Rana Basit Rice Mills (Pvt) Ltd: SC sets aside LHC judgment authorising attorney to file suit

ISLAMABAD: The Supreme Court ruled that the lack of a board resolution authorising the attorney does not invalidate the institution of the suit, as long as the Articles of Association confer upon the person(s) to institute the suit in the company's behalf.

A three-judge bench headed by Justice Mushir Alam heard the appeal of Rana Basit Rice Mills (Pvt) Ltd against the Lahore High Court (LHC) judgment in insurance claim.

The bench set aside the LHC judgment a board resolution authorising the attorney to file suit on behalf of the Rice Mills.

Rana Basit Rice Mills (Pvt) Ltd, (appellant) through its chief executive, obtained from the insurance company (respondent) a fire general policy to the tune of Rs 150,002,000 covering its stock of rice, paddy machinery and building etc against comprehensive insurable risk for a period 09.09.2011 to 09.08.2012 against the premium of Rs 370,000.

The night between 13.06.12 and 14.06.12, 'a gust thunderstorm' caused losses to appellant's insurable interest covered under the insurance policy.

The appellant as required under the law and policy lodged the claim to the tune of Rs 9,851,760.

The respondent-insurer appointed a surveyor to assess and evaluate the loss.

The surveyor after all requisite formalities assessed and verified the loss to the tune of Rs 4,957,083.

However, the respondent did not pay the assessed claim within 90 days as mandated under Section 118 of the Insurance Ordinance, 2000.

The appellant, therefore, approached the Insurance Tribunal Punjab, Lahore on 06.12.12 and claimed loss of Rs 9,851,760 from the responder-insurer.

The respondent contested the insurance claim of the Rice Mills and objected to the maintainability of its insurance petition on the ground inter alia that the petition was not filed by the authorised person as no resolution of the Board of Director was available on the record.

The appellant, to meet the challenge posed by the respondent, filed an application under Order VI Rule 17 read with Order VII Rule 18 and Section 151 CPC, sought the Tribunal permission to amend its petition to incorporate such fact.

The Tribunal vide order dated 10.02.2014 allowed the Rice Mills request to amend the petition and to place on record the Board Resolution.

The respondent took no exception to the Tribunal's order.

The Tribunal on 22.11.2016, after examining the evidence, granted the insurance claim of the Mills to the extent of Rs 4,957,083 as assessed by the insurance surveyor along with liquidated damages under s.118 of the Insurance Ordinance.

The respondent was directed to bear the cost of the case and to make the payment of the insurance claim and liquidated damages within a period of 30 days.

The respondent-insurer filed an appeal against the tribunal order before the LHC, on the ground that the board resolution authorising the attorney was admittedly not present on the date of filing of the insurance petition.

The High Court accepted the company's appeal 11.04.2018.

Rana Basit Rice Mills aggrieved by the LHC decision challenged it before the august court, which examined the legal repercussions of where no Board Resolution is presented authorising the deponent, Rana Abdul Basit, chief executive of the Mills to file and contest the insurance petition.

The judgment said the lack of a board resolution authorising the attorney does not invalidate the institution of the suit, so long as the Articles of Association confer upon the person/persons to institute the suit in the company's behalf.

Even otherwise, such a defect can always be cured by placing on record a Board Resolution issued even at a subsequent date, which would put the matter to rest, it added.

The judgment noted that the respondent (insurance company) did not challenge the finding of the Insurance Tribunal before the High Court on merit of the insurance claim as determined by the Tribunal, nor before the apex court.

It observed that the respondent insurer throughout laid emphasis on maintainability of the insurance petition filed without Board Resolution, which was allowed to be placed on record.

Respondent was not able to show any prejudice was caused to it.

Copyright Business Recorder, 2021