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Reportable

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

Civil Appeal No. 1234  of 2020   (Arising out of SLP(C) No 13380 of 2019)

State Bank of India and Anr      .... Appellant(s)

      Versus

New India Assurance Company Limited              ....Respondent(s)

J U D G M E N T

Dr Dhananjaya Y Chandrachud, J

1 Leave granted.

2 This  appeal  arises  from  a  judgment  and  order  of  the  National

Consumer  Disputes  Redressal  Commission1 in  a  first  appeal  from  a

judgment  and  order  of  the  State  Consumer  Disputes  Redressal

Commission, Andhra Pradesh2.

3 On 14 November 2005, a loan agreement was entered into between

the  first  appellant  -  State  Bank  of  India3 and  the  second  respondent4.

Under the terms of the agreement, all the assets which were charged to

the Bank were to be insured by the borrower.  In pursuance of the loan

agreement, an insurance cover was obtained by the Bank on behalf of the

1“NCDRC” 2“SCDRC” 3“Bank” 4 “Borrower"

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borrower in pursuance of an arrangement which it had with the insurer.   A

fire took place on the premises of the borrower on 15 February 2007.  The

insurer  not  having  accepted  the  claim,  the  second  respondent  filed  a

consumer complaint before the SCDRC.  By an order dated 17 November

2014, the SCDRC allowed the complaint in the following terms:

“In the result, the complaint is allowed.  The opposite party no.1  and  2  are  directed  to  forward  the  claim  of  the complainant to the opposite party no.3 and the opposite party no.3  to  process  the  claim  in  accordance  with  law.   The opposite party no.3 shall pay a sum of Rs.50,000/- towards compensation  together  with  costs  of  Rs.7,000/-.   Time  for compliance four weeks.”

Thus, by the above order of the SCDRC, the Bank was directed to forward

the claim of the insured to the insurer. The insurer was, in turn, directed to

process the claim in accordance with law.  No liability to pay compensation

was fastened on the Bank.

4 This order of the SCDRC was not challenged either by the borrower

or  by the Bank.   The first  appeal  before  the NCDRC was filed  by the

insurer who is the first respondent to the present proceedings.  By an order

dated 6 February 2019, the NCDRC allowed the appeal by making the

Bank liable to pay the claim of the borrower, together with interest at the

rate of 9% per annum.  That has given rise to the present appeal.

5 Mr Ramesh P Bhatt, learned senior counsel appearing on behalf of

the appellants, submits that against the order passed by the SCDRC, no

appeal was filed by the borrower.  The only direction of the SCDRC was for

the  Bank  to  forward  the  claim  to  the  insurer  so  that  it  could  be  in

accordance with law. Yet, it has been submitted, that in the appeal which

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was filed by the insurer against the above direction of the SCDRC, the

NCDRC has held the Bank liable.  Mr Bhatt submitted that this is contrary

to  law  since  the  borrower  had  accepted  the  order  of  the  SCDRC.

Moreover,  it  has been submitted that  in  the course of  the proceedings

which arose from the Securitisation and Reconstruction of Financial Assets

and Enforcement of Security Interest Act 2002, a  settlement was arrived at

between  the  Bank  and  the  borrower  in  terms  of  which  a  ‘No  Dues’

Certificate was issued by the Bank on 12 June 2017.  The borrower, it has

been submitted, had, on affidavit, agreed to withdraw all claims as against

the Bank.  Hence, it has been submitted that as between the borrower and

the Bank, there could be no valid basis in law to direct the Bank to pay the

amount of the claim to the borrower.  

6 On the other hand, it has been urged on behalf of the insurer by Mr

Varinder  Kumar  Sharma,  learned  counsel  that  the  claim  which  was

submitted by the borrower was belated.  The NCDRC has found that the

claim was submitted nearly six and a half years after the incident of the fire

which took place on 15 February 2007.  Hence, it has been submitted that

the NCDRC was justified in coming to the conclusion that the claim was

time barred.  Insofar as the borrower is concerned, the fact that there has

been a one time settlement with the Bank is not in dispute. However, Mr

Seshatalpa Sai Bandaru, learned counsel for the borrower disputed that

the borrower had filed an affidavit withdrawing all claims.  

7 Having  heard  the  learned  counsel  appearing  on  behalf  of  the

contesting parties, it  has emerged from the record that the order of the

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SCDRC was accepted by the borrower.  The only direction of the SCDRC

was  for  the  Bank  to  forward  the  insurance  claim  to  the  insurer.    As

between the Bank and the borrower, there has been a one time settlement.

The  Bank  had  issued  a  communication  on  10  February  2017  to  the

borrower in pursuance of which an affidavit was filed by the borrower on 31

May 2017 in the following terms:

“...I  am accepting  OTS Terms &  Conditions  and  oblige  the same.  I further undertake to agree for consent order to be passed in the Tribunal/Court for which I /We will co-operate to pass the consent  order  and in  case of  failure to attend for passing the consent order your bank is at liberty to present the said affidavit in the concerned Tribunal/Court for passing the consent  order.   I/Co-borrowers/Directors/Partners/Guarantors will  withdraw  all  the  cases  filed  by  me/us  in  DRT/High Court/Any other  courts  against  your  bank.   If  I/we failed to withdraw the same your bank is at liberty to file the present affidavit for dismissal/withdrawal of the pending cases.  If I/we failed to comply with any Terms & Conditions of the OTS, your bank can continue the SARFAESI Proceedings.”

Pursuant thereto, on 12 June 2017, the Bank recorded that it had closed

the loan account  on receipt  of  the amount  in terms of  the compromise

settlement.

8 In this background, we see no reason or justification for the NCDRC,

in  an  appeal  by  the  insurer,  to  foist  the  liability  on  the  Bank.   The

fundamental point is that the borrower not having challenged the order of

the SCDRC, such a liability could not have been foisted on the Bank by the

NCDRC.  The only issue in controversy was the liability of the insurer. The

NCDRC held that the insurer was not liable since the claim was submitted

nearly six and a half years after the incident of fire.  

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9 For  the  above  reasons,  we  allow  the  appeal  and  set  aside  the

impugned judgment  and  order  of  the  NCDRC dated  6  February  2019,

which  held  the  Bank  liable  to  compensate  the  second  respondent  in

respect of the insurance claim. There shall be no order as to costs.

10 The appellants shall,  in  pursuance of  the present  judgment,  be at

liberty to withdraw the amount which has been deposited before this Court

in  pursuance  of  the  interim  order  passed  pending  the  disposal  of  the

present proceedings, together with the interest accrued, if any.

…………...…...….......………………........J.                                                                     [Dr Dhananjaya Y Chandrachud]

…..…..…....…........……………….…........J.                              [Indu Malhotra]

New Delhi;  February 07, 2020