IN THE HIGH COURT OF JUDICATURE AT PATNA Letters Patent Appeal No.946 of 2011 In Civil Writ Jurisdiction Case No. 5394 of 2010 ====================================================== Branch Manager, Bank of India, Mohalla- Ramchandrapur, P.S.- Biharsharif, District-Nalanda. .... .... Appellant/Respondent Versus 1. Ram Lakhan Prasad (Proprietor: Maa Kali Jewellers), S/o Sri Kameshwar Mahto, R/o Mohalla-Jorowaopur, P.O.-Panchauri, P.S.- Deepnagar, District-Nalanda, Bihar. 2. Branch Manager, United India Insurance Company, Ranchi Road, P.S.- Biharsharif, District-Nalanda. .... .... Respondents ====================================================== Appearance: For the Appellant/s : Mr. Dr. Binay Kumar Singh Mr. R.S.Vidyarthi, Advocates. For the Respondent No. 1: Mr. Anil Kumar Sinha Mr. Hans Raj, Advocates. For the Insurance Company: Mr. Ashok Priyadarshi, Advocate. ====================================================== CORAM: HONOURABLE THE CHIEF JUSTICE and HONOURABLE MR. JUSTICE BIRENDRA PRASAD VERMA ORAL ORDER (Per: HONOURABLE THE CHIEF JUSTICE) 7 05-09-2011 Feeling aggrieved by the judgment and order dated 8th April 2011 passed by the learned single Judge in above CWJC No. 5394 of 2010, the respondent- Bank of India has preferred this Appeal under Clause 10 of the Letters Patent. The appellant, Bank of India (hereinafter referred to as „the Bank‟) has advanced certain financial assistance to the respondent no. 1, the writ petitioner (hereinafter referred to as “the borrower”), a trader in gold jewellery. The terms and conditions of the Hypothecation-cum-Loan Agreement stipulated that the borrower shall at all times keep the articles of insurable nature, insured against loss or damage and that the insurance shall be Patna High Court LPA No.946 of 2011 (7) dt.05-09-2011 2 / 4 2 assigned in favour of the Bank and shall deliver the policy to the Bank. Accordingly the borrower had insured such articles for Rs.17,46,000/=. The policy was drawn in the name of “Bank of India, A/c Maa Kali Jewellers”. As the providence would have it, the borrower ran into losses on account of theft. It is not in dispute that the borrower is indebted to the Bank and that the lost goods were insured by the respondent no. 2, the United India Insurance Company. The Bank with a view to recovering its dues resorted to Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as „SARFAESI Act‟). It was the said action of the Bank, which was under challenge before the learned single Judge in above CWJC No. 5394 of 2010. The dispute arose in respect of lodging of claim for insurance money. According to the borrower, insured was the Bank and it was the Bank which was required to lodge claim for insurance money under the policy. According to the Bank, the insured is the borrower who had to lodge the claim for insurance money. The learned single Judge has held that “the Bank was the custodian of the policy”. The learned single Judge further held that “the primary liability to comply the Insurance Policy lay with the Bank by asking the petitioner to furnish relevant information under the policy for raising a claim thereunder. If the Insurance Company does not honour the claim for reasons of any delay in procedures attributable to the Bank liability shall rest with the Bank alone to the extent of the insured amount in the SARFAESI proceedings. This shall be without prejudice to the rights of the Bank to pursue its remedy against the Insurance Company.” In view of the above observation, the learned single Patna High Court LPA No.946 of 2011 (7) dt.05-09-2011 3 / 4 3 Judge has restrained the Bank from proceeding under the SARFAESI Act till the exercise for recovery of the insurance money was not completed. Therefore, the present Appeal. Learned advocate Dr. Binay Kumar Singh has appeared for the Bank. He has strenuously urged that it is the borrower who is the insured. Under the Hypothecation –cum-Loan Agreement, the borrower was required to get its goods insured. It can never be the liability of the Bank to lodge claim for insurance. Dr. Singh has also raised doubt about the genuineness of the loss allegedly suffered by the borrower. Be that as it may, we are not supposed to investigate the genuineness of the loss claimed by the borrower. It will be the function of the police or the Insurance Company. The question before us is whether the Bank may be permitted to proceed under the SARFAESI Act until the insurance claim is lodged and satisfied. The prudence requires that the insurance money be recovered without delay and the remaining dues may be recovered by the Bank in accordance with law. The question is who will bell the cat. Neither the Bank is ready to approach the Insurance Company nor the borrower. The beneficiary is the Insurance Company. Dr. Binay Kumar Singh has vehemently submitted that on receipt of the information from the wife of the borrower, the Bank had immediately informed the Insurance Company about the incidence of theft, kidnapping, payment of ransom money and the loss suffered by the borrower. The Bank had thus discharged its liability. We do agree that the insured is the borrower and not the Bank as held by the learned single Judge. We are at pains to note that although under the loan agreement; the borrower was Patna High Court LPA No.946 of 2011 (7) dt.05-09-2011 4 / 4 4 required to deposit insurance policy with the Bank; the Bank had agreed to pay the insurance premia; the Bank has paid the premia regularly; the Bank does not disclose in specific terms whether the insurance policy is in possession of the Bank or not; whether at any time the policy had been handed over to the borrower or not. Though it is submitted that the policy was handed over to the borrower, no specific averment has been made nor the receipt for the same is produced. In view of the terms of the loan agreement and the conduct of the Bank in paying premia regularly, the necessary inference should be that the insurance policy was deposited with the Bank as agreed and that the Bank is in possession of the policy. If that be so, it is the duty of the Bank to hand over the policy to the borrower so that he can lodge the claim for insurance money or the Bank may lodge such claim as held by the learned single Judge. We are unable to comprehend the reluctance shown by the Bank. Though we do not agree with the observation that it is the primary liability of the Bank to lodge claim for insurance money, we do not interfere with the order as the Bank does not appear to have disclosed all its cards. For the aforesaid reasons, we dispose of this Appeal with modification in the impugned judgment passed by the learned single Judge that the borrower will not dispose of or deal with the secured assets in any manner till the Bank‟s dues are fully paid up. Sujit Kumar Sharma/- (R.M. Doshit, CJ) (Birendra Prasad Verma, J)