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Judgment
The present appeal has been filed against the order dated 01.08.2018 of the State Consumer Disputes Redressal Commission Punjab, Chandigarh (for short "the State Commission") in CC No. 99 of 2016.
Brief facts of the case are that respondent nos. 1 to 3 took the facility of over draft since long against the mortgage of property No.D-1 ( portion of 592) Model Town Market near post office Jalandhar Posh and Commercial Hub of the town . Respondent no.1 purchased a Standard Fire Special Policy and Burglary Insurance Policy dated 17.12.2011 for the period 19.12.2011 to 16.12.2012. The policy continued till 28.12.2013. Thereafter, it lapsed due to non payment of the premium. It is not a disputed fact that all the premiums against this policy were deducted from the account of the complainants by the appellant. This policy was renewed for the period 22.01.2014 to 21.01.2015 and the premium towards this policy was paid by the appellant by debiting the same from account of the respondents. In the midnight of 28/29.01.2014, fire took place in the said building. The respondents filed their claim before the insurance company and they learnt that policy was not valid during that time on account of non payment of premium. The respondents filed the complaint alleging deficiency in service on the part of the appellant. Their ground was that it was the obligation and duty of the appellant to pay premium regularly towards the policy and since they had failed in their service, the complainants were required to be compensated for that.
The appellant contested the complaint on the ground that obligation was of the respondents to purchase the policy and regularly paying the premium and they were under no obligation to either purchase the policy or continue paying the premium for the policy.
The parties led their evidences. The arguments were heard by the State Commission and certain case laws were relied upon by the parties. On the basis of material before it, the State Commission concluded as under:
"Taking into account the entire evidence on the record and the above referred law, we have come to this conclusion that OP No.2/Bank had been taking the policies as the building was hypothecated with it by the complainants. Op No.2/Bank has been earlier taking the insurance policies qua hypothecation of the building to protect its interest. Sudden discontinuance of policy without giving prior notice to the complainants by it is deficiency in service. In our opinion, OP No.2 Bank has been held to be deficient in service and guilty of negligence by us."
I have heard arguments of the learned counsel for the appellant. During the course of arguments, counsel has drawn my attention to the clause 7 of the Standard Hypothecation Agreement and it is argued that this clause gives discretion to the Appellant to purchase a policy and that the obligation is upon the borrower i.e. the respondent to purchase the insurance policy. It is submitted that since they have acted as per the standard hypothecation agreement, there is no deficiency in service on their part. Counsel for the appellant has placed reliance on the findings of this Commission in First Appeal No. 147 of 2010 titled State Bank of Bikaner and Jaipur and Anr. Vs. M/s Jagdamba Eant Udyog & Anr. and has argued that on the identical issue this Commission has held that it is the duty of the borrower to buy the policy and pay the premium.
I have given my thoughtful consideration to the arguments of the learned counsel. The relevant clause 7 of the Standard Hypothecation Agreement is reproduced as under:
"7. That the Hypothecated goods shall be insured against fire risk by the Borrowers with some insurance office or offices approved by the Bank and in the name and for the sole benefit of the Bank, for their full market value and the Borrower shall forthwith and from time to time deliver to the Bank all policies and receipts for premia paid on such Insurance endorsed and assigned with the full benefit thereof in favour of the Bank. Should the Borrower fail to so insecure of fail to deliver the policies of receipts for the premia duly endorsed as aforesaid within three days of their receipts, the Bank shall be at liberty though not bound, to effect such insurance at the expense of the Borrowers. The Borrowers further agree that the Bank shall be at liberty at any time in its discretion (without being bound to do so) to insure the securities for their full market value against riot, fire theft and civil commotion risks or any others type of insurance risk at the expense of the Borrowers with any insurance company."
