Decided on January 28,2020

Ambica Medical Stores Appellant
The Surat Peoples Co-Operative Bank Limited Respondents


DHANANJAYA Y.CHANDRACHUD,J. - (1.)The National Consumer Disputes Redressal Commission "National Commission" allowed an appeal instituted by the first respondent and set aside the decision of the State Consumer Disputes Redressal Commission of Gujarat "State Commission". The State Commission found substance in the consumer complaint of the appellants and decreed their claim for compensation in the amount of Rs 53,66,877 with interest at 9 percent per annum. In addition, the State Commission awarded Rs 25,000 towards mental agony and Rs 5,000 towards litigation costs. The claim of the appellants arose under an insurance cover pertaining to goods hypothecated by the appellants with the first respondent under a cash credit facility. The insurer, New India Assurance Company Limited, repudiated the claim of the appellants. As a consequence of the order of the National Commission which is challenged in the present appeal, the claim of the appellants stands rejected.
(2.)On 31 May 1998, the appellants and the first respondent entered into an agreement for a cash credit facility. In terms of clause 15 of the agreement, the appellants were under an obligation to insure the goods which were hypothecated to the bank. Clause 15 also contained a stipulation that in the event that the appellants failed to insure the goods, it was open to the bank to secure a cover of insurance for the goods and to recover the expenses incurred along with the premium from the appellants. The clause is extracted below:
"(15) We have to insure the goods given in hypothecation to the Bank against fire etc. at our own costs in favour of the Bank and if we fail to take insurance then the Bank can take the insurance and can recover all the expenses incurred and also the premium amount borne by them from us as the Bank has Right as per this Document."

(3.)The first respondent bank has stated that it was acting as a corporate agent of the insurer and, as a matter of routine practice, obtained policies for all its borrowers. As a practice, the first respondent upon receipt of an intimation, would remit the premium payable on behalf of the borrowers. The same course of action was followed by the first respondent under the lending facility granted to the appellants. The first respondent obtained the first insurance policy for the period 1998-99 in the sum of Rs 60 lakhs from the insurer, who is the third respondent to the appeal. The insurance policy covered a specific location of the borrower where the goods were stored, namely:
"12/1123-1124, Basement, Meghdoot Apartment, Surat"


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