PRESENT SRI P.V. NAGESWARA RAO, M.A., LL.M., PRESIDENT

 

Friday, 28^th May 2010

 

P.C. Narayana Reddy, S/o Narayana Reddy,

40 years, Hndu, Proprietor, M/s Sapthagiri Miltech Modern Rice Mill,

Palempalli Village, Kadapa mandal and District.                     ….. Complainant.

 

Vs.

 

The Branch Manager, A.P. State Financial Corporation Ltd.,

Branch Office, D.No. 7/605, 1^st floor,

Jayanagar Colony, Kadapa.                                                             ….. Respondent.  

                                                                                                                                     

 

This complaint coming on this day for final hearing on 27-5-2010 in the presence of Sri D.V.S. Prasad, Advocate, for complainant and Sri D. Lakshminarayana, Advocate for respondent and upon perusing the material papers on record, the Forum made the following:-

 

 

 

1.                Complaint filed under section 12 of the Consumer Protection Act 1986.

 

2.                The brief facts of the complaint are as follows:- The complainant was a proprietor of M/s Sapthagiri Miltech Modern Rice Mill, Palempalli Village, Kadapa Mandal. He invested huge money for purchasing land, obtaining licenses, permissions for running the rice Mill and construction of the mill started in February 2006.  The complainant availed loan from the respondent for building and machinery of the rice mill in 2005 and was regular in payment of installments to the respondent.  There was an agreement in between the complainant and the respondent for obtaining the loan and interms of the conditions of the agreement the respondent should insure the building and machinery and reimburse the premium amount paid towards the insurance from the loan amount of the complainant.   The respondent continued to pay the insurance and reimburse the same from the loan of the complainant. 

 

3.                The respondent addressed a letter on 13-3-2009 by the complainant that the fixed assets of the rice mill to be insured with M/s United India Insurance Co. Ltd., since they had entered M.O.U with the said company and submit the policy within 10 days, otherwise the respondent would insure the assets and debit the premium to the loan account. The complainant then addressed a letter dt.                17-3-2009 to the respondent to insure the assets and debit the premium amount to the loan account as usual as earlier. The complainant was under the impression that the respondent had insured the assets of the rice mill with the insurance company. 

 

4.                On account of heavy winds with rain, localized cyclonic effect on                  21-5-2009, the roof sheets of the rice mill for three sheds were blown off and the compound wall on three sides collapsed causing heavy damage. Since the Zink roof sheets were blown off the entire stock was in the rain water for more than an hour causing much damage to the stock in the mill. It was reported in the daily news papers also. The Tahsildar, Kadapa inspected the rice mill of the complainant and issued a certificate dt. 31-5-2009.   The complainant obtained O.D facility with M/s State bank of India, Kadapa Bazaar branch for the stocks in the rice mill and the said Bank insured the stock with New India Assurance Co. Ltd., Kadapa and on receipt of the information the insurance Company got appointed a surveyor namely Sri G. Venkata Ramana Raju of Kadapa for inspection and submit the report. The surveyor inspected and perused the loss and submitted the report. The complainant informed the respondent about the damage caused to the assets of the rice mill due to heavy gale on 21-5-2009 and to intimate the same to United India Insurance Co. Ltd., for appointment of surveyor to assess the loss. But the respondent informed the complainant that the assets of the rice mill was not insured inspite of their receipt of letter dt. 17-3-2009 addressed by the complainant and represented for the mistake made by them. Realizing their mistake the assets of the rice mill was insured with United India insurance Co. Ltd., Kadapa vide policy No. 050904/11/09/11/00000158 valid from 29-5-2009 to 28-5-2010 and intimated the same vide letter dt. 01-6-2009 to the complainant. The complainant became unhappy on the act of the respondent. The complainant personally engaged M/s Yuva Raj Engineers and Planners, Kadapa for assessment of the loss, who inspected and took photographs of the collapsed compound wall and damaged roofing and estimated the loss to an extent of Rs. 2,75,000/-. Though M/s Yuva Raj Engineers and Planners, Kadapa estimated the loss to a tune of Rs. 2,75,000/-, in practical, the complainant had to spend more than Rs. 1,00,000/- over the estimated value due to hike in labour and raw material. Thus the complainant spent Rs. 3,75,000/-  to get normalcy of the compound wall and roofing by obtaining loan from 3^rd party. The respondent was negligent in discharging the duties with regard to not insuring the assets of the rice mill, which would amount to deficiency of service. In case the respondent would have insured the assets the complainant would have reimbursed more than Rs. 3,75,000/- for getting the damaged assets to its normalcy which could not be reimbursed. Therefore, the complainant had mental agony for the acts of the respondent.   Thus the complaint was filed against the respondent for Rs. 3,75,000/- being the amount spent for getting the damaged assets of rice mill to its normalcy and Rs. 2,00,000/- towards mental agony and Rs. 3,000/- towards fee paid to M/s Yuva Raj Engineers and Planners, Kadapa and costs. 

