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Petitioner: PAKISTAN NATIONAL SHIPPING CORPORATION VS Respondent: PREMIER INSURANCE CO. OF JUDGMENT
Court Name: Sindh High Court Judge(s): Rasheed A. Rizvi Title:PAKISTAN NATIONAL SHIPPING CORPORATION vs PREMIER INSURANCE CO. OF
JUDGMENT
Reported As: 1999 MLD 1950 Result: Order Accordingly Judgment JUDGMENT ' Initially, this suit, which was for recovery of Rs.4,000,000 (Rupees four million only), was filed by Messrs United Oriental Steamship Co. Which was a partnership firm having four partners, who all were the plaintiffs as Nos.2 to 5. As a result of promulgation of Pakistan Maritime Shipping (Regulation and Control) Ordinance, 1974 (Ordinance III of 1974), the management of United Oriental Steamship Co. Was taken over by the Federal Government which later on acquired the whole of proprietary interest of the partners of the said steamship company. On 31-8-1976, the Pakistan Shipping Corporation Act, 1976 came into force and as a result of the same Messrs Pakistan Shipping Corporation was established; that on 31-10-1976, all proprietary interest of the United Oriental Steamship Co. Was transferred to the Pakistan Shipping Corporation. Again, this Pakistan Shipping Corporation was substituted by Pakistan National Shipping Corporation as a result of the promulgation of the Ordinance XX of 1979 and which is now plaintiff in the field. As a result of the "'above changes, the plaintiff was allowed amendments from time to time. 2. Earlier, this suit was heard and decreed vide judgment dated 7-2-1983 (reported in PLD 1983 Karachi 550 as Pakistan National Shipping Corporation v. Premier Insurance Co. Of Pakistan Ltd. And 2 others). The suit was decreed up to the extent of Rs. 15 lacs against the defendant No,1 with interest at 6% per annum from the date of suit till realisation and against the defendants Nos.2 and 3 the suit was dismissed with no order as to cost. Against this, defendant No,1 filed an appeal which came up for bearing on 31-10-1991 before a Division Bench comprising Abdul Rahim Kazi, J. (as he then was) and Mamoon Kazi, J. (as his lordship then was) and the judgment of learned Single Judge of this Court was set aside. (See Premier Insurance Co. Of Pakistan Ltd. v. Pakistan National
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Shipping Corporation and 2 others 1993 CLC 1284). The suit was remanded by the Appellate Court with the following observations:-- ' "..................... The learned Single Judge has held that it was a concluded contract but it has not been held as to on what date the said contract was concluded. In the judgment, while dealing with issue No,2, which also reflects on the point involved in the said additional issue the learned Single Judge, taking into cumulative effect of the entire correspondence has observed that there was a concluded contract between the parties but it has not been determined specifically as to on what date the contract had been concluded. In view of the provisions of War Risk Insurance Ordinance, 1965 and the said scheme, the determination of this point can be crucial for the decision in the suit. As the determination of this point also involves the question of fact, we would refrain from giving any finding on additional issue at this stage but would remand the case to the learned Single Judge to give finding on this issue as well after hearing the learned counsel for the parties. ' The upshot of the above discussion is that the present appeal is allowed, the judgment and decree passed in the suit is set aside and the case is remanded to the learned Single Judge to give findings on the additional issue as well as all the issues afresh. There will be no order as to costs." 3. The brief facts of the plaint are that the plaintiff was the registered owner of the vessel S.S. 