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Judgment
This revision petition has been filed under section 21(b) of the Act 1986 in challenge to the Order dated 30.10.2012 of the State Commission in appeal no. 1131 of 2007 arising out of the Order dated 27.04.2007 of the District Commission in complaint no. 483 of 2006.
We have heard the learned counsel for the insurance co. (the petitioner herein), for the complainants (the respondents no. 1 and no. 2 herein) and for the bank (the respondents no. 3 and no. 4 herein). We have also perused the record including inter alia the Order dated 27.04.2007 of the District Commission, the impugned Order dated 30.10.2012 of the State Commission and the petition.
The matter relates to an insurance claim on the insured vehicle (a truck) getting burnt. The insurance co. informed the District Commission during the course of adjudication that it had already sanctioned and settled the claim at Rs. 9.96 lakh. The District Commission took note of the same. However, vide its Order dated 27.04.2007 it partly allowed the complaint and ordered the insurance co. to pay the “claimed amount” to the complainants. The complainants appealed before the State Commission. The State Commission vide its impugned Order dated 30.10.2012 partly allowed the appeal and ordered the insurance co. to pay the amount of Rs.9.96 lakh with interest at the rate of 9% per annum w.e.f. 04.01.2006 i.e. the date of a legal notice given by the complainant. (In the operative paragraph of the State Commission’s Order the date is written as ‘04.10.2006’; however, the intended date appears to be ‘04.01.2006’ since the same has been referred to by the State Commission in the body of its Order; ‘04.10.2006’ in the operative paragraph appears to be a typographical mistake.) The State Commission also ordered the bank not to charge garage charges, to charge interest at the rate of 12% per annum on the loan amount w.e.f. the date the loan was advanced till 08.12.2005, not to charge any overdue charges, hidden charges, penalty, etc. and to pay Rs.25,000/- to the complainant as compensation for causing mental agony, harassment and loss of income. It provided Rs. 10,000/- as cost of litigation. It fixed a period of 30 days for compliance and stipulated for interest at the rate of 12% per annum from the date of filing of the appeal if compliance was not made within the specified period. Meanwhile, the insurance co. had already paid the settled amount of Rs. 9.96 lakh to the bank which had financed the subject vehicle and the bank had credited the same into the complainants’ loan account with it. The complainants had also put the District Commission’s Order dated 27.04. 2007 to execution. An Order dated 04.11.2009 was passed by the District Commission under Section 27 of the Act 1986 against which the insurance co. went for revision before the State Commission under section 17(1)(b). The revision filed by the insurance co. was disposed of by the State Commission vide an Order dated 16.01.2013 (which is not impugned herein).
This revision petition impugns the Order dated 30.10.2012 of the State Commission, with prayer to modify the award made by the State Commission by absolving the insurance co. to make any direct payment again to the complainants as the insurance co. has already fulfilled its contractual liability and has complied with the Order dated 27.04.2007 of the District Commission by making payment to the bank i.e. the financier and which payment has already been credited into the complainants’ loan account by the bank.
Accordingly the short point involved in the revision is whether the amount of Rs. 9.96 lakh against the claim ought to be paid again by the insurance co. to the complainants after it has already paid the same to the bank which had financed the subject vehicle and with which it was hypothecated.
The learned counsel for the insurance co. submits that the bank was made an opposite party (opposite parties no. 3 & 4) by the complainants in their complaint before the District Commission. In the award made in appeal by the State Commission specific directions have also been given to the bank. The submission is that the bank was inextricably involved in the whole matter and was also made a party to the complaint by the complainants themselves. He further submits that in the loan agreement between the complainants and the bank there is a specific provision in respect of ‘insurance and maintenance’ wherein it is expressly provided that the borrower i.e. the complainants shall keep the asset i.e. the subject vehicle insured against any loss or damage with an insurance company approved by the lender i.e. the bank, the insurance policy shall be in the name of the borrower with the necessary endorsement in favour of the lender as ‘loss payee’, and the first claim on any insurance proceeds shall be of the lender. The borrower irrevocably authorized the lender to claim insurance proceeds to safeguard the interest of the lender and to appropriate the proceeds thereof against the dues of the lender. The submission is that the insurance company has already satisfied the claim by lawfully paying the same to the bank and the bank on its part has already credited it into the loan account of the complainants and therefore the award made by the State Commission to pay a second time again to the complainants directly is erroneous and untenably self-defeating.
The learned counsel for the bank also makes similar submissions, that the loan agreement under which the vehicle was financed mandated that the first charge on the insurance proceeds was of the bank. This is as per the standard adopted uniformly by all banks and financial institutions in such kind of loans. The submission is that the State Commission has put and exposed the bank to prejudice since its Order conveys that now after again paying the complainants the insurance co. has been made concomitantly free to bring action against the bank in order to recover the said amount even though the same already stands credited into the complainants’ own loan account with consequential debit in their outstanding.
The learned counsel for the complainants submits that after Order dated 04.11.2009 has been passed by the District Commission under Section 27 in execution and Order dated 16.01.2013 has been passed by the State Commission under section 17(1)(b) in revision, the matter has attained finality and the instant revision against the Order dated 30.10.2012 of the State Commission loses its purpose and is not maintainable. The submission is that there is nothing wrong in the situation since the insurance co. was dutybound to pay the insurance claim to the complainants who were the ‘owner’ and even if it has paid it to the bank it still has unsatisfied liability towards the complainants.