 

5.                The respondent filed a counter denying the complaint and its averments. The parties who availed the loans would be governed by the provisions of State Financial Corporation Act. In respect of loans they were not at par with banking system. In case of sanctioning of the loan by the respondent corporation there would be certain limited aspects like hypothecation of the property, sanction of the loan repayment, default of loan, taking over of unit and sale of assets etc.,   The complaint was filed claiming certain amount as alleged liability of the respondent to reimburse the same. The nature of relief being reimbursement of an  amount. It was allegedly spent by the complainant to meet the damage caused to his unit which would not come  under the purview of C.P. Act for reimbursement of the amount by the financier to its borrower. It was purely a Civil nature. Therefore, the complaint should be dismissed.   

 

6.                The respondent corporation sanctioned a term loan of Rs. 32.54 lakhs on 20-7-2005 in favour of the complainant unit to meet a part of cost of building, plant and machinery for setting up 2 ½ capacity rice mill and General Loan Scheme on certain terms and conditions.  Condition No. 15 was that the borrower should insure the mortgaged properties against all risks including strike, riot, civil, commotion, natural calamities like earth quake, terrorism etc., with an insurance company approved by the corporation and that the policy should contain the agreed bank clause and should be handed over to the corporation for custody and that the loanee should renew the insurance certificate promptly (before expiry of the policy) during the tenure of the loan, failing  which the corporation had a right to recall the loan amount. The complainant executed the hypothecation deed on 16-9-2005 with a specific clause relating to the insurance. So it was the duty of the borrower to insure the unit and handed over the policy to the corporation including premium paid receipt. In case the borrower would be negligent in effecting repairs and to insure then it should be lawful for but not obligatory upon the corporation to effect such repairs and to insure and the expenditure thereof, on demand should be forthwith repaid by the borrower with interest or the same would be charged upon the properties hypothecated jointly with the principal sum and interest. Therefore, the insurance of the unit by the borrower was mandatory, but not obligatory on the part of the respondent. 

 

7.                At the time release of loan amount the insurance would be made by the corporation and a policy was obtained from IFFCO – TOKIO General insurance Co. Ltd., from 7-10-2005 to 6-10-2006 including an endorsement of enhancement                      dt. 12-5-2006. There was no insurance for the complainant’s unit for the subsequent years i.e. from 2006 to 2009 as he had not chosen to insure his unit. In 2009 there was an M.O.U with United India Insurance Co. Ltd., and in pursuance of it the respondent addressed a letter dt. 13-3-2009 to the complainant requesting to insure with the said Insurance company and submit the policy within 10 days and on his failure the respondent would insure the assets by debiting premium amount to his loan account.  The complainant should have to insure his unit or assets by                   23-3-2009 failing which the respondent would take burden of insurance. On                21-5-2009 there was strong winds and gale and due to it there was damage to the complainant’s unit. The complainant got reconstructed the damaged portions of the unit within a week with his own funds because there was no insurance for the unit by the date of alleged damage on 21-5-2009.   So the complainant himself was responsible for non insurance of his unit and assets by 21-5-2009. Subsequently the complainant requested the respondent to insure the unit and assets. Accordingly on 28-5-2009 the insurance people visited the complainant’s unit for verification and insured w.e.f 29-5-2009 to 28-5-2010. Under the policy the respondent was the insured. The complainant fabricated the letter dt. 17-3-2009 as if requested the respondent to insure his unit and as if the letter was in reply to the letter of the corporation dt. 13-3-2009. The letter was denied. If the complainant had given his consent to insure, the process of insurance could have taken up by the respondent forthwith. In the alleged letter dt. 17-3-2009 the complainant mentioned that the respondent was making insurance regularly for his unit.  But there was no insurance for the assets from 2006 to 2009 except at the time of release of initial loan amount. Therefore, the alleged letter dt. 17-3-2009 was a created and fabricated document. Each and every correspondence received by the respondent should have been entered and forwarded to the concerned section with inward seal. Immediately on receipt of letter an acknowledgement would be issued by the concerned officer as token of his receipt of the letter. So the alleged letter dt. 17-3-2009 had not such acknowledgement of any officer of the respondent. 

