Fraudulent ATM transactions are excluded from Banker’s Indemnity Policy coverage by specific "use of ATM" exclusion clauses.

The plaintiff (Federal Bank) availed a Banker's Indemnity Policy (Ext.A2) from the defendant Insurance Company for the period 2012-2013.

Between April and May 2012, fraudsters utilized ATM cards of other banks at the plaintiff's ATMs to withdraw cash.

The fraudsters would intentionally leave a small amount in the presenter, triggering an automatic "capture" by the machine after 42 seconds; this caused the system to reverse the entire transaction in the customer's account despite the majority of the cash being taken.

The Bank claimed a loss of ₹83,34,600 and sought indemnification.

The Insurance Company repudiated the claim, citing exclusion clauses related to the use of ATMs and Electronic Data Processing (EDP) systems.

The trial court decreed the suit in favor of the Bank; the Insurance Company appealed.

1. Whether the fraudulent ATM transactions are excluded from coverage under the terms of the Ext.A2 policy.

2. Whether the Insurance Company is entitled to rely on the "excess" clause to limit or negate its liability.

3. Whether the "unities doctrine" applies to treat multiple fraudulent transactions across the country as a single "occurrence."

The court applied the rule of contra proferentem, which dictates that ambiguous terms in a standard-form insurance contract must be interpreted in favor of the insured.

However, it clarified that this rule only applies where real ambiguity exists and cannot be used to create doubt where words are clear.

The court relied on Amravati District Central Cooperative Bank Ltd. v. United India Fire and General Insurance Co. Ltd. regarding the application of "excess" clauses to separate criminal acts.

It further referenced Texco Marketing Pvt. Ltd. v. Tata AIG regarding the "Blue Pencil Rule" for striking off repugnant clauses.

Galada Power and Telecommunication Ltd. v. United India Insurance regarding the prohibition against introducing new grounds for repudiation not found in the original repudiation letter.

The Court found that while Clause A of the policy covered "theft," specific Exception Clauses (g) and (i) explicitly excluded losses arising "directly or indirectly" from the use of ATMs or manipulation of EDP systems.

The Court rejected the Bank's argument that the Additional Cover Policy overrode these exceptions, noting that the add-on "fraud protection" was specifically limited to the plaintiff's own debit card holders, thereby implying exclusion for other banks' cards.

Regarding the "unities doctrine," the Court determined that because the frauds occurred at different locations over a month, they lacked unity of time, location, and intent, and thus constituted separate "losses."

While the Court agreed with the Bank that the Insurance Company could not belatedly rely on the "excess" clause (₹25,000 per claim) because it was not in the repudiation letter, this was moot because the primary exclusion clauses remained valid.

This was ultimately moot because the primary exclusion clauses remained valid.

The Court held that the fraudulent transactions were clearly excluded under the policy's ATM and EDP exclusion clauses.

It further held that each fraudulent withdrawal was a separate act, and the Bank failed to prove that the "excess" clause was so high as to render the policy nugatory under the Blue Pencil Rule.

Final order: Suit dismissed; parties to bear their own costs.