This appeal has been filed by the appellant National Urban Cooperative Bank Limited and anr. challenging the order dated 22nd December 2010 passed by the State Consumer Disputes Redressal Commission Uttar Pradesh, (in short ‘the State Commission’) in consumer complaint No. 75 of 2003.
2. Brief facts of the case are that the respondent no.1/ ccomplainant after obtaining financial assistance of Rs.25 lakhs from appellant/OP1 started unit in 1994 but for want of adequate financial assistance, the unit worked at 15% capacity only for 6 years and it was in Oct 2000 that OP1 extended financial assistance by sanctioning cash credit limit of Rs.25 lakhs. Immediately after the unit was extended financial assistance, the Bank suo moto got the unit insured under fire and special perils policy for Rs.28 lakhs with New India Assurance Co. Ltd. w.e.f. 30.01.2001 to 29.01.2002 in respect of building, machinery and stock. Before the expiry of said policy, complainant asked the Bank to take insurance policy like previous year. After the fire incident on 7.10.2002, complainant sent a letter dated 10.10.2002 to OP1to do the needful in order to expedite the insurance claim so that the complainant can pursue the matter with the insurance company. It has been alleged that OP2 (Secretary/GM of the Bank) vide letter dated 17.10.2002 made false and frivolous allegations against the complainant. Complainant filed the consumer complainant against malafide act of OP for not renewing the insurance policy. State Commission vide order dated 22.12.2010 partly allowed the complaint and directed OP to pay Rs.29,30,262/- along with 9% interest p.a. and to give benefit of dividend @ 9% on the share money of Rs.2,50,000/- to the complainant.
3. Hence, appeal has been filed by OP1-2.
4. Heard the learned counsel for the appellants and the learned counsel for the respondent No.1/complainant. Responded No. 2 District Industries Officer has been proceeded ex-parte vide order dated 24th January 2017 of this Commission.
5. The learned counsel for the appellants stated that the State Commission closed the opportunity of filing written statement and proceeded ex-parte on 22nd February 2007 and therefore version of the appellants could not come on record before the State Commission. However, the appellants engaged learned counsel Mr Sharma who filed his vakalatnama along with objections on 24th May 2007 but the same was removed from the court file before the State Commission and the State Commission did not consider the objections raised by the appellants.
6. On merits, the learned counsel for the appellants stated that the respondent No.1 vide letter dated 11th February 2001 requested the appellant not to get the insurance coverage as the respondent was facing financial hardships in running the business. This letter was informed to the complainant vide letter dated 17th October 2002 when after the incident on 7th October 2002, the complainant informed the incident of fire to the bank and asked to take action for getting the insurance amount.
7. It was further contended by the learned counsel for the appellants that as per clause 6 of the hypothecation deed dated 3rd October 2000, it was incumbent upon the respondent /complainant to get the goods insured and the bank was not bound to arrange the insurance. It was also contended that at the relevant time, there was no sufficient balance to take the insurance policy even if the bank wanted to take it. It was the duty of the complainant to have taken the insurance for the hypothecated goods. The bank could have taken the insurance for the benefit of the recovery of loan from the complainant but if the same was not taken by the bank, there was no deficiency in service on the part of the bank as the main responsibility lied with the complainant. The complainant is denying the letter dated 11 February 2001 by saying that the bank had taken many signed papers from the complainant at the time of sanctioning of the loan and the letter has been forged by the bank. The learned counsel stated that there was no necessity for the bank to do the same because the responsibility was already there on the part of the complainant to have taken the insurance for the hypothecated goods and there was no need to create any evidence to defend the bank.
8. On the other hand, the learned counsel for the respondent complainant stated that the bank had taken the insurance policy for the hypothecated goods valid from 30th January 2001 to 29th January 2002 but the bank did not get it renewed for which the bank was duty bound. As the ownership of the hypothecated goods rested with the bank, it was incumbent upon the bank to have taken the insurance for those goods. To evade the responsibility of taking insurance for these goods, the bank has produced a forged letter dated 11 February 2001 allegedly given by the complainant directing the bank for not taking the insurance. The State Commission has rightly not relied on this forged letter. As there was no insurance, so, no surveyor was appointed for assessing the loss however, the loss has been assessed by the chartered accountant vide report dated 6th February 2003. The State Commission has gone through this report and has agreed with the assessment by the chartered accountant. As insurance could not be taken because of the deficiency on the part of the appellant bank, the State Commission has rightly ordered the appellant to compensate the loss suffered by the complainant.