It is noteworthy that the insurance co. settled the claim at Rs.9.96 lakh and paid the said amount to the bank which credited it into the loan account of the complainants and the outstanding against the complainants stood reduced accordingly. The loan agreement to which the complainants were also signatories contained an express provision that the first charge on the insurance proceeds shall be of the bank. Yet the State Commission observed that any such payment made by the insurance co. to the bank “is on their own peril and cannot be justified”. We find this approach to be wholly erroneous. It ought to have been seen by the State Commission that the payment had been made in accordance with the loan agreement under which the first charge was of the bank and that the same had gone towards satisfying the outstanding in the complainants’ loan account. To our mind the converse would have been untenable i.e. had the insurance co. ignored the fact of the existence of the loan agreement or the fact that the said agreement gave first charge to the bank and had still paid it to the complainants directly in violation of the loan agreement the same would have been erroneous and unjustifiable. We also find an element of absurdity in such kind of award passed by the State Commission which totally ignores the loan agreement and which even after being conscious of the fact that the amount had already been paid to the bank makes an order that the same may be paid again to the complainants directly. If at all the State Commission wanted to pass, howsoever erroneously, an order to pay the complainants directly it could have ordered the bank which was also a party before it to refund the same to the complainants and debit their loan account accordingly. The State Commission however created and left an irrational, unjustifiable and untenable situation, it did not disturb the credit into the loan account of the complainants with the bank and yet ordered the amount be paid all over again to the complainants. Such approach and situation cannot be sustained as the same militates against logic and reason both.
We do not agree with the submission made by the learned counsel for the complainants that the instant revision petition has lost its purpose and is not maintainable. After the District Commission made its Order dated 27.04.2007 under section 14 appeal filed by the complainants under section 15 was partly allowed by the State Commission vide its impugned Order dated 30.10.2012. Revision against the said Order of the State Commission undisputedly lies before this Commission under section 21(b). This is in no way affected if in the meanwhile the Order dated 27.04.2007 of the District Commission had been put to execution. The power and responsibility of scrutiny under section 21(b) of the State Commission’s Order passed in appeal under section 15 remains unaffected. Pertinently, this Commission, vide its Order dated 27.02.2013, when it issued notice on the revision petition, also recorded the submissions of the learned counsel for the insurance co. that it had credited the amount in the account of the complainants and thought it fit to stay the operation of the State Commission’s impugned Order. The correct position is that on date the ‘complaint’ filed by the complainants has still not been finally decided, neither has the Order dated 27.04.2007 of the District Commission nor has the impugned Order dated 30.10.2012 of the State Commission attained finality within the meaning of section 24 of the Act 1986. Undoubtedly, execution proceedings under section 25(3) or section 27(1) of the Act 1986 are distinctively different from adjudication of a ‘consumer dispute’, they are separate independent proceedings. But this does not imply that revision under section 21(b) before this Commission loses its purpose or becomes non-maintainable just because the District Commission’s Order was meanwhile put to execution. We also find it relevant to note here that the jurisdiction of the State Commission for ‘revision’ under section 17(1)(b) is only in relation to a ‘consumer dispute’, it does not extend to execution proceedings under section 25(3) or section 27(1) (which were not part of the original statute as legislated in 1986 but were incorporated subsequently through amendments). Remedy against an Order passed in execution, for ‘enforcement’ under section 25(3) or for ‘penalties’ under section 27(1), in the separate independent execution proceedings, does not lie before the State Commission under section 17(1)(b) of the Act 1986. We are however not making a more in-depth critique regarding the Order dated 16.01.2013 of the State Commission passed under section 17(1)(b) since it has only been placed herein for reference alone and has not been specifically impugned. It suffices to say that with the instant revision petition being decided today, the question of executing the lower fora’s Orders does not arise and the Order dated 30.10.2012 of the State Commission as well as the Order dated 27.04.2007 of the District Commission for all intents and purposes would become infructuous. It is nonetheless made explicit for record that the jurisdiction of the State Commission under section 17(1)(b) is confined to ‘consumer dispute’ and does not extend to execution proceedings.
The direction contained in sub-para (1) of para 13 of the State Commission’s impugned Order dated 30.10.2012 was to “also” pay an amount of Rs. 9.96 lakh to the complainants with interest at the rate of 9% per annum w.e.f. 04.01.2006.
The same has been found to be erroneous and unjustifiable. As such the said direction contained in sub-para (1) of para 13 of the State Commission’s impugned Order shall stand modified to the extent that the amount of Rs. 9.96 lakh shall not be paid to the complainants again but the amount of Rs. 9.96 lakh already paid by the insurance co. to the bank and already credited into the loan account of the complainants with the bank shall be (rightly) treated towards satisfaction of the claim. However, the said amount of Rs. 9.96 lakh shall carry interest at the rate of 9% per annum w.e.f. 04.01.2006 i.e. the date stipulated by the State Commission in its Order till the date on which the payment was made by the insurance co. to the bank. The interest amount shall be paid by the insurance co. to the bank within six weeks, and the bank shall credit the same into the loan account of the complainants on the very day it is received.
The rest of the State Commission’s award as contained in sub-paras (2) to (7) of para 13 of its Order dated 30.10.2012 shall remain undisturbed.
So disposed.
The Registry is requested to send a copy each of this Order to the parties in the petition and to their learned counsel immediately. The stenographer is also requested to upload this Order on the website of this Commission immediately.