PER SUBHASH CHANDRA

This Appeal under section 19 of the Consumer Protection Act 1986 (for short, “the Act”) is filed against the impugned order dated 11/04/2019 of the State Consumer Disputes Redressal Commission, Pandri, Raipur, Chhattisgarh (for short, “the State Commission”) in Consumer Complaint No.43 of 2018 dismissing the Complaint which alleged that the Respondent No.1 had been deficient in service in not renewing the Fire and Earthquake Policy on its behalf with the Respondent No.3, the New India Assurance Company (hereinafter referred to as “the Insurance Company”).

2.     The brief facts of the case are that the Appellant took a term loan and opened cash credit account with the Shankar Nagar Branch of Union Bank of India in Raipur in respect of his factory.  The loan was availed for the plant, machinery, fixtures, building and stocks.  As per the conditions of the loan the insurance policy for fire and earthquake had been obtained from the Insurance Company and the premium amount for the same was deducted from the Appellant’s account on 19.08.2015 and 08/12/2016 for the previous two years respectively.  The Appellant states that deduction of premium for the said policy was by way of auto deduction and was done by the Respondent No.1 the Bank without Appellant having a right to choose the policy.  On 12/4/2018 a fire broke out in the premises and factory of the Appellant which was extinguished by calling the Fire Brigade.  On approaching the Respondent with the claim for the loss incurred, the Appellant was informed, vide letter dated 23/4/2018, that the insurance policy had lapsed on 08/12/2017 and therefore his claim was rejected. The Appellant contends that this was on account of failure of the Respondent No.1 which failed to renew the Policy by paying the premium due from the Appellant’s account, which amounted to deficiency in service in failing to renew the policy even though there was adequate balance in his account from which the policy premium could have been deducted.  Financial loss of approximately ₹97 Lakhs is claimed by him for which a legal notice dated 09/07/2018 was issued to which there was              no response by the Respondent.  Consumer Complaint No.43 of 2018 was filed on 05/10/2018 before the State Commission which came to be dismissed by the State Commission.  It is contended that the State Commission acted contrary to the judgments of this Commission in SBI vs. Surisetty Lakshmi Sai Mahalakshmamma decided on 23.10.2017 and State Bank of India vs. Girja & Ors..  It was further argued that discontinuation of the insurance cover by not renewing the insurance policy suo moto had been held in these judgments to be neither prudent nor vigilant on behalf of the Bank employees.  It was also argued that this Commission had held in Allahabad Bank vs. J.D.S. Electronic Company, I (2007) CPJ 270 NC that a notice was required to be given to get hypothecated stocks and equipments from being removed from insurance cover which was not done in this case.  Accordingly, it was prayed that the impugned order be set aside.

3.     On behalf of the Respondents, it was argued that obtaining insurance cover was the responsibility of the borrower Appellant as per clause 9 of the standard terms and conditions which reads as below:

“9.         Insurance

    The borrower’s assets offered as security (prime and collateral) for the facility to be kept fully insured comprehensively for 10% of assets value.  A copy of the policy to be submitted to the bank.  A list of the current insurance policies alongwith copies thereof to be submitted to the bank detailing therein the names and addresses of the insurer, brief particulars of goods covered, type of cover, amount of cover and date of expiry of each policy.  Insurance policies to contain the agreed bank’s clause.”

4.     It was argued that the Bank at its discretion can obtain an insurance policy on behalf of the borrower although it is not bound to do so.  It is stated that in the present case the Bank had, with the consent of the borrower, obtained insurance policy on two previous occasions, i.e. 19.08.2015 and 09.02.2016 before and after expiry of the said Policy.  It is contended that the Bank gave repeated reminders including at the level of the Branch Manager whose affidavit is also brought on record to substantiate the same.  It is argued that in view of the Appellant not paying heed to the Respondent the renewal could not be done in the absence of authorization and therefore, the Respondent bank cannot be faulted for deficiency in service.

