APPEARED AT THE TIME OF ARGUMENTS

For the Complainant           :     Mr. Vipul Goel, Director of the Complainant

For the Opposite Party       :     Mr. A.N. Tiwari, advocate

ORDER

C.VISWANATH

1. The case of the Complainant is that the Company had taken a loan from the Opposite Party/Canara Bank in 1980 with a limit of Rs.5 lakhs. The limits were enhanced from time to time by the Bank at the request of the Complainant. In the year 1997, the limits were enhanced to Rs.15 lakhs Open Cash Credit (OCC) and Rs.5 lakhs Key Shut Cash Credit(KCC).

    

2. In January 1998, the Complainant Company as well as most of the industries/factories operating in and around Delhi were sealed by the Delhi Pollution Control Committee (D.P.C.C.) on court orders.The Hon’ble Supreme Court had also passed an order that no interest would be paid for the period for which unit remained closed on court orders. After the Delhi Pollution Control Committee (D.P.C.C.) granted permission to re-start the factory in December 1999, the Complainant approached the Opposite Bank for re-finance and rehabilitation of the unit. In January 2001, the Opposite Party granted fresh limits and restructured the old limits. The old loan became around Rs.40 lakhs and fresh limits of Open Cash Credit(OCC) of Rs.40 lakhs, B/E 10 lakhs and Working Capital Term Loan (WCTL) of Rs.15.00 lakhs were granted.The Opposite Party mortgaged Land and Building, stocks and machinery towards security. The old limits of Rs.15 lakhs Open Cash Credit plus Rs.5.00 lakhs KCC, along with interest become Rs.40.00 lakhs, which were funded by Interest Term Loan (FITL) and Working Capital Term Loan (WCTL) of Rs.29.99 lakhs plus Rs.10 lakhs. The terms and conditions specifically provided that fixed assets such as Building, Plant & Machinery and the prime securities were to be insured for adequate value as per the Opposite Party’s guidelines. On 27^th August 2001, at around 12:30 hours after midnight, the night chowkidar Shri Dhal Bahadur heard some cracking noises and noticed flames inside the Complainant’s factory with burning smell. He immediately went inside after opening the door and saw huge flames. Fire occurred and spread due to short circuit at the winding table, where lot of raw material was stored.He cut the power supply and called the Fire Brigade, Police etc. and also called the Directors of the Complainant Company. The Fire Brigade, Police and the factory staff tried to control the fire. The fire caused heavy losses to the premises, machinery, raw material, finished goods and stocks etc. The Opposite Party and the Insurance Company were at once intimated about the incident. The Opposite Party Bank had always taken Insurance Policies from the Insurance Company and the accounts of the Complainant were debited with the premium amount.The Bank Statements have been annexed as evidence of regular deduction of Insurance Premium from the account of the Complainant Company.The Directors of the Complainant Company did not know the details of the Insurance Company and the premium etc. The Complainant was regularly requesting the Opposite Party orally and in writing to supply copies of the Insurance Policies, statement and other relevant papers regarding the Insurance Policy, premium amount etc.The Complainant, however, was never supplied the Policy papers and other related information, despite repeated requests. In the year 2001, when fire damaged the factory premises, machinery, stocks and raw material etc. of the Complainant Company, the Opposite Party took the Insurance Policy form New India Assurance Company, Kanta Nagar Branch. The Opposite Party took Insurance Policy on stocks in process and building only for Rs.50 lakhs, Rs.2 lakhs and Rs.28.88 lakhs, but the Opposite Party failed to take Insurance Policy for machinery and accessories etc. which had a replacement value of Rs.1.50 Crores.The Bank, however, valued it at Rs.31.76 lakhs by valuation report. The Complainant Company had also spent Rs.6.53 lakhs on machinery on order and overhaul to re-start the unit, approved and verified by the Opposite Party. The Complainant came to know for the first time from the report of the Surveyors of the Insurance Company about the blunder/mistake and deficiency on the part of the Opposite Party that they had not taken Insurance Policy on machinery and accessories etc. of the Complainant Company. In January 2002, the Complainant Company received an Insurance claim settlement of only Rs.34.96 lakhs, which was given to the Opposite Party.

    

3. Alleging deficiency on the part of Opposite Party, Complainant filed a Complaint before this Commission under Section 21 of the Consumer Protection Act, 1986, praying for relief as under:-

4. To allow the Complaint by directing the Opposite Party to pay compensation/damages of Rs. 2 Crores to the Complainant.

5. To pass an interim order restraining the Opposite Party to proceed with the recovery of an amount, as alleged by them to be standing on the Complainant, in terms of notice dated 25.06.2003 or any other notice.

6. To pass such other order or orders as this Hon’ble Commission may deem fit and proper under the circumstances of the case.

