The State of Gujarat Vs. Jaswantlal
Nathalal  INSC 272 (23 November 1967)
23/11/1967 HEGDE, K.S.
CITATION: 1968 AIR 700 1968 SCR (2) 408
Indian Penal Code, 1860, s. 409-Government
selling cement to contractor against allotment for specific construction workrespondent
taking delivery on behalf of contractor and diverting some quantity-whetherthere
was entrustment to him-if breach of trust committed.
The appellant State Government gave on a
contract to a contractor the work of construction of a building. The contractor
in turn gave that work on sub-contract to a firm K & Co. and the
respondent, was looking after the construction work on behalf of the firm. Upon
an application made to the Deputy Engineer, Ahmadabad, the contractor was
allotted 100 bags of cement for construction work. This cement was sold by the
Government to the contractor and delivered to the respondent for and on behalf
of the contractor. After taking delivery of the cement, the respondent
delivered only part Of it to the construction site and the balance was diverted
and stocked on account of K & Co. On these facts and the appellant's
complaint, the respondent was prosecuted for breach of trust under s. 409 of
the Indian Penal Code. The respondent's case was that in anticipation of
allotment of cement to the contractor, K & Co. had utilized some of their
own cement and therefore the cement liveries to them was on account of a
quantity already used by them for, the contractor. The Trial Court disbelieved
this version and convicted the respondent. The High Court, however, allowed an
appeal and acquitted the respondent.
On appeal to this Court
HELD : Dismissing the appeal : The
prosecution had failed to prove contrustment to the respondent.
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 is to create a fiduciary relationship between
them. A mere transaction of sale cannot amount to an entrustment. [41 1 B-c]
Although the Government had sold the cement in question to the contractor
solely for the purpose of being used in connection with the construction work,
that circumstance did not make the transaction in question anything other than
a sale. After the delivery of the cement, the Government had neither any right
nor dominion over it. If the purchaser or its representative had failed to
comply with the requirements of law relating to the cement control, he should
have been prosecuted for the same. It could not be held that there was any
breach of trust. [411 C-D] Velji Raghvaji Patel v. State of Maharashtra, 
429; .jaswantrai Manilil Aklianev v. State of
Bombay,  S.C.R. 483, 498500; Satyendra Nath mukherji v emperor I.L.R.
 1 cal. 97. referred to.
409 The king v. Grubb,  2 K.B. 683,
held in applicable.
CRIMINAL APPELLATE JURISDICTION : Criminal
Appeal No. 93 of 1965.
Appeal by special leave from the judgment and
order dated June 19, 1964 of the Gujarat High Court in Criminal Appeal No. 759
R.H. Dhebar, for the appellant.
N.N. Keswani, for the respondent.
The Judgment of the Court was delivered by
Hegde, .J. The State of Gujarat has filed this appeal, by special leave against
the order of acquittal made by the High Court of Gujarat in Criminal Appeal No.
759/63 on its file. The respondent herein was convicted for an offence under S.
409 IPC by the city magistrate, 7th court, Ahmadabad, and sentenced to suffer
ri-orous imprisonment for one year and to pay a fine of Rs. 500, in default to
suffer rigorous imprisonment for four months more.
The facts of the case lie within a narrow
compass. The Government of Gujarat gave on contract to Bharat Sewak Samai (Gujarat)
the work of construction of a building for the government litho-printing press.
From Exh. 20 it appears that the BSS in its turn gave that work on sub-contract
to a firm known as M/s. Kaushik & Co., though it was sought to make out
that M/s. Kaushik & Co. Were merely appointed to supervise the work. The
firm Kaushik & Co. consisted of two partners. The respondent who is the
brother of one of the partners was looking after the construction work-. On 9-462,
BSS applied to the Deputy Engineer (construction subdivision, Ahmadabad) for
allotment of ten tons of cement for the construction work in question. In
response to that application, the Deputy Engineer allotted five tons (100 bags)
of cement and the same was delivered to the respondent for and on behalf of BSS
on 10-4-62. All these facts are admitted.
The further case of the prosecution is that
after taking delivery of the aforementioned 100 bags of cement, the respondent
delivered at the work site sixty bags of cement and the remaining forty bass he
sent to the godown of PW2 Tayabali Jiwaji. About these facts also there is no
From the above facts, the appellant wants us
to conclude that the respondent had committed breach of trust in respect of the
forty bags of cement lie sent to the -godown of PW2.
The case forthe respondent is that in
anticipation of allotment to BSS Kaushik & Co. had utilized for the
construction work in question forty bags of cement belonging to them, and hence
he sent forty 410 bags of cement to the godown of PW2 to be stocked for and on
behalf of Kaushik & Co. The trial court disbelieved that Version and
convicted the respondent under s. 409 IPC. The High Court in a highly laconic
judgment allowed the appeal and acquitted the respondent.