'Ilyas Bakhsh' which was insured with the defendant No,1 for War Risk also with effect from 2-9-1965 for an amount of Rs.40 lacs; that at the relevant time, the vessel was berthed at Bombay (now Mumbai) India; that the said vessel was seized by the Government of India sometime after 2nd September, 1965; that the plaintiffs gave notices of abandonment of the ship on the ground that there was no likelihood of the plaintiffs regaining possession/ custody of the ship and filed a claim for Rs.40 lacs; that the defendant No,1 through its letter dated 10-3-1966 declined to accept the abandonment. It is the case of the plaintiff that the defendant No,1 cannot decline to accept the abandonment of the ship and that they are liable to pay to the plaintiff the amount insured i.e, Rs.40 lacs. It is prayed in the plaint that the suit be decreed 4 for Rs.40 lacs with 6% interest from the date of suit till realisation against both the defendants alongwith cost. 4. The case of the defendant No,1 is that it is not liable to pay the amount of insurance to the plaintiff; that no contract of insurance was concluded between the parties; that the abandonment of the vessel was ineffective and invalid; that the value of the ship was also disputed as not being Rs.40 lacs in addition, no cause of action was pleaded with the prayer for dismissal of the suit. On the application of the defendant No,1, the defendant No,2 namely Pakistan Insurance Corporation (hereinafter referred to as PIC) and defendant No,3 namely Federation of Pakistan were impleaded as third parties in view of the provisions of the War Risk Insurance Ordinance, 1965 (Ordinance XXV of 1965). (See PLD 1965 C.S. 439). Both the defendants Nos.2 and 3 filed a joint written statement denying their liability in any manner to pay the insurance amount. It was pleaded that the P.I.C. Being a delegatee of the defendant No,3 is not personally liable and that no decree could be passed against P.I.C.; that the War Risk Insurance Ordinance, 1965 (hereinafter referred to as the Ordinance, 1965) was promulgated on 9-9-1965 while the vessel was impounded by the Indian Authorities on 7-9-1965 and, therefore, the provisions of the Ordinance, 1965 are not available; that this Court has no jurisdiction as for recovery of War Risk Insurance under the Ordinance, 1965, a special Machinery has been provided which has not been resorted to. Both the defendants prayed for dismissal of the suit. 5. As a result of the above pleadings, on 14-11-1966, some eight issues were framed by this Court (Exh. 4). Subsequently, on 29-4-1978, issues were amended (Exh. 7) thereby enhancing the total issues to 16. On 26-1-1981, one more issue was framed. However, on 18-4-1998, after hearing all the parties at some length, the above issues were recast and by consent of the parties the following ten issues were finally adopted:--
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"(1) Whether the defendant No,1 as agents of the Central Government at relevant time issued any policy under War Risk Insurance Ordinance, 1965 in respect of vessel S.S. Ilyas Bux. If so, its effect? (2) Whether the vessel S.S. Ilyas Bux was lawfully insured for war risk by the plaintiff with defendant No,1 prior to 9-9-1965? If so, whether any Sea Policy was issued and if so, for what amount and for what period the Sea Insurance was effected? (3) Whether the ship S.S. Ilyasbaksh was seized and impounded by the Government of India at Bombay? If so, when was the said ship was seized and or impounded and for what reason? (4)(a) Whether the plaintiff validly abandoned the ship S.S. Ilyasbaksh in favour of the defendant No,1 by their letter dated 25-9-1965. If so, to what effect? (b) If the answer to Issue No,4 (a) is in affirmative, did the defendant No,1 assume the ownership subsequent to the above abandonment? If so, to what effect? (5) Whether the second abandonment notice of the plaintiff dated 9-3-1966 is valid and or binding on the defendant No,7? (6) Whether plaintiffs have refused/neglected/failed to bring the ship S.S. Ilyasbaksh from Bombay to Karachi. If so, to what effect? (7) What is the value of the ship S.S. Ilyasbaksh and to what amount, if any, are the plaintiffs entitled? (8) Whether the Court has no jurisdiction to determine the liability under the War Risk Insurance Ordinance, 1965 against third parties? (9) Whether defendant No,1 had no capacity to enter into any contract of war risk insurance except in the capacity of an agent of the then Central Government in view of the provisions of section 21 of the War Risk Insurance Ordinance, 1965? If