 

8.                It was alleged that the roof of three sheds on the eastern side was damaged and the Tahsildar issued a certificate to that effect. The main machinery hall cum godown with GR roof was only under the finance of the respondent within an area of 714.3 sq.meters as per approved valuation report. But the complainant made constructions in 748.3 sq.meters. The amount disbursed was for the original approved area of 714.3 sq.meters and a sum of Rs. 14.29 lakhs was released. Therefore, one godown cum main machinery hall was only financed by the respondent.   The alleged three sheds was not financed and was not approved in the plan submitted to the respondent.  They were unauthorized constructions made by the complainant with his own funds.  So the complainant was not entitled to claim any damages. Regarding damage caused to the compound wall a sum of                    Rs. 70,000/- was financed by the respondent as per its estimate.   The godown cum machinery hall financed by the respondent was not damaged. When the total construction cost of four sides of the compound wall would come to Rs. 70,000/- as financed by the corporation, it was not aware of claiming Rs. 3,75,000/- by way of reimbursement.   The complainant filed an estimation report of the valuer by estimating the cost of reconstruction of the damaged portion as Rs. 2,75,000/-.   The respondent corporation had not appointed the valuer for issuing the estimation report. It was a unilateral estimation report. It was not binding on the respondent. It had no sanctity because it did not contain the exact date of issuing. So the estimation report was created for the purpose of the case. The complainant had not filed any document in support of his expenditure for Rs. 3,75,000/- or Rs. 2,75,000/-. The estimation report was different from actual expenditure.   There was no document regarding cost of material or labour charges as proof of alleged expenditure. Thus the complainant claimed Rs. 3,75,000/- illegally by way of reimbursement. The question of reimbursement would arise when the actually expenditure and its payment were proved.   The respondent was not liable for             Rs. 70,000/- towards cost of compound wall with gate and it was not liable for any amount to the damaged three sheds as they were not in approved plan and not financed by the respondent. Therefore, the complaint may be dismissed with exemplary costs. 

 

9.                On the basis of the above pleadings the following points are settled for determination. 

i.                   Whether there is any negligence and deficiency of service on the part of the respondent?

ii.                 Whether the complainant is entitled to the relief’s as prayed for?

iii.              To what relief?

 

10.              On behalf of the complainant Ex. A1 to A7 were marked and on behalf of the respondent Ex. B1 to B9 were marked.    No written arguments filed by either of the parties.

11.              Point No. 1& 2.   The complainant namely Sri P.C. Narayana Reddy was a proprietor of M/s Sapthagiri Miltech Modern Rice Mill, Palempalli Village, Kadama mandal. M/s Sapthagiri Miltech Modern Rice Mill availed a loan from the respondent corporation in 2005 for the construction of the building and machinery of the rice mill and started the rice mill in February 2006. Sri P.C. Narayana Reddy as proprietor of the rice mill invested money for obtaining licenses permissions and purchase of land including construction of the mill.  The respondent filed Ex. B1 a Xerox copy of special terms and conditions applicable to sanction the term loans. In Ex. B1 the name of the unit was M/s Sapthagiri Miltech Modern Rice Mill situated in survey No. 319 and 320/3 of Palempalli Village, Kadapa and amount of term loan was Rs. 32.54 lakhs for construction of building, machinery, erection expenses and other operative expenses.  The period of term loan was 7 years inclusive of moratorium period of 1.5 years.   The method of repayment of term loan was in quarterly installments of 23 and first installment amount was Rs. 1,30,000/- and remaining installments at Rs. 1,42,000/- each.  Under Ex. B1 in clause – 15 of the terms and conditions it was mentioned that the borrower concerned should insure the mortgaged properties against all risks including strike, riot, civil, commotion, natural calamities like earth quake, terrorism etc., with an insurance company approved by the corporation.    The Loanee should renew insurance certificate / policy promptly before expiry of it during the tenure of the corporation’s term loan, failing which the corporation would have right to recall the loan amount.   The policy should be handed over to the corporation for custody. So the borrower i.e. M/s Sapthagiri Miltech Modern Rice Mill should insure the mortgaged properties with the insurance company approved by the respondent’s corporation.   While so on              13-3-2009 the corporation addressed a letter to M/s Sapthagiri Miltech Modern Rice Mill requesting to insure the assets with M/s United India Insurance Co. Ltd., and submit the policy within 10 days, otherwise the corporation would insure the assets and debited the premium to the loan account of the rice mill. Therefore, the rice mill was directed to insure the assets with United India Insurance Co. Ltd.,   If it was not insured then the respondent corporation would insure and debit premium amount from the rice mill account. The words “otherwise”, in Ex. A1 would means that the corporation would insure, in case the rice mill failed to insure the assets. 

