GOPALAKRISHNA TAMADA, J. ( 1 ) THE New India Assurance Company Limited, Vishakapatnam Branch, which insured the mechanized fishing Boat (by name publo-236 Sunitha ) belonged to the 1st respondent herein (1st defendant in the suit), is the appellant herein. The Bank of Baroda, Kakinada, which sanctioned loan to the 1st respondent for purchase of the said Boat, instituted the suit - O. S. No. 77 of 1984 against the 1st respondent, the guarantor and the insurance company in the Subordinate Judge s Court, Kakinada, (Defendants 1 to 3) for recovery of a sum of Rs. 1,26,409/- with future interest thereon. As the said suit was decreed, the insurance company (3rd defendant) filed this appeal. ( 2 ) THE brief case of the plaintiff-Bank according to the averments made in the plaint is as follows : On a request made by the 1st defendant for financial assistance for the purpose of purchasing the mechanized fishing boat, the Bank sanctioned a sum of Rs. 78,000/- as loan to the 1st defendant, which is repayable with interest @ 6% per annum with quarterly rests. In that connection, the 1st defendant executed a promissory note (Ex. A-1) for the said sum on 19-9-1978 in favour of the Bank. He also executed a letter of instalment (Ex. A-2) on the same day undertaking to repay the loan amount in 20 quarterly instalments @ Rs. 4,000/- each and interest thereon commencing from 19-12-1978. A Hypothecation Agreement for Agricultural Machinery (marked as Ex. A-3) was also executed by the 1st defendant on the same day in favour of the bank. The 2nd defendant in the suit stood as guarantor for the said loan and he also executed a Guarantee Bond (Ex. A-4) on the same day i. e. 19-9-1978 in favour of the Bank. The boat was insured with the appellant/3rd defendant-insurance company vide Marine Poilcy No. 8219125075 (Ex. A-15 and Ex. B-1) for a sum of Rs. 1,30,000/-, the assured being the plaintiff-Bank Account Lakka Vijaya Gopala Reddy (1st defendant ). While so, the 1st defendant did not pay the instalment amounts regularly in spite of repeated reminders from the Bank. On 4-3-1981, defendants 1 and 2 had acknowledged their liability stating that they confirm and acknowledge their indebtedness as Rs. 79,264. 39 ps. being the amount due to the plaintiff as on 30-12-1980. While matters stood thus, the 1st defendant issued a telegram (Ex. On 4-3-1981, defendants 1 and 2 had acknowledged their liability stating that they confirm and acknowledge their indebtedness as Rs. 79,264. 39 ps. being the amount due to the plaintiff as on 30-12-1980. While matters stood thus, the 1st defendant issued a telegram (Ex. A-6) on 16-2-1982 informing the Bank that in the early hours of that day due to fire accident the boat was sunk in sea near Isukapalli (Krishnapatnam port) and that the said factum was also informed to the insurance company. Later on, the plaintiff-bank requested the appellant-insurance company to settle the claim but, however, the claim was not settled by the appellant in spite of the lapse of substantial period. While so on 11-2-1984, the bank addressed a letter (Ex. A-11) to the 1st defendant stating that as on 30-12-1983, a sum of Rs. 1,23,037. 44 ps. was outstanding and that the said sum should be repaid by him immediately. A notice of demand (Ex. A-13) was also issued to the 2nd defendant on 27-2-1984. As both the defendants failed to repay the loan amount, the bank filed the suit as stated above. ( 3 ) THE borrower of the loan (1st defendant) and the guarantor (2nd defendant) remained ex parte. ( 4 ) THE 3rd defendant-insurance company contested the suit by filing a written statement. The insurance company contended that the suit is not maintainable. It further contended that the 1st defendant made a fraudulent claim for compensation as it was found during the course of the enquiries and investigations by their surveyors, assessors and investigators, that a deliberate and calculated fraud has been committed by the 1st defendant, aided and abetted by the Driver and the other four luskars of the vessel, by falsely alleging the occurrence of fire in the Engine room. It is, therefore, contended that the insurance company is not liable to pay the insurance claim to the 1st defendant and so the plaintiff is not entitled for the suit claim or any part of it from the insurance company. ( 5 ) ON the basis of the above pleadings, the following issues were framed by the Court below :1. Whether the defendants are agriculturists entitled to the benefits under Act IV of 1938?2. Whether the suit is not maintainable against the third defendant for want of privity of contract between the two?3. ( 5 ) ON the basis of the above pleadings, the following issues were framed by the Court below :1. Whether the defendants are agriculturists entitled to the benefits under Act IV of 1938?2. Whether the suit is not maintainable against the third defendant for want of privity of contract between the two?3. Whether the third defendant s liability has been absolved due to the fraud played by