so, what is its effect on the contract of insurance? (10) What relief, if any, the plaintiff is entitled to and against whom?" 6. I have heard Mr. Iqbal Siddiqui, Advocate for plaintiff, Mr. Mansoorul Arfin, Advocate for defendant No,1 and Mr. Abdul Rauf, Advocate for defendant No,2. None appeared on behalf of defendant No,3, namely Federation of Pakistan despite issuance of several notices. The most important question in this suit is whether the vessel S.S. Ilyas Bux was lawfully insured? If so, when and for what amount? The Ordinance, 1965 was promulgated on 9-9-1965 and the scheme was also made applicable from the said date. Before it is to be determined when the insurance came into existence, as it will determine the liabilities, if any, of the defendants. My findings on the above issues are as follows. Issue No,1. 7. The case of the plaintiff is that on 2-9-1965, it requested the defendant No,1 to insure the vessel and that after some negotiations, it was agreed that the War Risk Insurance for S.S Ilyas Bux was to be effective from 2-9-1965. This issue was framed at the insistence of Mr. Mansoorul Arfin, Advocate for defendant, although neither in the initial written statement (Exh. 3) filed by the defendant on 1- 9-1966, nor in the amended written statement filed on 8-1-1980, it was ever claimed by the defendant No,1 that it has acted as agent of the Central Government at the relevant time and issued policy under War Risk Insurance Scheme. To prove this issue, burden lies upon the defendant No,1. Mr. Abdul Rauf has drawn my attention to the cross-examination of P.W.2 (Exh. 10), namely, Saleem Ahmed Ejazi when on 8-4-1980 Miring cross-examination of this witness, a statement of Mr. Shah Jamil Alam, the then advocate appearing for the plaintiff was noted by this Court which as follows:- "(i) At this stage Mr, Shah Jamil Alam, learned counsel for the plaintiff states that in order curtail the cross-examination his statement may be. Recorded to the effect that the vessel in question was not covered under the War Risk Insurance Ordinance of 1965. This statement can be used by the learned counsel for the parties. (2) (Mr.. Mansoorul Arfin, learned counsel for defendant No,1 states that he does not accept the above position as correct)."
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8. Defendant No,1 has examined D.W..1 (Exh. 79) Chowdhry Muhammad, who at the relevant time was working with the defendant No,1 as the Secretary of the Company. Nowhere in his evidence, he has ever claimed that the defendant has acted as agent of the Central/Federal Government or that the vessel was insured in furtherance of War Risk Insurance Scheme. It is an admitted position that the War Risk Insurance Ordinance, 1965 was promulgated on 9-9-1965. According to its section 6, the Central Government was required to prepare one or more War Risk Insurance Schemes. Accordingly, the War Risk (Ships) Insurance Scheme was notified in the Gazette of Pakistan, extraordinary, 12th December, 1965 (PLD 1965 SC 522). This scheme was made effective from 9-9- 1965. According to clause 4 of this scheme, every owner of a ship is required to apply in order to obtain a policy of insurance as provided under section 13(1) of the Ordinance, 1965. Sub-clause (2) to clause (4) prescribed making of such application in triplicate in Form 'A' and simultaneously to pay premium through bank draft, cheque, money order, postal order or cash. Sub= clause (6) provides that if the application for insurance is not received in accordance with the prescribed form, the remittance may be retained by the Government agent and the application will be returned to the applicant for resubmission. Then clause (5) provides for issuance of a policy by the Government in Form 'C' after completion of the formalities provided under clause (4). It has been rightly argued by Mr. Abdul Rauf there their is no evidence on record to suggest that at any time the plaintiff applied for War Risk Insurance as provided under section 13(1) of the Ordinance, 1965 read with clause (4) of the Insurance Scheme or that at any time any policy was issued in Form 'C' by the Federal Government. Mr. Abdul Rauf has also-relied upon the case of Messrs Crescent Sugar Mills and Distillery Ltd. v. Messrs. American Export ISbrandt Sen Inc. And 2 others (PLD 1983 Karachi 29) which was upheld by a learned Division Bench of this Court comprising Ajmal Mian, J. (now Chief Justice of Pakistan) and Abdul Rasool Agha, J. (as he then was) vide judgment dated 25-2- 1988 in H.C.A.