Appellant Bench-III of the Securities and Exchange Commission of Pakistan (SECP) has upheld the decision of the Director Insurance SECP for imposing penalty of Rs 100,000 on an insurance company. According to the order issued by SECP Appellant Bench-III comprising Commissioner SCD Zafar Abdullah and Tahir Mahmood Commissioner CLD, irrespective of the fact that the asset sale proceeds were returned to the Appellant (insurance company), a violation of law has been committed by the company while keeping its asset in the name of an employee.
Application of law does not mean to get the desired results only; rather it requires application of law in true letter and spirit. The submission of the company contained in reply of show cause notice (SCN) and the appeal that there would have been no material impact on the financial position and performance of the company is not cogent. The company has violated the express provisions of law, which cannot be tolerated to ensure justice and rule of law. As a matter of fact the misstatements referred in the Impugned Order and stated above are material. The jurisprudence has envisaged a principle for administration of justice which requires that "If law requires that an act must be done in a particular way, it should be done in that manner as prescribed by the law."
As per bench, the company has failed or intentionally avoided to comply with the legal provisions of the Ordinance. Therefore, when a requirement of a statute has been violated then there is no need to establish mala fide or mens rea to prove the non-compliance of the provisions.
In view of the above the Impugned Order was passed with due care by keeping in view the principle of legal reasoning , necessary to establish the guilt and violation of law by the company. Therefore, Appellant Bench-III finds no reason to interfere with the Impugned Order dated 19/12/14 passed by the Director Insurance, therefore appeal is dismissed, bench added.
Bench has dispose of Appeal No 45 of 2015 filed under section 33 of the Securities and Exchange Commission of Pakistan Act, 1997 by the insurance company against the order dated 19/12/14 (the Impugned Order) passed by the Director Insurance under section 158 of the Insurance Ordinance 2000 (the Ordinance).
Brief facts of the case are that an onsite Inspection Team (the team) inquired the Appellant about the gratuity scheme but the team was informed that the Appellant is not operating any employment benefit scheme. The SECP said that the Impugned Order was passed on the basis of facts of misstatement in the books of accounts. The representative of the Appellant (company) has also admitted in the hearing that they violated the Section 158 of the Ordinance. The company has misstated in the employee benefit policies, agents commission, premium written, tax payments and fixed assets.
The SECP stated that the Impugned Order was passed on the basis of facts and figures observed during the on-site inspection conducted under order dated 01/02/13 under section 59A of the Ordinance. The company has misstated in the books of premiums and the Appellant has no control over reliability and authenticity of the amount of premium disclosed by their agents. Therefore, the Appellant bound to rely on the premium reported/disclosure by their agents.
The company has also violated the requirement of section 99(4) of the Ordinance which states that "It shall be unlawful for an agent to deduct from premiums paid by and received from a policy holder any sums on account of commission due to the agent." The Appellant has admitted in reply to the SCN and in appeal that the agents were used to deduct their commission from the amount of premium received from policy holders, the SECP said.