SUPREME COURT OF INDIA
National Insurance Company Limited
Vs.
Messrs Ishar Das Madan Lal
C.A.No.6113 of 2000
(S.B.Sinha and Markandeya Katju,JJ.,)
20.02.2007
JUDGMENT
S.B.Sinha,J.,
1. 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. 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.
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. [See United India Insurance Co. Ltd.
v. Pushpalaya Printers 1,
M/s Peacock Plywood Pvt. Ltd. v. The Oriental Insurance Co. Ltd2. and
United India Insurance Co. Ltd. v. Kiran Combers & Spinners3 .
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. Keeping in view the aforementioned legal aspect of the matter, we
may advert to the meaning of the word 'entrust'. Its ordinary meaning would
mean "to charge or invest with a trust; to commit to another with a
certain confidence regarding his care" [See Advanced Law Lexicon by P.
Ramanatha Aiyar, 3rd Edn. Book 2 page1613].
9. It requires no elaboration that offences of 'breach of trust' and 'theft'
contain different ingredients. Whereas theft has been defined in Section 378 of
the Indian Penal Code; breach of trust has been defined in Section 405 thereof,
which read as under:
"378. Theft.- Whoever, intending to take dishonestly any moveable property
out of the possession of any person without that person's consent, moves that
property in order to such taking, is said to commit theft."
10. Illustration (d) appended thereto reads as under:
"(d) A, being Z's servant, and entrusted by Z with the care of Z's plate, dishonestly runs away with the plate, without Z's consent. A has committed theft."
"405. Criminal breach of trust.-Whoever, being in any manner entrusted with property, or with any dominion over property, dishonestly misappropriates or converts to his own use that property, or dishonestly uses or disposes of that property in violation of any direction of law prescribing the mode in which such trust is to be discharged, or of any legal contract, express or implied, which he has made touching the discharge of such trust, or willfully suffers any other person so to do, commits "criminal breach of trust""
11. 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.
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.
13. Mr. Vishnu Mehra, the learned counsel appearing for the appellant has
relied upon the meaning of the word 'entrust' as contained in Black's Law
Dictionary, 8th Edn. and Webster's Universal Dictionary.
14. In Black's Law Dictionary, the word 'entrust' has been defined as under :
"To give (a person) the responsibility for something after establishing a
confidential relationship."
15. In Webster's Universal Dictionary meaning of the word 'entrust' reads as
under :
"To confer as a responsibility, duty etc. to place, something in another's
care."
16. Apart from the fact that the said meaning of the term 'entrustment' goes
against the submission Mr. Mehra, we may notice that 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. The person must be handed over
the possession of the property. Illustration (d) appended to Section 378 Indian
Penal Code, 1860 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.
17. The word 'entrustment', moreover, must be read in the context in which it
has been used. In Colinvaux's Law of Insurance, 7th Edn., by Robert Merkin at
page 50, it is stated :
"Words in context
The above generality is not applicable when it is clear from the context that
the words are not used in a colloquial popular sense. Thus the word
"flood" in the phrase "strom, tempest or floor" does not
cover a case where a house-holder's bathroom is affected by upward seepage of
water to a depth of three inches, as the context of the word requires an event
violent, sudden or abnormal. Similarly, heavy rain is not in itself likely to
constitute a storm. It has also been held that the phrase "sum actually
paid" in a reinsurance agreement referred to a sum which the reinsured is
merely liable to pay, as the agreement read as a whole was against liability
rather than actual payment."
18. In The State of Gujarat v. Jaswant Lal Natha Lal 4,
this Court held :
"The expression 'entrustment' carries with it the implication that the
person handing over any property or on whose behalf that property is handed
over to another, continues to be its owner. Further the person handing over the
property must have confidence in the person taking the property so as to create
a fiduciary relationship between them. A mere transaction of sale cannot amount
to an entrustment"
19. In Superintendent and Remembrancer of Legal Affairs, W.B. v. S.K. Roy5this
Court held :
"12. To constitute an offence under Section 409 Indian Penal Code,
1860, it is not required that misappropriation must necessarily take place after
the creation of a legally correct entrustment or dominion over property. The
entrustment may arise in any manner whatsoever. That manner may or may not
involve fraudulent conduct of the accused. Section 409 Indian Penal Code,
1860, covers dishonest misappropriation in both types of cases; that is to say,
those where the receipt of property is itself fraudulent or improper and those
where the public servant misappropriates what may have been quite properly and
innocently received. All that is required is what may be described as
entrustment or acquisition of dominion over property in the capacity of a
public, servant who, as a result of it, becomes charged with a duty to act in a
particular way, or, atleast honestly."
20. Yet again in Ram Narayan Popli etc. v. Central Bureau of Investigation
etc6. it was held :
"361. To constitute an offence of criminal breach of trust, there must be
an entrustment, there must be misappropriation or conversion to one's own use,
or use in violation of a legal direction or of any legal contract; and the
misappropriation or conversion or disposal must be with a dishonest intention.
When a person allows others to misappropriate the money entrusted to him, that
amounts to a criminal breach of trust as defined by Section 405. The section is
relatable to property in a positive part and a negative part. The positive part
deals with criminal misappropriation or conversion of the property and the
negative part consists of dishonestly using or disposing of the property in
violation of any direction and of law or any contract touching the discharge of
trust.
362. In Jaswantrai Manilal Akhaney v. State of Bombay7 it
was held that if the Managing Director of the Bank entrusted with securities
owned by the pledgor disposes of their securities against the stipulated terms
of the contract entered into by the parties with an intent to cause wrongful
loss to the pledgor and wrongful gain to the Bank, there can be no question but
that the Managing Director has necessarily mens rea required by Section 405.
363. The term entrustment is not necessarily a term of law. It may have
different implications in different contexts. In its most general signification
all it imports is the handing over possession for some purpose which may not
imply the conferring of any proprietary right at all. 364. When a person
misappropriates to his own use the property that does not belong to him, the
misappropriation is dishonest even though there was an intention to restore it
at some future point of time."
21. 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. We, in the facts and circumstances of this case, also direct the
appellant to pay and bear the cost of the respondent throughout. Counsel's fee
in this appeal is assessed at Rs.50, 000/-.
Judgment Referred.
1(2004) 3 SCC 0694
2(2006) 14 SCALE 0300
3(2007) 1 SCC 0368
4(1968) 2 SCR 0408
5AIR 1974 SC 0794
6(2003) 3 SCC 0641
7 (1956) SCR 0483