M/s Century Insurance Company Limited Vs. Saadullah Khan.

JUDGMENT SHEET

IN THE PESHAWAR HIGH COURT,

PESHAWAR

(Judicial Department)

R.F.A No. 187‐P/2017 with C.M. No. 188/2018 M/s Century Insurance Company Limited through its General Manager (Appellant) Vs.

Saadullah Khan (through legal heirs) and two others (Respondents)

For Appellant (s): Muhammad Arif Advocate.

For Respondent (s): M/s Samad Hasnain, Minhaj Ahmad and Zohair Ahmad Khan, Advocates.

Research Assistance: Riaz Aslam Daavi, SRO,

PHCP

Date of Hearing: 02.06.2026

Date of Order/ 24.09.2026 Announcement:

JUDGMENT

IJAZ ANWAR, J. This Regular First Appeal (RFA) under Section 124 of the Insurance Ordinance, 2000 (“the Ordinance”) is directed against the judgment and decree dated 25.09.2017 passed by the learned District Judge / Judge Insurance Tribunal, Khyber Pakhtunkhwa, Peshawar. By virtue of the impugned decision, the learned Tribunal accepted Insurance Petition filed by the

late respondent No. 1, Saadullah Khan, and passed a decree against the appellant, M/s Century Insurance Company Limited, for the recovery of Rs. 4,800,000/‐ (Rupees Forty‐Eight Lac) as the sum insured, along with mark‐up at the bank rate from the date of the claim until its actual payment, and Rs. 2,000,000/‐ (Rupees Twenty Lac) as liquidated damages under Section 118 of the Ordinance. In connection therewith, respondent No.2, MCB Bank Limited, preferred connected Cross‐ Objection No.05‐P/2017, principally challenging the adverse findings of negligence, fraud and collusion recorded against it in the impugned judgment.

Factual Matrix of the Case:

2.The late Saadullah Khan, sole proprietor of M/s Saadullah and Sons (Respondent No. 1), obtained a Rs.

4.5 million finance facility from MCB Bank Limited (Respondent No. 2) at its Nowshera Cantt. Branch. To secure this loan, the borrower hypothecated1 his business stock of cigarettes, Olpers milk, and Kolson Slanty, storing the goods in a godown near the bank of Hypothecation is a form of security for a loan in which movable property—such as goods, machinery, vehicles, or stock—is offered as collateral, but its possession remains with the borrower. In a pledge, possession of the goods is delivered to the lender; in hypothecation, possession remains with the borrower.

the River Kabul in Nowshera. Century Insurance Company Limited (the Appellant) insured this stock under Fire Policy No. 03/C/C003/0112966/0510/012 from April 28, 2010, to April 28, 2011, with a sum insured of Rs. 4,800,000. In July 2010, devastating nationwide floods caused the River Kabul to overflow, submerging the business premises of the borrower 3 and destroying all hypothecated stock and business records.

The borrower lodged an insurance claim with the Appellant on 9.08.2010. The Appellant repudiated the claim on 18.10.2010, asserting that the policy covered only specific perils4—fire, riot and strike damage, malicious damage, and burglary—and excluded flood and atmospheric disturbances. This repudiation triggered a long course of litigation. The borrower initially filed Civil Suit No. 61/1 in the Civil Court at Mardan on 24.02.2011, seeking Rs. 2,000,000/‐ for actual loss and Rs. 50,000,000/‐ as compensation for negligence and breach of trust. On 17.11.2011, the Civil Court allowed the Bank’s application under Order VII, (Ex.PW-1/4) and (Ex.DW- 1/2).

Respondent No 1, Saad Ullah Khan.

Perils means dangers, risks, or events that may cause loss or damage. In insurance law, a peril is the specific event against which insurance protection is provided.

Rule 10, of the Civil Procedure Code, 1908 (CPC), and returned the plaint for lack of jurisdiction. The borrower then filed Suit No. 297/1 in Banking Court No. II, Peshawar, on 22.12.2011. On 12.10.2013, after lapse of almost two years, he voluntarily withdrew the suit, and the Banking Court dismissed it with permission to approach the competent forum. After obtaining statutory permission from the Securities and Exchange Commission of Pakistan (SECP) under Section 162 of the Ordinance on 12.05.2014, the borrower filed the insurance petition before the Insurance Tribunal, Peshawar, on 16.05.2014. Both the appellant and the Bank contested the petition, which was decreed by the learned Tribunal through the impugned judgment and decree dated 25.09.2017, now challenged by the appellant before this Court.

3.Arguments heard. Record perused.

Arguments of the Parties:

4.Learned counsel for the appellant contended that the rights and liabilities of the parties were governed strictly by the insurance policy, which covered only the risks specified therein and did not extend to any loss

caused by flood or atmospheric disturbance. He argued that the learned Tribunal had unlawfully enlarged the scope of the policy by construing the expression ‘all relevant risks,’ which appeared in the finance sanction advice, 5 as ‘all possible risks,’ and by treating that condition as part of the insurance contract. He further submitted that no separate endorsement covering flood was ever issued, nor was any premium paid for that specific risk. Learned counsel further maintained that the insurance petition was barred by limitation, as Respondent No. 1 had failed to establish his entitlement to the exclusion of the period spent before the other forums. He, therefore, prayed that the impugned judgment and decree be set aside.

5.Learned counsel appearing for the legal heirs of Respondent No. 1 opposed the appeal and submitted that the finance facility was subject to the mandatory condition that the hypothecated stock be insured against ‘all relevant risks,’ which, according to him, necessarily included flood risk, particularly in view of the vulnerable location of the insured godown near the bank of River Sanction Letter No RH & CI-i-34 dated 30.03.2010 (Ex.PW-1/1)

Kabul. He further submitted that the Appellant was on the approved panel of Respondent No. 2/Bank, and that the premium charged under the policy had been duly paid. He maintained that neither the original policy nor any terms excluding flood or atmospheric disturbance were ever supplied or communicated to Respondent No.

