JUSTICE V.K.JAIN, PRESIDING MEMBER (ORAL)

          The complainant who is the appellant in FA No.1481 of 2017, is dealing in the trading of old and new packing bag.  He obtained the credit facility initially to the extent of Rs.7.25 lacs, which was later enhanced to Rs.14 lacs, from Oriental Bank of Commerce, appellant in FA No.2188 of 2017.  The stock of the goods kept in the shop of the complainant bearing Shop No.8, outside Bhagtanwala, Amritsar as well as in the godown near Janta Petrol Pump, Tarantaran Road, Amritsar was hypothecated by him with the bank.  As per the agreement between the complainant and the bank, the complainant was required to obtain an insurance cover in respect of the goods hypothecated to the bank but in case of default on his part, the bank was competent to take the insurance cover and debit the premium to the loan account.  The complainant did not obtain any insurance policy in respect of the goods which had been hypothecated with the bank.  The bank however, took insurance policy from respondent no.2 Oriental Insurance Company Ltd. for the period from 31.03.2014 to 30.03.2015.  A perusal of the above referred insurance policy would show that this was not the first policy taken in the name of the complainant and there was also an earlier policy bearing no. 233300/11/2013/1517.  The insurance policy was taken by the bank only in respect of the stock kept in Shop No.8, Bhagtanwala Road, Amritsar but not in respect of the stock kept in the godown near Janta Petrol Pump, Tarantaran Road, Amritsar.  In an incident of fire which happened on 29.12.2014, in the godown premises of the complainant at Tarantaran Road, the goods stored in the said godown were damaged/destroyed.  A claim for reimbursement in respect of the insurance policy was lodged with the insurer but was repudiated vide letter dated 17.03.2015 which, to the extent it is relevant, reads as under:

          “We have scrutinized the claim documents. On going through the preliminary survey report dt. 03.01.2015 and final survey report no. 14/F/085/15 dt. 25.02.2015 we observe that the fire loss occurred at godown situated at “Near Janta Petrol Pump, opposite Aman Farm, Tarantaran Road, Amritsar.” However, the subject policy no.233300/11/2014/1542 covers the location of risk at “Shop No.8, Bhagtanwala, Amritsar” which is 5.4 Km away from the location of occurrence of loss under subject claim.  The location “Near Janta Petrol Pump, Opposite Aman Farm, Tarantaran Road, Amritsar” is not covered under subject fire policy.”

2.      Being aggrieved, the complainant approached the concerned State Commission by way of a Consumer Complaint impleading the insurer as well as the bank as the OPs in the complaint. 

3.      The complaint was resisted by the insurer primarily on the ground on which the claim had been repudiated.  The bank also resisted the Consumer Complaint alleging therein that it had acted only as an agent of the insurer for collecting the insurance premium and there was no deficiency on its part in rendering services to the complainant.  On merits, it was also admitted that the bank had a tie-up with the respondent Oriental Insurance Company Ltd. as its agent though it was alleged that the said tie-up was only for collecting the premium.  It was admitted in the reply filed by the bank that the insurance premium was debited to the cash credit limit account of the complainant with the consent of the complainant.  It was also stated that it was the complainant who had obtained the insurance policy for the period from 28.03.2014 to 27.03.2015.  It was further alleged that the complainant had always obtained photocopies of the insurance policy from the bank for its record.  It was also stated in para 4 of the reply that the complainant never asked the bank to provide the copies of the insurance policy before the incident of fire as they had already taken the said copy from the bank for their record. 

4.      Vide impugned order dated 08.06.2017, the State Commission allowed the complaint against the bank but dismissed the same against the insurer.  Being aggrieved from the order passed by the State Commission, the bank is before this Commission by way of First Appeal No.2188 of 2017.  Since the complainant is also not satisfied with the amount directed to be paid to it by the State Commission, he is before this Commission by way of First Appeal No.1481 of 2017. 

5.      As far as the insurer is concerned, it is an admitted position that the insurance cover had been taken only in respect of the stock kept in Shop No.8, Bhagtanwala Road, Amritsar. Admittedly, the fire did not break out in the aforesaid shop and it broke out only in the godown premises of the Tarantaran Road, Amritsar.  Since the godown premises was not insured by the insurer, it cannot be held liable to reimburse the complainant for the loss of the stock which had been kept in the said godown.  Therefore, the view taken by the State Commission, to the extent the insurer is concerned, does not call for any interference by this Commission in exercise of its appellate jurisdiction. 

6.      It is first contended by the learned counsel for the bank that the complainant is not a consumer within the meaning of Section 2(1)(d) of the Consumer Protection Act, he having taken cash credit facility from the bank for a commercial purpose, at commercial rate of interest. 

