Jammu & Kashmir High Court - Srinagar Bench
Assistant General Manager vs M/S Javied Enterprises on 27 July, 2021
Bench: Chief Justice, Sanjay Dhar
Sr. No.215
Advance Notice
HIGH COURT OF JAMMU & KASHMIR AND LADAKH
AT SRINAGAR
CJ Court
MA No.61/2018
ASSISTANT GENERAL MANAGER ...APPELLANT(S)
STATE BANK OF INDIA
Through:- Mr. Altaf Haqani, Sr. Advocate with
Mr. Shakir Haqani, Advocate
Mr. Q. R. Shamas, Advocate.
Vs.
M/S JAVIED ENTERPRISES ...RESPONDENT(S)
Through:- Mr. Nasir Ahmad Shalla, Advocate.
CORAM:-
HON'BLE THE CHIEF JUSTICE HON'BLE MR. JUSTICE SANJAY DHAR, JUDGE.
(JUDGMENT)(ORAL) 27.07.2021 Per Sanjay Dhar 'J'
1) Appellant has filed the instant appeal under Section 17 of the J&K Consumer Protection Act challenging order dated 02.08.2018 passed by the J&K State Consumer Disputes Redressal Commission ['the Commission' for short hereinafter], whereby an award in the amount of Rs.20.00 lacs along with interest and litigation costs has been passed by the Commission in favour of the respondent herein (hereinafter referred to as the complainant) and against the appellant (hereinafter referred to as the opposite party).
MANo.61/2018 Page |2 2) The facts leading to the filing of the instant appeal are that the
complainant filed a complaint before the Commission against the opposite party alleging deficiency of service on the part of the opposite party and claimed compensation in the amount of Rs.22,20,000/ along with interest.
3) The case set up by the complainant before the Commission was that his house was mortgaged and the stocks in trade were also hypothecated with the opposite party as the complainant had availed cash credit facility from the opposite party. It was contended before the Commission that on account of floods which wreaked havoc in Srinagar City in September, 2014, the house and the business premises of the complainant suffer extensive damage. It was the further case of the complainant that the opposite party used to insure the house and the stocks in trade regularly and when the complainant approached the opposite party for indemnification of the loss caused to the house and the stocks in trade, he was directed to approach National Insurance Company. But to his dismay, the complainant was informed by the Insurance Company that his stocks were not insured by the opposite party and only the mortgaged house had been covered by the insurance policy. According to the complainant, it was responsibility of the opposite party to insure the mortgaged property as well as the hypothecated stocks in trade and its failure to do so has amounted to deficiency in service and resulted in loss of stocks in trade amounting to Rs.20.00 lacs.
MANo.61/2018 Page |3 4) The opposite party resisted the claim of the complainant by
filing its written version. In its written version, the opposite party, while admitting that during the previous years, the house of the complainant as well as stocks in trade were being regularly insured by it with National Insurance Company Private Ltd. and the policy was jointly being issued in the name of the complainant and the opposite party, claimed that in the year 2014, only the mortgaged house had been insured with the Insurance Company whereas the stocks in trade were left uninsured. According to the opposite party, it is the obligation of the borrower to seek insurance of his goods and that the bank has no obligation to do so.
5) Record of the Commission shows that after filing of its written version, the opposite party chose not to appear before the Commission and it did not lead any evidence in support of its version. As against this, the complainant filed evidence by way of affidavits in support of the case set up by him.
6) The learned Commission relying upon its judgment in the case titled 'City Hardware Store & Ors. Vs. J&K Bank Ltd.' decided on 28.02.2018, took a view that the bank is obliged to insure the stocks in trade of the borrower and in case it does not do so, it has to inform the insured-borrower. It was held that the opposite party cannot be absolved of its responsibility to insure the goods which it had been doing in the previous past. Accordingly, after taking into account the evidence led by the complainant, the Commission proceeded to award MANo.61/2018 Page |4 compensation in the amount of Rs.20.00/ lakhs along with interest and litigation costs in favour of the complainant and against the opposite party. It is this order of the Commission which is under challenge before us in this appeal.
7) We have heard learned counsel for the parties and perused the record of the case including the impugned order and the grounds of the appeal.
8) The arguments advanced by Mr. Altaf Haqani, learned Senior counsel, appearing for the appellant/opposite party, can be summarized into the following points:-
(I) That as per the Clause (6) of the loan agreement executed between the appellant/opposite party and the complainant, it was the responsibility of the borrower to take insurance cover in respect of hypothecated goods and mortgaged properties;
(II) That even if it is assumed that the opposite party was responsible for taking insurance cover in respect of the stocks in trade, the same could not be done by the opposite party, in the instant case because the borrower failed to furnish the periodical stock statements in terms of Clause (8) of the loan agreement;
(III) That in the written version filed by the opposite party before the Commission, a specific assertion was made by MANo.61/2018 Page |5 it that the complainant had failed to provide the stock statement and in spite of this, the learned Commission proceeded to hold the opposite party responsible for taking insurance cover for the hypothecated stocks in trade without there being any evidence to the contrary; (IV) That the evidence led by the complainant in support of his complaint before the Commission, even if taken to be correct, does not prove that the complainant had suffered loss of stocks in trade worth Rs.20.00/ lacs; (V) That keeping in view the situation that was prevailing in Srinagar City at the relevant time, the Commission was obliged to issue a notice to the opposite party before proceeding to decide the complaint in exparte.
