Two appeals were submitted under Section 19 of the Consumer Protection Act, 1986 by ICICI Bank Limited and ICICI Lombard General Insurance Co. Ltd. against the order dated 12 January 2017 issued by the Rajasthan State Consumer Disputes Redressal Commission. The State Commission had previously granted a complaint made by timber traders from Banswara who had lost money due to a fire.
Background of the Case:
The complainants, engaged in manufacturing and selling timber furniture, had taken a business loan of Rs. 34 lakhs from ICICI Bank in 2007. Along with this, Rs. 85,632 was sanctioned as insurance premium under the Home Safe Plus – Merchant Insurance Policy, meant to cover risks like fire and burglary on goods and stock.
On 4 August 2009, a fire engulfed their premises and gutted the stock. Upon the complainants making an insurance claim, ICICI Lombard rejected the claim on the premise that there was no effective Merchant Policy in operation at the time of the fire. Rather, the premium had purportedly been utilized to procure a Home Safe Plus – Secure Mind Policy, a scheme never agreed to by the complainants and with no connection to their business perils.
Complaint Before Consumer Forum:
Aggrieved, the aggrieved complainants approached the State Commission asking for Rs. 85 lakhs as damages for loss of furniture, building, stock, mental suffering, and cost of litigation. The State Commission partially concurred with them, holding both the insurance company and the bank liable, and ordered them to pay compensation jointly along with interest, costs, and compensation.
Grounds of Appeal:
ICICI Bank contended that the complainants were not "consumers" as per the Act because the services utilized were commercial in nature. It further contended that it was not its responsibility to ensure policy renewal and referred to past judgments where non-renewal of policies was not considered deficiency in service.
The complainants retorted that the sanctioned insurance premium was precisely for a Merchant Policy on cover of risk to goods and stock. However, the bank illegitimately diverted funds to Secure Mind Policies without their knowledge, which is a case of unfair trade practice. They further contended that authority letters were fabricated after the dispute.
Last Observations of the Commission:
The higher forum considered the sanction letter, loan terms, and insurance policies. It discovered:
- The Merchant Policy effective from 10 July 2007 to 9 July 2008 was never renewed.
- The Secure Mind Policy was issued without the consent of the complainants and was neither communicated at inception nor subsequently.
- Authority letters presented by the bank to substantiate the Secure Mind Policy were suspicious, undated, and repudiated by the complainants.
- No original proposal forms were made available by the bank or the insurance company.
The Commission ruled that although the bank had no contractual obligation to renew the Merchant Policy, siphoning premium funds to make another policy without the consent of the complainants constituted deficiency in service. Such action was a breach of consumer rights.
Final Order:
The appeals were partially granted. The previous order of the State Commission was overruled, but the bank was ordered to pay lump sum compensation of Rs. 5 lakhs to the complainants within four weeks. In default, the same would bear 9% interest per annum from the date of the order until realization. No costs were granted.
Conclusion:
The decision explained that while banks are not always at fault for automatically renewing insurance policies, charging customer money into unrelated policies without permission is an evident lack of service. Consumers have a right to reasonable compensation when their trust is violated in such a transaction.
Section 19, CONSUMER PROTECTION ACT - 2019
Consumer Protection Act, 1986
