Manager, State Bank of Travancore vs VINCENT

THIS appeal is directed against the order passed by the District Forum, Kerala in opposite party No. 645/95,1st opposite party is the appellant.

SHORTLY stated the allegations in the complaint are as follows. With the financial assistance of the 1st opposite party, the State Bank of Travancore, the complainant purchased a mechanised craft and engine. It was insured with the 2nd opposite party. It was involved in a riot and it was damaged and it was pushed into the sea and the complainant requested the 2nd opposite party for relief. But the claim of the complainant was repudiated on the ground that the risk was not covered by the policy. Attributing deficiency in service the above complaint is filed. The first opposite party filed a version stating that the complainant is not maintainable. It was however admitted that the complainant had availed of a loan for purchasing a fibre boat and the same was insured with the second opposite party. The first opposite party informed the second opposite party regarding the missing of the fibre boat in rioting. The 2nd opposite party had declined to settle the claim as the cause of loss is riot and civil commotion which is excluded from the policy. The first opposite party has never given any offer or undertaking that the claim would be settled favourably to the complainant by the 2nd opposite party and infact the first opposite party was acting only as an intermediary between the complainant and the second opposite party, the insurance company. The policy was obtained in the name of the complainant. The first opposite party cannot arbitrarily obtain any policy for the complainant''s boat without knowledge and consent of the complainant. Therefore the complainant is liable to be dismissed.

The second opposite party filed a version stating that the risk was not covered by the policy and therefore the repudiation of the claim is correct.

THE District Forum rightly found that the risk of riot has not been covered by the policy and therefore the second opposite party is not liable to indemnify the complainant. However it held that the second opposite party is liable to pay compensation. It was held that the 1st opposite party had obligation to cover all the risks and in that view passed an order directing the first opposite party to pay to the complainant a sum of Rs. 25,000/- together with interest at the rate of 18% from 18.7.1993 and another amount of Rs. 5,000/- was also awarded as compensation besides Rs. 250/- as cost. In this appeal filed by the 1st opposite party the order passed by the District Forum has been challenged. It is not disputed that the policy in question does not cover riot. Clause 9 of the Agreement for Hypothecation is the relevant provision relating to insurance coverage. It reads as follows: "That the Borrower(s) shall at all times keep such items of security as are of insurable nature, insured against loss or damage by fire and ether risks as may be required by the Bank and shall deliver to the Bank all such policies. It shall be also lawful for but not obligatory upon the Bank to insure and keep insured by debit to the Borrower (s) account (s) the security as are of insurable nature. The proceeds of such insurance shall at the option of the Bank either be applied towards replacement of the security or towards the satisfaction of the Bank''s dues hereunder."

FROM this it is clear that there is no obligation on the part of the bank to insure and really the borrower has an obligation to insure against the loss of damage by fire and other risk. The District Forum has observed that the complainant wanted the first opposite party to cover all risks while insuring the vessel. However we do not find any evidence to show that the complainant wanted to cover all risks including the risk of riots. We went through the deposition of the complainant but we were not able to see any statement in his evidence to the effect that the complainant requested the bank to cover all the risks including the riot. There is also no contention that premium was collected from the complainant to cover risk of riot also. R3 is the policy. Of course there is a vague statement of the complainant that the opposite parties gave assurance that all the risks including the risk of riot will be covered. However his statement is not at all supported by any evidence that at the time of taking policies that the opposite parties made such as assurance. Infact the District Forum observed that case of the Insurance Company is that at the relevant time they were not prepared to cover strike and civil commotion. If second opposite party has accepted premium for coverage of the risk of riot, there would have been deficiency on their part. In this context we may refer to the decision of the National Commission in United Insurance Company v. National Forum Consumer Education and Another, II (1995) CPJ 141 (NC)=1995 (2) CPR 1777. In that case there was a hypothecation arrangement for raising a cash credit facility. The bank took out policy against burglary but for the next year policy was taken only covering risks of fire. Later goods were stolen in burglary. The National Commission held that there is no agreement or material that the material goods will be insured against burglary and in the circumstances no deficiency in service can be attributed to the bank in not covering the risk of burglary. It is not disputed that the proposal does not contain strike, or civil commotion. The foregoing discussion would show that the order passed by the District Forum directing the Bank to indemnify the complainant cannot be sustained. We allow the appeal, set aside the order of the District Forum and dismiss the complaint. In the peculiar circumstances we direct that the parties will bear their respective costs. Appeal dismissed.