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Judgment
M. Shreesha, J
Aggrieved by the order dated 17-11-2014 in CC No.173 of 2013, passed by Andhra Pradesh State Consumer Disputes Redressal Commission (hereinafter referred to as 'the State Commission'), the Opposite Party No.3 (hereinafter referred to as 'the Insurance Company') preferred this Appeal under Section 19 of the Consumer Protection Act, 1986.
Vide the impugned order, the State Commission has allowed the Complaint in part directing the Opposite Parties Nos.1 & 2, namely, the State Bank of India (hereinafter referred to as 'the Bank') to forward the Complainant's claim to the Insurance Company and the Insurance Company to process the claim, in accordance with law. The Insurance Company shall also pay a sum of Rs.50,000/- towards compensation together with costs of Rs.7,000/-. The time for compliance of the order was four weeks.
The facts, in brief, are that the Complainant-Firm, engaged in the distribution of edible oil, availed a loan of Rs.20,00,000/- from the Bank, with cash credit limit, which was, subsequently, enhanced to Rs.25,00,000/-. It was averred that the Bank was an Agent of the Insurance Company and it used to debit the premium amount from the loan account of the Complainant, to obtain Insurance Policy on their behalf. It was stated that the Bank did not furnish copy of the Insurance Policy to the Complainant. It was pleaded that the Complainant maintained stock worth Rs.25,00,000/- to Rs.30,00,000/- in order to supply it to retail shops. While so, on 15-02-2007, between 10:30 P.M. to 11:00 P.M., a fire accident occurred due to which the entire stock, namely, oil packets, plastic cans and bottles were burnt and damaged and oil worth Rs.21,97,235.61/- was destroyed. Furniture, electrical fittings and service meter worth Rs.30,000/- were also destroyed. Immediately, the Complainant informed the Bank about the fire accident and the loss. The Bank, represented by the Assistant General Manager, Chief Manager and the Field Officer, inspected the premises, estimated the loss and informed the Complainant that there was nothing to worry since the stock was insured for an amount of Rs.25,00,000/-. On the date of inspection i.e.16-02-2007, the Chief Manager and the Field Officer took a statement from the Complainant that the stock for Rs.21,97,235.61/- and furniture & fittings worth Rs.30,000/- were damaged. They also took the stock statement as on 14-02-2007 and submitted the same to the Bank. On 17-02-2007, the Complainant gave a representation to the Bank and again, on 23-02-2007, wrote to the Bank requesting it to settle the claim with the Insurance Company.
It was averred that the certificates given by AP Fire Department, SHO II Town, Vishakhapatnam and certificate of APEPDCL dated 16-02-2007 were enclosed with the claim letter. It was averred that the Bank did not give the Complainant the Policy details but only informed them that an amount of Rs.15,043/- was debited to the Complainant's Account towards the insurance premium and gave assurance that the claim amount would be given within fifteen days. Despite repeated requests and also the registered letter sent on 18-01-2008, requesting the Bank to intimate the claim and the settlement details, there was no response from the Bank. The Complainant, further, submits that she received a notice from the Bank demanding her to pay the loan amount with interest, and, despite running from pillar to post i.e. from the Branch Office to Zonal Office, no details regarding the settlement of the claim were given to her. Subsequently, the Bank filed a suit against the Complainant and her husband for recovery of the loan vide OA No.178 of 2008 on the file of Debts Recovery Tribunal, claiming the loan amount from the Complainant. It was pleaded that whenever the Complainant requested the Chief Manager of the Bank, she was informed that 100% claim would come from the Insurance Company and postponed the matter on one pretext or the other. Subsequent to the suit having been filed, which was decreed in favour of the Bank, the Bank informed the Complainant that the amount would be settled for lesser amount under the OTA Scheme and requested the Complainant not to prefer an Appeal against the order of the Debts Recovery Tribunal or to file a Consumer Complaint.
It was pleaded that, on 03-10-2012, the Bank informed the Complainant and her husband that the entire outstanding amount will be settled for Rs.25,00,000/- under the OTA Scheme and an offer was made by the Complainant and her husband for Rs.20,00,000/- on 06-10-2012, towards full and final settlement. On receipt of the said letter, the Bank sent a letter, on 11-10-2012, to the Complainant advising her to improve the compromise offer substantially. On 16-10-2012, the Complainant gave another representation to the Bank for a sum of Rs.22,00,000/-. On receipt of the same, the Bank sent letter dated 23-10-2012 advising the Complainant to improve the compromise offer again. On 29-01-2013, the Complainant gave one more representation increasing the amount to Rs.30,00,000/- as per the advise given by the officials of the Bank. The Bank received the same and sent reply dated 31-01-2013 with the same reasons. As per the advise of the Bank officials, the Complainant gave a representation for One Time Settlement along with cheque for Rs.10,00,000/- which is nearly 20% of the outstanding NPA. It was informed to the Complainant that the said amount would be kept in a Suspense Account. The Bank sent reply dated 28-02-2013 with the same version, to improve the offer, without mentioning the claim for damage in the fire accident.