 

12.              On 17-3-2009 the rice mill through its proprietor addressed a letter to the respondent requesting to insure the assets with the insurance company and debit the premium amount to the rice mill account, because on previous occasions the respondent insured the assets. The loan was availed in 2005 and the assets were insured with IFFCO-TOKIO general insurance Co. Ltd., New Delhi for the period from 7-10-2005 to 6-10-2006 and the sum insured was Rs. 15,00,000/- towards building and the premium was Rs. 5,124/- only. The Xerox copy of policy was Ex. B3. Subsequently the insured sum was enhanced from Rs. 23,45,000/- to                          Rs. 24,95,000/- w.e.f 12-5-2006 and the rice mill paid the additional premium of            Rs. 214/-.   The Xerox copy of the policy was Ex. B4.   The borrower of the loan hypothecated the assets of the rice mill including building, machinery. The Xerox copy of hypothecation deed was Ex. B2.   The respondent filed Ex. B5 a Xerox copy of plan showing the proposed construction of the building for the rice mill along with resolution of the Panchayat Secretary, Pallempalli Gramapanchayat, Kadapa Mandal. 

 

13.              While so on 21-5-2009 there was heavy wind and rain causing damage to the roof of three sheds of the rice mill and compound wall of the rice mill on three sides. The zinc sheets were blown off and entire stock was in rain water. It was reported in daily news papers also. Ex. A7 was Xerox copy of Eenadu, Kadapa daily edition dt. 22-5-2009. The Tashildar, Kadapa visited the rice mill and issued a certificate that the Zinc sheet roof on three sheds situated towards east were blown off and the stock was with rain water and compound walls on three sides was also damaged. The Xerox copy of the certificate of the Tahsildar, Kadapa was Ex. A4. on perusal of Ex. B5 the Xerox copy of the plan it was only for the construction of one shed that too towards west of the vacant site. But it was not mentioned of three sheds on the east of the vacant site as mentioned in Ex. A4.  Therefore, Ex. A4 was issued by the Tahsildar Kadapa without physical inspection and verification. It was issued at the instance of the complainant.   There was no documentary proof that after the damage of the rice mill and the stock on 21-5-2009 the complainant informed the respondent about the same and also United India insurance Co. Ltd., for appointment of surveyor to asses the loss. The respondent informed the complainant that the assets of the rice mill were not insured. The complainant contended that inspite of the letter dt. 17-3-2009 under Ex. A2. the respondent failed to insure the assets with the Insurance Company. But the respondent insured with the Insurance Co. vide policy No. 050904/11/09/11/00000158 with validity period from 29-5-2009 to 28-5-2010. The Xerox copy of the policy was Ex. A6. So the insurance was subsequent to the damage on 21-5-2009.    The complainant contended that inspite of Ex. A2 the respondent failed to insure. But the respondent contended that Ex. A2 was not sent to the respondent corporation and it was a concocted and created document for the purpose of the case because even if it was posted by ordinary post, it would have been reached or received by the corporation on the next day or within two or three days. It was not received by the corporation.   To prove the same the Respodnent Corporation filed Ex. B9 Xerox copy of inward register from 16-3-2009 to 31-3-2009 wherein it was not found that the letter Ex. A2 was received by the corporation on any one of the dates shown in Ex. B9.   Further in Ex. A2 the complainant mentioned that the corporation insured the building and assets on previous occasions also. If it was correct there was no hurdle or obstruction to the complainant to produce earlier insurance policy. They were not produced because the respondent corporation had never insured the assets of the rice mill on previous occasion as mentioned in the letter Ex. A2.    In view of it Ex. A2 was brought into existence. A Xerox copy of detailed estimates without having date issued by M/s Yuvaraj Engineers and Planners, Kadapa with cost of estimate of     Rs. 2,75,000/- for brick work,  Below roof and above roof including cost of material and labour charges and constructions of the compound wall and roofing with Zinc sheets and plastering for the super structure on both sides.  When the Engineering consultant had issued Ex. A3 as engineers and planners he would have been certainly put the date on which date the estimate was given. Because Ex. A3 was not given immediately after the damage and it was issued before filing of the complaint M/s Yuvaraj Engineers and Planners, Kadapa failed to mention the date of issue of their estimate in Ex. A3. Ex. A5 was a Xerox copy of letter from respondent to the complainant stating that Rs. 12,814/- was debited towards insurance premium on 28-5-2009 to the account of rice mill. It was for the premium to the policy under Ex. A6.   