7. The Complaint was opposed by the Opposite Party by filing Written Statement in which it contended that the services provided by the Opposite Party did not suffer from any defects, faults or imperfection. Rather, the Complainant was guilty on account of mismanagement and negligence on their part. Occurrence of the fire on 27-28 August 2001 could have been avoided, if the Complainant had maintained and kept in order all the electrical supports in the factory premises. The Opposite Party filed a recovery suit/OA against the Complainant which was pending before Debts Recovery Tribunal-1, Delhi.No other court or authority had jurisdiction to entertain and determine any other proceedings, except the Hon’ble Supreme Court and High Court. As the activities being carried out in the factory premises of the Complainant were commercial, the Complainant was not a consumer after the amendment to Section 2(d)(ii) of the Consumer Protection Act, 1986.Further, there was no deficiency in service on their part and the Complaint was barred by limitation.It was, therefore, liable to be dismissed.

    

8. As per the Deed of hypothecation regarding Machinery and Agreement regarding Collateral Security, Machinery, vehicles; both dated 4.1.2001, obtaining insurance cover pertaining to all the movable products hypothecated to Opposite Party Bank was the main responsibility of Complainant.

    

9. The borrower should adequately insure the hypothecated machinery and assets for the full market value against risk of fire, war, riots, civil commotion, strike, accident, risk, theft, and also for such other purposes as may be prescribed by any law for the time being in force and as required by the Bank and keep the Policy always current by duly and punctually paying the premia from time to time and to assign the benefits in Insurance Policy thereof to the bank.

    

10. Since the Complainant Company was unable to maintain their financial discipline and operation in the account was very negligent, the Opposite Party provided fresh breathing, rehabilitation package and various security documents were executed by the Complainant Company on 4.1.2001.Still the Complainant could not do better and stopped its operation from August, 2001.Thereafter, the Opposite Party by various letters requested regularization of account and also repayment of dues.In spite of the Complainant assuring to clear the entire dues to the Opposite Party, there was no progress.Ultimately, vide their letters dated 6.7.2002 and 10.9.2002, the Opposite Party called upon the Complainant to pay the entire outstanding amount in the account, but still there was no progress.The Opposite Party vide its notice dated 25.6.2003 issued u/s 13(2) of the SARFAESI Act, served notices on the Complainant and also the guarantors thereby calling upon them to clear the entire liability with interest from 1.1.2002 at the applicable rate of interest within 60 days from the date of notice, i.e., 25.6.2003.Immediately thereafter, OA/Suit was filed in DRT-I, Delhi being OA No. 90/2003 on 29.12.2003.

     

11. Fire occurred on 27.08.2001 after midnight is a matter of record.It was, however, stated that fire in the factory premises may or could be on account of either faulty interior systems or on account of enjoying more electricity than the sanctioned load.The Opposite Party however, had no role to play, because this was totally within the control of management of the Complainant Company.

     

12. It was stated that as per terms of sanction, it was the responsibility of the Complainant to take insurance policies for adequate amounts and Opposite Party was to debit account of the Complainant with the insurance payments etc. under intimation to the Complainant Company.It was, therefore, absolutely baseless to allege that the Opposite Party always used to take insurance policies.It was further baseless to allege that the Complainant Company had no knowledge about the details of the Insurance Company or premium fixed.

     

13. The Complainant failed to take Insurance Policy on machinery etc. which at that time, as per their own valuer had been valued at Rs.31.76 lakhs.The Complainant claimed replacement value of those machinery and accessories etc. to the extent of Rs.1.50 crores.The replacement value as claimed is absolutely imaginary, hypothetical and without any basis.

     

14. As regards spending of Rs.6.53 lakhs by the Complainant on machinery on order and overhaul to re-start the unit was concerned, it was stated that it was the primary duty of the Complainant to make machinery workable so that they could run the production and do the needful.Expenses of Rs.6.53 lakhs, as submitted by the Complainant, were accepted by the Opposite Party in good faith.

     

15. Heard the Learned Counsel for the Complainant as well as Opposite Party.Also carefully perused the record.

     

16. The Complainant is a limited company registered under the provisions of the Companies Act, 1956.For running its business, it had taken a loan from the Opposite Party Bank.Terms and conditions of the loan provided that fixed assets of the Complainant such as building, plant & machinery were to be insured for adequate value as per the guidelines of the Bank.Fire broke out in the factory and it was the case of the Complainant that the Bank was always taking the Insurance Policy for the Complainant and the premium amount was being debited to the bank account of the Complainant.The Directors of the Complainant were also ignorant as to the details of the insurance taken.Fire had caused heavy loss by way of damages to machinery and accessories.To his surprise, the Complainant realizedthat the bank had insured only the building and stock in process and failed to take Insurance Policy on machinery etc.This amounted to deficiency in service by the Opposite Party.This case came-up before this Commission and orders were passed on 22.08.2003 that Consumer Forums had no jurisdiction as the deficiency in service alleged by the Complainant was for a commercial purpose.The Complainant was held to be not a consumer.Hon’ble Supreme Court in “M/s. Leatheroid Plastics Pvt. Ltd. vs. Canara Bank” [Civil Appeal No. 445 of 2004, dated 20.01.2010] set aside the order of this Commission and remanded the same for consideration on merits, which reads as under:

    “The National Commission has dismissed the claim petition of the appellant on the ground that the appellant is not a consumer after the amendment to Section 2(d)(ii) of the Consumer Protection Act,1986 (for short ’the Act’).