1, and that the policy document relied upon by the Appellant did not bear the Respondent’s signature. He further argued that the Appellant had failed to produce and prove the original, bilateral policy through legally admissible evidence, establish that flood was outside the agreed coverage, or conduct any survey before repudiating the claim. Regarding limitation, he submitted that Respondent No. 1 had prosecuted his claim before the Civil Court and the Banking Court with due diligence and in good faith, and was, therefore, entitled to the exclusion of the period so spent under Section 14 of the Limitation Act, 1908. He, accordingly, prayed that the appeal be dismissed and the impugned judgment and decree be maintained.

6.The learned counsel for MCB Bank (Respondent No.2) contested the adverse findings of negligence,

fraud, and collusion, arguing that the relationship was strictly borrower‐financier, regulated by contract, and that the Bank had no duty to act as the borrower insurance advisor. Supporting the plea of limitation, he further submitted that respondent No.1 had voluntarily withdrawn the proceedings before the Banking Court and had failed to establish the conditions necessary for exclusion of that period under section 14 of the Limitation Act, 1908. He, therefore, prayed that the cross‐objection be accepted, the adverse findings recorded against the Bank under Issues No.10 and 11 be set aside and expunged, respondent No.2 be held to bear no liability in respect of the claim, and the insurance petition be dismissed as barred by limitation.

Questions for Determination:

7.The following are central questions for determination before this court.

1.Whether the loss caused by flood or atmospheric disturbance fell within the risks covered by the insurance policy (Ex.PW‐1/4) and, if not, whether the scope of the policy could be enlarged by reference to Condition No.6 of the finance sanction advice (Ex.PW‐1/1)?

2.Whether the insurance petition instituted on 16.05.2014 was barred by limitation under Article 86(b) of the Limitation Act, 1908, and whether respondent No.1 was entitled, under section 14 thereof, to exclusion of the period spent in pursuing proceedings before the Civil Court and the Banking Court?

3.Whether the adverse findings of negligence and collusion recorded against respondent No.2/MCB Bank were supported by evidence and, consequently, whether its cross‐objection merits acceptance?

Historical, Statutory, and Jurisprudential foundations of insurance Law:

8.Before adverting to the controversy, it is

appropriate to notice briefly the historical and jurisprudential foundations of insurance law in Pakistan. Insurance6 evolved from the collective sharing of risk among traders, guilds and maritime communities into an organized mechanism for transferring risk against payment of premium.7 With the development of probability theory and actuarial science,8 insurance Insurance developed from people sharing one another's losses into a formal system in which risk is transferred to an insurer in return for payment of premium.

Premium is the price of risk transfer. It is the consideration paid by the insured to the insurer in exchange for the insurer's promise to bear the financial burden of a specified, uncertain event.

Probability theory estimates the chance of loss, while actuarial science uses that estimate to calculate premiums, reserves and financial risk.

acquired a scientific basis for assessing risks, calculating premiums and providing indemnity 9 against uncertain losses. In Pakistan, the insurance industry was initially governed by the Insurance Act, 1938, under the

supervision of the Controller of Insurance. The Pakistan Insurance Corporation was established in 1952; life insurance was subsequently nationalized in 1972

through the establishment of the State Life Insurance Corporation; and private sector participation was revived during the early 1990s. The Insurance

Ordinance, 2000 (Ordinance) thereafter repealed the Act of 1938, introduced a comprehensive regulatory framework, transferred supervision of the industry to the Securities and Exchange Commission of Pakistan10 and sought to protect policyholders and promote the sound development of the insurance industry. The Insurance Rules, 2017, framed under section 167 of the Ordinance, supplement this regime by regulating, inter Indemnity means protection against, or compensation for, a financial loss, damage, or legal liability.

The Commission is an independent body corporate established under section 3 of the Securities and Exchange Commission of Pakistan Act, 1997, and is the regulator of the insurance industry under the Insurance Ordinance, 2000. The administration of insurance law and supervision of insurers, insurance intermediaries and surveyors were entrusted to the Securities and Exchange Commission of Pakistan under section 20(4)(r) to (u) of the Securities and Exchange Commission of Pakistan Act, 1997.

alia, registration, capital and solvency requirements, reinsurance, intermediaries and insurance surveyors.

9.Fundamentally, an insurance policy 11 is a contract of indemnity and must primarily be construed according to the plain meaning of its language and the common intention of the contracting parties, adhering to the foundational principle of consensus ad idem 12 (meeting of minds), while pacta sunt servanda (agreements must be observed and enforced) requires that lawful contractual obligations be strictly performed. Where contractual terms are clear and unambiguous, absoluta sententia expositore non indiget (a clear statement requires no interpretation), expressum facit cessare tacitum (what is expressly stated excludes what is implied), and 10eprobate10 unius est 10eprobate alterius (the express mention of one thing implies the exclusion of others) govern the construction of the policy. The rule of ejusdem generis (general words following specific words are confined to the same class) may also guide the “Policy” means a contract of insurance. (Section 2, clause (xlv) of The Insurance Ordinance 2000).