7.      Section 2(1)(d) of the Consumer Protection Act provides that the term ‘Commercial purpose’ does not include use by a person of the goods bought and used and the services availed exclusively for the purpose of earning his livelihood by means of self-employment.  Therefore, a person hiring or availing services exclusively for the purpose of earning his livelihood by way of self-employment would be a consumer even if the services hired by him were commercial services.  On a perusal of the complaint, I find that in para 1 of the complaint, the complainant expressly averred as under:

“That complainant firm is dealing with trading of old and new bardana (packing bags) which is done by its proprietor for his self-employment and earning his livelihood with the help of two or three casual labourers as per requirement.”

          The above referred averment was admitted by the bank since, the contents of para 1 of the complaint were expressly admitted in the written version filed by it.  Moreover, no objection was taken in the written version filed by the bank that the complainant was not a consumer within the meaning of Section 2(1)(d) of the Consumer Protection Act.  Therefore, I have no hesitation in holding that the complainant was covered under the explanation below Section 2(1)(d) of the Consumer Protection Act and therefore, was a consumer within the meaning of Section 2(1)(d) of the Consumer Protection Act. 

8.      As far as merits is concerned, though it has also been alleged in the written version filed by the bank that the insurance policy for the period from 28.03.2014 to 27.03.2015 was obtained by the complainant, the documentary evidence available on record clearly shows that the said averment was incorrect.  In fact, the bank itself alleged in its written version that the complainant firm always obtained photocopies of the insurance policy from the bank for their record.  Had the policy been taken by the complainant, there could be no occasion for him to take a copy of the policy from the bank.  If the complainant had obtained a copy of the policy from the bank, it would mean that the policy was taken by the bank and not by the complainant.  In fact, in its letter dated 02.03.2015, addressed to the surveyor, the bank expressly stated as under: 

“We have regularly visited the shop and factory to check the stock of Baradana, Jute and Plastic bags hypothecated to the Bank against the above limit.  The Insurance Policy to cover the fire insurance of stock lying at shop as well as in factory has been taken by our bank as per the terms of sanction letter.  The insurance premium was recovered from the party by debiting the CC account.” (emphasis supplied)

9.      It would thus be seen that it is the bank and not the complainant who had been taking the insurance policy from Oriental Insurance Company Ltd.  It also shows that not only the stock kept in the shop but also the stock kept in the godown of the complainant had been hypothecated with the bank and the bank officers had been visiting not only the shop but also the factory/godown of the complainant at Tarantaran Road, near Janta Petrol Pump. 

In para 4 of the complaint, it was pleaded that when the surveyor showed reservation with respect to the payment, on the ground that the premises was not covered under the policy, the complainant asked the bank to provide the insurance policy and then the bank provided copies of the cover notes issued by the insurer on 24.03.2014, effective from 28.03.2014 to 27.03.2015.  It was further pleaded that on receiving the copies of the cover notes, the complainant was shocked to see that the premises where the stock was hypothecated was not mentioned in the cover note.  Thus, the case of the complainant in the Consumer Complaint itself was that he was not aware of the contents of the policy since even the premises in respect of which the policy had been obtained, came to be known to him only after the incident of fire, when the surveyor expressed doubt with respect to admissibility of the claim.  In reply to para 4 of the Consumer Complaint, the bank inter-alia stated that complainant never asked them to provide copies of the insurance policy after the incident since they were well aware of the policy as they had already taken photocopies for their own record from the bank.  Thus, the plea taken in the written version of the bank was that the copy of the insurance policy had been supplied to the complainant even before the loss had happened.  However, no evidence was produced by the bank before the State Commission to prove that the copy of the insurance policy was supplied by it to the complainant at any point of time.  No letter from the complainant seeking copy of the insurance policy was filed.  No acknowledgement from the complainant receiving the copy of the insurance policy was filed.  No affidavit of any bank officer was filed stating therein that he had delivered copy of the insurance policy to the complainant on a given date.  In these circumstances, I have no hesitation in holding that the copy of the insurance policy was supplied by the bank to the complainant.

10.    The learned counsel for the bank submits that since the insurance policy was being taken for three years, it cannot be possible that the complainant was not provided with the copies of the said policies.  He also submits that no letter at any point of time was written by the complainant asking for the copies of the insurance policies of the previous years which, according to him, indicates that the copies of the policies had been received and that is why no such letter was received.  However, I find no merit in the contention since there is absolutely no proof of the copies of the insurance policies of the previous year having been supplied to the complainant at any point of time.  It is illogical to presume that the complainant would not object to an insurance policy taken only in respect of the stock kept in the shop when he has hypothecated not only the stock kept in the shop but also the stock kept in the godown to the bank.  It would be his natural inclination to obtain insurance cover in respect of the entire stock hypothecated to the bank, irrespective of whether it was kept in the shop or it was kept in the godown, the insurance cover being for his own benefit. 

