PEN CO-OPERATIVE URBAN BANK LTD. vs BRANCH MANAGER, THE ORIENTAL INSURANCE CO. LTD.

THE Complainant is a Co-operative Bank having its Head Office at Pen, District Raigad. It had taken a Bankers Indemnity Insurance Policy dated 30th June, 1989 valid from 1.7.1989 to 30.6.1990 from Oriental Insurance Co. Ltd. thereinafter referred to as Insurance Company. The Respondents are Branch Manager and Chairman of the said Insurance Company. The total sum insured under said policy was as follows; Items A to E Rs. 5,00,000/- Additional sum insured for item A Rs. 45,00,000/-Additional sum insured for item B Rs. 8,00,000/-

ON 4th June, 1990 the Complainant noticed that a sum of Rs. 13,55,996.36 had been stolen by Mr. Pote, Cashier of the Bank. The Bank lodged a complaint with the Police and also intimated the said incident to the Branch Manager of the Insurance Company who is Respondent No. 1. The Bank also submitted its claim under the policy for the said amount of Rs. 13,55,966.36 in the prescribed claim form on 12thJuly, 1990.Pending the settlement of the claim by the Insurance Company. In the meantime on 6th October, 1990 a sum of Rs. 8,07,500/- was recovered from Mr. Pote above referred cashier of the Bank by the Pen police. However pursuant to the directions given by the First Class Judicial Magistrate of Pen, the said amount of Rs. 8,07,500/- has been kept in a sealed envelope in the safe deposit locker of the Bank. The Bank is unable to use this recovered amount in view of the Court directions and till the criminal complaint against Mr. Pote is disposed of. On the basis of the above allegations the Complainant claimed Rs. 11,53,748/- ( i.e. Rs. 13,55,996.36 less Rs. 2,02,249/-). It may be mentioned here that according to the complainant the Insurance Company has paid the amount of Rs. 2,02,249/-underthe claim and repudiated it liability for the balance amount. The petitioner also claimed interest on the amount claimed from 4.2.1990 till the date of actual payment as according to the Complainant there has been unjustifiable delay on the part of the Insurance Company to settle the lawful claim of the Insured. The complaint was contested by the Opposite Parties and they averred that the true position as discovered is that so called theft did not take place on 4th June, 1990. In fact the cashier who is said to have stolen the money was working as a Paying Cashier as well as Chief Cashier and defalcation came to light to the Complainant-Bank on the above date when the Bank appointed a new Cashier. Therefore, it is not a case of theft but a clear case of dishonesty, breach pf trust, defalcation and misappropriation of money. Item D of the policy pertains to dishonesty and explains the loss under the said Act as "by reasons of dishonesty or criminal act of the employee(s) of the Insured with respect to the loss of money and/or securities whenever committed and whether committed singly or in connivance with others". In case no amount had been recovered by the Police the Insurance Company would have been liable to pay an amount of Rs. 5.00 lakhs only with respect to item (D). Since a sum of Rs. 8,07,500/- has been recovered, the loss was reduced to Rs. 5,48,466.36. Considering the apportionment of the recovered amount between the insurer and the insured in proportion to the loss borne by each party to the contract of insurance, the net loss to be made good by the Insurance Company comes to Rs. 2,02,249/- which amount has since been paid to the Complainant.

AFTER hearing the parties and on going through the record we find that it is not a case of theft as argued on behalf of the Complainant but it is a case falling under item D referred to above. It was not disputed on behalf of the Complainant that the money used to remain in the custody of the Cashier. Mr. Pote during the banking hours. There is no evidence on record to show that the amount said to have been stolen was taken over by the cashier on 4th June, 1990 by committing a theft. There is also no evidence to show as to under what circumstances the theft was committed. It appears to us that the Cashier was misappropriating some of the amount which came into his custody and the misappropriation of the above amount must have been committed by him over a period of months or years and not on a single day. On an inquiry by this Commission, the Complainant''s Counsel had to admit that a case of misappropriation had been registered against the Cashier. Therefore, in the present circumstances by no stretch of imagination Mr. Pote can be said, to have committed theft of Rs. 13,55,996.36.

THE Insurance Company has paid to the Bank only a sum of Rs. 2,02,249/- by applying the principle of apportionment of loss after taking into consideration amount of Rs. 8,07,500/- said to have been recovered from Mr. Pote by the Pen Police and kept in safe locker of the Bank. We are of the opinion that at this stage the said recovered amount cannot be taken into consideration. It is, in fact in the custody of the Court and for safety''s sake it has been kept in the safe deposit locker of the Bank. The order about the disposal of the amount will be made by the Trial Court at the conclusion of the trial against Mr. Pote. Till the order is passed by the Court the Bank has no right to claim any right over the recovered amount. It was also explained by the Complainant''s Counsel that an application was made to the Trial Court for permission to use that amount but it was rejected. Therefore, at this stage the Insurance Company cannot apply the principle of apportionment, in case it is applicable to the facts of the present case. For the time being the Insurance Company will have to indemnify the Bank in respect of the loss and as the limit of loss under item No. D is limited to Rs. 5.00 lakhs the Insurance Company will have to pay the balance amount i.e. Rs. 5.00 lakhs minus the amount of Rs. 2,02,249/-already paid. This amount comes to Rs. 2,97,751/-. In the light of the above discussion, it is ordered that the Insurance Company will pay a sum of Rs. 2,97,751/- to the Bank within six weeks from the date of receipt of this order with interest at the rate of 16% from 12.9.1990 till the payment. (The above date has been taken after taking into consideration the fact that the claim was lodged by the Bank on 12th July, 1990and we consider two months time as sufficient for the settlement of the claim.) The Bank will also be entitled to the cost of the present petition which we assess at Rs. 2,000/-.