-70/1982. On this basis, it was argued that the liability of insurance depends on the terms and conditions of the insurance policy and in absence of any such insurance policy no liability can be imposed on the third party. 9. After going through the evidence and respective submissions of all the parties, I am of the considered view that no policy under the Ordinance, 1965 or the scheme framed thereunder was ever applied by the plaintiff or was ever issued by the defendant No, 1 . Mere verbal assertion of Mr. Arfin that after promulgation of the Ordinance, 1965 on 9-9-1965 an insurance company was not entitled to enter any War Risk Insurance business and if entered would amount to a business carried on behalf of the Central Government, will not be sufficient to prove this Issue. Indeed, there was a prohibition on the insurance companies to enter into any War Risk Insurance business after 9-9-1965. But this is not the case of the plaintiff in so far its pleading and evidence is concerned. I, therefore, answer this issue in negative. Issue No,2: 10. The case of the plaintiff is that the vessel in question S.S. Ilyas Mix was insured with the defendant No, 1. For War Risk in the sum of Rs.40 lacs with effect from 2nd September, 1965. This has been denied by defendant No,1 on the ground that no valid contract was concluded between the parties. In support, Mr. Iqbal Siddiqui has referred to several letters/communications exchanged between the plaintiff and defendant No,1 and which were brought on record during the course of evidence. The first letter is Exh.10/1 produced by P.W.1 which is dated 2-9-1965 which is written by plaintiff-company to the defendant No,1 which refers to the telephonic conversation of the same day between the author of the letter and the person to whom it was addressed. Exh 10/1 contains request to insure the aforesaid vessel which at the relevant time was berthed at Bombay. A cheque of Rs.2,000 (Rupees two thousands only) was enclosed as premium for the insured amount. However, the insurance amount was not mentioned in the said letter. This letter contains an endorsement from Muhammad Chowdhry to the extent "Cover will commence after I have
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received confirmation from my re-insurers at London". This letter was also exhibited as Exh. 11 by the same witness which is original Exh. 10/1. The other letter is dated 3-9-1965 (Exh, 10/2) which is in continuation of the previous letter (Exh.11). Again in the second letter reference was made to some telephonic conversation to the effect of two other vessels as well as S.S. Ilyas Bux. Bank Guarantee of Rs.50,000 was also forwarded. Again, the insurance amount of S.S. Ilyas Bux was not disclosed. Exh. 10/3 is cancellation letter dated 7-9-1965 written by the Secretary of defendant No,l through which all War Risk Cover granted by defendant No,1 was cancelled with immediate effect. It was further expressed that in case of denying the War Risk Cover, the plaintiff was required to agree to pay the premium at the revised rate to be determined in London and also to accept the revised terms and conditions and funds of all War Risk Insurance Cover. The terms proposed by defendant No,1 vide Exh. 10/3 duly explained vide Exh. 10/4 which is a letter of the same date i.e, 7-9-1965. This letter was followed by another letter (Exh. 10/5) written on the next day through whith defendant was asked to disclose the rate of premium for S.S. Ilyas Bux in order to enable the plaintiff to pay the same. On the same day, another letter was written by the plaintiff which is Exh. 10/6 through which a cheque of Rs.31,800 being the consolidated amount of premium of War Risk Insurance of three vessels including S.S. Ilyas Bux, was forwarded to the defendant No,1 for the sum insured of Rs.40 lacs for each vessel effective from 3-9-1965. Acknowledgement of the said letter and receipt of the cheque is further admitted by defendant No,1 vide letter dated 9-9-1965 (Exh. 10/7). 