NCDRC Clears Canara Bank Of Liability For Non-Insurance Of Hypothecated Goods

Brief Facts of the Case

The complainant, a company engaged in the quilt and foam business, had its stock and godown insured by Canara Bank, which deducted the premium from the complainant's account. The insurance was arranged through the National Insurance Company, and the bank's employees inspected the godown and stock prior to approval. After a fire destroyed the stock in the godown, the complainant informed the police and the bank. The complainant alleges the bank failed to renew the insurance in time and only arranged for new coverage after the fire, without inspection or informing the company. Aggrieved, the complainant filed a complaint before the State Commission of Uttar Pradesh, which allowed the complaint. It directed the bank to pay the insured amount of Rs. 25 lakh to the complainant company and8% simple annual interest on this amount along with Rs.20,000 compensation towards mental, physical and economic damages and Rs. 5,000 towards litigation. Dissatisfied, the complainant appealed before the National Commission.

Contentions of the Bank

The bank argued that it was the complainant;s responsibility to inform them about the policy renewal and provide the renewal receipt. The bank claimed that the complainant is not entitled to any relief and requested that the complaint be dismissed.

Observations by the National Commission

The National Commission observed that the main issue for consideration was whether the bank was liable for deficiency in service due to not ensuring the goods hypothecated to it were insured. The Commission referred to clauses in the CCA, particularly Clause 12, which clearly stated that it was the borrower's obligation to insure the goods at its own expense and deliver the insurance policies and receipts to the bank. While the bank could insure the goods if necessary, it was not required to do so unless the complainant company failed to take action. Furthermore, the Commission noted that the complainant company had been aware of the insurance policy details and had previously procured the insurance policy through its agent. The company's claim that it was unaware of the insurance arrangement was not supported by evidence. Moreover, there was no indication that the complainant company had taken any steps to renew the insurance after its expiration, despite knowing the expiration date. In terms of the alleged loss due to the fire, the Commission found that the complainant company failed to provide sufficient evidence, such as any formal loss assessment. Merely reporting the incident to the police and the bank was not enough to prove the extent of the loss or establish a claim. As a result, the Commission concluded that the complainant did not take adequate steps to insure the stock during the relevant period, and the bank was not at fault for failing to do so on its behalf. Citing case precedents such as Union Bank of India vs. Tirumala Enterprises and Oriental Bank of Commerce vs. HS Traders & Ors., the Commission determined that there was no deficiency in service by the bank under the Consumer Protection Act, 2019. Since the complainant company had primary responsibility to insure its goods, and failed to do so, the bank could not be held liable.

Consequently, the Commission set aside the State Commission's order, allowed the bank's appeal, and dismissed the complainant's claims for compensation and relief.

Case Title: Shree Shakti Foams Vs. Canara Bank

Case Number: F.A. No. 790/2023

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