5.     It is also stated that the Appellant submitted the monthly stock statement that was required to be submitted by 15^th of the subsequent month on 19/4/2018 pertaining to February and March 2018, on                    28^th February 2018 and 31^st March 2018 resepctively, i.e. after the incident of fire without informing the Respondent of the occurrence of the fire on 12/4/2018.  The stock statements for December 2017 and January 2018 indicated stocks of ₹7,81,500/- and ₹9,63,600/- respectively whereas for February and March, 2018 the stock indicated is inordinately  high at ₹32,16,000/- and ₹35,16,000/-.  It is contended that no opportunity to verify the stocks was provided to the Bank and therefore, the malafide of the Complainant is apparent.  Reliance is placed on this Commission’s order in M/s H.S. Traders vs. Oriental Insurance Co. Ltd. & Anr., FA 1481 of 2017 decided on 25.02.2019 and the judgment of Hon’ble Supreme Court in Central Bank of India vs. Jagbir Singh (AIR 2015 State Commission 270) and HDFC Bank Ltd. vs. Kumari Reshma and Ors. (AIR 2015 State Commission 290) to argue that the liability of taking the insurance policy is that of the borrower and the Bank cannot be held to be deficient in service for not renewing the Policy.

6.     I have heard the learned Counsel for the parties and perused the record.  Short synopsis have also been filed by the parties.

7.     During oral submissions, learned Counsel for the Appellant relied on Regulation 9(1) of the IRDA Guidelines to argue that as per section 9(2)(iii) “Every corporate agent shall, with a view to conserve the insurance business already procured through him, make every attempt to e4nsure remittance of the premiums by the policyholders within the stipulated time, by giving notice to the policyholder orally and in writing”. It was contended that the Bank had been deficient since it was the corporate agent of the Respondent No.3, the Insurance Company and had failed to discharge its obligatory duty.  Reliance was placed on Texco marketing Pvt. Ltd. vs. Tata AIG General Insurance Co. Ltd. & Ors., Civil Appeal No.8249 of 2022 decided on 09.11.2022 that the Bank had been guilty of unfair trade practice on account of incorporation of onesided and unreasonable clauses in the Hypothecation Agreement.

8.     From the foregoing, it is manifest that the Appellant had obtained a loan and working capital arrangement with the Respondent Bank and that the terms of the Hypothecation Agreement entailed that the Appellant as the borrower had to obtain insurance cover in respect of the plant, machinery, building and stock covered under the agreement.  However obtaining such insurance policy was the primary responsibility of the borrower/Appellant.  Payment of premium could be made by auto debit from the account with prior consent of the borrower/Appellant by the Bank on its behalf.  Only in the event of default the Bank could have obtained the insurance in order to safeguard its interest on its own.  It is indeed a fact that on the previous two occasions in 2015 and 2016, the Bank deducted insurance premium with the prior consent of the Appellant by auto debiting the account.  Thereafter it appears that there were some differences between the borrower/Appellant and the bank over this issue and that the Bank had been pressing upon him to obtain the necessary insurance cover which he failed to do.  An affidavit of the Branch Manager of the Bank which has been brought on record is clear evidence that efforts were made to either renew the insurance with Respondent No.3 or to consider obtaining of insurance from any other insurance provider.  The Appellant, for reasons best known to him, did not finalize his position until the fateful day of the fire which occurred at a time when there existed no insurance cover for the goods, building, plant and machinery.

9.     The contention of the Appellant that the Bank could have acted as a corporate agent of Respondent No.3, the Insurance Company, is not a valid contention.  The Bank, as rightly argued by the learned Counsel for the Respondent, being not primarily responsible for the act of obtaining insurance cover, cannot be held responsible for the negligence of the borrower/Appellant in failing to either renew or to obtain the insurance cover to cover the liabilities of his term loan and working capital.  For this failure to act with due diligence, the Appellant cannot transfer the liability to the Bank in the present case when it had been repeatedly urged to obtain necessary Insurance Company.  In any case his prior consent was essential before the Bank could auto debit his account with the premium for such insurance cover.  There is no evidence brought on record to prove that such instruction had been issued to the Bank by the Appellant and which was not complied with by the Bank.

10.    In view of the foregoing, and in the facts and circumstances of the case, the Respondent Bank cannot be held liable for any deficiency in service in the failure of obtaining the necessary insurance cover by the borrower/Appellant.

11.    For the aforementioned reasons, we find no reason to interfere with the order of the State Commission which is a reasoned and detailed order. The Appeal is, therefore, found to be without merit and is accordingly dismissed.  There shall be no order as to costs.  All pending applications, if any, also stand disposed of with this order.