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NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION
Ashok Bhan, President and Vineeta Rai, Member
MORION CHEMICALS LTD. - Appellant
Versus
UCO BANK AND ANR. - Respondents
First Appeal No. 773 of 2007 from Order dated 22.11.2007 in Complaint Case No. 64/06 of State Consumer Disputes Redressal Commission, Chandigarh, UT
Decided on : 13-05-2013
Mr. Neeraj Pal Sharma, Advocate, for the Appellant; Mr. Rajesh Rattan, Advocate, Mr. Ravi Bakshi, Advocate, for the Respondent
The duty to insure the hypothecated goods lies with the borrower, and a customer availing services for commercial purposes may not be considered a consumer under the Consumer Protection Act, 1986.
Headnote:
Insurance - Commercial Dispute - Consumer Protection Act, 1986 - [Standard Fire and Special Perils Policy] - [Consumer Dispute] - [Consumer Protection Act, 1986] - [Section 2(1)(d)(i), Section 2(1)(d)(ii)]
Fact of the Case:
The complainant, a chemical manufacturing company, obtained a term loan from the respondent bank and the bank obtained an insurance policy without the complainant's knowledge. The factory premises were damaged due to heavy rains, and the insurance company repudiated the claim. The State Commission dismissed the complaint, stating that it was the duty of the complainant to insure the hypothecated goods.
Finding of the Court:
The State Commission held that the complainant was obligated to insure the goods and that the bank and insurance company were not liable. The court also found that the complainant was not a consumer under the Consumer Protection Act, 1986.
Issues: The issues involved the duty to insure the hypothecated goods, the liability of the bank and insurance company, and the complainant's status as a consumer under the Consumer Protection Act, 1986.
Ratio Decidendi: The court held that the complainant's failure to insure the goods relieved the bank of liability to insure, and the complainant was not considered a consumer for commercial purposes.
Final Decision: The appeal was dismissed, and the complainant was granted liberty to seek redressal before the appropriate court/forum.
ORDER
Ashok Bhan, President - Complainant/Appellant has filed this Appeal against the judgment and order dated 22.11.2007 passed by the State Consumer Disputes Redressal Commission, Chandigarh UT (in short, the State Commission ) in Complaint Case No. 64/06 wherein the State Commission has dismissed the complaint filed by it.
Facts:
2. Complainant/Appellant, a chemical manufacturing company, got sanctioned a term loan of Rs. 2.25 crores from the Respondent No. 1 Bank (opposite party No. 2 before the State Commission) on 22.8.2005 by hypothecating movable property including machinery vide hypothecation deed dated 2.5.2004. In order to secure the term loan, Respondent No. 1 Bank (hereinafter to be referred to as the "Respondent Bank") without the knowledge of the Appellant obtained a "Standard Fire and Special Perils Policy" from the Respondent No. 2 Insurance Company (opposite party No. 1 before the State Commission) to insure the hypothecated building and stocks for a sum of Rs. 30,00,000 and Rs. 1.22 crores respectively against the risks of earthquake, fire and shock. The policy was valid from 28.6.2004 to 27.6.2005. On 3.8.2004, due to heavy rains in Chandigarh, there was accumulation of water in the factory premises as a result of which the machinery, material and other property lying thereon was completely damaged. Intimation was given to the Respondent Bank and the Insurance Company. However, the Respondent Insurance Company vide letter dated 20.9.2004 repudiated the claim of the Appellant on the ground that the risk for flood and cyclone group of perils was excluded from the policy. Complainant, being aggrieved, filed the complaint before the State Commission.
3. On being served, Respondent Bank entered appearance and filed its written statement taking the preliminary objection that the complaint was not maintainable as the resolution passed by the Appellant Company did not authorize Jai Bhagwan to file the same. On merits, it was pleaded that the complaint was barred by limitation as the cause of action had arisen on 3.8.2004 whereas the complaint was filed by the Appellant on 26.9.2006; that since the Appellant Company had failed to got insured the hypothecated machinery and stock, the policy was got issued by the Bank to secure its term loan.
4. Respondent Insurance Company contested the complaint on the grounds that it was barred by limitation; that the complaint was not filed by an authorized person; that since the Respondent Bank had opted for exclusion of risk of flood and cyclone peril, it had reduced the premium by 0.25% in the policy; that the Respondent Insurance Company was justified in repudiating the claim of the Appellant.
5. State Commission on appreciation of the facts, pleadings and evidence came to the conclusion that it was the duty of the Appellant Company to get insured the hypothecated goods against fire and other risks and the Respondent Insurance Company was justified in repudiating the claim of the Appellant in the absence of coverage of insurance against the loss occurred due to flood and cyclone. It was also held that if the borrower/Appellant had failed to get insured goods than the Respondent Bank was at liberty to get the insurance to protect the hypothecated goods. State Commission dismissed the complaint against both the Respondents.
6. State Commission in its order observed as under:
"14. Therefore, according to this clause, it is the obligation of complainant to affect the insurance of the goods hypothecated so that bank should have insurable interest. If the borrower makes default in affecting such insurance or renewing any policy or in delivering to the bank the policies or receipts for the premium for keeping the hypothecated plant and machinery so insured or to deliver the bank policy or receipts for premium, then it shall be lawful (but not obligatory upon) to effect such insurance or to renew to pay such premia and to kept the hypothecated movable plant and machinery, stocks of raw mat
