand notice by the Enquiry Officer was issued on 284-1973. ' In Petition No, 324 of 1975, Messrs Gholam Hussain-Hidaatullah Textile Mills Ltd., having failed to compulsorily insure their factory under . The Ordinance was issued usual notice under section 18 for furnishing necessary information which they failed to comply with. This was followed by show- cause notice and, some information having been supplied, petitioner's Advocate and the petitioner's representative having been heard and considering the documents the Enquiry Officer found as a matter of fact that the installation of the factory was completed in the second half of the year 1971. He, therefore, took 30th September, 1971 as the starting point to arrive at the value for various months during the relevant period adding the additions according to the statement filed which was Rs, 1,49,89,329 for the period from May, 1972 to July, 1972 taking into account the devaluation of Pakistani rupees. As to the depreciation, he allowed the sum only from month of March, 1972 because according to Director's report to the shareholders for accounting year ended 30th September, 1972 and the commercial production commenced in that month. He, therefore, on the basis of calculated insurable value assessed evaded premium to Rs, 7,42,562 followed by demand notice, as to the insurable goods it was found by the Enquiry Officer that the petitioners have failed to insure them under the Ordinance. He issued usual notice and heard the petitioner's representative and considered the informations supplied. He found that during the relevant period the petitioner's goods were covered under the risk of fire under various policies detailed in the assessm ent Order. He, therefore, based his assessment order in respect of goods insured against Fire Risks Insurance Policies as to Rs, 99,476 as evaded premium including surcharge and interest. ' Both the above assessm ent orders were challenged by single appeal by the petitioners dated 30- 10-1974 before respondent No 1 but this appeal still remains pending decision. Learned Deputy Attorney-General submitted that this petition should be dismissed on the ground that alternate remedy in shape of appeal has not yet been exhausted. ' As an additional ground it was urged by the counsel for the petitioners that under the Ordinance and the Scheme related to factories and goods the Enquiry Officer could invoke the jurisdiction only when a factory is manufacturing goods and during the ,period when a factory was not in production no premium could be claimed, and that buildings under construction and plant and machinery under installation could not be treated as , factory building within lhe meaning of schemes relating to factories. But this geiseral argument could not detain us as much as because they relate to queation of fact and the proper authority in this regard was the Enquiry Officer and not this Court in its writ jurisdiction. ' In Petition No, 487 of 1975, Messrs Liberty Mills Ltd.; as usual like other petitioners, failed to insure their goods under the Ordinance, it was followed by usual notice and hearing of the representative of the petitioners by the Enquiry Officer, who found that during the relevant period goods were insured against Fire Insurance Policies, detailed therein, with Mesas National Security Insurance Company Ltd. He, therefor on the basis of Fire Insurance policies produced by the petitioners fixed insurable value from 3-12-1971 to 31-1-1972 at Rs, 41,19,000 and from 1-2-1972 to 31-7-1972 at Rs, 40,00,000 and thereafter according to the reasons given therein after considering the Rules and the Scheme applicable, he assessed Rs, 1,11,276 as unpaid evaded premium including surcharge and interest which was followed by demand notice. The petitioner filed appeal before - respondent No 1 which was rejected by him vide an Order dated 24-44975. ' The legal grounds taken in this petition are the same. ' In Petition No, 850/75, Messrs Arag Industries Ltd., having failed to insure their factory under the Ordinance was issued usual notice under section 18 by respondent No, 2 followed by show-cause notice to determine insurable value in pursuance of which representative of petitioners appeared
