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Petitioner: THE EASTERN FEDERAL UNION INSURANCE Co. LTD VS Respondent: CENTRAL BOARD OF JUDGMENT
Court Name: Sindh High Court Judge(s): Ajmal Mian, Ali Nawaz Budhani Title:THE EASTERN FEDERAL UNION INSURANCE Co. LTD vs CENTRAL BOARD OF
JUDGMENT
Reported As: 1982 CLC 2316 Result: petition dismissed Judgment JUDGMENT AJMAL MIAN; J.- Since these 2 writ petitions involve common question of law, we intend to dispose of the same by this common judgment. The brief facts leading to the filing of the above Petitions are that the Eastern Federal Union Insurance Company Limited (hereinafter referred to as the Eastern Federal), petitioner in Petition No. D-947/81 and the Premier Insurance Company of Pakistan Limited (hereinafter referred to as the Premier Insurance), Petitioner in Petition No. D-517/81 were Insurance Companies dealing in life insurance as well as in general insurance till the promulgation of the Life Insurance (Nationalization) Order, 1972 (hereinafter referred to as the Order), whereby the life insu--rance business was nationalised and was taken over by the State and its management was entrusted to the Life Insurance Management Board (hereinafter referred to as the Board) till the incorporation of the State Life Corporation of Pakistan (hereinafter referred to as the corporation). Respondent No. 2 in the above first petition and respondent No. 4 in the aforesaid second petition (hereinafter referred to as Muhammad Fareed was working as an Assistant Income-Tax Officer at the time of promulga--tion of that Order. After Muhammad Fareed's services were lent to the Board and was posted as an Assistant to the Chairman of the Board. However, after the taking over of the management of the life insurance business by the Corporation Muhammad Fareed joined the Corporation and at present holds the post of the Deputy General Manager (Corporate, Claims and Taxes). 2. It may be pertinent to refer to section 22 of the Order, which reads as follows :- Section 22. Right of Corporation to seek relief in respect of certain transactions of the insurer.- Where an insurer whose life insurance business has been transferred to and vested in a
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Corporation under this Order has, at any time within fifteen years preceding the ap--pointed date- (a) made any payment to any person without consideration. (b) sold or disposed of any property of the insurer without considera--tion or for an inadequate consideration; (c) acquired any property or rights for an excessive consideration; (d) entered into or varied any agreement so as to require an excessive consideration to be paid or given by the insurer; (e) entered into any other transaction of such an onerous nature as to cause a loss to, or impose a liablity on, the insurer exceeding any benefit accruing to the insurer; (f) if a composite insurer transferred any property from his life department to his general department without consideration or for an inadequate consideration; (g) acted, or omitted to act, in violation of any provision of the Act and has thereby caused a loss to, or, imposed a liability on the insurer; and the payment, sale, disposal, acquisition, agree--ment or variation thereof or other transaction or transfer was not reasonably necessary for the purpose of the life insurance business of the insurer or was made without reasonable care and prudence on the part of the insurer, regard being had in either case to the circumstances at the time, the Corporation may apply for relief to the Tribunal in respect of such transaction, and all parties to the transaction shall, unless the Tribunal otherwise directs, be made parties to the application. (2) The Tribunal may make such order against any of the parties to the application as it thinks just having regard to the extent to which those parties were respectively responsible for the transac-- tion or benefit from it and all the circumstances of the case. (3) Where an application is made to the Tribunal under clause (i) in respect of any transaction and the application is determined in favour of the Corporation, the Tribunal shall have exclusive jurisdiction to determine any claims outstanding in respect of transaction. (4) Notwithstanding anything contained in this Article or anything contained in the Act the Corporation may bring suit under section 106 of the Act against any person to whom subsection (1) of that section is applicable. (5) Any amount due to the Corporation in pursuance of an order of the Tribunal under clause (3)- or an order of the High Court under section 106 of the Act may be set of against any compen-- sation, debt, liability or any money-due by the Corporation to the insurer or its share-holders or directors under the provisions of this Order, including the amount of compensation payable under Article 39." It may be noticed that under the above-quoted section of the Order, the Corpor4tion can re-open the matters referred to in clauses (a) to (g)for a period of IS years preceding the appointed date. It is the case of the Eastern Federal that Muhammad Fareed in pursuance of the above provisions has instituted as many as 20 cases against them and signed- the pleadings of the same as the Attorney of the Corporation and in fact is prosecuting the same before the Insurance Appellate Tribunal and had also appeared as the sole witness in some of the cases against the Eastern Federal, whereas in the case of Premier Insurance he has filed 3 cases against them under the above provisions. 3. It seems that the Central Board of Revenue through a notifica--tion dated 23rd April, 1981 issued in exercise of powers conferred by section 4 of the Income-Tax Ordinance, 1979 (hereinafter referred to as the Ordinance), appointed Muhammad Fareed as Special Officer. It further seems that the Commissioner of Income-Tax Central Zone `A', Karachi through his notification dated 25th April, 1981 in exercise of powers conferred by clause (c) of subsection (i) of section 5 of the Income- Tax Ordinance, 1979 (XXXI of 1979) and pursuance of the C.B.R.'s aforesaid notification dated 23rd April, 1981. Assigned jurisdiction in respect of the four insurance companies mentioned to the Schedule, namely, M/s. Premier Insurance Company Limited, M/s. 4dan Insurance Co. Ltd., M/s.