Agreement on the same thing in the same sense, or simply, meeting of minds.

construction of general expressions appearing after particular terms. Conversely, where policy language is reasonably susceptible to more than one construction, the canon of contra proferentem (ambiguity is construed strictly against the drafter) dictates that any ambiguity must be resolved against the insurer who authored the document. In insurance disputes, the contra proferentem doctrine is a vital judicial instrument. The Superior Courts have held that any doubt or ambiguity in the meaning of a contract must be construed strictly against the insurer as the party who drafted the policy.13 This common law doctrine stands statutory codified under Section 77(1) of the Ordinance, which absolutely prohibits construing any ambiguity in an insurance policy in a manner contrary to the interests of the policyholder and mandates that policies be drafted in clear, plain language. As a functional rule, courts must interpret grant‐of‐coverage provisions broadly to uphold protection, while construing exclusion clauses narrowly and strictly against the insurer. Furthermore, Universal Insurance Company V. Karim Gul (PLD 2021 Supreme Court 906), United Insurance Company Pakistan v. President of Pakistan (2026 CLD 351), American Life Insurance Company V. Master Agha Jan Ahmed (2011 CLD 350).

benignae faciendae sunt 12eprobate1212ions

chartarum, ut res magis valeat quam pereat

(instruments should be liberally construed so that they remain effective rather than perish) requires an

interpretation that gives practical, lawful vitality to the commercial transaction.

10.Insurance 14 contracts are additionally

governed by the cardinal doctrine of uberrimae fidei (utmost good faith), which imposes an overarching legal duty of complete candor, honesty, and disclosure of all material facts upon both insurer and insured—a

reciprocal statutory duty codified under Sections 75 and 76 of the Ordinance.15 The Principle of Indemnity dictates that the insured can recover only the actual pecuniary loss sustained and cannot derive a financial profit from the insured event. The subsidiary doctrine of Subrogation entitles the insurer, upon fully satisfying Section 2, clause (xxvii), “insurance” means the business of entering into and carrying out policies or contracts, by whatever name called, whereby, in consideration of a premium received, a person promises to make payment to another person contingent upon the happening of an event, specified in the contract, on the happening of which the second-named person suffers loss, and includes reinsurance and retrocession: Provided that a contract of life insurance shall be deemed to be a contract of insurance notwithstanding that it may not comply with the definition set-out in this clause.

Jubilee General Insurance Co. Ltd. v. Ravi Steel Company (PLD 2020 Supreme Court 324)

the claim, to step into the shoes of the insured and pursue legal remedies against third parties responsible for the loss. In determining liability, insurance law applies the doctrine of Proximate Cause (causa proxima non remota 13eprobate)—the dominant, effective, and direct cause that sets the loss in motion, rather than a remote antecedent condition. While the maxim caveat emptor (let the buyer beware) obligates a proposer to exercise reasonable diligence when purchasing insurance, it cannot be invoked by an insurer to bind a policyholder to an obscure, misleading, or uncommunicated exclusion clause hidden within the fine print of a standard‐form contract. Similarly, qui approbat non 13eprobate (one who approbates cannot reprobate) estops a party from enjoying the benefits of a transaction while repudiating its burdensome terms.

In terms of evidentiary burden, once the insured establishes that the loss, damage or injury arose from a risk covered by the insurance policy, a heavy burden shifts to the insurer to justify repudiation of the claim by proving that the risk was not covered; that it fell within an express exclusion clause; that the policy had been

obtained through suppression of a material fact, misrepresentation or fraud; or that the insured had breached a material term or condition of the policy. The insurer cannot, after execution of the contract, unilaterally assign a restricted or altered meaning to any term or covered risk to evade its contractual obligation or liability.16 Collectively, these statutory and equitable principles define the legal framework governing policy interpretation.

11.The written insurance policy remains the primary and best evidence of the terms agreed upon by the parties, reflecting the established principle that documentary evidence takes precedence over contradictory oral testimony.17 This rule is underpinned by the Parol Evidence Rule, a cornerstone of contract law providing that where parties have reduced their agreement to a formal written instrument, that writing constitutes the complete and final integration of their bargain, excluding extrinsic oral evidence to contradict, Messrs M.R Transport Co. Messrs National General Insurance (2001

CLC 1618).

Muhammad Akbar and others v. Province of Punjab through DOR, Lodhran and others, 2022 SCMR 1532, para. 10; Tassaduq Hussain Shah and others v. Allah Ditta Shah and others, 2023 SCMR 1635, para. 12; and Muhammad Arif v. Javaid Khan, 2025 MLD 323, paras. 9–10.

vary, add to, or subtract from its terms. The rule traces its origins to The Countess of Rutland’s Case (1604),18 where Sir Edward Coke reported that “a written deed will bar parol evidence,” and was subsequently reaffirmed in Goss v. Lord Nugent (1833).19 In Pakistan, the rule is statutorily enacted under Articles 102 and 103 of the Qanun‐e‐Shahadat Order, 1984 (“QSO”). Article 102 mandates that contractual terms reduced to writing must be proved by the document itself or admissible secondary evidence, while Article 103 excludes oral evidence intended to alter those proved terms.20 The rationale underlying the rule is to ensure contractual certainty, preserve the integrity of written agreements and guard against their displacement by what was historically described as the “uncertain testimony of slippery memory.”21 Although statutory provisos permit extrinsic evidence in exceptional cases (such as fraud, illegality, mistake, or condition precedent), The Countess of Rutland’s Case (1604) 5 Co. Rep. 26a; 77 E.R. 89. The expression concerning the “uncertain testimony of slippery memory” appears at 77 E.R. 90.

Goss v. Lord Nugent (1833) 5 B. & Ad. 58; 110 E.R. 713.

Qanun-e-Shahadat Order, 1984, Articles 102 and 103; Saleh Muhammad and others v. Subedar-Major Muhammad Bakhsh and others, PLD 1960 (W.P.) Lahore 231, paras. 3–4. Illustration (a) to Article 103 specifically illustrates the application of the rule to an insurance policy.

Oral statements based on human memory may be uncertain, inaccurate or unreliable, particularly after a long passage of time.

unambiguous documentary terms speak for themselves.

