Full Judgment Text
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CASE NO.:
Appeal (civil) 6113 of 2000
PETITIONER:
National Insurance Co. Ltd.
RESPONDENT:
M/s Ishar Das Madan Lal
DATE OF JUDGMENT: 20/02/2007
BENCH:
S.B. Sinha & Markandey Katju
JUDGMENT:
J U D G M E N T
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.
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.
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."
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 :
"\005It 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
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customer if any has been put in exclusive clause of the
policy\005"
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."
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.
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 (2004) 3 SCC 694], M/s Peacock Plywood Pvt.
Ltd. v. The Oriental Insurance Co. Ltd. [2006 (14) SCALE 300] and United
India Insurance Co. Ltd. v. Kiran Combers & Spinners [(2007) 1 SCC 368].
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 \026 3rd Edn. \026Book 2 \026 page1613].
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."
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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""
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.
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.
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.
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."
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."
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
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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.
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."
In The State of Gujarat v. Jaswant Lal Natha Lal [(1968) 2 SCR
408], this Court held :
"\005The 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\005"
In Superintendent and Remembrancer of Legal Affairs, W.B. v. S.K.
Roy [AIR 1974 SC 794], this Court held :
"12. To constitute an offence under Section 409 IPC, 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
IPC, 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."
Yet again in Ram Narayan Popli etc. v. Central Bureau of
Investigation etc. [(2003) 3 SCC 641], 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
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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 Bombay
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."
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/-.