9. I have carefully considered the argument's advanced by both the parties and have examined the material on record. It is seen that the State Commission has recorded the following in respect of the ex-parte order against the appellant opposite party:
“After filing complaint by the complainant, the notices were issued to the Opposite Parties. On perusal of the Order sheet, it is apparent clear that Shri R.P.Mishra Advocate has submitted his vakalatnama on behalf of the opposite Party No.2 Shri Kamla Kant Tripathi. On dated 30.09.2005 also the Opposite Parties were afforded last opportunity for submission of their written statements in two months additional time, but despite having sufficient opportunity the opposite Parties did not file any written submissions. Resultantly, on 22.02.2007, the orders were passed to hear this case ex-parte. The complainants submitted ex-parte evidence in support of his case.”
10. It is further seen that the appellant has not mentioned anything for this observation of the State Commission. It simply means that the observation recorded by the State Commission is correct. It also means that the bank was represented before the State Commission but the bank did not file the written statement even in the extra time provided by the State Commission. Clearly, no further time now can be given to the bank to file the written statement in the light of the judgment and order dated 04.03.2020 passed by the Hon’ble Supreme Court in Civil Appeal No.10941-10942 of 2013, New India Assurance Company Limited Vs. Hilli Multipurpose Cold Storage Pvt. Ltd. where the larger bench of the Hon’ble Supreme Court has decided that the statutory time period of 30 days cannot be extended beyond 15 days for filing the written statement. The appellant Bank did not also come in appeal against the order dated 22nd February 2007 whereby the Bank was proceeded ex-parte. Had the bank filed an appeal against the order dated 22nd February 2007, the bank may have been allowed to take part in the proceedings at the time of final arguments and even to give written submissions. Now that the final order has already been passed by the State Commission and the bank has come in appeal against the final order, the matter can be remanded to the State Commission for considering the arguments of the appellant bank and to decide the case, but the same is not desirable as the case has already traversed 19 years since the incidence of fire. As both parties have been heard in the appeal, I am deciding the matter finally in the appeal and refraining from remanding the matter to the State Commission.
11. The appellant Bank has stated that when the insurance was taken for the first time by the bank, then there was lot of objection from the complainant and its directors and later on the complainant had written a letter dated 11th February 2001 advising the bank that the bank should not take insurance for the hypothecated goods of the complainant and based on this letter, the bank did not take the insurance for the next year. The complainant has said that this letter has been forged on the blank papers which were taken by the bank duly signed by the complainant and its directors at the time of sanctioning of the loan. On the other hand the complainant is also asserting that the complainant wrote a letter dated 3rd December 2001 requesting the bank to take insurance for the next year after the current insurance lapses. The bank has not said anything about this letter. It is also seen that this letter is also shrouded in the mystery because there is no mention of this letter in the complaint filed by the complainant nor the same is reflected in the reply given by the complainant on 1st November 2002 in response to the letter dated 17th October 2002 written by the bank in reply to the letter sent by the complainant on 10th October 2002. It is worth noting that the bank in its letter dated 17th October 2002 had indicated that the complainant had requested the bank not to take the insurance for the hypothecated goods. This clearly shows that the alleged letter dated 3rd December 2001 is also an afterthought on the part of the complainant. In a way both the parties are trying to produce evidence to blame the other party for not taking the insurance. If the bank was relying on the letter dated 11th February 2001 of the complainant and finally did not take the insurance after expiry of the current insurance, the bank should have taken care that if the goods have not been insured by the complainant, then the bank should have written to the complainant for taking insurance or should have taken insurance as per clause 6 of the hypothecation agreement in order to safeguard the loan amount. But the same has not been done till 7th October 2002. As the letters relied upon by both the sides are doubted, it is better to proceed to examine the matter on the basis of the legal documents such as the hypothecation agreement and the equitable mortgage deed executed between the parties. On the basis of the equitable mortgage deed, the complainant has tried to establish before the State Commission that as per clause 8 of this agreement the ownership of the hypothecated goods was of the bank, therefore bank was responsible for taking the insurance. The hypothecation agreement is also a part and parcel of the equitable mortgage deed. Clause 6 of the hypothecation agreement reads as under:-
“6. That the hypothecated goods shall be insured against Fire risk by the Borrowers in 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 that the Borrowers will on demand deliver to the Bank all policies for and the receipts for premia paid on such insurance endorsed and assigned with the full benefit thereof in favour of the Bank. Should the Borrowers fail to so insure or fail to deliver the policies or receipts for premia duly endorsed as aforesaid three days after demand the Bank shall be at liberty, though not bound, to effect such insurance at the expenses of the Borrowers. The Borrowers further agree that the Bank shall be at liberty at any time at its discretion (without being bound to do so) to insure the securities for their full market value against roit and civil commotion risk or any other type of insurance risk at the expenses of the Borrowers with any Insurance Company.”
