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New India Assurance Company Limited v. Abhilash Jewellery .
Factual and Procedural Background
The respondent operated a business establishment at Vellappad in Trissur District, Kerala, and obtained a Jeweller's Block Policy for Rs 1,15,00,000. During the policy period, the respondent lodged a claim with the appellant for loss of gold ornaments weighing 587.870 grams. The appellant repudiated the claim on the ground that the loss occurred while the gold was in the custody of an apprentice, who was not an employee within the meaning of the policy.
The relevant policy clause stated: “11. (a) Property insured whilst in the custody of the insured, his partner or his employees.”
The National Consumer Disputes Redressal Commission (NCDRC), by order dated 15-3-2002, held that an apprentice is an employee, relying on Section 2(6) of the Kerala Shops and Commercial Establishments Act and definitions in the Employees State Insurance Act and other enactments. The present appeal challenges that order.
Legal Issues Presented
- Whether, under the terms of the insurance contract, an apprentice falls within the expression “employee” in the clause covering property “whilst in the custody of the insured, his partner or his employees.”
Arguments of the Parties
The opinion does not contain a detailed account of the parties' legal arguments.
Table of Precedents Cited
No precedents were cited in the provided opinion.
Court's Reasoning and Analysis
The court held that the dispute is governed solely by the insurance contract. Although the contract uses the term “employee,” it does not define it or incorporate definitions from any statute, including the Kerala Shops and Commercial Establishments Act or the Employees State Insurance Act. Therefore, statutory definitions cannot be automatically imported into the contract.
The court observed that various enactments define “employee” to include an apprentice by way of deeming provisions, which are legal fictions. Such legal fictions extend meanings for the purposes of those specific statutes but do not alter the ordinary meaning of words outside those statutory contexts. To illustrate the nature of legal fictions, the court referenced Section 43(3) of the Income Tax Act, which defines “plant” to include a book for depreciation purposes—an example demonstrating that statutory deeming clauses create artificial meanings confined to their legislative purpose.
Applying this approach, the court concluded that, since “employee” is not defined in the insurance policy, the term must be understood in common parlance. In common parlance, an apprentice is a trainee, not an employee, and the mere payment of a stipend does not establish a master–servant relationship between the firm and the apprentice.
On this basis, the court rejected the NCDRC’s reliance on statutory definitions to treat an apprentice as an employee under the insurance policy and held that the claim before the National Commission was not maintainable under the terms of the policy.
Holding and Implications
Holding: The order of the National Consumer Disputes Redressal Commission dated 15-3-2002 is set aside. The appeal is allowed. No order as to costs.
Implications: The immediate effect is that the NCDRC’s determination that an apprentice is an “employee” for purposes of this policy is reversed, and the respondent’s claim was held not maintainable under the policy clause covering property in the custody of “employees.” The court emphasized that, absent a contractual definition, terms in an insurance contract are to be given their common parlance meaning and that statutory deeming definitions are not automatically applicable to contract interpretation. No broader implications beyond the parties’ dispute are discussed.
Order
1. Heard learned counsel for the parties. This appeal has been filed against the order of the National Consumer Disputes Redressal Commission, New Delhi dated 15-3-2002.
2. The respondent had a business establishment at Vellappad in Trissur District in the State of Kerala. It took a Jeweller's Block Policy for Rs 1,15,00,000. During the currency of the policy, the respondent complainant lodged a claim with the appellant for the loss of gold ornaments weighing 587.870 grams. The claim was repudiated by the appellant on the ground that the loss of gold was occasioned as it was in the custody of an apprentice, who was not an employee.
3. The relevant clause in the insurance policy stated:
“11. (a) Property insured whilst in the custody of the insured, his partner or his employees.”
The question, therefore, is whether an apprentice is an employee.
4. The National Consumer Disputes Redressal Commission has held that an apprentice is an employee because Section 2(6) of the Kerala Shops and Commercial Establishments Act defines an employee to include an apprentice. The National Commission has also relied on the definition in the Employees State Insurance Act and some other enactments.
5. We are of the opinion that the view taken by the National Commission is not correct. The present case is covered solely by the contract of insurance. That contract of insurance no doubt uses the word “employee”, but it does not say that the word “employee” in the contract of insurance will have the same meaning as in the Kerala Shops and Commercial Establishments Act or the Employees State Insurance Act or any other enactment.
6. In various enactments, the word “employee”, has no doubt, been defined to include an apprentice, but that is only a deeming provision and a legal fiction by which the meaning of the word “employee” has been extended.
7. Legal fictions are well known in law. For example, Section 43(3) of the Income Tax Act defines “plant” to include a book. Ordinarily a plant means a factory, and by no stretch of imagination can we call a factory a book. However, the Income Tax Act deems a book to be a plant for the purpose of depreciation.
8. Many such illustrations of deeming clauses or legal fictions can be given. The definition of “employee” in various enactments which include an apprentice within the ambit of the definition is such a piece of legal fiction. That, however, does not mean that in common parlance an apprentice is an employee.
9. In the present case, since the word “employee” has not been defined in the contract of insurance, we have to give it the meaning which it has in common parlance. In common parlance, an apprentice is a trainee and not an employee. Even if he is given a stipend, that does not mean that there is a relationship of master and servant between the firm and the apprentice. Hence, we cannot agree with the view taken by the National Commission. In our view, the claim before the National Commission was not maintainable.
10. Hence we set aside the order of the National Commission.
11. The appeal is allowed. No orders as to costs.
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