The National Consumer Disputes Redressal Commission, led by Mr. Subhash Chandra and Dr. Sadhna Shanker, has ruled that the bank is not responsible for any deficiency in service related to the non-insurance of hypothecated goods. The Commission held that the responsibility for obtaining insurance rests with the complainant, not the bank.
Background of the Case
The complainant, a company engaged in the quilt and foam business, had its stock and godown insured by Canara Bank. The bank deducted the insurance premium from the complainant’s account and arranged insurance through the National Insurance Company. Before approving the policy, the bank’s employees inspected the stock and godown.
After a fire destroyed the stock, the complainant notified both the police and the bank. They alleged that the bank failed to renew the insurance policy in time and only arranged new coverage after the fire, without proper inspection or notice. The complainant filed a complaint with the Uttar Pradesh State Commission, which ruled in their favor. The State Commission ordered the bank to pay ₹25 lakh in insured damages, plus 8% simple annual interest, ₹20,000 as compensation for mental and economic damages, and ₹5,000 for litigation costs.
Bank’s Argument
The bank appealed to the National Commission, arguing that it was the complainant’s responsibility to inform the bank about the insurance renewal and provide the renewal receipt. The bank contended that the complainant was not entitled to any relief and requested that the case be dismissed.
Commission’s Analysis and Findings
The National Commission examined whether the bank was liable for any deficiency in service for not ensuring the hypothecated goods were insured. The Commission referred to Clause 12 of the Credit-Cum-Cash Agreement (CCA), which clearly stated that it was the borrower’s obligation to insure the goods at its own expense and provide the insurance policies and receipts to the bank. While the bank could insure the goods if necessary, it was not required to do so unless the complainant failed to take action.
The Commission noted that the complainant was aware of the insurance policy details and had previously arranged the insurance through its own agent. There was no evidence to support the complainant’s claim that they were unaware of the insurance expiration. Furthermore, the complainant did not take any steps to renew the insurance policy after it expired, despite knowing the expiration date.
Fire Loss and Lack of Evidence
Regarding the fire that destroyed the stock, the Commission found that the complainant failed to provide sufficient evidence to prove the extent of the loss. Merely reporting the incident to the police and the bank was not enough. The complainant did not submit any formal loss assessment to support their claim.
Commission’s Conclusion
Based on the evidence, the National Commission concluded that the complainant did not take the necessary steps to insure the stock during the relevant period, and the bank was not at fault for failing to do so on their behalf. The Commission cited past cases such as Union Bank of India vs. Tirumala Enterprises and Oriental Bank of Commerce vs. HS Traders & Ors., reinforcing that the bank had no deficiency in service under the Consumer Protection Act, 2019.
Final Decision
The National Commission set aside the order of the Uttar Pradesh State Commission, allowed the bank’s appeal, and dismissed the complainant’s claims for compensation and relief.