However, a document must first be duly proved before acquiring probative value; merely marking an unproved document for identification confers no evidentiary weight.23 Finally, where the insurer relies upon an unusual, restrictive, or exclusionary condition, the nature and communication of that condition must be examined under sections 75(3) and 76(2) of the Ordinance, which require the Tribunal to have regard to any notification given to the policyholder and treat unusual terms limiting the liability of the insurer, without the express acknowledgement of the policyholder, as misleading conduct.24 These principles, read in conjunction with the statutory framework, provide the touchstone for resolving the present controversy.

12.As to question No. 1, the core controversy centers on whether the loss of stock caused by the flood of July 2010 fell within the risks covered by the Qanun-e-Shahadat Order, 1984, Article 103, provisos (1)–(6).

Muhammad Mumtaz Shah (deceased) through LRs. and others v. Ghulam Hussain Shah (deceased) through LRs. and others, 2023 SCMR 1155, paras. 10–11.

Insurance Ordinance, 2000, sections 75(3), 76(2) and 77(1).

insurance policy (Ex.PW‐1/4 and ExDW‐1/2). As discussed in the preceding paragraphs, the written insurance policy constitutes the primary and best evidence of the terms of the contract of indemnity entered into between the insurer and the insured. In the instant case, the Fire Policy Schedule (Ex.PW‐1/4) explicitly, clearly, and unambiguously details the scope of coverage in the following words: ‐

“Property/assets mortgaged/stocks hypothecated with the bank must be insured against all relevant risks with Bank Clause in line with the guidelines provided in section 5.4 of Credit Handbook and other circulars issued from time to time. Insurance Premium receipts in original must be held along with other security documents. Insurance Policy must not contain any restrictive clause to avoid any dispute in the event of a claim.”

The deliberate use of the word ‘only’ after the enumerated perils restricts the scope of coverage to those four specified risks (Fire, Riot and Strike, Malicious Damage, and Burglary). In other words, the inclusion of the word “only” after the enumerated perils gives the list a closed, definite, and restrictive character.

Flood is conspicuously absent from the positive grant of coverage. Under the maxim 17eprobate17 unius est 17eprobate alterius,25 the specification of fire, riot, The express mention of one thing excludes another.

malicious damage, and burglary operates as a complete exclusion of all other risks, including flood. This limited coverage is further reinforced by the general exclusions of the policy (Ex.DW‐1/2), produced by the deputy manager of the Appellant (DW‐1). Clause 13 of the General Exclusions page reads verbatim as follows:

“A) General Exclusions This Policy does not cover loss, destruction or damage caused by

13.Any loss or damage occasioned by or through or in consequence directly or indirectly due to: (a) Hail, Snow, Wind, Typhoon, Hurricane, Tornado, Cyclone Rain, Flood or other atmospheric disturbances. (b) Landslide and Subsidence.”

Clause 13 of the policy conditions (Ex.DW‐1/2) expressly excludes any loss or damage resulting from flood, overflow of rivers, or atmospheric disturbances. The language of the exclusion is clear and unambiguous;

therefore, the maxim absoluta sententia expositore non indigent 26 applies. Flood is not merely omitted from the risks positively covered under the policy;

rather, loss or damage caused by flood is expressly excluded by the general exclusions. Consequently, neither the rule of contra proferentem 27 nor section A clear statement requires no interpretation.

Ambiguity is resolved against the drafter.

77 of the Ordinance is attracted, as the relevant policy provision is capable of only one reasonable interpretation. A court cannot manufacture an ambiguity where none exists.

13.To circumvent this clear contractual exclusion, the Insurance Tribunal looked outside the four corners of the policy and turned to Condition No. 6 of the finance sanction advice (Ex.PW‐1/1). Condition No. 6 of the sanction advice reads verbatim as follows:

“Property, assets mortgaged, stocks hypothecated with the bank must be insured against all relevant risks with Bank Clause in line with the guidelines provided in section 5.4 of Credit Handbook and other circulars issued from time to time. Insurance Premium receipts in original must be held along with other security documents. Insurance Policy must not contain any restrictive clause to avoid any dispute in the event of a claim.”

The learned Insurance Tribunal fell into legal error by construing the expression “all relevant risks” as encompassing “all possible risks” and by holding that Condition No. 6 of the Bank’s loan‐sanction advice formed an integral part of the insurance contract. A finance approval letter is a bilateral security arrangement between the lender bank and the borrower (Respondent No 1). The insurance policy, on the other hand, is an independent bilateral contract of indemnity

between the insurer and the insured. The insurer was not a party to the loan sanction advice. A security covenant requiring a borrower to obtain comprehensive insurance does not automatically bind a third‐party insurer to provide coverage for perils not underwritten or premiumed in the policy schedule. It is an elementary rule of contract law that the terms of one contract cannot be enlarged or rewritten by a condition contained in a separate contract to which the insurer was not a party. The internal security requirements of the Bank cannot impose a unilateral obligation upon a third party insurer to cover a risk for which no contract was signed, no risk was assessed, and no premium was paid. This separation of contractual spheres is further illuminated by Section 5 of the Credit Handbook,28 which regulates collateral management and controls.

The combined effect of Special Condition No. 6 of Ex.PW‐1/1 and Section 5.4 of the Credit Handbook is that the responsibilities of the borrower and the Bank were distinct but connected. The borrower had the primary contractual duty to obtain insurance for the Credit Handbook of MCB Section 5 “Insurance”.

hypothecated stock, select the class of policy best suited to his requirements, pay the premium, and deliver the policy and premium receipt to the Bank.

