Bank's Role As Intermediary Does Not Create Privity Of Contract With Insured: NCDRC Holds Insurance Company Liable
The National Consumer Disputes Redressal Commission, presided by Mr. Subhash Chandra and AVM J. Rajendra, in a petition by Sarva Haryana Gramin Bank held that a bank's role as an intermediary does not create a privity of contract with the insurer. The bank in such cases won't be liable for the wrongs committed by the insurer.
Brief Facts of the Case
Under the Prime Minister Fasal Bima Yojna (PMFBY), Sarva Haryana Gramin Bank was responsible for uploading details of farmer beneficiaries for insurance coverage. The complainant, having 7 acres of land, applied for crop insurance for his paddy crop through the bank. The bank deducted Rs. 2695 from his account as the premium. However, heavy rains destroyed his crop. However, he was denied the claim because the bank had entered wrong details of the village in the government portal. The complainant filed an appeal before the District Forum, wherein it was found that the bank failed in its duty to upload correct information, making it liable under the scheme's guidelines. The Forum ordered the bank to pay Rs. 92,527 to the farmer, Rs. 10,000 as compensation for mental agony, and Rs. 5,000 as litigation costs, within 45 days. The bank appealed before the State Commission of Haryana which dismissed the appeal, prompting the bank to file a revision petition before the National Commission.
Contentions of the Bank
The Bank argued that it had not received any premium and cannot be held liable for crop loss due to the insurance company's failure to follow operational guidelines under PMFBY. They claimed that since the insurance company received and retained the premium, it must compensate the farmers.
Observations by the National Commission
The National Commission observed that the case of the complainant is that the petitioner Bank is merely a facilitator for the farmers and the insurance company. Reliance was placed on Gurmel Singh vs. Branch Manager, National Insurance Co. Ltd., 2002 SCC Online SC 666, and an order in PIL No. 64 of 2021 by the Bombay High Court. The complainant contended that the Bank deducted the premium and that the crop loss due to unseasonal rains was undisputed. The Commission highlighted that the insurance company did not deny receipt of the premium but instead insisted that uploading correct details falls under the responsibility of the Bank and, therefore exempted them from liability. However, the Commission pointed out that in terms of the PMFBY scheme, it was the responsibility of the Bank to deduct the premium, upload the same, and remit to the insurance company.It was undisputed that the farmer's crop loss of Rs. 92,527 was certified, and the premium had been received. However, due to incorrect village details, the insurance company denied liability. The Commission held that the Bank's role as an intermediary does not create privity of contract with the insured. It was held that though there were mistakes in uploading the details, the insurance company got the premium and is liable for compensation and the lower forums erred in holding the Bank liable.
The National Commission allowed the revision petition and directed the insurance company to pay the complainant a sum of Rs. 92,527 along with Rs. 25,000 as litigation costs.
Case Title: Sarva Haryana Gramin Bank Vs. Rajinder Singh & Ors.
Case Number: R.P. No. 689/2023