State Consumer Disputes Redressal Commission
Nainital-Almora Kshetriya Gramin Bank ... vs M/S A-One Confectionery And Others on 27 May, 2011
STATE CONSUMER DISPUTES REDRESSAL COMMISSION UTTARAKHAND
DEHRADUN
FIRST APPEAL NO. 21 / 2008
1. Nainital-Almora Kshetriya Gramin Bank
Uttarayan Prakashan Parisar
Nainital Road, Haldwani
2. Nainital-Almora Kshetriya Gramin Bank
Branch Office, Skjylark Hotel
Mallital, Nainital
through its Branch Manager
...Appellants / Opposite Party Nos. 1 and 2
Versus
1. M/s A-One Confectionery
Bara Bazar, Mallital
Nainital through its Proprietor Idris Malik
......Respondent No. 1 / Complainant
2. National Insurance Company Limited
Uniyal Niketan, Mallital
Nainital through its Branch Manager
......Respondent No. 2 / Opposite Party No. 3
Sh. D.N. Garg, Learned Counsel for the Appellants
Sh. Arun Uniyal, Learned Counsel for Respondent No. 1
Sh. Avi Nanda, Learned Counsel for Respondent No. 2
AND
FIRST APPEAL NO. 25 / 2008
National Insurance Company Limited
Regional Office, Rajpur Road
Dehradun through Regional Manager
...Appellant / Opposite Party No. 3
Versus
1. M/s A-One Confectionery
Bara Bazar, Mallital
Nainital through its Proprietor Idris Malik
......Respondent No. 1 / Complainant
2. Nainital-Almora Kshetriya Gramin Bank
Uttarayan Prakashan Parisar
Nainital Road, Haldwani
2
3. Nainital-Almora Kshetriya Gramin Bank
Branch Office Weldraf Compound, Mallital
Nainital through its Branch Manager
......Respondent Nos. 2 and 3 / Opposite Party Nos. 1 and 2
Sh. Avi Nanda, Learned Counsel for the Appellant
Sh. Arun Uniyal, Learned Counsel for Respondent No. 1
Sh. D.N. Garg, Learned Counsel for Respondent Nos. 2 and 3
Coram: Hon'ble Justice B.C. Kandpal, President
C.C. Pant, Member
Smt. Kusum Lata Sharma, Member
Dated: 27/05/2011
ORDER
(Per: C.C. Pant, Member):
These two appeals arise out of the order dated 08.01.2008 passed by the District Forum, Nainital in consumer complaint No. 74 of 2006. Vide the impugned order, the District Forum has partly allowed the consumer complaint and directed the opposite party Nos. 1 and 2 - Nainital-Almora Kshetriya Gramin Bank to pay to the complainant sum of Rs. 3,40,000/- as compensation together with interest @6% p.a. from the date of filing of the consumer complaint till the date of actual payment; Rs. 1,500/- towards litigation expenses and Rs. 10,000/- as compensation for mental agony, within a month from the date of the order. The District Forum has also directed the opposite party No. 3 - National Insurance Company Limited to pay to the complainant sum of Rs. 2,30,000/- together with interest @6% p.a. from the date of filing of the consumer complaint till payment.
2. The facts of the case, in brief, are that the complainant Sh. Idris Malik runs a shop under the name and style of M/s A-One Confectionery in Nainital and is its sole proprietor. For his business, he took a loan of Rs. 5,00,000/- as a term loan and another loan of Rs. 2,00,000/- as cash credit limit from Nainital-Almora Kshetriya 3 Gramin Bank (for short "bank") - opposite party No. 2, which were payable over a period of 6 years and 12 months respectively. The plant and machinery of the firm was hypothecated in favour of the bank through the bank's Branch Manager - opposite party No. 2. According to the complainant, the bank had got the stock, machinery, building etc. of the firm insured with the National Insurance Company Limited - opposite party No. 3 for the period from 13.11.2002 to 12.11.2003 and 16.11.2003 to 15.11.2004 against fire and allied perils, S.R.C.C. etc. Unfortunately, the shop caught fire due to short circuit on 17.03.2006, causing damage to machinery, building and the stock of finished goods and raw material. An FIR was lodged with the police and the opposite parties were intimated immediately regarding the said incident. But the opposite parties did not take any action. As the complainant was in dark whether the bank had got the shop and its stock insured with the opposite party No. 3 for the relevant period during which the incident had occurred, he sought information from the opposite party No. 2 under the provisions of Right to Information Act. The opposite party No. 2 informed the complainant that the shop was insured for the period from 05.09.2005 to 04.09.2006. Inspite of this fact, the opposite party No. 3 - insurance company did not settle the claim, which led the complainant to file a consumer complaint before the District Forum, Nainital, alleging deficiency in service on the part of the opposite parties. The District Forum decided the consumer complaint vide its order dated 08.01.2008 in the above manner. Aggrieved by the said order, the opposite party Nos. 1 and 2 have filed First Appeal No. 21 of 2008 whereas the opposite party No. 3 has filed First Appeal No. 25 of 2008. Since both the appeals arise out of the same judgment and order and hence these are disposed of by this common order.
