IMPORTANT POINT
Wherever an exclusionary clause is contained in an insurance policy, it would be for the insurer to show that the case falls within the purview thereof. In a case of ambiguity, it is trite, the contract of insurance shall be construed in favour of the insured.

Headnote:(i) Consumer Protection Act (J&K), 1987—Insurance claim—Exclusion clause—Extent of its cover—Insurance claim under ‘Jeweller Block Policy’—Theft of 140 gms. of jewellery worth Rs. 63,000/- occurred in business premises—Insurance Policy covered risk of theft also—Case of insurer that claim is covered by an exclusion clause contained in the policy—Loss or damage occasioned by a customer in respect of property entrusted to him covered by exclusion clause—Consumer Commission held that the loss was not covered by the said policy—However, High Court held that there was no entrustment on the part of owner to the customer and that the act of removal of jewellery by the customer is a plain theft which is covered by the policy—Whether impugned judgment of High Court allowing claim of respondent is sustainable—(Yes)—Word ‘entrustment’—Meaning—Indian Penal Code, 1860—Sections 378 and 405.
       Held : It is not in dispute that an insurance cover against theft was granted by the appellant. The insurance policy, thus, covered the risk of theft also. An insurer determines the extent of its risk. It floats the policy knowing fully well the risk it seeks to cover. Having regard to the determination of the risk only he fixes the quantum of premium. The insured while entering into a contract of insurance must precisely know the extent of his cover so that he may take out additional insurance if it is so required.(Para 7)
       However, there may be an express clause excluding the applicability of insurance cover. Wherever such exclusionary clause is contained in a policy, it would be for the insurer to show that the case falls within the purview thereof. In a case of ambiguity, it is trite, the contract of insurance shall be construed in favour of the insured.(Para 8)
       Clause 8 of the contract of insurance would be attracted only where the offences specified therein are committed by any of the persons mentioned therein. For defeating the claim of the respondent, it was, thus, obligatory on the part of the appellant to establish that the conditions prescribed therein were satisfied.(Para 9)
       The word ‘entrust’ would imply giving responsibility to a person upon whom the owner has confidence. It envisages establishment of a relationship. When a customer enters into a jewellery shop, as of necessity, the owner or his agent must allow him to inspect the merchandise, the customer intends to purchase. For the said purpose possession in the legal sense is not handed over. The owner or his agent does not loose complete control thereover.(Para 12)
       For the purpose of arriving at a conclusion as to whether the exclusion clause is attracted or not, loss or damage must be occasioned, inter alia, by a customer in respect of the property entrusted to him. The word ‘customer’ contained in clause 8(c) of the Insurance Policy must be read ejusdem generis. A customer contemplated thereunder must have to be one who would be a man of trust. If a customer is not a man of trust or the property had not been entrusted to him, the exclusion clause would not apply. The customer who committed theft of jewellery was an unknown person. It was so categorically stated in the First Information Report. There was, thus, no occasion for the respondent to entrust the jewellery to him.(Para 13)
       Transfer of possession of goods, therefore, is a sine qua non for entrustment. The person must be handed over the possession of the property. Illustration (d) appended to Section 378 IPC envisages a situation of this nature. It by no stretch of imagination would have contemplated a situation where an unknown customer would have committed theft.(Para 16)
       We, therefore, are clearly of the opinion that the view taken by the High Court was correct. The High Court’s judgment is upheld. The appeal is dismissed.(Para 22)
       (ii) WORDS AND PHRASES—Word ‘entrustment’—Meaning—Word ‘entrust’ would imply giving responsibility to a person upon whom the owner has confidence—Indian Penal Code, 1860—Sections 378 and 405.
       Held : Its ordinary meaning, would mean “to charge or invest with a trust; to commit to another with a certain confidence regarding his care”.(Para 10)
       in Black’s Law Dictionary the word ‘entrusting’ in commercial law has been described as “The transfer of possession of goods to a merchant who deals in goods of that type and who may in turn transfer the goods and all rights to them to a purchaser in the ordinary course of business.” Transfer of possession of goods, therefore, is a sine qua non for entrustment.(Para 16)

JUDGMENT

S.B. Sinha, J.—Appellant insurer is before us questioning the correctness or otherwise of a judgment and order dated 10.09.1999 passed by a Division Bench of the High Court of Jammu & Kashmir in CIMA 21 of 1998 allowing the appeal preferred by the respondent herein from a judgment and order dated 16.12.1997 passed by the Jammu & Kashmir Consumers Protection Commission.