9) In order to test the merits of the first contention of learned Senior counsel appearing for the appellant, it would be apt to refer to Clause (6) of the loan agreement, which reads as under:
"6. INSURANCE:
All the assets charged to the Bank should always be fully insured by the Borrower against fire, lightening, riots, strikes, floods, cyclones, earthquakes, civil commotion, and other natural calamities etc. with a company approved by the Bank in the joint names of the Bank and yourselves, at your cost for full market value or Bank's interest, whichever is higher. The policies/cover notes should be lodged with the Bank. The policies should be kept alive (current) during the currency of the advance in the event of non-compliance., the Bank reserves the right (but nor be bound to exercise) to take the insurance MANo.61/2018 Page |6 cover as required by the Bank by debit to your account. The machinery to be purchased out of the Term Loan, if any, to be insured for the full market value or original cost of the machinery, whichever is higher. Likewise, all the renewals of the policies should also be effected/done by the borrower at all materials."
10) On the basis of the language of the afore-quoted clause, it has been contended by Mr. Haqani, ld. Senior counsel appearing for the appellant, that the primary responsibility to obtain insurance cover of the mortgaged and hypothecated properties was that of the borrower and the bank was at liberty to obtain the insurance cover without there being a duty cast upon it to do so.
11) On the other hand, learned counsel appearing for the complainant has submitted that the bank in the instant case had all along obtained insurance cover for both mortgaged property as well as hypothecated stocks in trade and during the relevant period, it abruptly omitted to obtain insurance cover for the hypothecated goods without even informing the complainant. According to the learned counsel, once the bank had chosen to obtain insurance cover for the mortgaged property, it was not open to it omit to obtain insurance cover for the hypothecated stocks in trade. In this regard, learned counsel has relied upon the judgment of the Supreme Court in the case of Canara Bank vs. M/S Leatheroid Plastics Pvt. Ltd,(2020) 5 SCC 722.
12) In the aforesaid case, a similar clause of loan agreement was subject matter of discussion before the Supreme Court and the issue raised in the said case was exactly the same as has been raised in MANo.61/2018 Page |7 the instant appeal. The Supreme Court, while interpreting Clause (9) of the loan agreement that was subject matter of discussion in the said case, made certain observations in para 14 of the judgment which are relevant to the context and the same are reproduced as under:
"14. Turning to clause 9 of the respective deeds/agreements, we find that it was the duty of the respondent to obtain the insurance policy. But liberty was with the bank also to effect such insurance at the risk, responsibility and expenses of the borrower only to the extent of the value of the securities as estimated by the bank. In the event of rejection of the claim wholly or in part irrespective of the fact as to whether the claim was made by the bank or the borrower, the bank's responsibility ceased. What emerges from a plain reading of clause 9 of the respective documents is that the duty to effect insurance was with the borrower, and the bank could not be held responsible if there was any loss or damage to the hypothecated assets which was not adequately covered by insurance taken by the borrower. Bank also would not remain responsible if the claim was rejected, whether in whole or part thereof. But the question that arises for adjudication in this appeal is that if the bank themselves effected the insurance and left significant part of hypothecated assets out of it without any intimation to that effect to the borrower, could such omission be held to be a lapse on the part of the bank? Going through the said two clauses, in our opinion, their proper construction would be that once the bank exercised the liberty to effect the insurance, it was implicit that such insurance ought to have covered the entire set of hypothecated assets, against which the credit facilities were extended. The bank could absolve themselves from any obligation in the event the claim was rejected wholly or in part. If, however, the bank in exercise of their liberty effected the insurance, then it became their obligation to cover the entire set of hypothecated assets. The clause under which liberty is given to the bank to effect insurance starts with the phrase - "The bank is at MANo.61/2018 Page |8 liberty and is not bound to effect such insurance."
The employment of the adjective "such" in this clause demonstrates that if the bank effected insurance, that policy would have to carry the features which a borrower's policy would have covered as per the terms of the deeds or agreements. The borrower's liability in such a situation to repay to the bank could arise in the event of rejection of the claim or part thereof, such claim arising on account of loss/damage to the hypothecated assets. But the grievance of the borrower here is that though the bank effected such insurance, part of the hypothecated securities was left out from the coverage. It was a case of underinsurance. We have already construed the relevant clauses to mean that if the bank had exercised liberty to effect insurance, it was their duty to take out policies covering the entire set of hypothecated assets. That would constitute part of services the bank were rendering to the borrower. Effecting insurance was not their absolute obligation. But such obligation they had taken it upon themselves. The contractual terms also envisaged bank's option or liberty to take up such obligation.
