LAFFANS (INDIA) PVT. LTD. vs CITI BANK

-COMPLAINT has been filed under Section 2(1)(c) and Section 17 of the Consumer Protection Act, 1986.

COMPLAINANT is an incorporated company under the Indian Companies Act purchased a Contessa Classic car from M/s. Classic Motor ,Pvt. Ltd for the use of its Chairman-Cum Managing Director''s personal cum family use by taking a loan of Rs. 1,49,205/- from opposite party No. 1 The said loan was to be repaid in 36 equal monthly instalments of Rs. 5,413/- only and for this the complainant excuted a loan cum hypothecation agreement dated 27th January, 1990. Thirty sever blank signed cheques were issued by the complainant towards the payment, of the above mentioned 36 instalments over a period of three years, instalments being payable monthly, COMPLAINANT insured the said vehicle with M/s. Oriental Insurance Company and paid the premium for the year 1990-91 by handing over a cheque for the premium amount to the Citi Bank (Opposite party No. 1) for being handed over to opposite party No. 2 in order to safeguard the interests of the Bank. The Insurance company issued Cover Note No. 870585 dated 1-2-90 for the said car for the year 1990-91 to the Bank who further handed it over to the complainant. Complainant gave two more blank cheques to Citi Bank for being given to the Insurance Company for the premia for the years 1991-92 and 1992-93 drawn on ANZ Grindlays Bank Connaught Place, New Delhi.

Complainant continued to use the vehicle under the bonafide belief that cheques issued by them had been given to the opposite party No. 2 and the vehicle has been insured in the normal course under the mandatory provisions. In 1991 complainant contacted the bank for collecting the insurance cover but were informed that the same had not yet been obtained from the opposite party No. 2. They assured that as soon as it was received it would be given to them.

THE vehicle met with an accident on 6th Feb., 1992, When a criminal case, as well as a claim for compensation was registered under the Motor Vehicles Act, 1988 against the complainant as well as the driver. Opposite Party No. 1 was informed of the Accident vide letters of 13th & 14th February, 1992. Complainant again requested for the insurance cover notes which again till then had not been handed over by the bank despite, repeated requests. In the meanwhile vide letter dated 10th February, 1992 opposite party No. 1 informed the complainant that the two cheques drawn on ANZ Grindlays Bank given for the payment of premia of insurance had been transmitted to the opposite party No. 2 on 3rd September, 1990 and asked the complainant to directly contact opposite party No. 2 for the insurance covers since it was the duty of opposite party No. 2 to encash the cheques and insure the said vehicle. THE complainant was surprised by the position taken by the bank since the first cover note had been received by the complainant from the bank. Complainant became suspicious and contacted ANZ Grindlays Bank regarding the encashment of the two cheques given as payment of premia. ANZ Bank informed them that the said cheques had not been presented for clearance vide leter dated 12-2-91. This meant that the car was not insured which is an offence under the law, Complainant requested the opposite party No. 1 vide his letter dated 27-2-92 to appoint a Surveyor and get the vehicle inspected for an estimate of the cost of repairs. Since due to the negligence on the part of opposite party No.l and opposite party No. 2, he was being put to great pecuniary loss on account of the vehicle not being insured by the two parties. There was no response from the Citi Bank so complainant informed them that he was constrained to appoint Shri B.K. Rahan of M/s. Rahan Brother as Surveryor to assess the damage caused to the car and the cost of repairs.

THE Surveryor Shri B.K Rahan submitted his Surveyor''s report dated 26-2-91 for the survey carried outs on 9-3-92 of the said car lying with M/s. Rajiv Motors in their workshop at Ram Nagar. A sum of Rs. 1318 was paid by complainant to the Surveyor for his services on 19th May, 1992. through cheque. Opposite party No.1 admitted vide their letter of 28-4-92 in respect to complainant''s letter of 27th Feb., 1992 that as per the hire purchase agreement complainant was to give the money to the opposite party No. 1. who would transmit the same to opposite party No. 2, for the insurance of the vehicle. On 20th April , 1992 also complainant had again asked for the particulars of the cover note with reference to their earlier letter of February 27th, 1992. The vehicle of the complainant was repaired by M/s. Rajiv Motors on 3-8-1992 who raised a bill for Rs. 1,22,729/-Complainant requested opposite party No.1 repeatedly to discharge their liability by paying the repair bill. This was not done by them and so the compllainant ultimately paid the amount on 3-8-92 as M/s. Rajiv Motors had threatened to sell the vehicle if the repair and garage charges were not paid. The delivery of the vehicle was taken on 3rd August, 1992, after making payment of Rs. 1,22,729/-

GROSS negligence on the part of opposite parties No. 1 & 2 caused grave and enormous pecuniary loss to the complainant by failing in their bounden duty of insuring the vehicle.

COMPLAINANT has sought the following four reliefs: - 1. To direct opposite party No. 1 & 2 to pay him the cost of repairs of the car Rs. 1,22,729/- paid on 3rd August, 1992, alongwith 12% interest thereon, 2. Direct the opposite parties to pay the fee paid to Surveyor of Rs 1318/- on 19-5-92 alongwith 12% interest. 3. Direct the opposite parties to pay Rs. 30,000/- being the expenses incurred by him on lawyer''s fees, cost of correspondence, conveyance charges for visits to opposite party No. l''s office for mental agony and the accompanying tension. 4. Award penal costs against the opposite parties for their negligent act amounting to deficiency in service.