     

    Learned counsel for the appellant submitted that the amendment to Section 2(d)(ii) came into force only on 15^th March, 2003 whereas the claim of the appellant relates to the year 2001. He submitted that the amendment does not have retrospective effect. This controversy is covered by a two Judge Bench decision of this Court in Karnataka Power Transmission Corporation & Another vs. Ashok Iron Works Private Limited reported in (2009) 3 SCC 240.

     

    Accordingly, this appeal is allowed; impugned judgment of the National Commission is set aside and the matter is remanded to the National Commission to consider the case on merits afresh in accordance with law, expeditiously.”

     

17. The main issue in this case is that the loss to machinery and accessories was not paid because of no insurance coverage.As made out in the above-mentioned submissions, Insurance Policies were regularly taken by the Bank and premium amount debited from the accounts of the Complainant.The Complainant had repeatedly requested the Opposite Party to furnish details of the Insurance Company and premium fixed.Documentary evidence, with letters written by the Complainant and received by the Opposite Party, have been adduced by the Complainant by way of evidence.It is not the case of the Opposite Party that notice was given at any point of time calling upon the Complainant to get the insurance done.Suddenly when fire broke out in the Complainant’s premises and it was found that no insurance was taken for the machinery, the onus and blame for taking the insurance was shifted to the Complainant, for the inaction and negligence on the part of the Opposite Party.Thus the Complainant had to suffer the loss and was denied the benefit of insurance claim.

     

18. The present case is well covered by this Commission’s judgment in the case of Allahabad Bank vs. J.D.S. Electronic Company I (2007) CPJ 270 (NC), where it was held:

    “It is admitted case of the parties that for preceding two years the stocks and equipments, etc. were got insured by the petitioner bank and premium amount debited in the account of respondent.  It is not the case of petitioner that any notice was given calling upon the respondent to get the hypothecated stocks and equipment, etc. insured directly by it for the subsequent year in which occurrence took place.  In that backdrop, we do not find any illegality or jurisdictional error in the orders passed by Fora below holding the petitioner bank deficient in service on ground of its not having got insured the hypothecated stocks and equipments, etc. and paying the said amount to the respondent.  Revision is without merit.  Dismissed as such with cost of Rs.3,500/- to the respondent.”

     

19. In another case, i.e., Union Bank of India vs. Annu Vastralaya and Anr. IV (2007) CPJ 187 (NC), it was held:

    “It is not the case of petitioner that any notice was given to respondent No. 1 to get the hypothecated stock insured directly from the Insurance Company for the said period.  Considering these facts including that the insurance was being taken since 1998 onwards by the Bank, no fault can be found in the impugned order.  Allahabad Bank’s case (surpa) had been rightly decided and does not require reconsideration.  Revision petition, therefore, deserves to be dismissed being without any merit.  Dismissed as such.”

     

20. In another case, i.e., Kashmir Singh vs. Punjab National Bank & Anr., [Revision Petition No. 1552 of 2012 decided on 03.12.2014], it was held: :

    “If the Bank was in no mood to furnish the insurance amount, it should have notified to the complainant about the same.

     

    The facts and circumstances of the case clearly go to reveal the negligence, inaction and passivity on the part of the Bank. They were supposed to do the needful but now they want to put the blame on other party.  The bank is terribly remiss in discharge of their duties.   Moreover, the premium was to be debited from complainant’s account only.  He was not required to pay the premium.

     

    Consequently, we allow the revision petition, set aside the order passed by the State Commission and restore the order passed by the District Forum”

     

     

21. In view of above, the Opposite Party is clearly responsible for the loss suffered by the Complainant and there is every duty cast upon it to compensate for the same.The Complainant has prayed to allow the Complaint by passing an order against the Opposite Party to pay compensation/damages of Rs.2 crores.He has claimed replacement value of Rs.1.5 crores for the machinery, Rs.45 lakh on account of loss of business and profit.Rs.1.5 lakh loss on account of the mistake made by the OP, deducted as miscalculation charges by the Insurance Policy, Rs.3.5 lakh on account of mental agony, suffering hardship and loss in business and livelihood.

     

22. As per the valuation report dated 14.12.2000 submitted by the valuer Mr. S.K. Kalia of Kalia Technical Services, appointed in consultation with the Complainant, the value of Plant and Machinery has been assessed at Rs.31.76 lakhs.In our considered view, therefore, a compensation of Rs.31.76 lakhs to the Complainant, alongwith interest @9% p.a. from the date of settlement of insurance claim, would meet the ends of justice.

     

23. In view of the above, the Opposite Party is directed to pay a compensation of Rs.31.76 lakhs to the Complainant alongwith interest @9% p.a. from the date of settlement of insurance claim within a period of 8 weeks from the date of this order.