From bare reading of this clause, it is apparent that the primary duty is that of the borrower i.e. of the respondents to purchase the policy and continue paying the premium and deliver the same from time to time to the bank. The clause also says that where the borrower failed to deliver the policy within three days then the bank is within its authority and has the liberty al-though not bound to get the insurance at the instance of the borrower. It also states that the bank is also at the liberty and discretion to ensure the securities against various calamities at the instance of the borrower with any insurance company. Al-though the clause put the primary duty upon the borrower. It also mandates that bank has the power and liberty to ensure the property against the risk by buying the insurance policy at the instance of the borrower. The issue herein is whether such a discretion has been exercise by the appellant or not. The facts proved on record which re not disputed clearly show that even at the time when the policy was purchased in the year 2011, the premium was paid by the bank by debiting the same from the account of the borrower i.e. the respondents. Undisputedly, the appellant continued reviving the said policy by paying the premium to the insurance company after debiting the same from the account of the respondent. This conduct of the appellant clearly shows that they had exercised the discretion to buy the insurance policy at the instance of the complainant. Since they had exercised their discretion, the respondent had given this understanding that bank would continue reviving the policy by paying the premium and debiting the same from the account of the respondents. There is no material on record to show that complainants / respondents ever objected to this arrangement. Without informing the complainants that premium subsequent to the period 20.12.2013 had not been paid by the bank and that they should pay the same at their own, the bank sat silently. Naturally the complainants could not have come to know about the said circumstances when the bank was regularly paying the premium of the policy since 2011. This conduct clearly shows that bank had faulted in discharge of their services which they by their conduct agreed to discharge.
Counsel for the petitioner has relied on the findings of this Commission in State Bank of India & Jaipur & Anr. ( supra). The findings in this case are on different sets of facts, wherein loan was taken and property with the bank was mortgaged but property was not insured by the complainant and property was destroyed in the year 2005. In was on the following facts that the findings are given:
"As far as merits of the case is concerned, learned Counsel for Appellants submitted that as per terms and conditions of agreement of loan, complainant was under obligation to get his property insured in joint names of complainant and opposite party Bank. Clause-31 of the Agreement runs as under:
"All goods book-debts movables and other assets hypothecated, pledged, mortgaged or otherwise charged to the Bank as security for any of the aforesaid credit facilities and also all immovable properties given as security for all such facilities or any of them as may be required by the Bank shall be kept at the Borrower's risk and expense in good condition and fully insured against loss or damages as may be required by the Bank due to any reason whatsoever and particularly the machineries hypothecated and/or pledged to the Bank against fire and/or such other risk(s) as the Bank may from time to time stipulate in the joint names of the Borrower and the Bank with an insurance company approved by the Bank and for such amount as the Bank may consider necessary and that the insurance policies shall be delivered to the Bank when required by the Bank to do. If the Borrower failed to effects such insurance, the Bank may, but without being obliged to so, insure the said goods movables and other assets and moveable properties against fire and/or such risk(s) in such joint names and debit the premium and other charges to any account of the Borrower opened or to be opened".
Perusal of aforesaid condition clearly reveals that complainant was under obligation to get property in question insured in the joint name of complainant and the Bank and Bank was not under any obligation to get it insured though the liberty was given to the Bank that if complainant fails to effect such insurance, the Bank may, but without being obliged to do so, get the property insured. Thus, it becomes clear that learned State Commission has committed error in holding that opposite party was under obligation to get property insured. No doubt, opposite party got property insured after the incident after deducting premium amount from complainant's account, but by no stretch of imagination, it can be presumed that opposite party was under obligation to get property insured at the time of incident and failure on the part of the opposite party amounting to any deficiency on its part."
It is apparent that findings are based on the facts of that case. In the present case also, clause 31 of the agreement is different than clause 7 on which the appellant is relying. In this case, under clause 7, a discretion has been given to the appellant to buy the insurance policies and conduct of the bank shows that they have exercised that discretion by buying the policies year after year. In the light of the facts of this case, I hold that findings in the case of State Bank of Bikaner and Jaipur & Anr. (supra) are not applicable and are distinguishable.
In view of the above discussion, it is apparent that there was deficiency in service on the part of the appellant. I find no illegality or infirmity in the impugned order. Appeal is dismissed in limine with no order as to costs.