The complaint has been contested by the respondents. Respondent No. 1 has admitted having handed over the insurance cover note No. 870585 dated 1-2-1990 for the year 1990-91 to the Complainant from opposite party No 2. They have however, pleaded that as per Clause 6(e) of the loan agreement signed by the complainant it was his responsibility for keeping the vehicle, insured. Clause 6(e) of the agreement reads; (e) The borrower (s) shall keep the vehicle (comprehensively insured against all eventualities as stipulated from time to time with any insurance approved by Bank. In case of failure of the borrower(s) to insure the vehicle(s), the Bank may get the insurance done on behalf of the borrower(s) by debiting his account. The first claim on any insurance proceeds shall be that of the Bank. The borrower(s) will comply with all directions of the Bank. The borrower(s) irrevocably authorities the Bank to act on it''s behalf and take all necessary steps, actions proceedings and to compromise any claim deemed fit in the opinion of the Bank. However, any non action on the part of the Bank will not affect the liability of the borrower(s) to pay the necessary amounts.

Respondents No. 1 (The bank) has however, admitted having received the two cheques dated 1-2-91 and 1-2-1992 drawn on ANZ Grindlays Bank in favour of the complainant''s car. These two cheques were alleged to have been handed over by the bank to the Oriental Insurance Company, Chaudhary Building, K-37, Connaught Circus, New Delhi, on 3rd September, 1990, as stated in thier letter dated 10th February, 1991 to the complainant.

THE Citi Bank respondent No. 1 has pleaded that it was the responsibility of the Insurance Company to insure the vehicle therefore there was no negligence on their part. It has been argued by the learned Counsel for the complainant that Clause 8(b) of the agreement stipulates as follows:- (b) Save and except the insurance premium for first year, in relation to the vehicle(s), which shall be paid by the borrower(s) at the time of purchase there of the premium for the subsequent, years, though to be borne by the borrower(s), will be paid over to the Insurance Company by the Bank. To enable the Bank to do so, the borrowers) shall either pay over the insurance amount relating to the subsequent years (viz. second and third year) to the Bank or this insurance amount will be added to and form part of the loan amount. In order to ensure repayment of the said insurance amount to the Bank, the same shall, at the discretion of the Bank, be repaid by the borrower in equal corres-ponding with the instalment for repayment of the loan and interest or there post-dated cheques to be issued by the Borrower(s). The Borrower(s) warrants that all such instalments will be promptly paid and that all such postdated cheques will be duly honoured when presented. The Bank confirms that it will duly make payment of such insurance premium.

CLAUSE 8(b) is very clear and stipulates that except for the first insurance premium which shall be paid by the borrower at the time of purchase of the vehicle, the premia for the subsequent years will be paid over to the Insurance Company by the bank though to be borne by the borrower i.e. the complainant in this case. It is in compliance with the terms of the Clause 8(b) that the two cheques for the insurance premia dated 1-2-1991 and 1-2-92 drawn on ANZ Grindlays Bank in favour of the Insurance Company were given to respondent No. 1 for onward transmission to the Insurance Company. Respondent No.l has alleged handing over the cheques to the Insurance Company. It is, therefore, an established fact that the bank had taken the insurance premia cheques from the complainant and had agreed to send the same to the Insurance Company. The allegation of the Citi Bank is that they sent the cheques to the Insurance Company, but the Insurance Company denies receipt of the cheques. It was the duty of the Citi Bank to establish that the cheques had been received by the Insurance Company. However, they failed to do so.

IN the aforesaid circumstances, it was on account of the negligence of Respondent No. 1 that the car was not insured for the period from March, 1991 till March, 1992 and, therefore, they are liable to reimburse the complainant to the extent of the loss suffered by them. The complainant has claimed an amount of Rs. 1,22,729/- on account of repairs of the car. They have produced the bill of Rajiv Motors who were entrusted with the job. The complainant has also produced the report, of the Surveyor in which he has assessed the loss. IN that report the price of the parts has been shown as Rs. 90,329.77. IN the report he has deducted depreciation on the rubber parts. After allowing depreciation of Rs. 9,021.15 on rubber parts he has worked out the price of the parts at Rs. 81,308.62 and adding the labour charges of Rs. 23,500/- to the said amount. He has stated that the total loss was of Rs. 1,04,808.62. He has also suggested depreciation on the metal parts which has not been done by him for the reason that the date of registration was not given to him. The metal parts are said to be of the value of Rs. 70,087.47. The car had been used by the complainant for a period of about 2 years,. Therefore we allow depreciation on metal parts at 20%. The amount of depreciation comes to Rs. 14,022/ - after deducting that amount from the total amount of Rs. 1,04,808.62 the balance comes to Rs. 89,786.62 Pay Rs. 89,800/-

RAJIV Motors has shown the price of parts replaced as Rs. 91,006.71 and labour charges as Rs. 31,722.05. In our view the estimate given by the Surveyor appears to be correct, consequently we liiold that the complainant is entitled to Rs. 89,800/- as repair charges. The negligence on the part of respondent No. 1. Citi Bank has caused much mental agony and hardship to the complainant for which we award Rs. 10,000/- as damages. In view of the above reasons, we accept the complaint and direct respondent No. 1-Citi Bank to pay Rs. 89,800/- as repair charges to the complainant and fee paid to the Surveyor. Taking into account the delay we award interest on the amount of the repair charges at the rate of Rs. 12% p.a. as claimed from the date of payment of the amount to RAJIV Motors i.e. 3-8-92 till the date of payment to the complainant. The respondent No.1 is directed to pay Rs. 89,800/ alongwith interest thereon and Rs. 10,000/- damages to the complainant within a period of three months failing which action shall be taken under Section 27 of the Consumer Protection Act, 1986. Costs Rs. 2,000/- Complaint allowed with costs.