Insurance Co. Ltd. Vs. M/S Ishar Das Madan Lal  Insc 168 (20 February 2007)
S.B. Sinha & Markandey Katju
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 :
"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 :
any of the insured's family members;
any servant or traveler or messenger
in the exclusive employment of the insured;
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 :
"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"
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
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
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
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].
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 :
"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."
Illustration (d) appended thereto reads as under :
"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
"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
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
"To confer as a responsibility, duty etc. to place, something in
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 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
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 :
"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"
In Superintendent and Remembrancer of Legal Affairs, W.B. v. S.K.
Roy [AIR 1974 SC 794], this Court held :
"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
Yet again in Ram Narayan Popli etc. v. Central Bureau of Investigation etc.
[(2003) 3 SCC 641], it was held :
"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.
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.
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.
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
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/-.