D1 against the former?4. To what relief?additional Issue :1. Whether the suit is bad for misjoinder of parties and cause of action? ( 6 ) DURING the course of trial of the suit, the Bank examined its officers as P. Ws. 1 and 2 and got marked Exs. A-1 to A-16. On behalf of the defendants, the 3rd defendant examined its Divisional Manager as D. W. 1 and the person who conducted investigation about the fire accident of the boat, was examined as D. W. 2, Exs. B-1 to B-14 were also got marked. On a consideration of the entire evidence, the learned Subordinate Judge held on issue No. 1 that the Bank is entitled to claim interest at contract rate. On issue No. 2, the Court below held that Ex. A-15-policy is a tripartite agreement between the insurance company, the bank and the 1st defendant and both the bank as well as the 1st defendant were assured in respect of the insurance of the boat and that, therefore, there is privity of contract between the bank and the insurance company. On issue No. 3, the Court held that the liability of D-3 is not absolved by any fraud played by D-1 on D-3 and that D-3 is liable to pay the amount to the plaintiff as covered by Ex. A-15-policy. On the Additional Issue No. 1, the Court below held that the suit is not bad either for the alleged misjoinder of parties or cause of action. Accordingly, the learned Subordinate Judge decreed the suit against D-1 to D-3 for a sum of Rs. 1,26,409/- with interest at 14. 5% per annum on Rs. 79,264. 39 ps. The Court below, however, restricted the liability of the insurance company to the extent of the liability covered by Ex. A-15 policy. Aggrieved by the said decree and judgment, the insurance company filed this appeal. 1,26,409/- with interest at 14. 5% per annum on Rs. 79,264. 39 ps. The Court below, however, restricted the liability of the insurance company to the extent of the liability covered by Ex. A-15 policy. Aggrieved by the said decree and judgment, the insurance company filed this appeal. ( 7 ) IT is mainly contended by Sri Kota Subba Rao, learned counsel for the appellant-insurance company that the plaintiff-bank is not a party to the insurance contract and, therefore, the suit by a person who is not a party to the insurance contract is not maintainable. Learned counsel further contended that under the terms of the insurance contract, the liability of the insurance company arises only if there is a liability to pay the amount to the policy holder (1st defendant) and that as the contract of insurance was repudiated by the insurance company on account of the fraud which was found to be played by the policy holder, question of payment of compensation to the 1st defendant or to the plaintiff-bank does not arise. It is further contended that as the 1st defendant did not question the action of the insurance company in repudiating the claim, the said repudiation becomes final and in the absence of any claim made by the 1st defendant against the said repudiation, the plaintiff-bank cannot be permitted to question the same on behalf of the 1st defendant. Learned counsel also brought to our notice the legal principles enunciated in Rhesa Shipping Co. , S. A. v. Edmunds, (1985) 2 All ER 712; judgments of the Apex Court in M/s. Bihar Supply Syndicate v. Asiatic Navigation, AIR 1993 SC 2054 ; Delhi Electric Supply v. Basanti Devi, 1999 (2) UJ 1536 (SC) the judgment of the Bihar State Consumer Disputes Redressal Commission, Patna, reported in M/s. Geetanjali Silk House v. The New India Assurance Co. Ltd. (1994) 3 CPJ 435 and another judgment of a Division Bench of this Court in M/s. Economic Roadways Corpn. , Hyd. v. National Insurance Co. , Hyd. , 2002 (1) LS 128 (DB ). ( 8 ) LEARNED counsel for the plaintiff-Bank (3rd respondent herein) strongly opposed the contentions made by the learned counsel for the appellant and stated that having regard to the language used in Ex. , Hyd. v. National Insurance Co. , Hyd. , 2002 (1) LS 128 (DB ). ( 8 ) LEARNED counsel for the plaintiff-Bank (3rd respondent herein) strongly opposed the contentions made by the learned counsel for the appellant and stated that having regard to the language used in Ex. A-15-policy, the Court below was perfectly justified in holding that there was privity of contract between the plaintiff-bank and the insurance company and so the insurance company cannot escape from its liability. ( 9 ) IN the light of the above contentions, the point that arises for consideration in this appeal is whether the plaintiff-bank being a creditor is entitled to sue the insurance company for compensation under Ex. A-15-Policy even after the claim for compensation is repudiated by the 3rd defendant-insurance company? ( 10 ) IT is rudimentary that in hypothecation, the property under hypothecation is pledged to the creditor as security for the debt taken by the debtor but without physical transfer of the pledged property. The property under hypothecation, therefore, remains in possession of the debtor during the period of repayment of