STATE BANK OF INDIA vs Sri Easwari Vaccines and Om Vaccine Clinic

THE present Revision Petition has been filed under Section 21(b) of the Consumer Protection Act, 1986 against the impugned order dated 27.9.2011 in FA/480/2009 passed by the State Consumer Disputes Redressal Commission (in short, ''State Commission''), Chennai, Tamil Nadu. The State Commission partly accepted the Appeal and reduced the compensation amount from Rs. 2,59,512 to 1,29,756, while upholding the rest of the order passed by the District Consumer Disputes Redressal Forum (in short, ''District Forum''). The District Forum directed the Petitioner Bank to pay compensation of Rs. 2,59,512 to the Respondents herein, along with Rs. 10,000 as damages and Rs. 1,000 towards cost. Brief facts in this case are that, on 11.3.2004, M/s. Sri Easwari Vaccines & Om Vaccine Clinic, the Complainant, availed a loan of Rs. 5,00,000 from State Bank of India, the OP -1, on the basis of trade and business, with the loan account No. 01563/071131. There was a tie -up with The New India Assurance Co. Ltd., the OP -2, to insure the goods/stock of the Complainant to the guarantee of the loan. On 25.11.2005, the Complainant''s clinic was completely damaged due to heavy inundation, caused by floods from River Cauvery. Thereafter, the Surveyor of OP -2 conducted the spot inspection and estimated the damages. The OP -2 repudiated the claim, since there was no renewal of policy. The Complainant came to know this fact from OP -1 on 29.11.2005, which the renewal of the policy was not at all made in March 2005 for the subsequent period. Several correspondences between complainant and both the OPs took place, but no avail. Hence the Complainant filed a complaint, claiming relief under several heads.

THE District Forum allowed the complaint and directed the OP -1 to pay Rs. 2,59,512 towards insurance claim and Rs. 10,000 as damages and Rs. 1,000 as costs. Aggrieved by the order of District Forum, the OP -1 preferred a First Appeal before State Commission. The State Commission modified the order of the District Forum by reducing the amount payable from Rs. 2,59,512 to Rs. 1,29,756 while rest of the order remained same.

AGAINST the order of the State Commission, the OP -1 preferred this revision petition.

WE have heard the Counsel of the parties. The Counsel for the OP -1, the bank, invited our attention to Clause 10/8 of the sanction letter and contended that it was the duty of the Borrower to get insured the hypothecated assets purchased with the money advanced by the Bank. The Insurance Clause is reads as under:

Insurance:

The equipment/machinery and other assets covered by this advance should by fully covered against fire risks and if necessary, insurance cover for riot and strike will have to be taken as and when called upon by the Bank to do so with an Insurance Company approved by the Bank in joint names of the Bank and the unit. You should make punctual payment of all Premia and not to do or suffer to done any act which would invalidate insurance during the policy of the advance.

The Counsel for the Complainant vehemently argued that the original insurance policy, the terms and conditions, etc. were in possession of bank, he was not informed about renewal. It was the duty of the Petitioner Bank to renew the Insurance Policy when it had expired on 30.3.2005. Though, the loan account was closed before the date of occurrence, the Bank should have renewed the Insurance Policy. Had the Bank renewed the same, Complainant would have got the compensation/claim from the Insurance Company.

WE have perused the MOU, entered between SBI and the New India Assurance Co. Ltd. It was for tie -up of direct insurance business being a corporate agent for the insurance coverage of all the advances made by the SBI to its loan borrowers. Accordingly, SBI took two insurance policies, as one -year annual policy, and debited the premium amount from the borrower''s account. Thereafter, these policies were not renewed, after 30.3.2005.

WE have given a thoughtful consideration to the fact that the OP bank advanced loan and it was to protect its own interest by remitting the insurance premium to the OP -2. There was a MOU also between OP -1 and OP -2. When the banker, OP -1 was in possession of entire loan documents, including the policy, it was the obligation of OP -1 to renew the policy on due date, i.e. 30.3.2005. Similarly, the complainant also appears to be not prudent enough, as he had closed the term loan account, on 27.10.2005. However, the damage to the machineries has taken place on 25.11.2005. It is pertinent to note that at the time of closure of loan account, the Complainant had not verified all documents. It was a clear lapse on the part of complainant. Also, the complainant should have questioned and sought clarification from the OP -1 about non -renewal of his policy. Hence, it is a contributory negligence on the part of complainant. Therefore, we are of considered view that there is no illegality in the order passed by the State Commission. Hence, we confirm the order passed by the State Commission and dismiss this revision petition. The parties are directed to bear their own cost.