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Criminal Reference No. 232 of 1958, decided on 13th April,
S. 104 and Penal Code (XLV of 1860), S. 468‑refences not identical.
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S. 107‑Sanction to institute proceedings‑Offence mainly falling under Ss. 410, 468 P. P. C. but only subsidiarily under S. 104, Insurance Act (IV of 1938)‑No sanction necessary.
The principal allegation against the three accused was that they formed‑a conspiracy to commit the offence of cheating the income‑tax authorities, their modus operandi being to set up a fictitious figure as insurance agent, withdraw large sums from the insurance premia deposited in their bank, credit them in the name of the fictitious agent and thus evade income‑tax by fictitiously reducing their real income. The forging of an application form by the accused for the purpose of obtaining an insurance licence in the name of the fictitious person was only subsidiary to, and in fact a. pre‑requisite of, the commission of the main offence of cheating.
The accused were charge‑sheeted under the principal allegations of cheating etc. i.e., under sections 420, 468, P. P. C., rather than under section 42 (2) or section 104, Insurance Act (IV of 1938).
Weld, that no sanction for institution of proceedings was required under section 107 of the Insurance Act (IV of 1938).
Munshi Noor Ahmed and others v. Malik Abdul Rehman P L D 1957 B J 10 distinguished.
Held, that P L D 1957 J3 J 10 was not an authority for the proposition that where the prosecution of an accused for the main offence does not require the sanction of .any prescribed authority, proceedings cannot be taken merely because prosecution for a subsidiary offence or offences, with which the accused has not been charged, requires such sanction.
Fazlur Rehman for Petitioners.
Murtaza Hussain A. A. G. for the State.
Date of hearing: 6th April 1959.
This is a case referred by the learned Sessions Judge, Karachi to this Court by his order dated the 26th May, 1958, recommending that the order of the City and Additional District Magistrate, Karachi dated the 27th of March 1958, overruling certain, legal objections relating to section 107 of the Insurance Act of 1938, raised by the applicant and his two co‑accused be set aside and the criminal proceedings pending against the applicant and his co- accused be quashed.
2. On the 24th of June 1957, the Police Station Pakistan Special Police Establishment, Karachi, submitted a charge sheet against (1) Ismail‑ Ebrahim Alloo, Superintendent, Government Department, Habib Insurance Company, Limited, Lahore, (2) Ch. Mukhtar Ahmed, Accountant Branch Officer of the American International Underwriters (Pakistan) Limited, Lahore, and (3) Ismail Budden Syed, Assistant Manager, Home Insurance Company, Karachi, which runs as follows:‑
"All the above mentioned three accused persons, being the employees of Messrs American International Underwriters (Pakistan) Limited, Lahore,, managed to obtain deceitfully an Insurance licence on 27‑4‑1954 in collaboration with each other, from the Controller of Insurance, Government of Pakistan, Karachi, in the fictitious name of Muhammad Usman Mathin, 12 Scotch Corner, The Mall, Lahore. The prescribed and printed application form of the name of Muhammad Usman Mathin for obtaining a licence to act as an Insurance Agent, was forged by accused No. 2 under the instructions of accused No. 3 (Ismail Budden Syed) while accused No. 1 (Ismail Ebrahim Aloo) had also knowledge of the said agency of Muhammad Usman Mathin being fictitious.
On the so acquired Insurance licence, insurance business was done by the accused persons and a total amount of about Rs. 15,741‑4‑0 on account of commission' and return commission' etc., was withdrawn by them through cheques in the name of Muhammad Usman Mathin from the National Bank of India, Lahore between the period of June and December 1953, and the same was pocketted (sic) by them. In this respect four bearer cheques of a total amount of Rs. 7,527‑13‑0 of the name of Muhammad Usman Mathin have been traced from the said bank which bear signatures of the accused persons and were cashed by accused No. 2 (Ch. Mukhtar Ahmed).