On 07-01-2013, the Complainant had sent a letter under the Right to Information Act, 2005 (hereinafter referred to as 'the RTI Act') to the Bank, seeking details regarding the claim and, again, on 18-05-2013, sent another letter, requesting under the RTI Act, to send the details of the Insurance Policy and other information. On receipt of the said letter, the Regional Manager & Central Public Information Officer sent a photocopy of the Policy and also mentioned that the Complainant did not submit any claim, suppressing the inspection done by the Assistant General Manager and the Field Officer of the Bank on 16-02-2007. It was pleaded that the Complainant had given representations on 17-02-2007, 23-02-2007 and 18-01-2008, after the said inspection. The Complainant met the officials of the Insurance Company on 18-05-2013, after receiving a copy of the Policy, but was informed that, since it was time barred, they could not settle the claim. Hence, the Complainant approached the State Commission seeking direction to the Bank to pay damages for the loss in the fire accident for Rs.22,27,235.61/- with interest @12% p.a., to refund the insurance premium amount of Rs.12,767/- debited on 29-03-2007, together with damages and costs.
The Bank filed their Written Version stating that the Complainant Firm was availing cash credit facility of Rs.25,00,000/- from the Bank after executing the security documents on 14-11-2005. The loan amount was also secured by the personal guarantee of her husband, Sri M. Ramaiah, and also by the house property at Vishakhapatnam. It was stated that after availing the loan facility, the Complainant committed a default in paying the loan amount. It was denied that the Bank did not give the Policy particulars to the Complainant. It was stated that the Complainant was fully aware of the debit of the insurance premium to the Account as per the terms of the agreement entered into and had been receiving the copies of the Policy premium. It was stated that the Complaint was time barred, as it was filed beyond the period of limitation. Since the alleged date on which the fire accident took place was 15-02-2007, obtaining of the copy of the Insurance Policy on 15-06-2013 does not extend the period of limitation. It was stated that the Complainant and her husband vide letter dated 27-11-2006 and 22-01-2007 had admitted that they had committed a default. The Bank initiated recovery proceedings, under the provisions of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as 'the SARFAESI Act'), and served a demand notice dated 04-09-2007 under Section 13(2) of the said Act on the Complainant and her husband, the guarantor to the loan. As there was no response to the said notice, the Bank after awaiting for sufficient time issued possession notice dated 15-11-2007 under Section 13(4) of the said Act.
The said possession notice was also published in the daily newspapers. The Hon'ble High Court, vide an order dated 29-02-2008, in W.P. No.4381 of 2008 filed by the Complainant, challenging the possession notice, granted interim stay, on the condition of depositing Rs.2,50,000/- within a period of six weeks. The Bank filed their Counter Affidavit in the said Writ Petition and prayed to vacate the said interim order. The Hon'ble High Court, on 23-04-2009, in WVMP No.3220 of 2008 in WP No.4381 of 2008, continued the interim order dated 29-02-2008 and posted the Writ Petition for final hearing on 15-06-2009. The allegation of the Complainant that there were talks of settlement going on, was denied by the Bank. The agreement executed by the Complainant while availing the loan facility i.e. agreement of loan cum hypothecation on 14-11-2005 and the letter of arrangement dated 14-11-2005 clearly speak of the responsibility of the Complainant in protecting the hypothecated stock by obtaining Insurance. As the Complainant and her husband had failed to repay the loan amount, the Bank filed OA No.178 of 2008 before the Hon'ble Debts Recovery Tribunal, Vishakhapatnam, for recovery of debt of Rs.44,53,832/- which was allowed on 08-08-2012. Therefore, the offer of OTA Scheme and the allegation made by the Complainant regarding settlement under the Scheme were denied. It was pleaded by the Bank that the question of refund of insurance premium or the amount claimed towards damages incurred in the fire accident cannot be paid and there is no deficiency in service on their part.