the debt. However, the creditor is entitled to seize and dispose of the hypothecated property and adjust the sale proceeds towards the loan, in case the debt is not repaid by the debtor as per the terms of the agreement of hypothecation. The said right to seize and dispose of the property to realize the loan amount is exercised by the creditor being the first option available to him under the agreement of hypothecation as it would be the most effective and convenient option to realize the loan amount in the event of non-payment of loan. Such an option can be resorted to by the creditor, provided the property under hypothecation remained intact in the hands of the debtor without the same getting damaged or destroyed either accidentally or otherwise. But, if for any reason, the hypothecated property is destroyed or damaged partially or totally on account of any mishap or accident, the creditor s right to realize the loan amount by disposing of the property will get hampered and in which case he has to resort to the other remedy of suing the debtor and the guarantor in a Court of law for realization of the loan amount, which is a time-consuming process. Therefore, in case of non-payment, the creditor always favours to avail the remedy under the agreement and as such he will have a bona fide interest in the safety and security of the property until the entire loan is repaid by the debtor. In his anxiety to protect the said interest in the hypothecated property and especially its safety, the creditor, while sanctioning this type of loans, is naturally justified in imposing some reasonable condition or conditions upon the borrowers in regard to the safety or security of the hypothecated property. One such condition which is generally imposed by the creditors is insuring the hypothecated property against any possible risks or natural calamities, so that even in case of any damage to the property pending repayment of the loan, the creditor s interests are sufficiently safeguarded, as the compensation amount payable under the policy of insurance can be claimed from the debtor and adjusted towards the loan amount. Further, as desired by the creditors, the insurance policies are obtained in the name of the loan account of the borrower by way of abundant caution. Thus, of late, it has become an inevitable formality in each and every loan transaction of this type to insure the property that is pledged or hypothecated, pending repayment of the loan, as a measure of security to the said loan. ( 11 ) HAVING perused the entire record, especially the agreement of hypothecation and Ex. A-15-policy in the instant case, we are of the view that Ex. A-15-policy came to be obtained by the 1st defendant (debtor) in exactly similar circumstances and with similar purpose and object as aforestated. As seen from the column provided for the name of the policyholder in Ex. A-15, it is mentioned thus : "m/s. Bank of Baroda, Kakinada A/c Mr. L. V. Gopalareddy, Vishakhapatnam. " The plaintiff-bank tried to take advantage of the said mentioning of the bank s name in the said column and contended that the bank is the policyholder and thus entitled to claim compensation and sue the insurance company for the said compensation under the policy. L. V. Gopalareddy, Vishakhapatnam. " The plaintiff-bank tried to take advantage of the said mentioning of the bank s name in the said column and contended that the bank is the policyholder and thus entitled to claim compensation and sue the insurance company for the said compensation under the policy. As observed by us in the foregoing paragraph, the intention behind obtaining the policy in the name of the loan account of the borrower is only to see that the interests of the bank in the hypothecated property in case of occurrence of any mishap to the property are sufficiently safeguarded and by virtue of such reference of the loan account number in the policy, the compensation amount that might become payable under the policy to the debtor is credited to the said loan account of the borrower that is opened with the bank, which amount can be claimed by the bank without much difficulty and appropriated towards the loan amount. It is in those circumstances the loan account number is mentioned in the aforementioned column in Ex. A-15. But, it does not mean that the bank is a policyholder under Ex. A-15. As a matter of fact, for all practical purposes, the policyholder under Ex. A-15-policy is the 1st defendant as it is the 1st defendant on whose application the contract of insurance was entered into between the 3rd defendant-insurance company and himself (D-1) and, therefore, it is only the 1st defendant who is entitled under law to make any claim for compensation as per the terms of the policy in case of any loss or damage to the property. Therefore, in the circumstances of the case, by mere mention of the bank s name in the column provided for the name of the policyholder in Ex. A-15, the bank cannot become a policyholder. At the cost of