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Eastern Federal Union Insurance Co. Ltd., and New Jubilee Insurance Co. Ltd., to the Special Officer, Central Zone `A', Karachi. It further seems that after the insurance bf the above notifications, Muhammad Fareed had issued notices to the petitioners for production of the accounts books for the purpose of assessing the income-tax (i.e. To Premier Insurance for the year 1978-79 and to Eastern Federal for the year 1979- 80). It also seems that the petitioners after tile receipt of the above notices made representations to the, Central Board of Revenue pointing out therein that as Muhammad Fareed had in fact instituted the cases before the Insurance Appellate Tribunal against the Companies under section 22 of the Order and as he was prosecuting he same in as much as he appeared in some of the cases as the sole witness, itwas not just and fair to appoint him as-the assessing authority. But it seems that the Central Board of Revenue turned down the above representations. Thereupon, Muhammad Fareed issued further notices petitioners for the production of accounts books of the relevant year and appearance. It also seems that after the receipt of the above notices, the petitioners have filed the present Petitions in which both the petitioners have claimed more or less identical reliefs in substance except that premier Insurance in their writ petition also prayed for setting aside the aforesaid notification dated 25th April, 1981 issued by the Commissioner of Income-tax empowering Muhammad Fareed to exercise the jurisdic--tion of the assessing authority for the purpose of the aforesaid insurance companies. It may be advantageous to refer to the reliefs prayed for in Petition No. 497/81, which are as follows : "(a) The petitioners pray that this Hon'ble Court may be pleased to declare that the appointment of the respondent No. 2 as Special Income-Tax Officer to hear and to decide the income-tax assess-- ments of the petitioners is against the principles of natural justice and otherwise void: (b) Petitioners pray for a further order directing the respondent No. 2 to forbear from hearing the Petitioners income-tax cases or from taking any steps in connection therewith. (c) Costs of this petition is also prayed." 4. (a) In support of the above Petitions Mr. Muhammad Ali Sayeed has vehemently urged that Muhammad Fareed is not a fit person to act as the assessing authority being a biased person against the petitioners. Mr. Mansoorul Arfeen adopted the arguments of Mr. Muhammad Ali Sayeed but has additionally submitted that since Muhammad Fareed at present is an employee of the Corporation, he cannot be appointed as special officer for acting as the assessing authority in violation of section 4 (4) of the Ordinance. (b) On the other hand Mr. Nasrullah Awan as well as Muhammad Fareed (who has appeared in person) have submitted that the appointment of Muhammad Fareed as a Special Officer, as well as the assessing authority for the four Insurance Companies are in consonance with law and that the Petitioners have not pointed out any particular bias on the part of Muhammad Fareed. It was further contended by Mr. Awan that there is no violation of section 4 (4) of the Ordinance. (c) In furtherance of the above submissions, the learned counsel for the petitioners have invited our attention to Muhammad Fareed's affidavit in support of the application for vacation of the stay order and his counter-affidavits to the Petitions and have submitted that from the treading of the contents of the above affidavits, it is evident that Muhammad Fareed is biased and, therefore, is not a fit person to act as the assessing authority which involves adjudication of the income-tax liability, which is a quasi-judicial work. It has also been urged by them that though there is no doubt that Muhammad Fareed is a man of integrity and there cannot be any question about his probity, gut he is obsessed with the idea to recover maximum taxes for the State. It was also pointed out by them that while filing the aforesaid 20 cases before the Insurance Appellate Tribunal Muhammad Fareed has formed very poor opinion about the working of the petitioners companies and has made serious allegations of the commission of irregularities by the petitioners