11. Through Exh. 10/7, it was asked by the defendant No,1 whether S.S. Ilyas Bux was under "duress" on 2nd, 3rd, 4th or 5th September, 1965 which was denied by the plaintiff vide Exh. 10/9 dated 10-9- 1965. However, on 25-9-1965, the defendant No,1 conditionally accepted to grant War Risk Cover to S.S. Ilyas Bux vide Exh. 10/14 effective from 2-9-1965 up to 27-9-1965. Relevant portion of Exh. 10/14 reads as follows:- ' "In view of all the above and subject to as "Ilyas Baksh" not having been under duress on any date between the 2nd September and 5th September, 1965 or any date prior to that, we are pleased to provide you provisional cover for Rs.30 lacs (Rupees thirty lacs only), effective from the 2nd September, 1965 up to the 20th September, 1965 taking into account the notice of cancellation served by us on the 7th September, 1965, against War Risks. If we are able to make any improvement in the sum insured we shall advise you of the same. We would, however, make it absolutely clear that we are under no obligation to increase the sum insured any further but nevertheless we will make all efforts to increase the cover. ' The cover granted for War Risk would be subject to our standard policy conditions, terms, warranties etc. And provisions of the Institute War and Strike Clauses- Hulls Time." 12. On the same day i.e, 25-9-1965, plaintiff lodged insurance claim with the defendant No,1 for Rs.40 lacs as the vessel in question was impounded by the Indian Government on 7-9-1965 which request was denied by the said defendant vide Exh. 10/16. Through this letter, the defendant No,1 also declined to accept the abandonment of the said ship. This gives rise to the dispute between the parties. Subsequent to Exh. 10/14, the defendant No,1 has reiterated the same stand vide Exh. 10/16 dated 27-9-1965, (Exh. 10/18) dated 1-10-1965 and Exh. 10/20 dated 15-10-1965. Much of the controversy revolves around the letter dated 25-9-1965 (Exh. 10/14), the original of which was also brought on record as Exh. 34. There are several other lettters written by the defendant No,1 through which the said defendant is found continuously demanding premium for War Risk Cover from the plaintiff. The said letters are Exh. 10/21 dated 21-10-1965, Exh. 10/22 dated 26-10-1965 and Exh. 37 dated 17-11-1965. The terms and conditions proposed in Exh. 10/14 (also Exh. 34), the defendant No,1 enhanced the War Risk Cover from 30 lacs to 35 lacs vide Exh. 41 dated 2-12-1965 which reads as follows:-- ' "Now, subject to the terms and conditions of our Standard Marine Policy and the Institute War and Strike Clause, Hulls (Time) and the provisions of our said letter of the 25th September, 1965, we are
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pleased to advise that we have increased your cover on the above ship to Rs.35,00,000 for the period from 2nd September, 1965 to 20th September. 1965. ' We had also advised you that although in your original request as contained in your letter of the 2nd September, 1965, you had not mentioned any amount for which cover was required, yet we were endeavouring to provide you cover for a amount up to the extent of Rs.40,00,000, but without any obligation. In this connection we also refer to our letter of the 27th September, 1965 and would advise that the cover in the sum of Rs.35.00,000 (rupees thirty five lacs only) is the final amount for which we have been above to afford you protection for the period stated above." 13. Examination of the abovementioned documents establishes the fact that the vessel in question was covered against War Risk and this fact was not denied by the defendant No,1. In letters dated 21-10-1965 (Exh. 10/21) and dated 26-10-1965 (Exh. 10/22), the defendant No,1 had. Written to the plaintiff about continuation of War Risk Cover in respect of S.S. Ilyas Buksh. Learned counsel appearing for the defendant No,1 was not able to satisfy as to why 'continuation' of the War Risk Cover was agreed by the defendant when, according to them, there was no war risk insurance agreed between the parties. There is, in my considered view, sufficient material to establish that the vessel S.S. Ilyas Buksh was covered against war risk by the defendant No,1 namely Premier Insurance Company of Pakistan with effect from 2-9-1965 to 20-9-1965. 