2. Respondent herein carries on business in jewellery. It obtained a policy known as ‘Jeweller Block Policy’. A theft of 140 gms of jewellery worth of Rs.63,000/- occurred in his business premises. A First Information Report was lodged therefor. Respondent also lodged a claim with the appellant herein. The same having not been settled for a long time, an application was filed before the State Consumers Protection Commission constituted under the J & K Consumers Protection Act, 1987.

3. The question raised before the Commission was as to whether the loss in question was covered by the insurance policy. Appellant contended that the claim of the respondent is covered by an exclusion clause contained in the policy, which reads as under :

“8. Loss or damage occasioned by theft or dishonesty or any attempt there at committed by or where such loss or damage has been expedited or in any way sustained or brought about by :

(a)any of the insured’s family members;

(b)any servant or traveler or messenger in the exclusive employment of the insured;

(c)any customer or broker or their customer or angadias or cutters or goldsmiths in respect of the property hereby insured entrusted to them by the insured his or their servants or agents.”

4. The Commission by reason of its order dated 16.12.1997, inter alia, found the said claim to be not sustainable on the ground that the loss was not covered by the said policy, stating :

“....It appears to us that while preparing the insurance agreement the insurer was aware of the fact that this could be the easiest way for any Jeweller to raise claims against the insurance companies and that is why this clause has been deliberately introduced and theft by customer if any has been put in exclusive clause of the policy....”

5. The High Court, as indicated hereinbefore, by reason of its judgment and order dated 10.09.1999, did not agree therewith. It was held :

“What is meant by the term ‘entrustment’ does handing over of jewellery to a customer amounts to entrustment. The dictionary meaning of the word ‘entrust’ would be to give to another for care, protection or to commit something trustfully or plays trust upon a person’. If a customer enters the premises of a shopkeeper and examines some movable property and takes away the same, then there hardly arises any occasion for entrustment to such a customer. In the present case a customer entered the business premises and removed 140 gms. of Jewellery. There was no entrustment on the part of the owner to the customer. The act of removal of the goods by the customer is nothing but a plain theft. This is a dishonest taking and removing the property by the customer with the intent of permanently depriving the owner.”

6. A short question which, thus, arises for our consideration is as to whether clause 8 of the policy is applicable to the facts and circumstances of the present case.

7. It is not in dispute that an insurance cover against theft was granted by the appellant. The insurance policy, thus, covered the risk of theft also. An insurer determines the extent of its risk. It floats the policy knowing fully well the risk it seeks to cover. Having regard to the determination of the risk only he fixes the quantum of premium. The insured while entering into a contract of insurance must precisely know the extent of his cover so that he may take out additional insurance if it is so required.

8. However, there may be an express clause excluding the applicability of insurance cover. Wherever such exclusionary clause is contained in a policy, it would be for the insurer to show that the case

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2007 Supreme(SC) 216

IMPORTANT POINTWherever an exclusionary clause is contained in an insurance policy, it would be for the insurer to show that the case falls within the purview thereof. In a case of ambiguity, it is trite, the contract of insurance shall be construed in favour of the insured.

Cases Referred (6)

IMPORTANT POINT
Wherever an exclusionary clause is contained in an insurance policy, it would be for the insurer to show that the case falls within the purview thereof. In a case of ambiguity, it is trite, the contract of insurance shall be construed in favour of the insured.