11.    The learned counsel for the bank, however, relies upon Clause 26 of the Agreement of Hypothecation of Assets which to the extent it is relevant, reads as under:-

"That the hypothecated assets, including all goods/stocks, raw materials, semi-finished & finished goods etc., plant and machinery shall be insured comprehensively, including fire, burglary, war riots, civil risks, natural calamities etc. particularly those risk which cannot be envisaged normally but is or is likely to be in the knowledge of the Borrower and the policies shall be taken out in the name of the Bank or in the joint names of the Bank and the Borrower, by the borrower with the Bank clause with all rights and benefits of the policy and that all policies along with premium receipts on such insurance shall be delivered to the Bank. In case the Borrower fails to insure or to deliver the policies and premium receipts as aforesaid, the Bank shall be at liberty and have the option but not bound to effect such insurance including renewals from time to time, of the same, at the risk, responsibility and the cost of the Borrower in its absolute and unfettered discretion as the sole judge. Provided, however, that in the event of rejection of any claim against such insurance wholly or partly for the omission/deficiency of any type whatsoever, to insure any risk the Bank shall not be held responsible as insurance, including its renewals from time to time, of hypothecated stocks/goods, raw materials, semi-finished & finished goods etc. is the responsibility of the Borrower and the entire liability of the Borrower to the Bank shall continue notwithstanding such rejection of the claim, as aforesaid and or any such omission to insure or deficiency of insurance and the Bank shall not be held liable and responsible for such act of omission to insure or deficiency of insurance as aforesaid. The Borrower shall keep the Bank fully indemnified in this respect."

It would thus be seen that the complainant had expressly agreed with the bank that it will not hold the bank liable even if the bank either omits to take an insurance policy or there is a deficiency in the insurance policy taken by it, in respect of the hypothecated stocks/goods etc. The justification  given in the agreement for avoiding such a liability was that it is the borrower who was primarily responsible for taking insurance cover in respect of the hypothecated goods. It is contended by the learned counsel for the complainant that the aforesaid indemnification of the bank would apply only in  a case where the borrower fails to take the insurance cover and as a result of such default on the part of the borrower, the bank has to take the  insurance cover. This is also his submission that in the present case, there was no such default on the part of the complainant in taking the insurance cover and the bank of its own and as an agent of the insurer had chosen to take the insurance cover. I, however, find no merit in this contention. Irrespective  of the reasoning behind indemnification of the bank, the fact remains that the parties had agreed, at the time of execution of the agreement itself that in the event of a claim being rejected on account of any omission/deficiency of any type whatsoever on the part of the bank in insuring the hypothecated goods, the borrower shall not hold the bank responsible. Therefore, though it cannot be disputed that there was deficiency on the part of the bank in taking the insurance cover since the said cover was not obtained in respect of the goods kept in the godown of the complainant, the bank cannot be held responsible for the loss suffered by the complainant on account of the said deficiency. Moreover, since the date of the insurance policy for the relevant period was from 31.3.2014 to 30.3.2015 it would only be logical to infer that the first insurance cover was taken for the period from 31.3.2012 to 30.3.2013 and thereafter it was got renewed for the period from 31.3.2013 to 30.3.2014 before it was finally renewed for the period in question i.e. from 31.3.2014 to 30.3.2015. The loan agreement was executed between the bank and the complainant on 15.2.2012 followed by a supplementary agreement dated 19.9.2012 when the limit was enhanced. Therefore, the complainant did have an opportunity to take an insurance cover before 31.3.2012 and then when the supplementary agreement was executed and the credit facility  was enhanced.

12     The learned counsel for the complainant also submits that since the bank was an agent of the insurer, the insurer would be liable for the deficiency on the part of the bank. I, however, find no merit in this contention as  stated in the written statement filed by the bank before the State Commission that it was an agent of the insurer only for the purpose of collecting the premium.

13.    The learned counsel for the complainant has also referred to the decisions of this Commission in RP No.2810 of 2004 – Allahabad Bank Vs. J.D.S. Electronic Company decided on 19.1.2006, RP No.1999 of 2007 – Union Bank of India Vs. Annu Vastralaya & Anr. decided on 5.9.2007  and RP No.1552 of 2012 – Kashmir Singh Vs. Punjab National Bank & Anr. decided on 3.12.2014. However, none of the judgements indicates that the loan agreement between the borrower and the lender contained a clause identical to Clause 26 of the agreement in this case whereby the parties expressly agreed that the lender will not be liable for any omission/deficiency in obtaining the insurance policy in respect of the hypothecated goods. Therefore, the judgements would not apply to a case where the agreement contains such a provision.

14.    For the reasons stated hereinabove, the impugned order cannot be sustained and the same is set aside. The complaint is consequently dismissed with no order as to costs. Both the appeals stand disposed of.