Thereafter, the Insurance Company was impleaded as the third Opposite Party. They have filed their Written Version resisting the Complaint and stating that they never received any claim from the Complainant or the Bank. It was averred that no mention about any claim was made to the Bank and all averments made by the Complainant relate to the loan transaction between the Complainant and the Bank. No deficiency in service can be attributed to the Insurance Company as the incident occurred on 15-02-2007 and the Complainant met the officials of the Insurance Company after 18-05-2013 i.e. almost six years after the date of the fire accident and, therefore, the claim is hopelessly time barred.
The State Commission while allowing the Complaint observed as follows:
"23. The Regional Manager of the Opposite Party No.3-Insurance Company has stated that the Opposite Party No.3 has not received claim either from the Complainant or from the Opposite Party No.1. The question of the Opposite Party No.3, receiving the claim from the Complainant does not arise as it is the Opposite Party No.1 acting as the Corporate Agent of the Opposite Party No.3 got insured the stocks with the Opposite Party No.3 and received claim and relevant documents from the Complainant-Firm. The negligence on the part of the Opposite Party No.1 and 2 is manifest in their sleeping over the claim for seven years and the negligence on the part of the Opposite Party No.3 is established by its inaction in pursuing the claim when the Complainant approached it with the copy of Insurance Policy.
The Opposite Party being the master insofar as the insurance business in terms of MoU is concerned, ought to have made enquiry with the Opposite Party No.2 as to why the claim of the Complainant-Firm was not forwarded. This line of analysis of facts would take deviation if viewed from the reflection of the reply of the Opposite Party No.2 which boldly pleaded that the Opposite Party No.3 had not settled the claim as the Complainant failed to maintain stocks on the date of fire accident. However, when it came to evidence in the shape of affidavit, the Opposite Party No.2 focused on the transactions and correspondence made with the Complainant in respect of the recovery proceedings and shifted burden on the Complainant to pursue the claim with the Opposite Party No.3.
The Opposite Party No.1 and 2 are Corporate Agents of the Opposite Party No.3 for the purpose of insurance business of the Opposite Party No.3. The Opposite Party No.1 and 2 neglected to pursue the claim. Only in case the Complainant obtained insurance policy directly from the Opposite Party No.3 without involvement of the Opposite Party No.1 and 2, the responsibility would be cast on the Complainant to lodge and pursue the claim with the Opposite Party No.3. Once the claim is received by the Opposite Party No.1 and 2 the responsibility to forward the same will be on them and it is the obligation of the Opposite Party No.3 to process the claim. All the opposite parties failed to perform their respective obligations and thus can be found with deficiency in service on their part.
The Complainant filed a complaint against the Opposite Party No.1 and 2. Subsequently, the Complainant impleaded the Opposite Party No.3. Except a general relief, unfortunately, the Complainant has not sought for specific relief against the Opposite Party No.3 though placing reliance on MoU between State Bank of India and the Opposite Party No.3. The Opposite Party No.3 cannot contend that it has not received claim while the claim has been pending with its Corporate Agent for about six years. In tems of MoU, the Opposite Party No.3 has to be saddled with liability the State Bank of India incurred in the course of its acting as the Corporate Agent of the Opposite Party No.3.
The Opposite Party No.1 and 2 have every right to proceed against the Complainant for recovery of the loan amount. However, they should not mingle the liability of the Complainant to pay the loan amount with the liability of the Opposite Party No.3 and their responsibility to forward the claim. In the interest of justice and on application of principles of natural justice as also to avoid multiplication of litigation, this Commission is inclined to direct the Opposite Party No.1 and 2 to forward the claim and the Opposite Party No.3 to process the same. For the inconvenience caused and the financial constraint suffered owing to non-settlement of the claim, we hold the Complainant entitled to compensation, an amount of Rs.50,000/- payable by the Opposite Party No.3 in terms of liability clause of MoU.
In the result, the Complaint is allowed. The Opposite Party No.1 and 2 are directed to forward the claim of the Complainant to the Opposite Party No.3 and the Opposite Party No.3 to process the claim in accordance with law. The Opposite Party No.3 shall pay a sum of Rs.50,000/- towards compensation together with costs of Rs.7,000/-. Time for compliance, four weeks."
The learned counsel appearing for the Appellant vehemently contended that the Insurance Company cannot be made liable as the claim was time barred; that in the Execution Proceedings, under pressure, the Surveyor had assessed the loss and he had submitted that the loss was assessed at only Rs.10,000/-, on account of the policy excess. It was also contended that the main prayer of the Complaint was only against the Bank.
