Insured Cannot Assume Obligation On Part Of Bank To Renew Policy: NCDRC

The National Consumer Disputes Redressal Commission, presided by AVM J. Rajendra overruled the State Commission's order against SBI and held that the insured cannot assume obligation on the bank's part to renew the policy unless agreed otherwise. Brief Facts of the Case The complainant and his mother took a cash credit loan of Rs. 3,00,000 from SBI/bank, pledging shop stock, machinery, furniture, and 27.3 cents of jointly owned land as security. Later, they availed an additional Rs. 2,00,000. The loan terms required the stock, machinery, and furniture to be insured with United India Insurance/insurer, with premiums deducted from the complainant's account. Initially, the insurance was with New India Insurance, but due to tie-up arrangements, it was shifted to the insurer. The bank assured the complainant it would manage policy renewals, including premium payments. Subsequently, a fire destroyed the shop's stock and property, causing a loss of about Rs. 14,00,000. Upon approaching the insurer, the complainant discovered the policies had lapsed. The complainant alleged that the bank's failure to renew the policies amounted to negligence and deficiency in service. The complainant filed a complaint before the District Commission, which allowed the complaint. It directed the bank and the insurer to pay Rs. 12,00,000 with 9% interest for deficiency and Rs. 3,000 as litigation costs. Aggrieved, the Bank and the insurer filed an appeal before the State Commission of Kerala, which partly allowed the appeal. It reduced the compensation amount to Rs 4,50,000 with 9% interest. Consequently, the bank and the insurer filed a revision petition before the National Commission. Contentions of the Opposite Parties The bank and insurer denied any agreement requiring them to insure the pledged goods. The bank stated it did not offer insurance services or charge premiums. The complainant, being a large businessman, was not eligible for such services. The bank argued that paying and renewing insurance policies was the complainant's responsibility. While it occasionally paid premiums at the complainant's request, it had no tie-up with the insurer. Policy certificates were retained by the bank, and the complainant had to ensure his goods were insured. The complainant also failed to submit stock statements. The bank denied the claimed loss of Rs. 14,00,000 and asserted no service deficiency. The insurer stated it had no duty to notify about policy expiry. Observations by the National Commission The National Commission observed that the relevant clauses of the loan agreement placed the responsibility of insuring the property on the complainant. There was no evidence that the bank agreed to renew the policies or assume this obligation. Furthermore, the existence of clauses requiring insurance in joint names did not imply additional responsibilities for the bank unless explicitly stated, which was not the case. The National Commission found no deficiency in service by the bank or the insurer. Orders from the State Commission and District Forum were set aside, and the complaint was dismissed. Case Title: State Bank Of India Vs. R. Vishwanatha Pai Case Number: R.P. No. 4248/2012 Click Here To Read/Download The Order

Insured Cannot Assume Obligation On Part Of Bank To Renew Policy: NCDRC

Ayushi Rani

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