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Sunday, January 20, 2013

the Bank had failed to insure the property.=The State Commission was also informed that in all cases of house loan advanced in Tiruchirapalli by the OP/Bank, during 2003-09 period, the bank itself had insured all houses. In none of the cases, premium was directly paid to the insurance company by the borrower. Clause 13 in the loan agreement needs to be viewed in this background. Had the OP/Bank acted with promptitude and insured the house in time, the benefit of insurance would have been available when the floods came and damaged it. This lapse was further compounded by belated effort on the part of the Bank to ensure it, at the cost of the complainant. The State Commission has therefore rightly held it to be a case of deficiency of service.- the decision of the Tamilnadu Consumer Disputes Redressal Commission in FA No. 194 of 2011 is bases on correct appreciation of the evidence on record. There is no case for intervention by this Commission in exercise of powers under Section 21 (b) of the Consumer Protection Act, 1986. The revision petition is therefore dismissed and the impugned order is confirmed. Further, considering the conduct of the revision petitioner an additional cost of Rs 25,000 is awarded to the respondent/complainant. The same shall be paid by the revision petitioner within three months. Failing this, the amount shall carry interest at 9% for the period of delay.


NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION
NEW DELHI

REVISION PETITION NO.4645 OF 2012
(Against the order dated 24.07.2012 in First Appeal No.194/2011 of the State Commission, Tamil Nadu)


1. The Chairman
     Indian Bank
    Chennai

2. The Manager
    Indian Bank,
    Thillai Nagar, 10th Cross,
    Tiruchirapalli- 18                                                                                                                                       ……….Petitioners


Versus
1. Consumer Protection Council Tamilnadu,
    No.2, RMS Building,
    Thillai Nagar Main Road,
    Tiruchirapalli- 18

2. Sh. K. L.N. Phani
    No.7/4, 12th Cross,
    Kumaran Nagar,
    Tiruchirapalli- 17                                                                                                                                          .........Respondents



BEFORE
HON’BLE MR. JUSTICE  J. M. MALIK,
                              PRESIDING MEMBER
HON’BLE MR. VINAY KUMAR, MEMBER



For the Petitioners         :   Mrs. Seema Gupta, Advocate


PRONOUNCED ON: 10.01.2013.


ORDER

PER MR.VINAY KUMAR, MEMBER

This revision petition has been filed on behalf of the Chairman Indian Bank and Manager Indian Bank Tiruchirapalli against the order of Tamilnadau State Consumer Disputes Redressal Commission in First Appeal No. 194 of 2011.  The matter arose out of a House Construction loan taken by respondent/Complainant from the revision petitioners/OPs in 2003.  The construction of the house was completed in September, 2004 and the building got damaged by floods in November, 2005.  The Complainant claimed compensation from the OPs, alleging that the Bank had failed to insure the property.  As per the complaint petition, it was responsibility of the Bank to insure it.  The borrower was not required to send any proposal to Bank in this behalf and the premium was also debited to his account.  After the matter was taken up by the Complainant with the Bank, the later, as alleged in the Complaint, ‘realised their mistake, they hurriedly went to the United India insurance company and insured the house of the complainant No:1 on December 3rd, 2005 as it is mandatory for the bank to insure the mortgaged property.  Since the insurance was post-floods, the insurance company could not pay’.  

2.      This claim was contested on behalf of the OPs relying primarily on clause 13 of the ‘TERM LOAN AGREMENT FOR HOUSING FINANACE’ executed between the parties.  Clause 13 reads as follows:-
“The borrower shall, at his/her own cost, insure and keep insured the mortgage security when executed/created against fire and such other insurable risks, loss or damage as the bank shall from time to time require for the full market value thereof with any nationalized insurance company jointly in the names of the borrower and the Bank with Bank clause and deliver the insurance policies taken from time to time to theBank  with receipt of payment of premia.  In case, the borrower neglects or defaults, the bank may without being under any obligation, insure the mortgage security at the cost of the borrower and debit the premia paid from time to time to the borrowers account.  The amount of premium not paid by the borrower to Bank shall carry interest as payable in the loan account.  The non-admission or rejection of insurance claim by the insurance company for any reasons whatsoever will not affect or qualify the liability of the borrower and in case any amount is received from the insurance company towards the claim lodged by the Bank under the policy, the same shall be received and appropriated by the Bank towards dues owing under the term loan.”  
3.      The District Forum dismissed the complaint holding that the Complainant had failed to establish that the opposite parties have failed to take insurance of the house when they were under an obligation to do so.  Therefore, the District Forum held that there is no deficiency of service or unfair trade practice on the part of the OPs.  The decision of the District Forum was reversed by the State Commission and the appeal of the Complainant was allowed with compensation and cost.