The learned counsel, who is appearing for the Bank, submitted that the Complainant had defaulted in the repayment of the loan amount; that the Complainant was very much aware of the fact that the insurance premium was debited to his Account; that the Policy copy was never retained by the Bank; that the Complainant had to make the claim with the Insurance Company and she did not do so within the permissible time period; that the Bank had preferred OA No.178 of 2008 before the Hon'ble Debts Recovery Tribunal for recovery of debt of Rs.44,53,832/- which was allowed on 08-08-2012; that the Complainant and her husband are, admittedly, defaulter on the loan; that the recovery proceedings were initiated against them under Section 13(2) of SARFAESI Act, 2002 and, therefore, there is no deficiency in service against the Bank and no liability can be fastened upon them.
The facts not in dispute are that the Complainant Firm had taken a loan with the Opposite Party-Bank for an amount of Rs.20,00,000/- which was later enhanced to Rs.25,00,000/-. It was averred by the Complainant that the Bank and the Insurance Company entered into a Memorandum of Understanding (MoU) with an understanding that the Government of India permitted the Bank to act as Corporate Agent and it would obtain license from Insurance Regulatory and Development Authority and clearance from the Reserve Bank of India to act as Corporate Agent. The Bank agreed to apply to IRDA through the Insurance Company for license to operate and transact as Corporate Agent of the Insurance Company.
Further, it is mentioned in the MoU that the Insurance Company, on behalf of IRDA, would issue license to the Bank, to carry on the agency business, however, subject to the Bank fulfilling the requirement of IRDA. The Insurance Company would defend, at its cost, any claims against the Bank, on account of its acting as agent of the Insurance Company. The Insurance Company has undertaken to timely issue of policies and renewal notices. The Insurance Company had taken the mantle on itself of carrying out inspection of the risk involved for the purpose of assisting in risk management in respect of the projects financed by the Bank and it also agreed for speedy and fair settlement of claims.
The Bank and the Complainant entered into Letter of Arrangement on 14-11-2005 whereunder it was agreed that the Complainant should insure the hypothecated items against fire, floods, cyclones, etc., and on failure of the Complainant to obtain such Insurance Policy, the Bank has the option to take Insurance Policy by debiting the premium to the loan account of the Complainant, however, exercise of the right by the Bank is optional and not mandatory. Clause 6 of the Letter of Arrangement reads as under:
"All the assets charged to the Bank should always be fully insured by the Borrower against fire, lighting, riots, strikes, floods, cyclones, earthquakes, civil commotion and other natural calamities, etc., with a company approved by the Bank in the joint name 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 not be bound to exercise) to take the insurance 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."
While so, on 15-02-2007, a fire accident occurred at the premises of the Complainant and the same was intimated to the Bank on 16-02-2007. The fire accident was evidenced by the certificate issued by the AP State Fire Accident Department, the FIR lodged with the Police Station, II Town, Vishakhapatnam. The contention of the learned counsel for the Bank that no such claim was made by the Complainant is unsustainable in the light of the fact that the documents on record show that the Complainant had addressed a letter dated 17-02-2017 within two days of the incident and, thereafter, on 23-02-2007 enclosing the certificates of the Fire Department and copy of the Police Complaint lodged. The Complainant had clearly requested for indemnification of the loss to the extent of Rs.22,27,235.61/-. We agree with the findings of the State Commission that this letter can be construed as a claim. For better understanding of the said claim by the Complainant; a portion of the letter is reproduced as hereunder:
"I availed cash credit loan for an amount of Rs.25,00,000/- vide account No.10615763620 from your branch. I used to do business in a large scale and I used to submit the monthly returns regularly as per terms & conditions of loan. Your branch used to pay the Insurance Policy which is linked to your Branch and the said policy amount used to credit to my loan account, since the date of availing loan.
You informed me to submit certificate from fire department, and concerned police station for claiming the compensation from the Insurance Company.
As per your request, I am herewith enclosing (1) Certificate dated 19-02-2007 instead by the APES Fire Station (2) Certificate dated 18-02-2007 issued by the Office In Charge II, Town Police Station, Vishakhapatnam City.
I request your good self please arrange loss of an amount of Rs.22,27,235.61/- as per the stock statement submitted by me from the Insurance Company, I could not run the business without receiving the claim amount."