Correspondingly, Section 5.4.529 required the Bank officials to examine the nature, location, and storage conditions of the stock, identify the relevant risks, review the policy before disbursement, and ensure that the required coverage had been obtained. Appendix II (the Insurance Grid) prescribed fire, burglary, riots and strikes, and malicious damage as the mandatory

minimum coverage for commodities under

hypothecation, while additional risks were to be selected on a case‐to‐case basis. Appendix I shows that flood could be covered through an Atmospheric Disturbance endorsement;30 however, Section 5.4.4 expressly

provides that no extension of risk is covered unless the 5.4.5 Insurance Grid Branches/ offices are advised to ensure coverage of all pertinent risks associated with the asset held under security. In order to provide guidance an Insurance Grid (insurance risk coverage on assets held as security) is being introduced (Appendix II to Chapter 5.4). The Insurance Grid identifies the risk coverage to be obtained for various assets commonly held as security by the bank and this should not be considered as exhaustive requirement. Actual decision on risk coverage should be taken by relevant approval/review authority keeping in view nature, location and storage conditions of the asset held as security.

For Current Assets and fixed assets (Plant & Machinery and Building) charged to the bank, insurance cover should invariably be obtained against the following risks: 1. Fire 2. Riots & Strikes 3. Malicious Damages 4. Burglary (shall not be required for mortgaged properties) An endorsement is a written addition to that policy which adds, removes, limits or changes particular coverage.

premium for that extension is received by the insurance company. Thus, while the borrower was responsible for obtaining and paying for the insurance policy, the relevant approval or review authority of the Bank was required to identify the risks against which the secured assets needed protection. In this regard, the use of the expression “all relevant risks” in Condition No. 6 of the Finance Approval (Ex.PW‐1/1) may reasonably be taken to indicate that the Bank had discharged its duty, at the approval stage, to identify the risks requiring coverage.

Any alleged subsequent failure by the concerned branch to verify the coverage actually obtained may, subject to proof and the applicable rules, expose the concerned staff to disciplinary action or otherwise entail consequences as between the Bank and the borrower.

However, neither such failure nor the Credit Handbook could, in the absence of an appropriate endorsement and payment of the applicable premium, create flood coverage or extend the insurer’s liability beyond the risks covered under Ex.PW‐1/4.

14.Nevertheless, under Clause 5 of the Letter of Hypothecation (Ex.PW‐1/3), the primary responsibility

for selecting, obtaining, and paying the premium for the appropriate class of insurance rested squarely upon the borrower. For ready reference, the relevant clause is reproduced below:

“5. I/We shall at all times during the continuance of this security and for so long as any money shall remain due and owing to you by virtue of the said agreement insure and keep insured the hypothecated goods as aforesaid to the full extent of their value against fire, theft and such other risks as, you may require from time to time with Insurance Company as may be approved by you and in your name and shall duly and punctually pay the premia payable in respect thereof at least one week before the same shall become due or payable and shall handover to you the policy or policies of insurance and receipts for premia paid in respect thereof. I/We agree not to raise at any time any dispute as to the amount of the insurable interest. If default be made in payment of such premia or in keeping the hypothecated goods so insured then and in such event it shall be lawful but not obligatory upon you to pay such premia and to keep the hypothecated goods so insured and all costs, charges and expenses incurred by you for the purpose, shall be charged to and paid by me/us, together with an addition of 20% thereto as liquidated damages as if the same were part of the amount due to you under the said agreement.”

This clause establishes that the borrower is the sole contracting party responsible for maintaining and paying the premium for the insurance policy. The borrower was fully aware that his godown was situated near the vulnerable bank of the River Kabul. Under the principle of caveat emptor (let the buyer beware), it was his duty to assess his environmental risks, request

an additional flood endorsement,31 and pay the corresponding premium. He failed to do so, and cannot now shift the consequences of his commercial negligence onto the insurer.

15.During cross‐examination, respondent No.1, while appearing as PW‐2, expressly and unequivocally admitted the following facts: (i) flood was not covered under the written policy schedule (Ex.PW‐1/4), (ii) he had paid no premium for flood risk coverage, (iii) no separate flood endorsement was ever issued by the Appellant, and (iv) the Appellant had given him no verbal or written assurance that his stocks would be protected against flood. Under Article 113 of the Qanun‐ e‐Shahadat Order, 1984, a fact admitted by a party need not be proved. These admissions directly concern the disputed scope of coverage and, having neither been withdrawn nor satisfactorily explained, materially undermine the claim of respondent No.1. In Muhammad Akbar and others v. Province of Punjab and others (2022 SCMR 1532), the Supreme Court held that an express, A policy is the principal insurance contract, while an endorsement is a written addition to that policy which adds, removes, limits or changes particular coverage.

unequivocal and unqualified admission, which was neither challenged nor disowned, was binding and required no further proof. Accordingly, when these admissions are read together with the express terms of the insurance policy, they establish that flood risk did not form part of the agreed coverage.

16.The oral assertion of the plaintiff that bank officials gave him an oral assurance of flood coverage is legally inadmissible. Even if any such assurance had been given, he was required to verify it from the terms of the written policy. If the policy had not been supplied to him, he ought to have obtained and examined it before paying the premium; otherwise, he should have refused to pay it. Under Articles 102 and 103 of the QSO, extrinsic oral evidence cannot be admitted to contradict, vary, or enlarge the terms of a written contract. This statutory bar enforces the Parol Evidence Rule, safeguarding commercial transactions against subjective assertions. The Superior Courts have consistently held that documentary evidence carries greater evidentiary weight than oral assertions, as it is