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and was heard and the documents considered by the Enquiry Officer, who on the basis of Fire Insurance Policy taken out by the petitioners assessed Rs, 5,11,874.10 as evaded and unpaid premium including surcharge and interest. This was followed by demand notice. ' The petitioners challenged the above assessment Order in appeal which was dismissed by respondent No, 1 by his Order dated 28-7-1975. It may be noted that appellant's repsesentative was heard and, in fact, the petitioner was given the relief for month of May, 1972 with regard to increase in value for month of May, 1972, and the Enquiry Officer was directed to modify The assessment and give benefit to the petitioners of month of May, 1972 which was caused due to devaluation and to assess it from June to July, 1972. ' Additional ground taken in this petition was that the insurable value should have been left to the factory owner to determine the same and the definition of "actual value" as defined in Clause III to Explanation 1 to section 7, was ignored by respondent No, 2 and the adoption of value on the basis of Fire Policy taken out by the petitioner was not legal, and that addition of Rs, 10 lass on account of devaluation is not based under the Ordinance, Rules and Schemes, therefore, the assessment Orders are arbitrary. ' Petition No, 851 of 1975 is by the same petitioners Messrs Arag Industries Ltd. This was with regard to goods which were not insured according to the Ordinance. After usual procedure of issuing notice and hearing the representative and considering the documents the Enquiry Officer assessed Rs, 2,84,351.07 as unpaid and evaded premium, followed by demand notice. ' The petitioners filed an appeal which was, however, dismissed by respondent No, 1 on 28-7-1975 and in this case after hearing the representative of the appellant. ' The grounds in both the petitions are the same. ' In Petition No, 325 of 1975,' Messrs Gul Ahmed Textile Mills Ltd., the petitioner, having failed adequately to insure its goods under the Ordinance and the Schemes, was followed by Notice under section 18 of the Ordinance. After considering the documents and hearing the representative of the petitioner, the respondent No, 2, the Enquiry Officer on the basis of Fire lasurance Policy taken out by the petitioner assessed Rs, 5,82,799 as unpaid and evaded premium including the interest and surcharge. This was followed by demand notice. It may be noted that the basis of assessment, as in other cases, were again documents produced by the petitioner and the Fire Risks Insurance Policies taken out by them. The assessment order was unsuccessfully challenged by an appeal which was dismissed by respondent No, 1 on 1-3-1975. ' As an additional ground, it was submitted that respondent No, 2 has not given exemption of various items such as goods insured under Motor Insurance Policies, and the goods not intended for sale or meant for use as an ingredient in manufacturing of any goods, as provided by Notification No, SRO 107(1)/72, dated 1-2-1972, and it was submitted that the impugned order does not show that the petitioner was given any deduction of the gazetted items according to the above notification and that they were not allowed any depreciation for the Insurance policies relating to motor vehicles. ' In Petition No, 1101 of 1975, Messrs Globe Textile Mills Ltd , having failed to insure their goods under the Ordinance were issued show-cause notice and after hearing the representative and considering their documents produced, the Enquiry Officer assessed Rs, 1,68,670 as unpaid and evaded premium including surcharge and interest followed by demand notice. The petitioners' appeal was dismissed by respondent No, 1 on 25-8-1975. ' As an additional ground it was submitted that the impugned assessment order was bad in lavi and the finding of the Enquiry Officer that the petitioner has evaded to take War Risks Insurance Policy for adequate value because the petitioner obtained the War Risks Insurance Policy of insurable value amounting to Rs, 10 lacs against the goods which figure was competible to the accepted value by Messrs Newaealand Insurance Company under the Fire Insurance Policy.
