Oceanic Colour Lab vs State Bank of India

Biswanath Rath, J—Heard Mr. S.S. Das, learned Senior Advocate for the petitioner.

This writ petition is filed by the petitioner assailing the impugned order dated 11.7.2014 passed by the learned Debt Recovery Appellate Tribunal, Kolkata in Appeal No. 115 of 2012/310 appearing at Annexsure-1, the order dated 31.5.2012 passed by the learned Debt Recovery Tribunal, Orissa, Cuttack in O.A. No. 178 of 2011 appearing at Annexure-2 and also further for a direction to the Opp. party-Bank to adjust the insurance claim of Rs. 9,00,000/-(Rupees Nine Lakhs) alongwith accrued interest thereon since 28.5.2008 till the date of adjustment.

Brief facts involved in the case is that a Recovery of Debt Proceeding was initiated by the State Bank of India, Station Bazar Branch, Puri against the present writ petitioner and others Under Section 19 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 before the Debt Recovery Tribunal, Orissa, Cuttack for issuing Recovery Certificate to the tune of Rs. 15,86,264/- together with interest, cost and other usual reliefs. The matter was decided on contest and disposed of vide O.A. No. 178 of 2011 on 31.5.2012 with the following direction:

"The application for the recovery of Rs. 15,86,264-00(Rupees Fifteen Lacs Eighty six Thousand two hundred sixty four) only together with interest thereon at the rate of 9% per annum is allowed on contest with cost against the defendant Nos. 1 to 3 jointly and severally. The defendants shall pay pendente lite and future interest @ 9% per annum on the amount due from the date of filing of the Original Application till the full and final realization of the claim amount. The applicant bank can recover the Bank dues from the defendants after the sale of the mortgaged properties which are more fully described in the schedule of the properties which shall form part of the judgment. If the sale proceeds are insufficient to satisfy the Certificate, then from other properties of the defendants which are uncharged.

The defendants are restrained from depleting, transferring, encumbering or in any way dealing with their assets without first paying the claim of the applicant bank.

Let a Recovery Certificate be issued under Section 19(22) of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 and the same be forwarded to the Recovery Cell for further action as per law.

Let a copy of the judgment be supplied to the parties forthwith as per rules."

Being aggrieved by the above order in O.A. No. 178 of 2011, the present petitioner filed Appeal No. 115 of 2012/310 before the Debt Recovery Appellate Tribunal, Kolkata. As it appears, considering the grounds raised by the present petitioner, the appellate authority framed two issues such as :

"(i) Whether the Bank committed any error in not making insurance claim at the request of the borrower and if so what is the liability of the Bank?

(ii) Whether the interest calculated in the O.A is in order or not?"

Considering the submissions of the parties and taking into consideration the provisions of the terms of contract as well as the citations cited at Bar, the learned appellate Tribunal decided the Issue No. 1 as well as Issue No. 2 in favour of the Opp.party-Bank and consequently dismissed the Appeal on the premises of having no merit.

In advancing his argument, Sri Das, learned Senior Advocate appearing for the petitioner in the present writ petition submits that in view of clear terms in the letter of arrangement issued by the Opp.party-Bank on 27.7.2006, the Opp. party-Bank failed in discharging its responsibility particularly in the matter of claim of insurance and therefore submitted that both the forums have failed in appreciating the conditions in relation to insurance appearing in the letter of arrangement and consequently both the forums have arrived at wrong conclusion.

There is no dispute at the Bar that the petitioner is a borrower and the sanction and credit facility was made by issuing a Letter of Arrangement dated 27.7.2006. Clause-6 of the Letter of Arrangement deals with the insurance reads as follows:

"6. INSURANCE:

All the assets charged to the Bank should always be fully insured by the Borrower against fire, lightning, 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 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."

A close scrutiny of Clause-6 of the Letter of Arrangement referred to herein above not only makes it clear in compelling the borrower to fully insure all the assets charged to the Bank but also contains a condition that the policies/cover notes should be lodged with the Bank with a rider to the Bank for having right (but not be bound to exercise) to take the insurance cover as required by the Bank by debit to its account. This clause also further contains a condition for renewal of the policies to be effected/done by the Borrower at all materials. The above also makes it abundantly clear that the borrower alone makes premium to the insurer. On a query by the Court to the learned Senior Advocate appearing for the petitioner as to payment with regard to renewal of premium, the learned Senior Advocate was fair enough to submit that the borrower was making the premiums but from the loan account.

A conspectus reading of the condition at Clause-6 in the Letter of Arrangement makes it clear that the Bank/Financer has no obligation in the matter of claim on account of insurance. From the reading of both the impugned order, we also find that both the Courts below have not only deliberated this issue at length but with cogent reasoning have ultimately come to the conclusion that the Opp. party-Bank had no obligation in the matter of claim of insurance. We are in full agreement with such view of both the forums below and find no fault in either of the judgments of the authorities below.

Under the above circumstances, this Court finds no substance in the submission of the learned Senior Advocate appearing for the petitioner. The Writ petition thus stands dismissed.