4.      The decision of the State Commission has been challenged in the revision petition primarily on the ground:- 
“That the Ld. State Commission had committed a grave error of law by not appreciating the Term Loan Agreement (Ex. B-4) executed by the respondent No.2 in favour of petitioner No.2, which incorporates terms and conditions between the parties.  As such the Ld. State Commission could not have gone beyond the terms of the contract while passing the impugned judgment.  The Ld. State Commission did not appreciate Clause-13 of the Term Loan Agreement reproduced herein above as, it was the primary obligation of the respondent No.2 to have got the building insured and premium paid and the bank without under obligation, in exercise of its discretion may take out insurance of the building on behalf of its customers/borrowers.”

 5.     While allowing the appeal of the Complainant, the State Commission has held the OPs to be negligent in not insuring the house of the Complainant in time.  Debiting of a sum of Rs.4463/- to the account of the Complainant on 2.12.2005, towards insurance premium to United India Insurance Co, has been held to be a belated effort to insure the building after it was already damaged in the floods.  The State Commission also held that:-
“Further, the 2nd opposite party failed to instruct the 2nd complainant to insure the building at the earliest point of time and in case, even after that, the 2nd complainant failed to insure the building, then without further delay the 2nd opposite party should have insured the building, since all the documents relating to the building were vested with the 2nd opposite party, invoking Clause 13 of the Agreement Ex. B4.  The failure to instruct the 2nd complainant to insure the building and failure to insure the building debiting the premium amount to the 2nd complainant’s account in time amounts to negligence and deficiency in service on the part of the opposite parties .  That, there is stated in Ex.B4 “without being under any obligation” does not empower the opposite parties to commit arbitrary omissions and commissions amounting to negligence and deficiency in service.”    
           
 6.     We have heard at length Mrs. Seema Gupta, Advocate for the revision petitioner.  The main thrust of her argument was that in terms of clause 13 of the loan document executed by the Complainant with the Bank, the obligation to insure the house rested squarely on the Complainant.  It was due to his failure to do so that the Bank had exercised the option to have the property insured. However, the counsel argued, that as the insurance was done on behalf of the Complainant, in terms of the agreement between the parties, no liability would devolve on the Bank from the consequences of such insurance. But, learned counsel could not explain why the insurance was taken in December, 2005 when the loan agreement had been executed long before in June, 2003. Moreover, as observed by the State Commission, the OPs did not even ask the complainant before taking the insurance ‘on his behalf’. Therefore, considering the manner in which insurance was done, we reject the contention that there was no deficiency of service. 

7.      Further, if the obligation was of the Complainant alone, it was still incumbent upon the Bank to show how the Complainant was first asked/required to discharge it, before exercising the option to go ahead with it.  There is nothing to show that the Bank first advised the Complainant to insure the house and only upon his failure, insured it with the United India Insurance Co. The fact remains that after taking no action to insure the building for two and half years, the Bank exercised its option under clause 13 to insure it, debiting the account of the Complainant.  We are therefore, in full agreement with the view of the State Commission that ‘without being under any obligation’ did not empower the RP/OP to commit arbitrary omissions and commissions.          
                  
8.      Significantly, the State Commission has also referred to the information supplied by OP/Bank itself (Ex. A-11 & A-12), which show that it is the common practice that buildings constructed with housing loan from Banks, are got insured by the banks themselves, debiting the premium to the account of the borrowers.  As per this, the OP/Bank even receives 10% commission from the United India Insurance Co. on the premium collected in this behalf.  
The State Commission was also informed that in all cases of house loan advanced in Tiruchirapalli by the OP/Bank, during 2003-09 period, the bank itself had insured all houses.  In none of the cases, premium was directly paid to the insurance company by the borrower. Clause 13 in the loan agreement needs to be viewed in this background. Had the OP/Bank acted with promptitude and insured the house in time, the benefit of insurance would have been available when the floods came and damaged it. This lapse was further compounded by belated effort on the part of the Bank to ensure it, at the cost of the complainant. The State Commission has therefore rightly held it to be a case of deficiency of service.

9.      In the revision petition reliance has also been placed on the following two decisions of this Commission:-
1. UCO Bank Vs. Gadadhar Mohapatra, I (2007) CPJ 29 NC.
2. State Bank of India, Branch Bellary Vs. B. Nagaraj & Ors.,
 IV (2005) CPJ 112 (NC).

We have perused the two decisions.  Facts of both are very different from the facts in the case before us.  Therefore, the case of the revision petitioner can derive no support from either decisions cited on their behalf.

10.    For the reasons detailed above, we come to the conclusion that 
the decision of the Tamilnadu Consumer Disputes Redressal Commission in FA No. 194 of 2011 is bases on correct appreciation of the evidence on record. There is no case for intervention by this Commission in exercise of powers under Section 21 (b) of the Consumer Protection Act, 1986. The revision petition is therefore dismissed and the impugned order is confirmed. Further, considering the conduct of the revision petitioner an additional cost of Rs 25,000 is awarded to the respondent/complainant. The same shall be paid by the revision petitioner within three months. Failing this, the amount shall carry interest at 9% for the period of delay.
.……………Sd/-……………
(J. M. MALIK, J.)
PRESIDING MEMBER

                                                         …………Sd/-……………….
(VINAY KUMAR)
                                                                                   MEMBER
S./-








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