less susceptible to the frailties of human memory.32 In Tassaduq Hussain Shah v. Allah Ditta Shah (2023 SCMR 1635) and Muhammad Mumtaz Shah v. Ghulam Hussain Shah (2023 SCMR 1155), the apex Court held that once a contract is reduced to writing, the document speaks for itself (acta probant sese ipsa)33 and courts cannot rewrite the contract on the basis of extrinsic evidence or loose understandings. This is also aligned with the principles of commercial certainty and stability of written transactions as emphasized in Muhammad Arif v. Javaid Khan (2025 MLD 323),34 as well as with the rule laid down in Saleh Muhammad v. Subedar‐ Major Muhammad Bakhsh (PLD 1960 (W.P.) Lahore 231), wherein it was held that where the terms of a transaction are reduced to writing, the document itself is the best evidence; if its language is plain and unambiguous, oral evidence cannot be used to substitute for, contradict, vary or enlarge its terms. The same rule was specifically applied to an insurance policy in Messrs Abdul Ghani and others v. Mst. Yasmeen Khan (2011 SCMR 837), Shamshad v. Arif Ashraf Khan (2010 SCMR 473), Azeem Khan and another v. Mujahid Khan (2016 SCMR 274).

Written documents prove themselves or acts speak for themselves.

Oral evidence cannot substitute for or outweigh written proof, irrespective of its quantity. Once an agreement is reduced to writing, Article 103 of the QSO excludes oral statements between the parties that contradict or vary its written terms. (Paras 9–10 of 2025 MLD 323).

Ijaz Brothers v. Messrs Silver Star Insurance (2025 CLD 1912), where the Insurance Tribunal held that where a written policy covered only a shop, oral evidence was inadmissible to extend coverage to an uninsured godown. Thus, it was held that an insurance company is strictly liable only for the perils specified in the policy schedule.

17.Moreover, the argument that the policy document did not bear the physical signature of Respondent No. 1 does not invalidate its exclusionary terms. An insurance policy is issued by the insurer on specified terms and conditions and need not necessarily bear the signatures of the insured. In Muhammad Asghar v. Standard Insurance Company Limited (2007 CLC 209 [Lahore]), it was held:

“Insurance Policy is issued by the Insurance Company on certain terms and conditions with its own signatures and it does not necessarily have signatures of the other party.”

Thus, the absence of the signatures of Respondent No. 1 on the insurance policy does not advance his case. The borrower relied upon this very policy as the foundation of his claim, paid the premium, and accepted its benefits.

Under the doctrine of qui approbat non 27eprobate

(one who approbates cannot reprobate), a party cannot enforce a contract to derive a benefit while simultaneously repudiating its express limitations.

18.In the light of the above discussion, the loss caused by the flood of July 2010 was an uninsured peril that lay entirely outside the contract of insurance (Ex.PW‐1/4) and was explicitly excluded under General Exclusion No. 13 of Ex.DW‐1/2. The terms of the bilateral finance sanction advice (Ex.PW‐1/1) and the Credit Handbook were legally incapable of expanding the liability of the Appellant or writing a new risk into the contract of insurance in the absence of an express endorsement and the payment of a corresponding premium. Consequently, the merits question is decided in favour of the Appellant and against Respondent No. 1.

19.As to question No. 2, the issue of limitation has become academic in view of our conclusion that the suit instituted by respondent No. 1 before the Insurance Tribunal was devoid of merit. Nevertheless, since both the appellant and respondent No. 2 have vigorously pressed this issue, we deem it appropriate to record our findings thereon. The alleged loss occurred during the

floods of July 2010. Article 86(b) 35 of the Limitation Act, 1908, prescribes a period of three years for a suit on a policy of insurance, which begins to run from the date of the occurrence36 causing the loss. Consequently, the insurance petition filed on 16.05.2014 was prima facie beyond three years, requiring evaluation of whether Respondent No. 1 was entitled to the statutory exclusion of time under Section 14 of the Limitation Act, 1908.

Section 14 mandates two conditions for excluding time spent in prior litigation: (i) that the previous civil proceeding was prosecuted with due diligence and in good faith, and (ii) that the court in which the previous proceeding was pending was unable to entertain it due to a defect of jurisdiction or another cause of a like nature.37 The period from 24.02.2011 to 17.11.2011 spent 86(b) Period of Time from which the Description of suit limitation period begins to run:

On a policy of insurance when Three years The date of the the sum insured is payable occurrence causing after proof of the loss has been the loss.

given to or received by the insurers

In State Life Insurance Corporation v. Mst. Syeda Muzhara Fatima (2021 CLD 479), it is held that an illegal or unjustified repudiation of a claim provides a fresh, recurring cause of action from the date of formal denial.

Kiramat Khan v. Inspector General, Frontier Corps and others (2023 SCMR 866), para. 5; Secretary to Government of Khyber Pakhtunkhwa, Communication and Works Department and others v. Messrs Parcon Associate Government Contractors and others (2025 CLD 680), paras. 3–

before the Civil Court is plainly excludable because that Court returned the plaint under Order VII, Rule 10 of the CPC for lack of jurisdiction. In respect of the period from 22.12.2011 to 12.10.2013 spent before the Banking Court, the record shows the suit was withdrawn with

permission to file fresh proceedings before the

competent court. Although such permission does not by itself satisfy the requirements of Section 14,38 the jurisdiction of the Banking Court over the insurance claim must be evaluated under the Financial Institutions (Recovery of Finances) Ordinance, 2001 (FIO 2002) and Insurance Ordinance, 2000. Under Sections 2(b),39 5, 7(4),40 and 9(1) 41 of FIO 2001, Banking Courts possess exclusive civil jurisdiction to entertain, try, and

adjudicate suits instituted either by a financial

Sohail Islam and another v. Saadullah Khan and others (2026 SCMR 757), paras. 10–11.

2(b) “Banking Court” means—

(i)in respect of a case in which the claim does not exceed hundred million rupees or for the trial of offences under this Ordinance, the Court established under section 5; and

(ii)in respect of any other case, the High Court.

