In a significant ruling, the National Consumer Disputes Redressal Commission (NCDRC), presided over by AVM J. Rajendra, overturned previous orders against the State Bank of India (SBI) and dismissed a complaint alleging negligence in renewing an insurance policy.
Background of the Case
The case involved a complaint filed by R. Vishwanatha Pai, who, along with his mother, had taken a cash credit loan of ₹3,00,000 from SBI. The loan was secured by pledging shop stock, machinery, furniture, and 27.3 cents of jointly owned land. Later, an additional ₹2,00,000 loan was availed.
As part of the loan terms, the pledged assets were to be insured, and the premiums were to be deducted from the complainant’s account. Initially, the insurance was with New India Insurance but was later shifted to United India Insurance due to a tie-up arrangement. The complainant alleged that SBI assured him it would handle policy renewals, including premium payments.
In 2009, a fire destroyed the shop’s stock and property, resulting in a claimed loss of ₹14,00,000. However, the complainant discovered that the insurance policies had lapsed, prompting him to file a complaint alleging negligence and deficiency in service by the bank and the insurer.
Legal Proceedings
- District Commission: The complaint was allowed, and the bank and insurer were directed to pay ₹12,00,000 in compensation with 9% interest and ₹3,000 as litigation costs.
- State Commission (Kerala): The bank and insurer appealed, leading to a reduction in compensation to ₹4,50,000 with 9% interest.
- National Commission: SBI and the insurer challenged the State Commission’s order, arguing that they had no obligation to renew the insurance policies.
Arguments Presented
- Bank’s Defense: SBI denied any agreement to insure the pledged goods or renew policies. It claimed that the responsibility for ensuring insurance rested with the complainant. While the bank occasionally facilitated premium payments upon request, it did not offer insurance services or charge premiums. The bank also highlighted the complainant’s failure to submit stock statements and denied the claimed loss of ₹14,00,000.
- Insurer’s Defense: United India Insurance argued it had no obligation to notify policyholders about policy expiry.
National Commission’s Observations
The NCDRC reviewed the loan agreement and found that the responsibility for insuring the pledged assets lay with the complainant. There was no evidence to suggest that the bank had agreed to renew the policies or assume any additional obligations.
The Commission ruled that clauses requiring insurance in joint names did not imply the bank’s responsibility for policy renewal unless explicitly agreed upon. It concluded that neither the bank nor the insurer was deficient in service.
Final Verdict
The NCDRC set aside the orders of the State and District Commissions and dismissed the complaint, exonerating SBI and the insurer.
