UNION BANK OF INDIA vs CHANDRIKA RAI AND TIPURARI RAI

THE Revision Petition is filed against the judgment dated 10.9.2001 of the State Commission UP in Appeal No. 1519/SC/2001.

BRIEF facts of the case are: The Respondents Chandrika Rai and Tripurari Rai approached the Petitioner Union Bank of India in the month of October, 1990 for availing of a loan for purchase of a new Escort Tractor. A loan of Rs. 75,000/- was sanctioned and as per the terms of the agreement, the tractor is required to be hypothecated to the Bank. Accordingly agreement of hypothecation dated 29.10.1990 has been executed (Annexure P-2). The tractor was insured on 7.11.1990 for a period 7.11.1990 to 6.11.1991. After the expiry of the insurance cover on 6.11.1991, it was required to be renewed / extended by paying the stipulation premium to the Insurance Company for a further period of one year. The same has not been done. On 30.1.1992 the tractor met with an accident for which a claim petition was filed by one Shri Shambhu Nath Singh against the Respondent for a sum of Rs. 10,20,000/- which is still pending. It was the case of Respondents / Original Complainant before the District Forum that the first insurance premium was paid by the Union Bank and that subsequent instalment also should have been paid by the same bank which failed in renewing the insurance. He therefore claimed a sum of Rs. 1,00,000/- as compensation for the alleged negligence on the part of the Union Bank. The Respondents also claimed a sum of Rs. 30,000/- from the Bank alleging that Bank has overcharged in their account. Thus the Respondent claimed total sum of Rs. 1,30,000/- from the Petitioner in the said complaint.

THE District Forum, Azamgarh vide its order dated 17.5.2000 passed an ex-parte order against the Petitioner and directed the Petitioner Bank to pay a sum of Rs. 1,30,000/- along with 12% interest. The Petitioner Bank then moved an application before the District Forum for review of the order. However, the District Forum vide its order dated 20.7.2001 dismissed the review application of the Petitioner. Aggrieved by these orders dated 17.5.2000 and 20.7.2001, the Petitioner Bank filed an Appeal in the State Commission, U.P. The State Commission held that the Appeal was barred by limitation and dismissed the same vide its order dated 10th September, 2001. Against this order, the present Revision Petition has been filed.

REGARDING limitation it has been brought to our notice that Mr. Chandrika Rai who is one of the Respondent had died on 23rd May, 2000 after the order of the District Forum was passed on 17.5.2001. When the Petitioners filed an Appeal in the State Commission in the name of Mr. Chandrika Rai it was not known to them that Mr. Chandrika Rai had already expired. Thereafter the Bank committed the same mistake while filing the Revision Petition in the National Commission. Now the name of Mr. Chandrika Rai has been substituted by his son Shri Ramakant Rai who is a legal heir. This position has been considered on 31.7.2002 as per our order to implead legal representatives and amend the Revision Petition. In view of death of one of the Respondents/Complainants there has been confusion in filing the correct memo of parties. In view of this we condone the delay which has been pleaded by the Petitioners. The case of the Revision Petitioner is that according to Clause 7 of the Hypothecation Agreement dated 29.10.1990 (Annexure P-2), the responsibility for taking out an insurance cover for the tractor is squarely on the borrower namely the Respondent. According to the same Clause, the responsibility to punctually pay all premiums is also squarely on the borrower. It is also argued by the Petitioner Bank that the first premium of the Insurance Policy of the tractor was paid by the Petitioner Bank by debiting the account of the Respondent at the request of the Respondent, and that the same in no manner fixed the responsibility on the Bank to renew the Insurance Policy from time to time. They further argued that there is no question of negligence on their part in not renewing the Insurance Policy.

AS regards the claim of the Respondent that the Petitioner Bank recovered from them an excess amount of Rs. 30,000/- the Petitioner Bank argued that the interest and the charges charged to the account of the Respondent as per the rules and regulations of the Bank and that the Respondent had accepted the charges. As a matter of fact the Respondent paid the entire dues of the Petitioner Bank without any demur and closed its Bank Account with the Petitioner Bank as early as in February, 1994. It is argued after February, 1994, the question of any relationship of consumer and service provider between the Petitioner and the Respondent did not survive.

WE have carefully gone through the pleadings and heard the parties. The main question is whether the Petitioner Bank was under an obligation to insure the tractor and to renew that insurance from time to time. In this context Clause 7 of the Hypothecation Agreement of 29.10.1990 is relevant and is reproduced below: "Clause 7: The Borrowers shall insure to the satisfaction of the Bank and keep insured the hypothecated goods constituting the Bank''s security and the premises in which the same may be against fire, theft and all such other risk or risks as the Bank may at any time and from time to time require the Borrowers to insure in a sum equivalent to their full market value with some Insurance Office or Offices approved by the Bank in the joint names of the Bank and the Borrowers or otherwise as the Bank may require and shall duly and punctually pay all premia and shall not do or suffer to be done any act which may invalidate or avoid such insurance and shall deposit the insurance policy and all cover notes, premium receipt and other documents connected therewith with the Bank. Any moneys realized from such insurance shall at the option of the Bank be applied either in reinstating the security or towards the balance due to the Bank."

From the above, it is clear that the legal responsibility for insuring the vehicle and for renewing it from time to time is squarely on the Borrower. The Petitioner Bank argued that while sanctioning the loan for vehicles, tractors, etc. since there may be delay or some reluctance on the part of the Borrowers to get the vehicle insured quickly, the Bank insists on getting the insurance done before the release of the loan or immediately thereafter and debits the borrower''s account. This is to ensure that borrowers obtained the insurance in time. In any case such payment of the first premium and debiting into this client''s account is done at the insistence of the borrower. It is clearly the responsibility of the borrower to renew the insurance from year to year as long as the vehicle is hypothecated to the lender Bank.

WE feel it is practically impossible for a lender Bank to take up the responsibility of renewing the insurance from year to year of their various borrowers. We agree that this view and Clause 7 of the Agreement clearly support this. We therefore find that there is no negligence on the part of the Petitioner''s Bank on this count. As far as the claim of the Respondents that they have been overcharged Rs. 30,000/-, we find that the payment charged are according to the standard terms; that the amounts have been paid without any complaint; and that the lower fora are not just for ordering the lending Bank to return these amounts. In the light of the above arguments we allow the Revision Petition and set aside the order of the State Commission and dismissed the complaint. No order as to costs.