A bank's contractual right to insure a mortgaged property for security purposes does not impose an absolute legal obligation on the bank to guarantee valid insurance coverage; the primary duty to verify the insurance policy details and ensure the protection of the asset rests with the borrower.

KIRAN SIBAL, MEMBER

The instant appeal has been filed by appellant/Opposite party against the order dated 17.10.2022 passed by District Consumer Disputes Redressal Commission, SAS Nagar (Mohali) (in short, “District Commission”), whereby the complaint filed by complainant against opposite party (in short ‘OP’), under the Consumer Protection Act, was allowed while granting the following relief:-

“9. In view of our discussion, we allow the present complaint and direct to the OP to pay Rs.2,75,000/- to the CC alongwith interest @ 9% per annum from the date of fire i.e. 18.03.2016 till the date of payment. The OP is further burdened to pay a consolidated amount of compensation to the tune of Rs.1,00,000/- to the CC towards mental agony, harassment and cost of litigation……..”

2. It would be apposite to mention that hereinafter the parties will be referred, as have been arrayed before the District Commission.

3. Brief facts for the disposal of the appeal, as set out in the complaint, are that the complainant entered into a housing loan agreement No.088-412-000-00174 for the purchase of Flat No.302, Shiva Apartments, Ajit Enclave, Dhakoli, MC, Zirakpur with the OP-Bank. At the time of entering into the loan agreement, the OP-bank also got insured the said flat from the insurance company i.e. Bajaj Allianz and deducted the premium amount from the bank account of the complainant. However, the complainant never received any cover note or any other document regarding the insurance policy. On 18.03.2016, the said flat of the complainant caught fire and suffered huge loss, despite taking every possible step to save the property. An intimation regarding the loss of property due to fire was given to the Branch Manager of OP-Bank telephonically on 18.03.2016 and even a written request was made on 19.03.2016 to the OP-Bank to inform the insurance company. The complainant also informed the police authority regarding the said incident, vide DDR No.8 dated 19.03.2016. Thereafter, when no surveyor of the Insurance company visited the spot to assess the loss, the complainant approached the OP-Bank and enquired about the matter and also obtained the photocopy of the insurance policy from the OP-Bank, for which the insurance premium was paid regularly. After obtaining the insurance policy, the complainant was shocked to know that the mortgaged property was never got insured by the OP-Bank. Rather, the property which got insured by making payment of premium for the year 2013-14 and 2014-15, was the old residential house situated at #1155, Block No.1, Rathpur Colony, Pinjore, Panchkula, Haryana. The bank had no insurable interest in the said old property and it was not authorized to carry out the insurance of said property in any manner. Further, the mortgaged property was never insured for the period of 2015-16 for which the complainant had already consented and the bank was under a legal obligation to carry out the insurance of the property. Alleging deficiency in service on the part of the OP/Bank, the complainant filed consumer complaint before the District Commission and sought directions against the OP-Bank to pay Rs.4,00,000/- on account of loss of property along with interest @ 18% p.a and further to pay Rs.3,00,000/- as compensation towards physical strain and mental agony suffered by the complainant besides Rs.1,00,000/- as an exemplary cost and Rs.20,000/- towards cost of litigation.

4. Upon notice, OP-Bank appeared through counsel and filed its written reply, wherein it raised certain preliminary objections, which are not required to be reproduced here for the sake of brevity. On merits,