14. It was strenuously argued by Mr. Mansoorul Arfin, learned counsel for the defendant No,1, that despite the abovementioned letters, there was no concluded and binding agreement between the parties as no separate policy of sea insurance as provided under section 7 of the Stamp Act, 1899 was issued. Reliance was placed on section 2 (20) of the Stamp Act as well as on section 2 (13) (a) of the Insurance Act, 1938. This is not a case of issuance of a fresh sea insurance policy but it was a case of issuing additional coverage pertaining to war risk. It has not been denied by the defendant No,1 that the vessel S.S. Ilyas Baksh was earlier insured for the marine risk which fact is apparent from the examination in chief of D.W.I namely Chowdhry Muhammad who, at the relevant time, was the Secretary of defendant No, 1. He has produced the original of such policy as Exh. 79/1. Nonetheless, all these submissions of Mr. Arfin were earlier considered by a learned Single Judge of this Court Nasir Aslam Zahid, J. (as his lordship then was) for which Mr. Arfin was not able to compel me to take another view. The objections were replied in the following manner while making reference to the cases Tricambji v. Verji Kanji (AIR 1923 Born. 142) and Ahmed Shah v. Grindlay & Co. (AIR 1944 Sindh 98). Following is the relevant portion of the said Judgment appearing at pages 563 and 564 of Pakistan National Shipping Corporation v. Premier Insurance Company of Pakistan Ltd. And 2 others (PLD 1983 Karachi 550):-- ' "In my view there is a distinction between the English Law and the statutory law in Pakistan on this point. Under the provisions of the English Marine Insurance Act, 1906 apparently a contract of Sea Insurance is inadmissible in evidence and not valid unless it is expressed in a formal policy. This is, however, not so in Pakistan Law. Section 7 of the Stamp Act no doubt specifies that no contract for sea insurance shall be valid unless the same is expressed in a sea-policy, but the word "Sea policy" employed in seciton 7 is not restricted in meaning to a formal policy but will also mean a document or documents which are covered by the definition of this term in section 2(20) of the Stamp Act ' I am in agreement with the above views expressed in AIR 1923 Born. 142 and AIR 1944 Sindh 98. Contention of Mr. Fazlur-Rehman, learned counsel for the Insurance Company, that unless the contract of Sea insurance is contained in formal insurance policy, it is invalid-, therefore, is not accepted. I have already discussed in sufficient detail the correspondence exchanged between the plaintiff and the Insurance Company. In my view the documents brought on record constitute,
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a contract of sea insurance between the plaintiff (United Oriental Steamship Co.) and the Insurance Company as requirements of subsection (3) of section 7 have been satisfied." 15. As a result of the above discussion, I hold that S.S. Ilyas Baksh was extended War Risk Cover by the defendant No,1 prior to 9-9-1965 for an amount of Rs.35 lacs. Issue No,3: 16. In this connection, the plaintiff has examined Khan Wajahat Jamil as Exh. 9 who, at the relevant time, was the 5th Engineer serving on S.S. Ilyas Buksh. He stated in his examination-in-chief that it was in the 2nd week of September, 1965 when the said vessel was stationed at Bombay Shipyard. When Indian Custom officials, Police and Naval Officers seized the said vessel and removed the crew of the vessel to Visapur Central Prison, India. This statement of P.W.1 was not denied in the cross-examination. P.W.2, Saleem Ahmed Aijazi has produced Exh. 10/13 which is a letter dated 16- 9-1965 through which defendant .No,1 was informed 'that the vessesl in question was impounded on 7-9-1965. Then there is a certificate of detention issued by Mercantile Marine Department Bombay dated 13-9-1965 (Exh. 78/4) produced by witness Kaleem Akhtar. According to this Certificate (Exh. 78/4)…
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