As there is sufficient evidence against the accused persons for offences under sections 420/468/471/109 P. P. C., this charge sheet is submitted against them . . . . ."
3. The objection was raised in the trial Court on behalf of Ch. Muhktar Ahmed, accused No. 2, that the offences complained of against the three accused persons fall within the purview of sections 104 and 41 of the Insurance Act and that consequently proceedings could only be instituted against them under section 107 of the Insurance Act by the Controller of Insurance or with the previous sanction of the Advocate General of the province concerned. This contention was repelled by the learned Magistrate in his order of the 27th March 1958, above referred to on the following grounds:‑
"In the present case, it cannot be said that fundamentally the charges against the accused persons relate to an offence under the Insurance Act or exclusively triable under the Insurance Act for which prior sanction of the prescribed authority is necessary. As I have pointed out above, the offence‑ punishable under section 468, Pakistan Penal Code is not covered by any parti cular provision of the Insurance Act. On the contrary, it was laid ‑down in P L D 1958 Kar. 86 that Where two distinct offences are disclosed on the face of a complaint one of which being under section 24 of the Pakistan (Administration of Evacuee Property) Ordinance, 1949, cannot be tried without sanction, the Magistrate is not precluded from trying the other offence which is under section 420 of the Pakistan Penal Code simply because the first cannot be taken cognizance of without prior sanction."
4. Against the above order Mukhtar Ahmed filed a revision application in the Court of the learned Sessions Judge, Karachi. The same objection was repeated, and found favour with the Court for the following reasons :‑
(1) In the opinion of the learned Sessions Judge, the docu ment forged or falsified in the present case is the prescribed application form submitted by the accused persons to the Controller of Insurance for the purpose of obtaining an Insurance licence in the name of the fictitious person Muhammad Usman Mathin, that the application form in question is prescribed by section 42 of the Insurance Act, being consequently a document required by or for the purposes of any of the pro visions of the Insurance Act. The learned Sessions Judge, therefore, considered it obvious that any falsification of material particulars in a document of this kind would amount to an offence made punishable under section 104 of. the Insurance Act.
(2) The learned Sessions Judge accepted the general principle that where an act is an offence both under a special law and under the general law the prosecution is not precluded from invoking the general law, but went on to observe :‑
"The Controller of Insurance has been entrusted with the responsibility of administering Insurance Law in the country, and it must, therefore, have been thought appropriate he should be the person to initiate any proceedings that may become necessary in respect of offences mentioned in the Act. The question, therefore, arises that if the offence mentioned in it, section 104 of the Insurance Act is not a new offence and the definition given therein is identical or corresponding to the definition of an offence already made punishable in Penal Code as well, should the prosecution be allowed to evade the special procedure laid down in section 107 of the Insurance Act. I think the answer to this question is clearly contained in a recent decision given by S. A. Rehman, C. J. of the West Pakistan High Court in Munshi Noor Ahmad and others v. Malik Abdul Rehman P L D 1957 (W. P.) S. J 10. In that case, his Lordship was dealing with the question whether the pre requisite of obtaining sanction of the competent authority for prosecuting a Government servant could be evaded by charging the servant concerned with an offence under section 467 of the P. P. C. instead of S. 409 of the P. P. C. The accused persons in that case had been charged with falsification of accounts and misappropriation of money. Sanction for prosecution was required for an offence under section 409 but not for that under section 467 of the P. P. C. His Lordship laid down that the test to be applied is whether primarily and essentially the allegations made would pertain to an offence which cannot be tried without sanction of the prescribed authorities. Applying that test the learned Judge held in the case before him that the allegations really amounted to charging the accused with misappropriation of money and to facilitate that crime they were being also accused of falsifying the records. He, therefore, concluded that the accused cannot be proceeded with in the absence of sanction from the appropriate authority.