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companies including unauthorised divergence of funds, etc. And., there--fore, he cannot defuse the above impression from his mind while acting as the assessing authority. (d) On the other hand, it was submitted by Mr. Nasrullah Awan and Muhammad Fareed that the cases which are pending before the Insurance Appellate Tribunal relate to life insurance business and for period during 15 years preceding 1972, whereas the assessments in question relate to the general life insurance business for subsequent period after nationaliza--tion, namely, for the years 1978-79 and 1979-80 and, therefore, the aforesaid pending cases before the Insurance Appellate Tribunal have no direct bearing on the assessments which are going to be made. It was also submitted by them that an Income-Tax Officer is entitled under law not only to assess on the basis of the documents produced by an assessee but can also rely upon the information derived by him through any private source including from his own personal knowledge provided such information is disclosed to the assessee and he is provided an opportunity to meet the same. 5. (a) Mr. Muhammad Ali Sayeed has referred to the case of From United Breweries Co. Ltd. And another v. Keepers of the Peace and Justice for County Borough of . Bath (1926 A C 586), the case of Metorpolitan Properties Co. (F.G.C.) Ltd. v. Lannon and others Regina v. London Rent Assessment Panel Committee, Ex parte, Metropolitan Properties Co. (F.G.C.) Ltd. ((1969) 1 Q .B 577), the case of Manak Lai, Advocate appellant v. Dr. Premchand Sinahvi and others (AIR 1957 SC 4255), the case of Mineral Development Ltd. v. The State of Bihar and another (AIR 1960 SC 468), the case of R. Viswanathan and others v. Rukn- ul-Mulk Syed Abdul Wajid (AIR 1963 SC 1), the case of A. K. Kraipak and others v. Union of India and others (AIR 1970 SC 150), the case of The Andhra Pradesh State Road Transport Corporation. Hyderabad and another v. Sri Satyanarayana Transports (Private) Ltd., Guntur and others (AIR 1965 S. C 1303), the case of Muhammad Nawaz v. Ghulam Kadir and 3 others (PLD 1973 SC 327), the case of ShaikhAkhtar Ali v. Federal of Pakistan and 4 others ((1960) 42 Taxation 47 (Lah:)), and the case of the Assessee v. Department ((197R) 37 Taxation 5 (Trib.)), Mr. Muhammad Ali Sayeed has also referred to certain passages from the well-known books namely, the Discipline of Law by Lord Deening 1979 Edition at p. 86, Garner's Admistrative Law, 4th Edition, pages 122 and 123., de-Smith's Judicial Review of Adrntaislrative Action 4th Edition at pages 252, 263 and 270 Mr. Mansoorul Arfin has referred to the book known as Principles of Administrative Law by M. P. Lain and S. N. Jain 3rd Edition at pages 206, 207, 2 14 and 215. (b) On the other hand Mr. Nasrullah Awan and Muhammad Fareed have referted to the case of Seth Gurmukh Singh and another v. Commis--sioner of Income-tax, Punjab ((1944) 12 1 T R 393). The case of Anraj Naraindass v. Commissioner of Income-Tax, Delhi, ((1951) 20 1 T R562) and the case of Zulfiqar Ali Bhutto and 3 others v. The State.. (13) (c) It may advantageous to quote hereinbelow the passages relied upon by M/s Muhammad Ali Sayeed and Mansoorul Arfin from the aforesaid books referred to hereinabove, which read as follows Lord Denning the Discipline of Law, 1st Edition, g. 86 . (i) A man may be disqualified from sitting in a judicial capacity on one of two grounds, First, a "direct pecuniary interest" in the subject-matter.. Second, "bias" in favour of one side or against the other. "So far as 'pecuniary interest' is concerned, I agree with the Divi--sional Court that there is no evidence that Mr. John Lannon had any direct pecuniary interest in the suit. So far as bias is concerned, it was acknowledged that there was no actual bias on the part of Mr. Lannon, and not want 'of good faith. But it was said that there was, albeit unconscious, a real likelihood of bias, This is a matter on which the law is not altogether clear but I start with the oft- repeated, saying of Lord Hewart, C.J, in R v. Sussex Justice, ex parte Mc Carthy: "It is not merely of
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some importance, but is of fundamental importance that justice should not only be done, but should manifestly and undoubtedly be seen to be done." (i.e) An adjudicator may indeed seldom achieve "the icy impartiality of a Rhadamanthus", and the idea that "by taking the oath of office as Judge, a man ceases to be human and strips himself of all predilections, becomes a passionless thinking machine, "is doubtless a myth. The common law nevertheless disqualifies a Judge, Magistrate or independent arbitrator from adjudicating whenever circumstances point to a real likelihood that he will have a bias, by which is meant "an operative prejudice, whether conscious or unconscious, "in relation to a party or an issue before him. Members of appeal tri6unais determining tax assessments and entitlements to social security benefits fall into the same category." "However, the, pendulum has how swung towards a test of reasonable suspicion, founded on the apprehensions of