(emphasis supplied)
It is seen from the record that despite repeated requests and the communication made to the Bank, there was no communication from the Bank regarding whether the claim was forwarded to the Insurance Company or not. There is not a single pleading in the Written Version, as to why the Bank had not forwarded the claim to the Insurance Company, while admitting that the premium was deducted from the Account of the Complainant. The MOU which has been filed evidences that the Bank got the stocks insured with the Insurance Company on receiving a certain amount as commission and, therefore, the complete inaction of the Bank for inordinate period of almost seven years is construed not only as deficiency in service but also complete inaction on their part. On one hand, the Bank admits to the deduction of the premium from the Complainant's Account and entering into an MOU with the Insurance Company; however, it does not give any reasons for not having forwarded the claim to the Insurance Company and then proceeds against the Complainant for recovery of the loan amount under the SARFAESI Act, 2002.
We find force in the contention of the learned counsel that no averment has been made against the Insurance Company in the Complaint. Though an opportunity was given to implead the Insurance Company in the State Commission, it is observed from the record that the pleadings have not been amended and there is no averment of deficiency in service against the Insurance Company. It is also an admitted fact that the Complainant had procured a photocopy of the Insurance Policy under RTI Act only on 18-05-2013 after making two applications dated 07-01-2013 and 18-05-2013, and then approached the Insurance Company. The stand taken by the Bank that no inspection was done is completely unsustainable in the light of the representations made by the Complainant that the Assistant General Manager, the Chief Manager and the Field Officer of the Bank inspected the premises on 16-02-2007. The Complainant repeatedly gave representations on 17-02-2007, 23-02-2007 and 18-01-2008 and sent these letters through registered post. It is pertinent to mention that the Bank, in the Written Version, apart from stating that the Complainant was fully aware of the debit of the insurance premium to the Account of the Complainant, as per the terms of the agreement entered into, and and had been receiving the copies of the policy, remained silent regarding the representations made by the Complainant, the inspection done by their senior officials and also regarding forwarding of the claim to the Insurance Company. Strangely, in reply to para 5(a) and 5 (g) of the Complaint, the Bank submitted that the Complainant alone should have made the claim with the Insurance Company for the alleged loss and that the Bank had no role in that regard.
When the Policy was taken through the Bank and there is an MOU between the Bank and the Insurance Company and the claim was made to the Bank, the contention of the Bank that the Complainant alone should have got the claim processed is completely unsustainable. The entire Written Version filed by the Bank only speaks of the recovery proceedings initiated against the Complainant. It is significant to mention that the Bank had never stated in their Written Version that the Complainant had made a claim with them or that the claim was forwarded to the Insurance Company. Even in their evidence filed by way of affidavit, the Bank has only given details of the proceedings initiated under the SARFAESI Act, 2002 and the defaulting of the loan amount, but nowhere mentioned either about the claim made by the Complainant or forwarding of the same to the Insurance Company. Such a stand taken by the Bank when it is clearly specified in the MOU that 'And Whereas SBI has represented that it is entitled to act as a Corporate Agent of a General Insurance business Company such as the Insurer as permitted by Government of India' is deprecated. It is pertinent to note that the Policy copy filed herein shows that the period of cover was from 28-03-2006 to 27-03-2007. The MOU was entered into on 10-10-2003 and was valid for a period of three years thereon, which ended on 10-10-2006. Therefore, the MOU was very much in existence during the issuance of the Policy. In view of the clear stipulation in the MoU that 'And Whereas the Insurer and SBI have discussed and agreed that it would be in their mutual interest that SBI should act as a Corporate Agent for the insurer on commission basis in relation to the Insurance business of the insurer', the contention of the Bank that they have no role to play is untenable.
For all the aforenoted reasons, we are of the considered view, that the Bank is to be made liable for not having forwarded the claim, not having kept the Complainant informed regarding the Policy and the claim and for not having taken effective steps in that regard, for which both the first and second Opposite Parties, i.e., the Bank are liable to pay the claim amount to the Complainant with interest @9% p.a., three months from the date of filing of the claim till the date of realization. We are of the considered view that since there is no specific pleading regarding deficiency in service against the Insurance Company and also having regard to the admission made by the Complainant that the Policy copy was received by them only in the year 2013, when they had approached the officials of the Insurance Company, the Insurance Company cannot be made liable to settle the claim which is time barred.
In the result, this Appeal is allowed and the order of the State Commission is modified in this First Appeal to the extent indicated above. Time for compliance, four weeks from the date of receipt of a copy of this order failing which the amount shall attract interest @12% p.a..
The Appeal stands disposed of.