7(4) Subject to sub‐section (5), no court other than a Banking Court shall have or exercise any jurisdiction with respect to any matter to which the jurisdiction of a Banking Court extends under this Ordinance, including a decision as to the existence or otherwise of a finance and the execution of a decree passed by a Banking Court.

9.Procedure of Banking Courts. (1) Where a customer or a financial institution commits a default in fulfillment of any obligation with regard to any finance, the financial institution or, as the case may be, the customer, may institute a suit in the Banking Court by presenting a plaint which shall be verified on oath, in the case of a financial institution by the Branch Manager or such other officer of the financial institution as may be duly authorized in this behalf by power of attorney or otherwise.

institution or a customer arising out of a default in the fulfillment of any obligation in respect of a “finance” extended to or availed by such customer. This special jurisdiction is strictly confined to enforcing financial accommodations, loan repayments, and security

covenants (such as mortgages, pledges, and

hypothecations) executed between a recognized

financial institution and its customer, to the complete exclusion of all ordinary civil courts. Thus, the Banking Court had no jurisdiction to entertain or adjudicate upon claim against insurance company under an

insurance agreement.42 Conversely, Section 122(1)(a)43 read with Section 122(3) 44 of the Insurance Ordinance, 2000 confers exclusive jurisdiction over policyholder 45 claims against insurers solely upon the Insurance Messrs Sunny Petroleum Service v. National Bank of Pakistan (2025 CLD 1539), Standard Chartered Bank (Pakistan) Ltd. v. Yawar Faruqui and another (2026 PLD 167 Kar).

122.Powers of Tribunal. —(1) A Tribunal shall:

(a)in the exercise of its civil jurisdiction, have in respect of a claim filed by a policy holder against an insurance company in respect of, or arising out of a policy of insurance, all the powers vested in a civil Court under the Code of Civil Procedure, 1908; (Act V of 1908) 122(3) No Court other than a Tribunal shall have or exercise any jurisdiction with respect to any matter to which the jurisdiction of a Tribunal extends under this Ordinance, including a decision as to the territorial limits arid the execution of a decree, order or judgment passed by a Tribunal: Provided that for the purposes of this section a Small Claims Settlement Committee established under section 117 shall not be deemed to be a Court.

A "policyholder" is defined under section 2(xlvi) as the person to whom the policy is issued.

Tribunal arising out of an insurance policy, strictly excluding the jurisdiction of all other courts. The Banking Court was, therefore, legally unable to adjudicate the insurance claim of the policy holder in respect of insurance Policy, irrespective of the failure of that Court to record an express finding of lack of jurisdiction.

20.Admittedly, it is primarily the duty of a litigant to approach the competent forum having jurisdiction to grant the relief sought. Correspondingly, the forum concerned is expected to examine its jurisdiction at the threshold and, upon finding that it lacks jurisdiction, promptly return the matter for presentation before the proper forum. In the present case, however, the Civil Court expressly observed in its order that the Banking Court was the proper forum.

Respondent No.1, acting upon that judicial determination, approached the Banking Court, which entertained and retained the suit. It is well settled that Pursuit of a civil remedy in compliance with a judicial direction fully supports the existence of due diligence

and good faith. 46 Therefore, the error, cannot fairly be attributed exclusively to respondent No.1; rather, it was materially induced and prolonged by the acts of the Courts concerned. In such circumstances, the maxim actus curiae neminem gravabit 47 that an act of the Court shall prejudice no one becomes applicable, and a litigant acting bona fide and with due diligence cannot be deprived of a lawful remedy merely because of an erroneous judicial direction or the Court’s delay in determining its jurisdiction. Failure on the part of a court to examine its jurisdiction at the threshold is often regarded as “contributory negligence”, warranting exclusion of the time spent before the wrong forum for the purposes of limitation. This principle has been discussed in Ufaid Gul v. Mst. Farkhanda Ayub Khan (2025 SCMR 64) in the following terms:

“As per the principle laid down in Sherin and others v. Fazal Muhammad and others (1995 SCMR 584), where a party, despite acting with reasonable diligence, is misled by the court or fails to receive timely guidance Abdul Qadir Pathan and others v. Nabi Bux Pathan through legal representatives and others (2025 CLC 1936), paras. 17–20. Mst. Anwar Bibi v. Abdul Hamid (2002 SCMR 144).

“An act of the court shall prejudice no man”. Bashir Ahmed Anjum v. Province of Punjab (2025 SCMR 206), Faqir Muhammad v. Khursheed Bibi (2024 SCMR 107), Abid Jan v. Ministry of Defence (2023 SCMR 1451), Homoe Dr. Asma Noreen v. Govt of Punjab (2022 SCMR 1546), Muhammad Ijaz v. Muhammad Shafi (2016 SCMR 834), Khushi Muhammad through L.Rs. and others v. Mst. Fazal Bibi and others (PLD 2016 Supreme Court 872).

about jurisdictional matters, the resulting delay or error is not entirely attributable to that party. In the present case, defendant No.2/respondent No.1 initially filed the appeal before a forum lacking pecuniary jurisdiction, i.e., the learned Additional District Judge (West), Islamabad. However, the court itself, despite lacking jurisdiction, entertained the appeal for a substantial period without raising the issue, thereby contributing to the delay. This situation falls squarely within the doctrine of contributory negligence, where negligence by both the appellant and the court contributed to the procedural misstep. In light of this, the contributory negligence of the court in not promptly addressing the jurisdictional defect must be considered, and the defendant No.2/respondent No.1 cannot be deprived of relief solely on this ground. The High Court rightly held that the delay caused by filing before the wrong forum was not solely attributable to the defendant No.2/ respondent No.1, and therefore, no further prejudice should be caused to the defendant No.2/respondent No.1 on this account. The principle that an act of the court shall prejudice no one” finds application here, as established in Ghulam Ali v. Akbar alias Akoor and others (PLD 1991 SC 957), reinforcing the notion that the defendant No.2/ respondent No. l’s legal rights must be preserved despite procedural lapses induced by the court. Therefore, it is clear that if there was a contributory negligence of the person knocking the door of the court and by the court, the person knocking the wrong door cannot be deprived of his/her legal rights available under the law. In the instant case it is clear that it was contributory negligence of the court also, therefore, the condonation of delay and view taken by the High Court is correct.”