43. We have heard the learned counsel for the parties and perused the material placed on record.
4. While challenging the impugned order, the bank's plea is that the District Forum has misinterpreted the terms and conditions of the agreement executed between the complainant and opposite party Nos. 1 and 2. Learned counsel for the bank referred to Clause 8 of the agreement (Paper No. 66 on the record of First Appeal No. 21 of 2008), wherein it is stipulated that so long as any money is due and owing in the cash credit account, the hypothecated premises shall be maintained in good and saleable condition by the borrower and shall be kept insured at borrower's expenses against the risks of fire and other perils as may be required under the law. It has also been stipulated under this clause that the borrower shall duly and punctually pay the premia due on the policies atleast one week before the same becomes due and hand over the receipt to the bank. If the borrower makes default in effecting such insurance or its renewal or in payment of the premia, the bank shall have the right to effect such insurance or renewal or to pay the premia and to debit the expenses incurred by the bank for this purpose to the borrower's account which will be treated advance and shall be payable by the borrower with interest as per provision of Clause 6 of the agreement. The bank's purpose for such terms and conditions is solely to secure the loan advanced to the borrower and, therefore, the bank also asked the borrower to create a charge on the assets owned by the borrower and hypothecate the plant and machinery and stock in trade in favour of the bank and to get the stock, plant and machinery insured with an insurance company approved by the bank. Further, if a situation, as stated above, arises and the bank gives effect to the insurance or its renewal or pays the premia, the bank will get the insurance for such an amount which is sufficient to cover the outstanding dues. The District 5 Forum, without appreciating this legal aspect of the case, has wrongly held the bank liable to pay the amount as directed in the impugned order.
5. The insurance company, appellant in First Appeal No. 25 of 2008, has challenged the impugned order on the ground that the District Forum has passed the impugned order without considering the facts of the case and the report submitted by the surveyor. The learned counsel for the insurance company submitted that the complainant did not cooperate in the investigation and did not provide the details as were asked by the surveyor inspite of several reminders. Further, the surveyor has assessed the net loss at Rs. 29,420/- on the basis of whatever details he could collect. But the District Forum, without considering it, has directed the insurance company to pay sum of Rs. 2,30,000/-, the sum insured, to the complainant.
6. Learned counsel for the complainant - respondent No. 1 reiterated the facts of the case as stated in the consumer complaint and as argued before the District Forum.
7. We considered the submissions made by the learned counsel for the parties. The complainant's contention that he had hired service of all the opposite parties is not fully tenable because in the matters of loan and insurance, it may be said that he had taken the service of the bank for the loan and the insurance company for insurance, but so far as the insurance, if it was done by the bank, is concerned, we are of the view that it was not a service as defined under Section 2(1)(o) of the Consumer Protection Act, 1986, rendered by the bank. The learned counsel for the insurance company referred a decision of the Hon'ble National Commission in the case of Allahabad Bank Vs. J.D.S. Electronic Company; I (2007) CPJ 270 (NC), wherein the 6 Hon'ble National Commission has observed that under the agreement, primary obligation of get the stock insured was of the bank and hence the bank had made a deficiency in service. We are of the view that the facts of the instant case are somewhat different. In the instant case, the agreement between the bank and the complainant does not stipulate that it would be the bank's primary obligation to get the stock insured with the insurance company. The Clause No. 8 of the agreement (Paper No. 66) states that the hypothecated premises would be kept insured by the borrower at his own expenses at all times during the currency of the agreement. The borrower shall duly and punctually pay the premia due on the policies atleast one week before the same has become due or payable and hand over the receipt to the bank. However, in case of default, the bank may also effect such insurance or its renewal or payment of the premia, as the case may be, and debit such expenses to the borrower's account who will have to pay such amount with interest. The agreement clearly stipulates that this would be lawful, but not obligatory for the bank. The complainant, on the contrary, has referred to Clause No. 13 of the loan's sanction order dated 31.03.2003 (Paper No. 109) which states that the stocks, machinery and building should be insured against fire and S.R.C.C. risks with bank's interest clause. The complainant misinterpreting the words "bank's interest clause" has alleged that it was the primary obligation of the bank to get the plant, machinery and stocks insured with the insurance company. Since the bank got the stock and F.F.F. (furniture, fixtures and fittings) insured for sum of Rs. 2,30,000/- only as against the amount of Rs. 7,50,000/- in earlier policies, without informing the complainant, it had made deficiency in service and, therefore, the bank was liable to compensate the loss. We find this interpretation not acceptable in the eyes of law firstly because getting the stock insured was not the primary obligation of the bank and secondly because it was not a service to be rendered by 7 the bank against some consideration. Further, there is difference between the insurable interest of the complainant and the bank. While the complainant would like an insurance cover of Rs. 7,50,000/- at all times, even after the repayment of the loan, the bank's insurable interest is confined to the balance amount of loan including interest. With the passage of time, when the loan amount becomes less, bank's insurable interest is also reduced. That is why, the bank got the stock insured for sum of Rs. 2,30,000/- for the period from 05.09.2005 to 04.09.2006 against the risk of fire and allied perils. Interestingly, the complainant, whose insurable interest was much more than the bank's, was not aware of it and he could know about the said insurance only when he sought information from the bank under the Right to Information Act. Thus, the complainant himself was negligent about his interest. He was carrying on a business with an investment of more than Rs. 9,00,000/- and, therefore, he should have ascertained every year whether the plant, machinery, stock and building were adequately insured or not. Further, under the shopkeepers' insurance policy, building, plant and machinery are not insured. If the fire had caused damage to these items, then this loss can not be indemnified against such an insurance policy.