12. This clause clearly states that the borrower is responsible to take insurance of the hypothecated goods at the first place and if the borrower fails to take the insurance, then the bank is at liberty to take the insurance but the bank is not bound to take that insurance. It is clear that no deficiency in service can be attributed on the part of the bank only on the ground that the bank has failed to take insurance after the borrower has failed to take the insurance for the hypothecated goods. However, in the present case, the bank had taken the earlier insurance on their own, hence there can be an expectation that the bank will come forward to take the insurance for the next year as well, though the main responsibility of taking insurance remains with the borrower. Thus, the major part of the negligence remains with the borrower but some portion also rests with the appellant bank. Thus, it is a clear case of contributory negligence on the part of the complainant.
13. The State Commission has not considered the aspect of contributory negligence on the part of the complainant and has loaded all the deficiency and negligence on the appellant bank. Moreover, the State Commission has treated the appellant bank as an insurer to indemnify the loss suffered by the complainant in the fire. The fact is that the appellant bank is not the insurer and the bank is not able to identify and assess the total loss suffered by the complainant as would have been done by an insurer, had there been a valid policy. Even for not taking the policy, the complainant is primarily responsible as has been examined above. A complainant can only be compensated to the extent to which the deficiency in service warrants.
14. Another issue that draws my attention is the amount of loss suffered by the complainant. As there was no insurance policy, so no surveyor was appointed. However, the State Commission may have appointed an IRDA approved loss assessor to quantify the loss. The State Commission has relied on the report of the Chartered Accountant of the complainant company which is not an independent evaluation of the loss. Moreover, the breakup of Rs.25 lakhs cash credit limit shows that only 8 lakhs was given for raw material. As this disbursement may have been after the machinery and molds etc. may have been purchased by the complainant, the stock value of Rs. 35 lakhs is doubtful particularly keeping in view the fact that the complainant was running its factory for 6 years at 15% of the capacity. Though this loss has very little to do with the compensation to be awarded to the complainant for the limited deficiency in service on the part of the appellant bank, however, it is being clarified to emphasize that this amount may look quite big but this may not reflect the actual loss.
15. As already examined above, the deficiency on the part of the appellant bank is very little, if there is some at all, and the major part of negligence is on the part of the complainant itself and the complainant can only be c
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ompensated for the deficiency in service on the part of the opposite party keeping in view the major contributory negligence on the part of the complainant. In the facts and circumstances of the case, I deem it appropriate to quantify this compensation at Rs.6 lakhs only. 16. So far as the refund of the share money of Rs.2.5 lakhs is concerned, the appellant has already refunded the amount of share money however, the State Commission has ordered the payment of dividend in the form of interest at the rate 9% per annum. It is not clear whether the dividend has been declared by the appellant bank or not for every year and this information has not been dealt with by the State Commission in its order. Just because the money remained with the bank, the State Commission has ordered interest at the rate 9% p.a on this amount. As the position of dividend is not clear, but the amount is not very large, therefore, I would not like to interfere with the order of the State Commission except that instead of 9% p.a, interest at the rate 7% per annum would be sufficient. 17. Based on the above discussion, the present appeal No. 148 of 2011 is partly allowed and the order of the State Commission is modified to the extent that the appellant Bank would pay Rs.6 lakhs instead of Rs.29,30,262/- along with interest at the rate 6% per annum from the date of filing of the complaint till actual payment. The interest on share money to be paid by the appellant bank will be 7% per annum instead of 9% per annum as awarded by the State Commission. The order be complied by the appellant bank within a period of 45 days from the date of receipt of this order.