This is a case filed by the complainant Mr. Susanta Paul against the O.P insurance company for payment of insurance claim which was repudiated by the insurance company on the ground that the vehicle in question was registered as a private vehicle; that at the time of theft, the vehicle was being used for hire and reward, i.e., for commercial purpose. Before going to the details fact of the case it is to be mentioned that the vehicle was financed by BANGIYA GRAMIN VIKASH BANK, ISLAMPUR BRANCH and was HYPOTHECATED with the bank. The liability of loan had been discharged by the BANGIYA GRAMIN VIKASH BANK, ISLAMPUR BRANCH, which is so reflected on the registration certificate of the vehicle attached as annexture-1 &2. The matter of hypothecation is also mentioned in the insurance policy.

When you buy a car through a bank loan, the vehicle is registered at the local Regional Transport Office (RTO) in your name. Also, the Registration Certificate (RC) will bear your name despite being financed by the bank. However, the RTO will note the hypothecation of your car in the RC stating the car is in favour of the respective bank. Just like this process, the hypothecation in car insurance will be in favour of the respective bank that you have availed the loan from. The ownership of the car will remain with the bank until the total amount is paid off. The insurance company will make note of the loan on the insurance policy document until the time you have full ownership of the car.

In Mr Keshav Natu Mhatre vs The Manager, New India Assurance ... on 23 December, 2010 BEFORE THE HON'BLE STATE CONSUMER DISPUTES REDRESSAL COMMISSION, MAHARASHTRA, MUMBAI the honorable court held as under “That apart, we agree with the Advocate for the respondent when he submitted that this claim should have been filed with Tata Motors Finance as co-complainant since vehicle was under hypothecation of Tata Motors Finance.  Under the Hire Purchase scheme, vehicle was sold to the complainant and he had committed default and it is improper on the part of the complainant not to join Tata Motor Finance as co-complainant for making payment, if at all they are entitled to get the same”                  In a revision petition the 682 of 2011 the honorable NCDRC also affirm the upper mentioned judgment of the state commission.

Only to understand the significance/ gravity of hypothecation of a vehicle we can also refer the following judgment. In CRIMINAL APPEAL NO. 6 of 2021 (arising out of SLP (Crl.) No.3893/2020) THE SUPREME COURT OF INDIA observe the same.

The vehicle having been hypothecated to appellant, it could not have been transferred without clearing the loan and without consent of the appellant.

The vehicle being hypothecated to appellant and there being award against original owner, the vehicle can neither be transferred to respondent No.1 nor there is any right in respondent No.1 to claim the vehicle.

The judgments make it clear that the lender has a priority claim on the insurance proceeds, even if the owner has taken possession of the car and has paid the loan in full. This is because the lender's security interest in the car continues until the hypothecation is removed from the registration certificate of the car.

In the present complaint the complainant file this case without making the bank as a co-complainant to whom the alleged car was hypothecated. It is a matter of total loss.  Complainant only endorses the name of the bank as a proforma opposite party. Complainant made the entire insurance claim for the alleged theft car (total loss) from the opposite parties in favour of him only by suppressing the material fact that the alleged vehicle which was theft and not found by the police authority is still now HYPOTHECATED to the BANGIYA GRAMIN VIKASH BANK, ISLAMPUR BRANCH. We have gone through the entire case record and never find that neither the complainant nor the opposite party mention about the hypothecation of the alleged car. We don’t know is there is any outstanding amount of loan on the alleged car to the BANGIYA GRAMIN VIKASH BANK, ISLAMPUR BRANCH or not. Insurers would have issued the policy with ‘agreed bank clause’. The implication of this clause is that, in the case of any claim under the policy, the claim would be payable to the lender. However, the interest of the lender in the claim amount is limited up to the outstanding balance of the loan amount. Therefore, in this case, the insurers will be issuing the cheque of the settlement amount in favour of the lender only. After receiving the settlement amount, the lender will deduct the outstanding amount of the loan, and then will remit complainant the balance amount.

In our view, if the complainant succeeds to prove his case there will be a juridical error to declare award in favour of the complainant only.  

In view of the above position, judicial propriety demands that no order conflicting with the order of the Hon’ble apex court, be passed. Under the circumstance, let the petition of complaint be returned to the complainant along with Annexures and other documents filed by the complainant, with the liberty to re-file the same with BANGIYA GRAMIN VIKASH BANK, ISLAMPUR BRANCH as co- complainant. If the complainant willing to file the complaint again, the entire time period of this case no CC-10/2020 (dated 03/02/2020 to 23/05/2023) will be excluded from the schedule time binding for filing of cases according to the consumer protection act.

Let a plain copy of this Order be supplied to the parties concerned by hand/by Post forthwith, free of cost for information & necessary action.

 The copy of this Final Order/Judgement also available at