The appellant, Canara Bank, had extended credit facility to the respondent and had banking relationship since 1980. There was a deed of hypothecation and the other an agreement of collateral security for machinery and vehicles. Under the respective deeds/agreements, it was borrower’s obligation to keep the hypothecated assets insured but the bank retained the liberty to obtain insurance coverage of such assets. The bank had exercised the option of affecting the policy, which was permissible under both the agreements and debited the premium from the respondents account but the entire set of hypothecated assets was not covered by the policy. The said policy covered Stocks-in-process and building for Rs. 50 Lacs, Rs 2 Lacs and Rs 28.88 Lacs. No coverage was taken for plant, machinery and accessories. There was fire in the premises of the respondents on 27th August 2001, which caused damage to their stocks and machineries. The respondents lodged claim with the Insurance Company from where they got to know that the policy did not cover plant, machinery and accessories etc. The respondents had valued those uncovered assets for Rs 1.50 Crore where as appellant valued then for RS 31.76 lacs and the claim was received for Rs. 34, 92, 970/-. The respondent then became liable for the debt repayment for the price of such uncovered hypothecated assets. The respondent then approached National Consumer Disputes Redressal Commission, New Delhi for compensation of Rupees 2 crores from the bank alleging deficiency in service in not obtaining insurance for machineries,accessories etc. the commission accepted the plea and on 6th February 2009 directed the appellant to pay the compensation for Rs 31.76 lacs along with the interest @ 9% per annum from the date of settlement of the insurance claim within a period of 8 weeks from the date of the order. The present appeal is against this decision and respondent have also filed a cross objection in which they seek raising of the compensation sum to Rs 2 Crore, as was originally claimed before the Commission.

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Whether there was any deficiency of service on the part of the bank in not covering the whole set of hypothecated assets under the insurance policy?

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The commission was right in holding that the complainant had suffered loss because of inaction and negligence on the part of the bank. As regards the cross objection of the respondent, it is observed that the decision of the commission is supported by adequate reasoning. Hence, the appeal stands to be dismissed.

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