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TMI Blog2010 (4) TMI 1179X X X X Extracts X X X X X X X X Extracts X X X X ..... contained herein or endorsed or otherwise expressed herein that if the Insured shall discover any direct LOSS of Money and/or Securities sustained by the Insured by CONTIGENCIES as provided hereinafter at any time during the period of insurance stated herein or any subsequent period in respect of which the Insured shall have paid or agreed to pay and the company shall have accepted or agreed to accept the premium required for the renewal thereof, the company will indemnify the Insured in respect of all such direct losses but not exceeding, (a) the total sum insured hereby in respect of any loss or losses caused by acts or omissions of any one person whether Officer, Clerk or Employee of the Insured or acts or omissions in which such person is concerned or implicated or in respect of any one casualty or event irrespective of the total amount of such loss. (b) in any one period of insurance twice the total sum insured hereby in respect of all such losses. In lieu of Cover Note No: RENEWAL Policy No:264/52/1/00402 Schedule INSURED NAME: THE AMRAVATI DISTT. CENTRL COOP. BANK LTD., OFFICE, ADDRESS: AMRAVATI Date of Proposal H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ements or the establishment of any credit to any customer on the faith of such documents. 4. By reason of the dishonest or criminal act of any Officer, Clerk or Employee of the Insured with respect to the loss of Money and/or Securities wherever committed and whether committed directly or in connivance with others. 5. [Deleted] xxxxxx PROVISOS 1. EXCESS The Insured shall bear the amount of excess stipulated in the Schedule in respect of each and every loss if the loss is under Contingencies 1, 2 or 3 insured by the Policy. In respect of losses under contingencies 4 or 5, the Insured shall bear 25% of the amount of the loss or the amount of excess stipulated in the Schedule whichever is the higher. xxxxxx (emphasis supplied) 3. An employee of the Bank by name Lodaya working in its Dhamangaon Branch committed a series of embezzlements. On receiving a report dated 28.2.1977 from its Special Auditor about the same, the Bank reported the matter to the police and also to the Insurer. The employee concerned was suspended on 16.3.1977 and eventually dismissed from service on 19.3.1978. 4. The Bank claimed indemnity from the Insurer in terms of the policy i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r contingencies 1, 2 or 3 but did not use the said words when referring to losses under contingency (4). Therefore, the Arbitrator held that the insurer could not apply the Excess clause to each and every loss separately; that having regard to the terms of the policy, the amounts embezzled had to be aggregated; and that out of the total loss, the Bank had to bear 25% and the insurer was liable to pay the balance. The Arbitrator therefore deducted 25% from ₹ 3,44,449/86 and made an award directing the insurer to pay ₹ 2,58,337/40 to the Bank. 6. The Bank made an application under Sections 14 and 17 of the Arbitration Act, 1940 (`Act' for short) in January, 1984. The Insurer filed a petition under Section 30 of the said Act for setting aside the ex parte award. Both petitions were heard together and the Civil Court by Judgement dated 27.6.1990 upheld the award and dismissed the petition under Section 30 of the Act for setting aside the award and directed that the award be made a rule of the court. 7. Feeling aggrieved, the Insurer filed an appeal in the High Court of Bombay. By Judgment dated 18.2.2008 the appeal was allowed, the judgment of the Civil Court and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roviso (1) of the Insurance Policy, the Bank contended that 25% thereof will have to be deducted therefrom and the Insurer should be made liable to pay the balance of ₹ 2,58,337/40. It was therefore submitted that the High Court ought not to have set aside the well-reasoned award of the Arbitrator nor remitted the matter for fresh consideration, after nearly a quarter century. 9. What therefore falls for consideration is the interpretation of Proviso (1) of the Insurance Policy. In General Assurance Society Ltd. v. Chandumull Jain (AIR 1966 SC 1644) a Constitution Bench of this Court laid down the principle relating to interpretation of Insurance Contracts. This Court held: In interpreting documents relating to a contract of Insurance, the duty of the court is to interpret the words in which the contact is expressed by the parties, because it is not for the court to make a new contract, however reasonable, if the parties have not made it themselves. In Oriental Insurance Co. Ltd vs. Sony Cheriyan - 1999 (6) SCC 451, this Court held : The insurance policy between the insurer and the insured represents a contract between the parties. Since the insurer undertakes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bay 397) interpreted the word `claim' in the Excess clause therein, which provided that the Bank shall be considered co-insurer to the extent of 25% subject to the minimum excess of ₹ 25000/- for each and every claim. Negating the contention of the Bank that in view of the said clause, its liability as co-insurer was not in respect of each and every loss, but in regard to each claim (that is, the aggregate of several losses which constituted a `claim'), the learned Judge held : The word is of common occurrence in the field of insurance and may mean either the right to make a claim or an assertion of a right. The plain object of the clause, as stated earlier, is to exempt the insurance company from the liability to pay small claims which the Bank has to bear itself. The word, claim in this clause means the occurrence of a state of facts which justifies a claim on insurer and does not mean the assertion of a claim on company. In other words, in my judgment, the operation of the Excess Clause is determined by the facts which give rise to the claim and not by the form in which the claim is asserted. The employer committed several acts of fraud and defalcation and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence to Contingencies 1,2 and 3, and the second part in regard to Contingencies 4 (and 5 where it was applicable), only to differentiate between the quantum that had to be borne by the Insured in respect of each and every claim which was a fixed ₹ 11,500/- for each and every loss under Contingencies 1, 2 and 3, whereas it was 25% of the amount of the loss or ₹ 11,500/- whichever was higher in regard to each and every claim under Contingency 4 (and 5). 14. Having regard to the wording of Proviso (1), in regard to losses referable to Contingencies 1, 2 and 3, the Insured had to bear a fixed amount i.e. ₹ 11,500/- in regard to each and every loss. Therefore the words 25% on each and every claim or ₹ 11,500/- whichever is higher on DAR were not applicable in regard to the claims under Contingencies 1,2 and 3 as what was to be borne in such cases was a fixed flat sum of ₹ 11,500/- per every loss. The said words 25% on each and every claim or ₹ 11,500/- whichever is higher on DAR applied only in regard to losses referable to Contingencies 4 and 5; and in regard to losses thereunder, what was to be borne by the Insured was 25% of the amount of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontingency No.4.] 15. It is therefore necessary to identify each act of embezzlement by Lodaya in regard to each account, as the loss on account of each embezzlement forms a separate claim. The Bank has to bear 25% of the amount embezzled (or 11500/- whichever is higher) in regard to each and every embezzlement, and not by aggregation of the embezzlements. The Arbitrator has stated the total of the amount of embezzlements in regard to each account. He has not given the details of every embezzlement. For example with reference to the account of Purohit, the amount embezzled is shown as ₹ 44,615/84. But this does not constitute a single embezzlement. The Arbitrator has stated thus in regard to this account : The account of Shri Purohit: On 22.6.76 ₹ 4700/- were debited to the above T.D. ledger and credited to an account opened in the name of Shri Purohit. The credit slip was prepared by Shri Lodaya, who himself, signed in place of the Agent. Then he withdraw and made away with same of this money. Similar misdeed was repeated on 3.6.76 (Rs.4000/-) and 7.8.76 (Rs.1110-30). It is thus clear that the amount of embezzlement shown as ₹ 44,615/84 with referen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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