a reasonable man who had taken reasonable steps to inform himself of the material facts. "Reasonable suspicion" tests look mainly to outward appearances; "real likelihood tests focus on the Court's own evaluation of the probabilities ; but in practice the tests have much in common with one another, and in the vast majority of cases they will lead to same result. For the Courts to retain both tests. As alternative methods of approach is unlikely to cause serious uncertainty, and there may be advantages in preserving a measure of flexibility. It would be surprising, surely, if a Court were to refuse to set aside a decision on the ground that a reasonable observe could not have discovered facts that subsequently came to light and which indicated to the Court that there was- a real likelihood of bias in the adjudicator." Two main classes of cases may arise although they are by no means exhaustive. The first is where au adjudicator is associated with a body that institutes or defends the proceeding. The Courts have refused to hold that a person is disqualified at common law from sitting to hear a case merely on the ground that he is a member of the public authority, or a member of or subscriber to the voluntary association, that is a party to the proceedings. He is, however, disqualified if he has personally. Taken an active part in instituting the proceedings, or has voted. In favour of a resolution that the proceedings be instituted ; for he is then in substance both Judge and party." Principles of Administrative Law 6y M.R. Join and S.M. Join, 3rd Ed., 206.207 "An essential element of judicial process is that the Judge should be impartial and neutral and be in a position to apply his mind objectively to the controversy before him. If the. Judge is biased, if there are factors which may influence him to improperly favour one party against the other, .The proceedings before him will be vitiated. Generally speaking, a similar principle applies to quasi- judicial bodies, through not wholly, because in the cases where the administration acts as the adjudicator :n disputes between itself and an individual, the administration is bound to have some official" or " policy" bias, and it cannot be expected to have that kind of cold objectivity which is characteristic of a Judge." "The question of bias is thus to be decided by the Court not on the ground whether in the mind of the Court there was a "real likelihood" of bias or not put by applying the yardstick as to what a reasonable man would think about the matter ; whether he would suspect "bias" in the circumstances. Even when the Court may feel that there was no real likelihood of bias in the circumstances of the case, the Court may still quash a decision if right-minded people would suspect bias on the part of-the adjudicator. The test as now formulated boils down to the "reasonable suspicion" "test." (d) (i) Referring to the case reported in 1926 A C 586, it may be mentioned that the facts of the above cases were that on 9th May, 1924, the Licencing Justice met and passed the following resolution "That the clerk be instructed to write Mr. A. E. Withy asking whether he will, be prepared to act for the Licencing Justices in opposing the renewals of licenses referred to the compensation authority, and in the event of his agreeing, to act to instruct him." The aforesaid solicitor agreed to respondent the
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Licensing justices. Before the Licencing Justices at the principal meeting of the Compensation authority; which was held on 13th June, 1924, he duly appeared for the Licencing Justices and opposed the renewal of the Licence of the 7 dials hotel, which was refused. The Justices present at the aforesaid principal meeting when the aforesaid decision was reached included 3 ;justices, who were present at the meeting of the Licencing justices on May 09 when the instructions to oppose the Licence were given, as well as the 4th Justice who had been present at their meeting of 22nd February, when the decision to refer the matter to the Compensation authority was taken. The' above refusal was challenged and on 25th July, 1924, the Queen Bench Division granted a rule nisi for a writ of certiorari to remove the proceeding of the compensation authority on the ground that the 4 justices referred to hereinabove were disqualified by interest from adjudicating upon in the matter but on hearing of the agreements, the above rule was discharged and this decision . Was affirmed by the Court of appeal upon an appeal. The matter went to the House of Lords in appeal. And inter alia Viscount Cave L. C. While dealing with the question observed that "no doubt the statute contemplates the possibility of the