In the present case it is clear that the document in question was an application form prescribed under section 42 of the Insurance Act. It was falsified or forged with a view to obtaining an Insurance Licence. It is clear, therefore, that primarily and essentially the allegations against the accused persons amount to an offence under section 104 of the Insurance Act, although they may also be guilty of other offences, arising out of the same transaction and punishable under the General Penal Law . . . . . .'Thus I cannot subscribe to the view taken by the learned Magistrate that the offence complained of against the accused persons does not fundamentally relate to the Insurance Act."
(3) The learned Sessions Judge called attention to the wording of the first information report lodged against the accused on the 18th of May 1956, and argued that the recital contained therein did not support the view urged by learned counsel for the Govern ment of Pakistan that the three accused persons were acting purely in their private and individual capacity when they forged the document in question for the purposes of obtaining an insurance licence, and that consequently the essential condition for invoking section 107 of the Insurance Act was not fulfilled. In the opinion of the learned Sessions Judge the accused persons were acting as officers of an insurer.
5. One point calling for mention is that in arriving at his conclusion the learned Sessions Judge has obviously been influenced by the wording of the first information report above referred to. The document in question runs :‑
"Reliable information has been received that Messrs American International Underwriters (Pakistan) Ltd., Karachi, who are the local agents and attorneys to the Hanover Fire Insurance Co. of U. S. A. and the New Hamshire Fire Insurance Co. of U. S. A. with their head office at Karachi, have devised ways and means to cheat and defraud the Government of Pakistan and the public of the income‑tax and also of the premiums charged deceitfully in excess by them. After the amounts of premium are deposited in the bank they allow rebate at certain percentage on their record and draw the same from the bank showing the purpose as refund to the parties but the said amounts are neither refunded nor shown as income to the Income‑tax authorities and are dishonestly misappropriated.
The Government of Pakistan have got large number of policies 'endorsed in favour of the Governor‑General or the President of Pakistan with the said Insurance agents and are paying the premiums according to the fixed rates but in all the cases rebates are allowed without intimation to the Government, withdrawn from the bank and misappropriated by the accused firm. (Then follow two instances).
It is also alleged that the fictitious insurance agent M. U. Mathin has been registered in order to cover up the com mission obtained in his name from Messrs Kohinoor Textile Mills and Colony Textile Mills thus evading income‑tax.
The above facts disclose the commission of an offence under section 420/408 P. P. C. . . . . ."
It will be seen that there is a significant difference between the above First Information Report and the charge‑sheet finally submitted to the Court, the reason obviously being that in the interval of more than one year elapsing between the drawing up of the two documents the prosecution had been able to discover fresh facts and to clarify the position. The case as presented in Court is that contained in the charge‑sheet, and the learned Sessions Judge has been to some extent led astray by attaching too much importance to the F. I. R.
6. The learned Sessions Judge considered that the accused were, assuming the truth of the allegations made by the prose cution, guilty of an offence under section 41 of the ‑ Insurance Act. The section in question runs:‑
"41.‑(1) No person shall allow or offer to allow either directly or indirectly, as an inducement to any person to take out or renew or continue an insurance in respect of any kind of risk relating to lives or property in Pakistan, any rebate of the whole or part of the commission payable or any rebate of the premium shown on the policy, nor shall any person taking out or renewing or continuing a policy accept any rebate, except such rebate as may be allowed in accordance with the published prospectuses or tables of the insurer
"Provided that acceptance by an insurance agent of commission in connection with a policy of life insurance taken out by himself on his own life shall not be deemed to be acceptance of a rebate of premium within the meaning of this subsection if at the time of such acceptance the insurance agent satisfies the prescribed conditions establishing that he is a bona fide insurance agent employed by the insurer.
(2) Any person making default in complying with the provisions of this section shall be punishable with fine which may extend to five hundred rupees."
It will be seen that the offence constituted by the above section is that of allowing a rebate of commission and it is obvious that there is an underlying assumption that a rebate is genuinely given. In other words, what is made punishable by the section is the un desirable trade practice adopted by some insurance companies of tempting a potential client by offering a secret rebate of premium. In the present case, on the other hand, the prosecution allegation is that the so‑called rebates granted by the accused were fictitious and that, in fact, the accused, themselves continued to enjoy the benefit of the money withdrawn from the bank and credited in the fictitious name of Muhammad Usman Mathin. Section 41 of the Insurance Act was never intended to cover such a situation, and the accused cannot be, and have not been, charged in the present case with that offence.
