1.       Vakalatnama on behalf of respondent No. 2 has been filed today.

2.       Both the parties have filed certain documents, which are taken on record and will be considered.

3.       The present revision petition is filed against the order dated 29.08.2017 passed in first appeal No. 36 of 2012 whereby the appeal of the complainant was allowed and the order of the District Forum dated 18.05.2012 passed in consumer complaint No. 04 of 2011 was set aside.

4.       The brief facts of the case are that the respondent No. 1/complainant (herein after called as ‘the complainant’) had its C. C. Account No. 554 with the bank with sanctioned cash credit limit of Rs. 18,00,000/- for the purpose of carrying on its business.  Against this cash credit limit, the complainant had hypothecated its goods. On 18.11.2010, the goods of the complainant were stolen and also destroyed causing a loss of Rs.9,61,000/-.  An FIR No. 546 of 2010 under section 461/380 of I.P.C. was registered. Thereafter, the complainant submitted an application dated 02.12.2010 with the petitioner-bank asking them to supply the copies of the insurance policies retained by the petitioner-bank, in order to place its claim before the insurer. The said copies were supplied to the complainant on 06.12.2010.  It was, at that time, that he found that his policy for the year 2009-2010 expired on 17.01.2010 on account of non-payment of the premium for the renewal. He was informed by the Branch Manager of the petitioner-bank that the bank had forgotten to renew the insurance policy after 17.01.2010.  This resulted in failure of the complainant to place his claim for reimbursement of his loss to the insurer.

5.       The complainant thereafter filed a complaint before the District Forum.  His contention before the District Forum was that it was the bank, who had themselves obtained the insurance policy and had been paying the premium after deducting the same from complainant’s account and getting the policy renewed from the period of 22.02.2006 till its expiry.  It is submitted that the policy was first taken by the bank on 22.02.2006 and renewed every year by deducting premium from complainant’s account and paying it to the insurer.  His contention was that it was the duty of the petitioner–bank to get it renewed.

6.       The petitioner–bank, however, took the plea that under the hypothecated agreement it was the duty of the complainant to get its hypothecated goods insured and since he has failed to do so, no responsibility can be imposed upon the petitioner–bank.

7.       The parties led their evidences before the District Forum.  The District Forum, however, vide its order dated 18.05.2012 dismissed the complaint finding no merit in it.

8.       The complainant challenged the order of the District Forum before the State Commission.  It took the same pleas before the State Commission. He also took the plea that it was the petitioner–bank, who had obtained the policy of insurance by signing the Proposal Forum and also as an agent of the insurance company, therefore, it was its duty to renew the insurance for the benefit of both the parties.

9.       The petitioner-bank, however, took the plea that they had duly informed the complainant about the expiry of the previous policy and the need for its renewal. The petitioner-bank also took the plea that they never suo-moto filled up the Proposal Form and did it only after consultation with the complainant.  They also took the plea that the period of insurance coverage was from 18.01.2009 to 17.01.2010 and the cash credit account of the complainant  was renewed on 14.12.2009 and as such, it was the duty of the complainant at the enhancement of the limit to see whether its stocks was adequately insured or not. 

10.     These were the two arguments before the State Commission.  Both the arguments of the petitioner-bank were dismissed by the State Commission.  The State Commission held as under:

“7.        Further, if the obligation was of the Complainant alone, it was still incumbent upon the bank to show how the Complainant was first asked / required to discharge it, before exercising the option to go ahead with it.  There is nothing to show that the Bank first advised the Complainant to insure the house and only upon his failure, insured it with the United India Insurance Co.  The fact remains that after taking no action to insure the building for two and half years, the Bank exercised its option under clause 13 to insure it, debiting the account of the complainant.  We are therefore, in full agreement with the view of the State Commission that without being under any obligation did not empower the RP/OP to commit arbitrary omissions and commissions.

8.         …..

For the reasons detailed above, we hold that  since the respondent bank from the very beginning, used to insure the stock of the complainant’s firm, it was their duty to renew the insurance cover after expiry of the previous insurance policy or to bring it to the notice of the appellant the need to take a fresh policy.

Needless to mention that though the respondent bank took the plea that the appellant was informed to renew the insurance policy after expiry of the period of the earlier policy ending on 17.01.2010, in view of the fact that in his cross-examination, D.W.-1 has admitted that they do not have any paper to establish this contention, this version of the bank cannot be accepted as a truthful account.  As the appellant had to suffer loss for the inaction of the respondent bank to insure the stock of the appellant’s firm, this is nothing but a clear case of deficiency of service on their part.”

11.     The impugned order dated 29.08.2017 is challenged before us on the same ground i.e. under the hypothecation agreement (copy of which has been placed by the petitioner-bank for the first time before this Commission). As per clause 6, the sole and absolute duty to get its hypothecated stock insured is that of the complainant.  During the course of arguments, it is also denied that any proposal form had been signed by the petitioner-bank.  It is, however, admitted that they had acted as an agent of the insurer.  Regarding the deduction of the payment of the premium for the year prior to 17.01.2010, it is submitted that the premium had been deducted as per the written instructions from the complainant.  It is also argued that as per the guidelines of RBI at the time when the cash credit limit is given, it is the duty of the petitioner-bank to obtain the insurance policy and so they have acted as per the guidelines of RBI.