Therefore, the period spent before Banking Court is excludable under Section 14 of the Limitation Act, 1908 as the Banking Court lacked jurisdiction in this matter.

It is a settled principle that condonation of delay under Section 5 of the Limitation Act, 1908 is discretionary, while the exclusion of time under Section 14 of the Act is a mandatory statutory right once the legal

requirements are established.48 This conclusion on limitation does not, however, affect the dismissal of the insurance claim on the merits. Question No. 2 is answered accordingly.

21.As to question No. 3, the relationship between Respondent No. 1 and Respondent No. 2/Bank was that of borrower and financier, regulated by the finance sanction advice (Ex.PW‐1/1) and the Letter of Hypothecation (Ex.PW‐1/3). Condition No. 6 of the sanction advice was a security covenant requiring the hypothecated stock to be insured with a Bank mortgagee clause. Crucially, Condition No. 5 of the Letter of Hypothecation (Ex.PW‐1/3) explicitly details this allocation of responsibility, stating that the borrower shall at all times during the continuance of this security and for so long as any money shall remain due and owing by virtue of the said agreement insure and keep insured the hypothecated goods as aforesaid to the full extent of their value against fire, theft, and such other Kiramat Khan v. Inspector General, Frontier Corps and others (2023 SCMR 866), para. 5; Secretary to Government of Khyber Pakhtunkhwa, Communication and Works Department and others v. Messrs Parcon Associate Government Contractors and others (2025 CLD 680), paras. 3–

risks as the Bank may require from time to time. This condition establishes that the borrower is the sole contracting party responsible for maintaining and paying the premium for the insurance policy, while the Bank is only authorized, but not obligated, to pay the premium in the event of the default by the borrower.

The Insurance Tribunal erred in holding that the Bank was under a duty to ensure that the borrower’s stocks were insured against all possible risks, including flood, and that its failure to do so amounted to fraud, negligence or collusion. Through Condition No. 6 of the Finance Approval, the Bank had informed the borrower of its obligation to obtain insurance against “all relevant risks.” It was, therefore, incumbent upon the borrower to secure the requisite coverage while obtaining the policy from the appellant. Similarly, respondent No. 1 produced no evidence before the learned Tribunal to establish any fraud or collusion on the part of Respondent No. 2. In the absence of cogent and reliable evidence, such sweeping findings rest merely on assumptions, conjectures and surmises, which no judicial or adjudicatory forum ought to entertain.

Lastly, the alleged failure of the Bank to specify each risk separately in the Finance Approval (Ex.PW‐1/1), as contemplated by Clause 5.4 of the Credit Handbook, and the use of the general expression “all relevant risks” instead, cannot, by itself, be regarded as constituting fraud or collusion. Thus, the adverse findings of collusion, fraud, and negligence recorded against the Bank must be expunged from the record. The question No. 3 is answered accordingly.

22.Before parting with this judgment, we

observe that insurance and security documentation in Pakistan is drawn up exclusively in English fine print which is evident from the record placed before us, creating significant comprehension barriers for policyholders and commercial borrowers regarding coverage scope and exclusion clauses. To ensure meaningful compliance with Section 7749 of the

77.Construction of ambiguities in favour of policy holder.—(1) Any ambiguity in a contract of insurance shall not be capable of being construed in a manner which is contrary to the interests of the policy holder.

(2)An insurer or an insurance intermediary shall:

(a)when drafting policy documentation, make reasonable efforts to use plain language; and

(b)when drafting proposal forms and claim forms, make reasonable efforts to ensure that it identifies in those documents the usual information the insurer ordinarily requires to be disclosed; and that those documents are in plain language and provide instructions where

Ordinance and protect consumer interests, it is

advisable for insurance companies and commercial

banks to provide policyholders and borrowers with corresponding plain Urdu translations of insurance policies, sanction conditions, and exclusion schedules alongside the English documentation. A written

acknowledgment or affidavit should be obtained from policyholders confirming that the Urdu version was supplied and that policy terms and exclusions were fully explained and understood. A copy of this judgment shall be transmitted to the Governor, State Bank of Pakistan (SBP) and the Chairman, Securities and Exchange

Commission of Pakistan (SECP) for consideration and regulatory implementation.

23.In view of the foregoing discussion, the

instant appeal is allowed. The impugned judgment and decree is hereby set aside. Consequently, the Insurance Petition filed by respondent No. 1 stands dismissed. The necessary on how the‐questions should be answered; and comply with the law.

(3)Failure to comply with foregoing sub‐section shall be an absolute bar and shall preclude an insurer from refusing payment of a claim on grounds of non‐compliance or nondisclosure by the policy holder, where it may reasonably be determined that the non‐compliance or non‐disclosure resulted from inadequate understanding by the policy holder of the language of the policy, proposal or claim form as a result of such failure.

connected Cross‐Objection filed by Respondent No. 2 is accepted and the adverse findings are hereby expunged from the record. The parties shall bear their own costs.

Announced on Dated: 24.09.2026

Senior Puisne Judge

Judge DB Mr. Justice Ijaz Anwar, and Mr. Justice Inamullah Khan, Hon’ble Judges