licencing justice appearing before the compensation authority and taking part in the argument ; for it is provided by section 19 subsection (2) that the compensation authority shall give any person appearing to them to be interested in the question of the renewal of a licence "including licancing justice", an opportunity of being heard. But the statute nowhere says that the justices who, elect to appear as opponents of the renewal and take active steps (such as instructing as solicitor) to make their opposition effective, may neverthe-- less act as Judges in the disputes ; and in the absence of clear provision to that effect 1 think that the ordinary rule, that no one can be both party and judge in the same cause holds good. More or less same views were expressed by Lord Atkinson and Lord Summer. The appeal was allowed by the House of Lords and the case was remitted back to- the Queen Bench Division with a -direction that the rule nisi may be made absolute. (ii) As regards the case reported in 1969 I. Q. B. 577, it may lx stated that the facts of the above case were that in respect of flats 31, 60-A and 60 Oakwood Court, London, a block of flat of which the landlords were Metropolitan Properties Company (F. G. C.) Limited, the appellants were the tenants, a rent officer on the application in February. 1966 of the tenant for determining fair rent of the flats. On objection by the landlords to the determination, the matter was referred to the Rent Assessment Committee (Chairman John Lannon, a respondent), which heard the matter 4 days beginning in January, 1967. Oral represen--tation was made expert evidence was Balled on both sides and the Com--mittee inspected inter alia the exterior of Oakwood Court the interior of flat No. 31 and exterior of comparable relied on by both the side, namely, flat No. 48 in Melbury Court, a different block. On the basis of the above evidence the Committee recorded its finding. The landlords appealed in respect of each of the determination by the committee, inter alia it was contended that the John Lannon, the Chairman of the Commit--tee which heard the above case was not competent to hear the above case as the landlords had a dispute with the father of Mr. Lannon in respect of a flat rented out to him and the Chairman was residing with his father in the .Flat in respect of which there was dispute between the same landlord and the father. It was held by the Court of appeal reversing the Judgment of the Divisional Court that the decision of the committee headed by Mr. Lannon was vitiated on account of bias. It may be ins--tructive to quote hereinbelow a passage from the Judgment of Lord Denning M. R. "There must be circumstances from which a reasonable man would think it likely or probable that the Justice, or Chairman, as the case may be, would. Or did, favour one side unfairly at the expense of the other. The Court will not inquire whether he did, in fact, favour one side unfairly. Suffice it that reasonable people might think he did. The reason is plain enough. Justice must be rooted in confidence: and confidence is destroyed when right-minded people go away thinking : "The judge was biased."
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Applying these principles, I ask myself: Ought Mr. John Lannon to have sat? I think not. If he was himself a tenant in difference with his landlord about the rent of his flat, he clearly ought not to sit on a case against the self same landlord, also about the rent of a flat, albeit another flat. In this case he was not a tenant, but the son of a tenant. But that makes no difference. No reasonable man would drag any distinction between him and his father, see--ing he was living with him and assisting him with his case. Test it quite simplyif Mr. John Lannon were to have asked any of his friends : -I have been asked to preside in a case about the rents charged by the Freshwater Croup of Companies at Oakwood Court. But I am already assisting my father in his case against them, about the rent of his flat in Regency Lodge, where I am living with him. Do you think I can properly sit?" The answer of any of his good friends would surely have been: "No, you should not sit. You are already acting, or as good as acting, against them. You should not, at the seine time, sit in judgment. On them. (i.e) With reference to the case reported in A I (t 1957 SC 425, it may be stated that the facts of the above case were that the appellant was an advocate practising as Sojat. A complaint was filed against him under section 13 of the Legal. Practitioners Act by Dr: Premchand Singhvi. It was alleged by him that the appellant was guilty of professional miscon--duct and the…
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