13.     Learned counsel for the petitioner-bank has placed reliance upon the judgment of this Commission in the case of Rahul Electricals vs. State Bank of India and Ors., revision petition No. 2945 of 2012, decided on 05.07.2013. 

14.     It is argued by the learned counsel for the complainant that the insurance policy had been obtained by the bank on its own by the petitioner-bank and thereafter they continued to get it renewed from year to year and they had failed to get it renewed on its expiry on 17.01.2010 and therefore, it amounts to deficiency in service on their part.  It is further argued that if the petitioner-bank were not inclined to renew it on its expiry after 17.01.2010, it was their bounden duty to inform the complainant requiring him to get the insurance policy renewed and since they have not done so, they cannot now be permitted to take advantage of their own failure/wrong.

15.     We have given thoughtful consideration to the rival contentions and perused the material on record.

16.     From Clause 6 of the Hypothecation of Goods to Secure a Demand Cash Credit filed by the petitioner-bank, it is apparent that the primary duty to get the hypothecated stock insured is that of the borrower.  The clause however, further mentions that if the borrower fails to do so within stipulated period, the petitioner-bank shall be at liberty, though not bound to effect such insurance at the expenses of the borrower.

Clause 6 reads as under:

“That the hypothecated goods shall be insured against Fire risk by the Borrowers in some Insurance office or offices approved by the Bank and in the name and for the sole benefit of the Bank for their full market value and that the Borrowers will on demand deliver to the Bank all policies for and the receipts for premia paid on such insurance endorsed and assigned with the full benefit thereof in favour of the Bank.  Should the Borrowers fail to so insure or fail to deliver the policies or receipts for premia duly endorsed as aforesaid three days after demand the Bank shall be at liberty, though not bound to effect such insurance at the expenses of the Borrowers.  The Borrowers further agree that the Bank shall be at liberty at any time at its discretion (without being bound to do so) to insure the securities for their full market value against riot and civil commotion risk or any other type of insurance risk at the expenses of the Borrowers with any Insurance Company.”

17.     Learned counsel for the petitioner-bank has primarily relied on this clause in order to emphasise the argument that it is the duty of the complainant to get the insurance of the goods renewed.

18.     From the bare reading of this Clause, it is apparent that although it is the primary duty of the complainant to get its stock insured, however, on its failure, Clause gives liberty to the petitioner-bank to get the hypothecated goods insured at the expenses of the borrower.  It is apparent that this option had been exercised by the petitioner-bank way back on 22.02.2006 when it obtained the insurance policy of the hypothecated goods at the expense of the complainant.  The fact that the premium had been deducted from the account of the complainant, make its abundantly clear that it was at the expense of the complainant.  From year to year, the petitioner-bank continued to renew the said policy after deducting the premium from the account of the complainant.  No letter or any other document has been placed on record by the petitioner-bank to show that every year the premium was deducted on the written instructions from the complainant.  It only goes to show that they had been renewing the insurance policy in terms of clause (6) of the Hypothecated agreement. The complainant, therefore, was under the impression that it is the petitioner-bank who had obtained the insurance policy for its hypothecated goods at its expenses and made no efforts to obtain any other insurance policy.  The proposal form which has been placed before us by the complainant today clearly establishes that the proposal was filled by the petitioner-bank and they are the proposer.  This proves the fact that the policy had been obtained by the petitioner-bank at the expenses of the complainant.  They also continued to renew the policy for the last three years i.e. from 2006 to 17.01.2010.  If the petitioner-bank was not inclined to further renew the policy despite the fact that they were the proposer of the said policy, it was their duty to inform the complainant to obtain the insurance on its hypothecated goods.  By not doing so, they have failed to discharge their duty.  The plea taken by the petitioner-bank before the State Commission was that the complainant was informed to renew the insurance policy after expiry of the period of earlier insurance policy ending on 17.01.2010 and the State Commission has clearly observed that the witness of the petitioner-bank in his cross-examination had admitted that the petitioner-bank did not have any document to establish this contention.

19.     During the course of arguments, the petitioner-bank has failed to draw our attention to any document which can show that the complainant was informed about this fact. By taking this plea that the complainant was informed to renew the insurance policy on its expiry on 17.01.2010, they indirectly have also admitted their obligation to inform the complainant in that eventuality.

20.     This Commission in the case of Rahul case (supra) has also clearly held that if the complainant fails to get the insurance policy on being asked to do so in writing, the bank was in its own discretion to get the goods insured on account of the complainant.  The findings in Rahul case (supra) are given on the facts of that case and does not help the petitioner in any way. In the case before us, the petitioner-bank has already exercised its discretion under the clause (6) of the hypothecated agreement by getting the goods insured.

21.     We found no illegality or infirmity in the impugned order. The present revision petition has no merit, the same is hereby dismissed with no order as to costs.