SECP Appellate Bench Dismisses Appeal by United Insurance and SPI Insurance

The Appellate Bench of the Securities and Exchange Commission of Pakistan has dismissed two appeals filed by United Insurance Company of Pakistan Limited and SPI Insurance Company Limited (now fully merged into United Insurance Company of Pakistan Limited).  

First appeal was made against a direction issued by the SECP under Section 60 of the Insurance Ordinance to encash the insurance guarantee of Rs. 50 million issued in favor of Sukh Chayn Valley Limited. The second appeal was filed against a penalty order issued by SECP for non-compliance with the direction thereof. 

Sukh Chayn had entered into a land purchase agreement and paid a mobilization advance to contractors / sellers against Insurance guarantee issued by SPI Insurance. However, due to a dispute between seller and buyer the agreement was cancelled and Sukh Chayn demanded encashment of insurance guarantee.  

The matter was taken to the court initially by the contractors and subsequently by the buyer. After proceedings and decisions by Civil court, high court and supreme court, the direction was issued by SECP to encash the insurance guarantee. However, SPI Insurance and United Insurance failed to implement orders passed by the Commission and Courts for encashment of insurance guarantee of Rs. 50 million. 

The Bench dismissed both appeals after hearing the Appellants and the respondent. The Bench observed that the IHC Order passed by Justice Mohsin Akhtar Kayani stated that; “the absolute obligation of respondents under the said Insurance Guarantee is regardless of any dispute between the parties, who were aware of the consequence while executing the Insurance Guarantee”. The Bench also observed that the IHC Order was upheld by the Supreme Court of Pakistan.  

The Bench concluded that insurance company is under obligation to settle the claim of Insurance Guarantee because the decisions rendered by the Supreme Court, the IHC and the Civil Court.   

The Bench also found objection with regard to the lack of SECP’s jurisdiction without substance. In addition, the Bench has also dismissed two other appeals filed by the United Insurance Company of Pakistan Limited.