8. We also observed in this case that the shop and its stock was insured for the period from 13.11.2002 to 12.11.2003 for Rs. 7,50,000/-. According to the terms and conditions of the agreement, the complainant had to pay the renewal premium atleast 7 days before the due date, i.e., he had to pay the premium on or before 05.11.2003 and had to hand over it to the bank. It appears that he did not do so and, therefore, the bank got it insured, as per Clause No. 8 of the agreement, for the period from 16.11.2003 to 15.11.2004. Thus, due to the negligence of the complainant, the renewal was delayed by 5 days. Therefore, we are of the view that the bank can not be charged 8 with deficiency in service. Instead, we find that the complainant has committed breach of the terms and conditions of the agreement. If it is held that the bank has committed deficiency in service by not getting the stock insured in time and that too inadequately, that would be highly ridiculous. The primary role of a bank is to manage its finances in such a way which may yield best profit within the various constraints laid down by the Reserve Bank of India. In case of advancing various loans to the borrowers, the bank's main concern is to secure it from every possible risk and that is why the bank asks the borrower to create a charge on assets, hypothecate the stock, insure it with an insurance company. As a marketing strategy, the bank may offer to get the stock etc. insured either at bank's expenses or at the borrower's expenses but in the instant case, the bank has not made such an offer. What the agreement says is that it would the primary responsibility of the borrower to get the hypothecated premises insured but if the bank finds that the borrower has not done so in time, the bank may get it insured in the manner as discussed above. In such a situation, it would be for the bank to decide the insurance amount because bank's concern is to secure its money. The bank may decide the insurance amount keeping in view the outstanding dues against the borrower. In the instant case, the bank had a charge on the FDR of Rs. 2,00,000/-. Thus, the insurance of Rs. 2,30,000/- was sufficient to cover the risk. But the complainant should have taken care of his business by ascertaining whether the building, plant and machinery and the stock in trade was adequately insured against the risk of fire and allied perils. It is a part of the business management and, therefore, the complainant was solely responsible for it. After all, it is he who would be enjoying the fruits of flourishing business and he is not going to share it with his financier.
99. Having considered all these facts and the legal aspect of the case, we are of the view that the bank has not committed any deficiency in service and it can not be held liable to pay the amount, interest etc., as directed by the District Forum. Therefore, the First Appeal No. 21 of 2008 filed by the bank deserves to be allowed.
10. However, the order of the District Forum against the insurance company needs modification. There are sufficient evidences that the loss had occurred to the complainant due to the fire. In the Fire Report, as stated by the surveyor, the loss has been assessed at Rs. 90,000/-. But the surveyor has not given any basis as to how he valued the loss of stock at Rs. 52,560/- (Paper No. 42 on the record of First Appeal No. 25 of 2008). The basis for non-standard valuation has also not been given. The surveyor had visited the spot after more than two months from the date of incident. In such a situation, the loss estimated in the Fire Report should be made a basis. At the most, the insurance company can apply policy excess clause and deduct Rs. 10,000/- from it. Thus, it would be proper and just to award an amount of Rs. 80,000/- to the complainant against the loss of stock suffered by him. Therefore, the First Appeal No. 25 of 2008 filed by the insurance company is fit to be partly allowed with the modification in the impugned order as discussed above.
11. For the reasons aforesaid, First Appeal No. 21 of 2008 is allowed and the order impugned dated 08.01.2008 in so far as relates to the opposite party Nos. 1 and 2, is hereby set aside and the consumer complaint No. 74 of 2006 is dismissed against the opposite party Nos. 1 and 2. No order as to costs.
12. First Appeal No. 25 of 2008 is partly allowed. Order impugned dated 08.01.2008 against the insurance company is modified and the 10 amount of compensation is reduced from Rs. 2,30,000/- to Rs. 80,000/-. Rest of the order of the District Forum passed against the insurance company is confirmed. No order as to costs.
13. Let the copy of the order be kept on the record of First Appeal No. 25 of 2008.
(SMT. KUSUM LATA SHARMA) (C.C. PANT) (JUSTICE B.C. KANDPAL) K