7. The learned Sessions Judge also considered that section 104 of the Insurance Act did not create a new offence, the definition given therein being, to quote his own words, "identical or corresponding to the definition of an offence already made punishable in the Penal Code as well". He has, unfortunately, not specified the section of the Penal Code which he 'considers to be identical in content with section 104 of the Insurance Act, but presumably he is referring to section 468. These two sections may accordingly with advantage be compared. Section 104 of the Insurance Act runs :‑
"104.‑Whoever, in any return, report, certificate, balance sheet or other document, required by or for the purposes of any of the provisions of this Act, wilfully makes a statement false in any material particular, knowing it to be false, shall be punish able with imprisonment for a term which may extend to three years, or with fine which may extend to one thousand rupees, or with both."
Section 468, P. P. C., on the other hand, is to the following effect :‑
"468. Whoever commits forgery, intending that the docu ment forged shall be used for the purpose of cheating, shall be punished with imprisonment of either description for a term which may extend to seven years, and shall also be liable to fine."
A comparison of the wording shows that the two sections cannot be considered to constitute identical offences. Section 468 of the Penal Code clearly contemplates that the object of the forgery is to facilitate the offence of cheating, and if that condition is no fulfilled, no offence under section 468, P. P. C., is committed. Section 104 of the Insurance Act, on the other hand, renders punishable an act which need not fall within the orbit of section 468, P. P. C. In other words, the basic ingredient of an offence under section 104 of the Insurance Act is not the forging of the document, but the wilful making of a false statement in a document which may be in all other respects perfectly genuine.
8. The above analysis destroys the basis of the learned Sessions Judge's argument that the prosecution of the accused under section 468, P. P. C. amounts to an evasion of the special procedure‑ prescribed by section 107 of the Insurance Act.
9. The learned Sessions Judge has placed great reliance on the decision of this Court in Munshi Noor Ahmed and others v. Malik Abdul Rahman, already referred to. With very great respect, I entirely agree with the principle laid down therein, but what the learned Sessions Judge has failed to observe is that the present case is not identical with, but is, on the contrary, the converse of that dealt with by Rahman, C. J. in the latter the facts alleged by the prosecution really made out an offence under section 409, P. P. C , the offence of section 467, P. P. C., with which the accused was charged being only subsidiary. In the present case, on the other hand, it is clear that the principal allegation against the three accused is that they formed a conspiracy to commit the offence of cheating the income‑tax authorities, their modus operandi being to set up a fictitious figure as insurance agent, withdraw large sums from the insurance premia deposited in their bank, credit them in the name of Mathin and thus evade income‑tax by fictitiously reducing their real income. On this view of the matter the forging of an application form by the accused for the purpose of obtaining an insurance licence in the name of Muhammad Usman Mathin was only subsidiary to, and in fact a pre‑requisite of, the commission of the main offence of cheating. It is fort his reason that I have described the present case as the con verse of Munshi Noor Ahmad v. Malik Abdul Rahman, and, applying the reasoning laid down therein it would be an abuse of the process of the Court to quash the proceedings against the accused under sections 420, 468 and 471, P. P. C. and proceed against them for the comparatively less serious offences created by sections 41 and 104 of the Insurance Act. Munshi Noor Ahmad's case certainly cannot be considered as an authority for the proposition that where the prosecution of an accused for the main offence does not require the sanction of any prescribed authority, B proceedings cannot be taken merely because prosecution for a subsidiary offence or offences, with which the accused has not been charged, requires such sanction.
10. For the above reasons. I am unable to accept the recommendation of the learned Sessions Judge and dismiss the application.
A. H. Order accordingly.
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