Before examining the correctness of the High
Court's judgment it is necessary to mention that in this case the BSS had not
made any complaint against the respondent. In other words, it is not the case
of BSS that the respondent who took delivery of hundred bags of cement on their
behalf had misappropriated forty bags out of the same. The case against the
respondent proceeded on the basis that the government had entrusted to him 100
bags of cement for the purpose of being used in the construction of the
building in question, but he misappropriated forty bags out of the same.
Therefore, we have to see whether the
prosecution has established the entrusment pleaded and the misappropriation
We were not made aware of the conditions
under which the government gave the construction work to BSS. The written
agreement between the government and the BSS, if there be any, has not been
produced in this case. There is also no oral evidence in regard to the
particulars of the agreement between the government and the BSS. Therefore we have
to proceed on the basis that the contract given to the BSS is one of those
usual contracts under which it was for the contractor to secure the necessary
materials. Evidently because cement was a controlled commodity in 1963, BSS had
to apply for its allotment. In the absence of any evidence to the contrary we
have to proceed on the basis that BSS either paid for the cement in question or
its price was adjusted towards the money due to it.
On the proved facts, it is difficult to
accept the contention of the appellant that after the sale of the cement in
question the gOvernment had any proprietary right over the same. Nor can it be
said that the transaction in question resulted in any fiduciary relationship
either between the government and BSS or between the government and the
respondent. It was a normal transaction of sale though the sale in question was
effected by the government on the representation that cement was required for a
The term "entrusted" found in S.
405 IPC governs not only the words "with the property" immediately
following it but also the words "or with any dominion over the
property" occurring thereafter-see Velji Raghvaji Patel v. State of
(1)  2 S.C.R. 429.
411 Before there can be any entrustment there
must be a trust meaning thereby an obligation annexed to the ownership of
property and a confidence reposed in and accepted by the owner or declared and
accepted by him for the benefit of another or of another and the owner. But
that does not mean that such an entrustment need conform to all the
technicalities of the law of trustsee Jaswantrai Manilal Akhaney v. State of
Bombay(1). The expression 'entrustment' carries with it the implication that
the person handing over any property or on whose behalf that properly 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. It is true that the government had sold the cement in
question to BSS solely for the purpose of being used in connection with the
construction work referred to earlier. But that circumstance does not make the
transaction in question anything other than a sale. After delivery of the
cement, the government had neither any right nor dominion over it. If the
purchaser or his representative had failed to comply with the requirements of
any law relating to cement control, he should have been prosecuted for the
same. But we are unable to hold that there was any breach of trust.
A case somewhat similar to the one before us
came up for consideration before a division bench of the Calcutta High Court in
Satyendra Nath Mukherji v. Emperor (2 ) . These arc the facts of that case. One
Satya Sunder Mitra was a contractor. He was granted a permit by the Executive
Engineer ', A.R.P. (Shelters), construction division, to purchase seven tons of
cement from Balmer Lawrie and Company. The permit was -ranted on ,he condition
that the cement was to be used in the work connected with the construction of
shelters, which work he had contracted to do for the Executive Engineer. The
finding in the case was that with the help of an employee of Mitra and
Chaudhuri who were banians of Balmer Lawrie and Company, six tons of cement
were diverted and disposed of for another purpose.
The trial court convicted Satya Sunder Mitra
under s. 406 IPC and another for abetting the offence committed by Satya Sunder
Mitra. The High Court allowed their appeal, holding that -there was no
entrustment of the cement in question within the meaning of the term as used in
s. 405 of Indian Penal Code. In the course of the judgment it was observed
"The permit was granted in accordance with the system of control
established under the Defence of India (1)  S.C.R. 483,498-500
1. L. R. [ 1 947] 1 Cal 97 412 Rules, under
which an order has been issued by the Government of India preventing selling
agents such as Balmer Lawrie and Company from delivering any cement except
under instructions from the Government or from the Cement Adviser. 'The
transaction, so far as the contractor is concerned, was one of purchase and the
property in the cemen t clearly passed to him. No doubt he could not have
obtained the permit through the Executive Engineer if it had not been intended
that the cement should be used for the purpose directed by the Engineer, but,
in our opinion, in no sense can it be said that there was any entrustment
either of the property or of any dominion over the property." We are of
the opinion that the legal position is as explained in that decision.
The decision of the Kings Bench Division in
The King v. Grubb(1) relied on by Mr. Dhebar learned counsel for the appellant
does not bear on the question under consideration.
Therein, the factum of entrustment was not in
dispute. The only question of law that arose for decision in that case was
whether when a property is entrusted to a company, and the person directing and
controlling the company, by whose instructions the property had passed into the
possession of the company, had converted the same fraudulently, that person can
be said to have committed an offence under s. 1 of the Larceny Act 1901. The
court answered that question in the affirmative.
ln view of our conclusion that the
prosecution has failed to prove the entrustment pleaded, it is unnecessary to
consider whether on the material on record it can be concluded that the
respondent had misappropriated 40 bags of cement referred to earlier.
In the result, this appeal fails and the same
R.K.P.S. Appeal dismissed.
(1)  2 K. B. 683.