The Appellate Bench of the Securities and Exchange Commission of Pakistan (SECP) has dismissed two appeals filed by United Insurance Company of Pakistan Limited and SPI Insurance Company Limited (now fully merged into United Insurance). The appeals were related to the encashment of a Rs. 50 million insurance guarantee issued in favor of Sukh Chayn Valley Limited.
Details of the Dispute:
- First Appeal: The first appeal was filed against a direction issued by SECP under Section 60 of the Insurance Ordinance to encash the Rs. 50 million insurance guarantee in favor of Sukh Chayn Valley Limited.
- Second Appeal: The second appeal was filed against a penalty order issued by the SECP for non-compliance with the direction to encash the guarantee.
Sukh Chayn Valley had entered into a land purchase agreement with contractors/sellers, paying a mobilization advance against an insurance guarantee issued by SPI Insurance. However, the agreement was later canceled due to a dispute between the parties, prompting Sukh Chayn to demand the encashment of the insurance guarantee.
Court Rulings and SECP’s Role:
The matter was taken to court, initially by the contractors and then by the buyer. Following proceedings in the Civil Court, High Court, and Supreme Court, SECP directed the encashment of the insurance guarantee. However, SPI Insurance and United Insurance failed to comply with both the SECP’s order and the courts’ directives.
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Bench’s Decision:
After hearing both parties, the Appellate Bench upheld the IHC Order passed by Justice Mohsin Akhtar Kayani, which emphasized that the insurance guarantee’s obligation was absolute and unaffected by any dispute between the parties involved. The Bench noted that both parties were aware of the consequences when the guarantee was executed. Furthermore, the Supreme Court of Pakistan upheld this order.
The Bench concluded that the insurance companies were obligated to settle the claim, based on the decisions of the Civil Court, High Court, and Supreme Court. Additionally, the Bench dismissed the argument regarding the SECP’s jurisdiction over the matter.
Further Appeals Dismissed:
In addition to the two appeals related to the insurance guarantee, the Bench also dismissed two other appeals filed by United Insurance Company of Pakistan Limited.