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Therefore, there was no question of levying surcharge of 20% on the premium nor there was any liability to pay it. t may be noted that the petitioners obtained War Risks Insurance cover spent of goods insured against Fire Risk end paid premium amounting to RS. 2,177.94 for December, 1971 and on enquiry it was found that the goods were under-insured even during December, 1971 and uninsured during the remaining period, that is, 1-1.1972 to 31-7-1972. The Enquiry Officer giving the benefit of the paid premium to the petitioners assessed Rs, 1,68,670. As to the fresh ground that respondent No, 2 issued show-cause notice dated 4-4-1974, proposed insurable value totalling to. Rs, 53,65,000 while in the impugned assessment order the insurable value has been increased instead of Rs, 1,24,63,020. It may be observed here that even in appeal no such ground was taken before the appellate authority, which was a proper forum. Even otherwise, the assessment is based on the documents furnished by the petitioners themselves and on the basis of Fire Insurance Policies taken out by them. ' In Petition No, 553, Messrs Bawany Industries Ltd. The petitioner like other petitioners failed to insure their goods under the Ordinance, followed by usual notices, hearing their representative and considering their documents, the Enquiry Officer assessed Rs, 5,88,737 including surcharge and interest as unpaid and evaded premium. ' Apart from the above their goods in transit were also not insured under the Ordinance. After usual procedure the Enquiry Officer assessed Rs, 574 as unpaid end evaded premium. The same petitioner was also required under the Ordinance to insure their factory. Having failed to do so, liner following the usual procedure of show-cause notice, heating the petitioners' representative and considering their documents a sum of Rs, 7,87,530 was assessed as unpaid and evaded premium which included surcharge and interest. ' A joint appeal was filed against three assessment orders, that is, with regard to factory, goods and goods in transit against a total assessment of Rs, 13,76,841. All the three appeals, however, were dismissed by respondent No, 1 by his order dated 4-4-1975. ' In addition to the common grounds in all the petitions it was urged that the petitioner has insured their goods, goods in trisalt and factory for the month of October, 1971 under the Ordinance and issued a cheque for Rs, 1,04,504.40 towards the premium but it could not be cashed due to fall of Dacca. Therefore, it cannot be said that the petitioner failed to take out the requisite insurance policies and non-cashing of the cheque, in the circumstances, was beyond the petitioner's control, therefore, the impugned orders are bad in law. ' The ground that the petitioner has taken out Insurance policies under the Ordinance and issued a cheque has no substance because although the petitioner applied to Adamjee Insurance Company Limited, Karachi who was acting as an agent of the Federal Government for taking out War Risks Insurance Policies and gave a cheque of the amount drawn on Habib Bank, Dacca.. This cheque could not be presented for payment or got cashed because of fall of Dacca. Adamjee Insurance Company Limited presumably had issued a War Risk Insurance Policy on the expectation that the cheque of the petitioner would be cashed in due course. But as the cheque was not cashed the War Risks Insurance Policy was cancelled by Admajee Insurance Company Limited, Karachi. Therefore the issue of the War Risks Insurance Policy was obviously conditional on the payment of the amount of premium but this was not done. The declaration of cease-fire came on or about 17th December, 1971 but it did not absolve the petitioner from taking out another War Risk Insurance Policy as it is a statutory obligation. The petitioner most probably knew that the cheque issued by him could not be presented and cashed because of fall of Dacca. Since he had not paid the premium and the policy had been cancelled this ground Is not available to the petitioner. ' In Petition No, 1580/74, Jubilee Spinning & Weaving Mills Ltd. Having not complied with requirements of Ordinance, 1971 was issued usual notice and after hearing the representative and considering the documents', the Enquiry Officer assessed Rs, 4,75,207.83 as unpaid premium with
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regard to their factory and Rs, 1,33,110.88 with regard to the goods which included surcharge and interest. This was followed by demand notice. The basis of this assessment was again the Fire Insurance Policy taken out by them. A joint appeal against the assessment order was dismissed by the respondent No 1 by his order dated 12-8-1974. ' An additional ground against the impugned order was that the assessment of costs of the factory was arbitrary and in violation of Rule 7 of the Ordinance, according to which the cost of new unit of the factory was to be assessed then depreciation to be allowed according to the Income-tax Act, 1922, but the insurable value should not be less than 25% of the cost, and that the cost of the new unit of the factory can be ascertaineu from P.1.C.I.C., I.D.B.P. And other loan-giving agencies but the respondents have failed to follow the rules besides motor vehicles are not goods under section 2(f) of the Ordinance and not compulsorily insurable. Therefore, demand of premium on motor vehicle is without lawful authority and that ;he petitioner insured the factory and the goods in December 1971 and paid premium of Rs, 40,494.82 and Rs, 35,000 respectively, therefore, the provisions of section 13 of the Ordinance are not attracted and the usual levy of surcharge and the interest and the assessm ent of the cost of the factory on the basis of Fire Insurance…
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