repetition, it has to be stated that the name of the bank came to be incorporated in the policy only because of the interest which the bank was having over the hypothecated property and with a view to safeguard its interest, the loan account number of the borrower/policy holder was quoted in the policy and since mentioning of the mere loan account number without the name of the concerned bank wherein such loan account is opened does not give complete reference, the bank s name was incorporated. By such mention of the bank s name in the policy, the plaintiff-bank does not become a contracting party to Ex. A-15-policy of insurance and so there does not exist any privity of contract between the plaintiff-bank and the appellant-insurance company. As already stated, it is the 1st defendant being a policyholder who is alone entitled under the terms of the policy to raise any dispute or make any claim for compensation and the bank can never become a party to Ex. A-15-policy. As a matter of fact, even P. W. 1 who is the Branch Manager of the plaintiff-bank had categorically admitted the above factum in his evidence stating that "d-1 himself insured the suit boat with D-3". We are, therefore, of the opinion that the finding of the Court below to the effect that Ex. A-15-policy was a tripartite agreement between the bank, the borrower and the insurance company, is wholly erroneous and not based on sound reasoning. For the above reasons, we find force in the contention which is advanced by the learned counsel for the appellant that there is no privity of contract between the bank and insurance company and that the plaintiff-bank being not a party to Ex. A-15-insurance policy cannot sue the insurance company for compensation. ( 12 ) COMING to the point, as seen from the record, a claim was made by the 1st defendant to the appellant-insurance company for payment of compensation on the ground that the insured property had sunk into the sea due to fire accident to the insured property on 16-2-1982. Ex. A-10-letter addressed by the 1st defendant to the bank also reveals the said factum and the claim for compensation was accordingly submitted with all relevant documents to the insurance company. The record further reveals that before settling the claim, the insurance company had initiated its routine survey/investigation to know about the truth or otherwise of the said claim. But, the surveyor who was appointed by the insurance company, after thorough enquiries and investigations into the cause of the mishap, opined that "a deliberate and calculated fraud has been committed by the Driver of the said vessel and the 4 Lushkars by falsely alleging the occurrence of fire in the Engine room to support his false and fraudulent claim against the Insurance Company and, therefore, the claim merits repudiation by the insurance Company. " Pursuant to the said Opinion of the Surveyor (Ex. B-9), the insurance company had rejected the claim for compensation and repudiated the policy. In such an event, the only option that was available to the policyholder (D-1) would be to question the said order of repudiation in appeal within the prescribed time-limit. But, admittedly, no such appeal was preferred by the 1st defendant and the order of repudiation had thus become final and consequently, the statutory remedy of appeal which was available to the 1st defendant was wasted. The 1st defendant having failed to avail the statutory remedy of appeal by questioning the said order of repudiation, his right to claim compensation under the terms of Ex. A-15-policy became extinguished. Consequently, the Bank s first option of realizing the loan amount as per the terms of the hypothecation agreement (by making a claim through 1st defendant) and adjusting the compensation amount towards the said loan, became forfeited. In such circumstances, the plaintiff-bank had no other alternative remedy under law except to sue the borrower (1st defendant) and the guarantor (2nd defendant) by filing an appropriate civil suit for recovery of the loan amount in accordance with law. But curiously in this case, the bank had chosen to sue the insurance company also for realization of the loan amount, along with the borrower and the guarantor. As stated above, the suit is not maintainable against the insurance company as the plaintiff-bank can maintain the present suit only against the borrower and the guarantor (Defendants 1 and 2) as per the terms of the agreement of hypothecation and that the insurance company (3rd defendant) is no way concerned with the said agreement. For the foregoing reasons, we are of the view that the Court below is not justified in decreeing the suit against the appellant-insurance company. The decree of the Court below as against the 3rd defendant-insurance company is accordingly liable to be set aside. ( 13 ) IN the result, the appeal is allowed and the decree and judgment of the Court below as against the appellant-3rd defendant is hereby set aside. No costs. Appeal allowed.