13) Applying the ratio laid down by the Supreme Court in the aforesaid para to the instant case, it would be safe to conclude that even if Clause (6) of the loan agreement provides that the assets charged to the opposite are to be insured by the borrower, but once a part of the charged assets was insured by the opposite party while leaving the other part of the charged assets, it has to be deemed that the opposite party had taken it upon itself to effect insurance of the charged assets and, as such, it was obliged to take insurance policy in respect of the left out charged assets i.e. hypothecated stocks. It is an admitted case of the parties that the opposite party did take out insurance policy for the year 2014 in respect of the mortgaged house. Thus, it was obliged to take out insurance policy in respect of the MANo.61/2018 Page |9 hypothecated stocks as well. Having not done so, the opposite party is guilty of rendering deficient services to the complaint-borrower. The opposite party did not even inform the complainant that it had left out the hypothecated stocks from the insurance cover, which goes on to confirm that there was deficiency in service on the part of the opposite party.
14) Much emphasis has been laid by the learned counsel for the appellant/opposite party on the contention that the bank/opposite party could not take out insurance policy for the hypothecated stocks in trade as the borrower/complainant had failed to furnish the periodical stock statements to the opposite party. The learned counsel has contended that a specific assertion was made in this regard in the written version submitted by the opposite party before the Commission.
15) It is a beaten principle of evidence that initial burden of proving a fact lies on the party who asserts the said fact. It was alleged by the opposite party in its written version that the complainant had failed to provide the periodical statement of stocks in trade. Thus, in order to discharge its burden of proof, it was for the opposite party to lead evidence in support of the same by producing the relevant record. However, it chose not to appear before the Commission thereby abandoning its right to lead evidence. Thus, there was nothing on record before the Commission to show that the stocks in trade could not be insured by the opposite party on account of failure of the MANo.61/2018 P a g e | 10 complaint to furnish the requisite statements. The opposite party did not produce any communication before the Commission to show that it had sought information regarding stocks in trade from the complainant to, at least, discharge the initial burden of proof. In these circumstances it was not open to the opposite party to escape its obligation to effect insurance of the stocks in trade.
16) The contention that there was no evidence before the learned Commission to hold that the complainant had suffered loss to the tune of Rs.20.00/ lakhs is also without any merit. The complainant had clearly and categorically stated in his affidavit that he had suffered loss to the tune of Rs.20.00 lacs in respect of the stocks in trade. His version is corroborated by the affidavit of Mohammad Subhan Bhat. Neither complainant nor his witness has been cross- examined by the opposite party as it chose not to appear before the Commission. Therefore, the assertion of the complainant and his witness as regards the extent of loss suffered to the stocks in trade of the complainant, has remained unrebutted. The Commission was, therefore, fully justified in relying upon aforesaid affidavits by way of evidence and concluding that the complainant had suffered damages to the hypothecated stocks in trade to the tune of Rs.20.00 lakhs.
17) Lastly, it has been argued that keeping in view the situation that was prevailing in Srinagar City at the relevant time, the Commission was obliged to issue a notice to the opposite party before proceeding to decide the complaint in exparte.
MANo.61/2018 P a g e | 11 18) The minutes of the proceedings of the Commission reveal
that the opposite party did initially contest the complaint and, in fact, it also filed its written version before the Commission. The minutes of the proceedings further go on to show that on and after 26.10.2015, the opposite party stopped appearing in the case and the same was adjourned from time to time for about two and a half years but nobody appeared on behalf of the opposite party. Ultimately on 19.04.2018, the Commission observed that since nobody is appearing on behalf of the opposite party, their right to cross-examine the complainant's witness is closed. On 25.07.2018, the learned Commission observed that the opposite party is not interested in contesting the matter and its right to file evidence was closed.
19) The manner in which the opposite party has prosecuted its case before the learned Commission smacks of gross negligence and lethargy on its part. There may have been some disturbances in Srinagar City for a few months but it is nobody's case that Srinagar City was shut down for two and a half years which prevented the opposite party from appearing before the Commission. Once the opposite party had appeared before the Commission pursuant to the notice issued to it and filed its written version, the law did not cast an obligation on the Commission to summon the said party afresh. The contention of opposite party in this regard is devoid of merit and deserves to be rejected.
MANo.61/2018 P a g e | 12
20) For the foregoing reasons, we are of the view that there is
no ground to interfere in the impugned order passed by the learned Commission. The appeal is found to be without any merit and the same is, accordingly, dismissed.
21) Record of the learned Commission along with a copy of this judgment be sent back.
(SANJAY DHAR) (PANKAJ MITHAL)
JUDGE CHIEF JUSTICE
SRINAGAR
27.07.2021
"Bhat Altaf, PS"
Whether the order is speaking: Yes/No
Whether the order is reportable: Yes/No
MOHAMMAD ALTAF BHAT
2021.07.30 10:51
I attest to the accuracy and
integrity of this document