Case Note & Summary
The Supreme Court allowed the appeal filed by the State Bank of India and another against the order of the National Consumer Disputes Redressal Commission (NCDRC) dated 6 February 2019. The dispute arose from a loan agreement entered into on 14 November 2005 between the Bank and the borrower, under which the borrower was required to insure assets charged to the Bank. The Bank obtained an insurance cover from New India Assurance Company Limited on behalf of the borrower. A fire occurred on the borrower's premises on 15 February 2007. The insurer did not accept the claim, leading the borrower to file a consumer complaint before the State Consumer Disputes Redressal Commission, Andhra Pradesh (SCDRC). On 17 November 2014, the SCDRC allowed the complaint, directing the Bank to forward the claim to the insurer and the insurer to process it in accordance with law, with compensation of Rs.50,000 and costs of Rs.7,000 payable by the insurer. No liability was fastened on the Bank. The borrower did not challenge this order. The insurer appealed to the NCDRC, which on 6 February 2019 allowed the appeal and made the Bank liable to pay the claim with 9% interest. The Bank appealed to the Supreme Court. The Supreme Court noted that the borrower had accepted the SCDRC order and had entered into a one-time settlement with the Bank, issuing a 'No Dues' Certificate on 12 June 2017. The borrower had filed an affidavit undertaking to withdraw all cases against the Bank. The Court held that the NCDRC, in an appeal by the insurer, could not impose liability on the Bank when the borrower had not challenged the SCDRC order and had settled with the Bank. The only issue was the insurer's liability, which the NCDRC found time-barred. The Supreme Court set aside the NCDRC order and allowed the Bank's appeal with no order as to costs, permitting the Bank to withdraw any amount deposited in Court.
Headnote
A) Consumer Law - Insurance Claim - Liability of Bank - The NCDRC, in an appeal by the insurer, could not impose liability on the bank to pay the insurance claim when the borrower had accepted the State Commission's order directing only forwarding of the claim and had entered into a one-time settlement with the bank, withdrawing all claims against the bank. (Paras 3-9) B) Consumer Law - One-Time Settlement - Effect on Pending Claims - A one-time settlement between the borrower and the bank, coupled with an affidavit by the borrower to withdraw all cases against the bank, extinguishes any liability of the bank towards the borrower in respect of the insurance claim. (Paras 5, 7-8) C) Consumer Law - Appeal - Scope - In an appeal by the insurer against the State Commission's order, the NCDRC could not foist liability on a party (the bank) that had not appealed and whose liability was not in issue before the State Commission. (Paras 4, 8)
Issue of Consideration
Whether the National Consumer Disputes Redressal Commission (NCDRC) could, in an appeal filed by the insurer, impose liability on the bank to pay the insurance claim when the borrower had accepted the State Commission's order and had entered into a one-time settlement with the bank.
Final Decision
Appeal allowed. Impugned NCDRC order dated 6 February 2019 set aside. No order as to costs. Appellants at liberty to withdraw amount deposited in Court.
Law Points
- Consumer law
- Insurance law
- Liability of bank
- One-time settlement
- Acceptance of order
- Appeal by insurer