 

14.              There was no proof with bills that the complainant spent another                Rs. 1,00,000/- in addition to Rs. 2,75,000/- as estimate amount for conducting the repairs.  In Ex. B2 under the heads insurance and repairs at page – 7 it was very clear that the borrower should insure the properties hypothecated and it was not obligatory upon the corporation to repair and keep in good working order. Ex. B6 was Xerox copy of valuation report given by the respondent to the rice mill                  Rs. 70,000/- was valued for compound wall with gate and Rs. 14,29,000/- was valued for the machinery hall cum godown with zinc sheet roof. It was for one shed of 714.3 sq.meters. So it was not for the three sheds as alleged by the complainant in the complaint.   Ex. B7 was Xerox copy of valuation for repairs to the rice mill and for reconstruction of compound wall issued by an approved value at Kadapa. Ex.B8 was colour photos of the rice mill. In one of the photos three sheds were shown

15.              The loan was availed in the name of M/s Sapthagiri Miltech Modern Rice Mill, Palempalli Village, Kadapa District. Ex. A1 was addressed in the name of the rice mill with proprietor P.C. Narayana Reddy. Ex. A2 was addressed by the rice mill to the respondent. Ex. A3 was also in the name of rice mill with regard to proposed damaged work.   Ex. A5 was also addressed in the name of rice mill by the corporation. The policy under Ex. A6 was in the name of rice mill. But they were not in the name of Sri P.C. Narayana Reddy, Proprietor of rice mill Similarly  the hypothecation deed was in between M/s Sapthagiri Miltech Modern Rice Mill, Palempalli for its proprietor P.c. Narayana Reddy and the respondent’s corporation. In Ex. B2 itself at last page P.C. Narayana Reddy signed as Proprietor on behalf of the rice mill. The other documents filed by the respondent were also in the name of the rice mill.    But the complaint was filed by P.C. Narayana Reddy in his individual capacity as Proprietor rice mill. The rice mill was not the complainant represented by its proprietor.   The signatures in the complaint were also made by P.C. Narayana Reddy and not on behalf of rice mill. 

 

16.              Apart from it the rice mill represented by the proprietor availed loan from the respondent and hypothecated the properties to the respondent but claimed the amount spent for getting the damaged property of three sheds and compound wall on three sides to its normalcy was against the corporation, who sanctioned the loan. As discussed earlier there was no bills or any documentary proof spending                  Rs. 3,75,000/- towards repairs of the rice mill. The loan was sanctioned for rice mill of one shed but the complaint was filed for damages for three sheds.  Therefore, in these circumstances there are no merits in the case and there is no deficiency of service on the part of the respondent.    Hence, the points are answered accordingly. 

 

17.              Point No. 3 In the result, the complaint is dismissed without costs.

 

Dictated to the Stenographer, transcribed by him, corrected and pronounced by us in the open forum, this the 28^th May, 2010

 

 

 

Witnesses examined.

For Complainant    NIL                                                  For Respondent :     NIL

Exhibits marked for Complainant : -  

 

Ex. A1         X/c of letter from respondent to complainant, dt. 13-3-2009.

Ex. A2         X/c of letter from M/s Sapthagiri Miltech Modern Rice Mill

to respondent, dt. 17-3-2009.

Ex. A3         X/c of Abstract cum detailed estimate issued by G. Ravindranad. 

Ex. A4         X/c of certificate issued by Tahsildar, Kadapa, dt. 31-5-2009.

Ex. A5         X/c of letter from respondent to complainant, dt. 01-6-2009.

Ex. A6         X/c of standard fire and special perils policy issued by United India

Insurance Co. Ltd.,

Ex. A7         X/c of Eenadu paper Kadapa edition, dt. 22-5-2009 (3 pages).

Exhibits marked for Respondent: -  

 

Ex. B1         X/c of special terms and conditions applicable to term loan (4 pages).

Ex. B2         X/c of hypothecation deed, dt. 16-9-2005.

Ex. B3         X/c of standard fire and special perils policy issued by IFFCO-TOKIO,

dt. 7-10-2005.

Ex. B4         X/c of fire endorsement issued by IFFCO-TOKIO, dt. 12-5-2006

Ex. B5         X/c of plan showing the  proposed construction of the building

with panchayat resolution.

Ex. B6         X/c of valuation report  given by the respondent to the rice mill,

dt. 9-5-2006.

Ex. B7         X/c of valuation repairs issued by M.S. Srinivasa Reddy, dt. 12-3-2010.

Ex. B8         Five Colour photographs.                  

Ex. B9         X/c of inward register rom 16-3-2009 to 31-3-2009.

                                                                  

 

1)     Sri D.V.S. Prasad, Advocate for complainant.

2) Sri D. Lakshminarayana, Advocate for respondent.

 

2) Copy was dispatched on      :

3) Copy of delivered to parties :