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PETITIONER: THE STATE OF GUJARAT

       Vs.

RESPONDENT: JASWANTLAL NATHALAL

DATE OF JUDGMENT: 23/11/1967

BENCH: HEGDE, K.S. BENCH: HEGDE, K.S. SIKRI, S.M. SHELAT, J.M.

CITATION:  1968 AIR  700            1968 SCR  (2) 408

ACT: Indian Penal Code, 1860, s. 409-Government selling cement to contractor against allotment for specific construction work- respondent  taking  delivery  on behalf  of  contractor  and diverting some quantity-- whether- there was entrustment  to him-if breach of trust committed.

HEADNOTE: 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,  Ahmedabad,  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]

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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, [1965] 2 SC.R. 429;  .jaswantrai  Manilil   Aklianev v.  State  of  Bombay, [1956] S.C.R. 483, 498500; Satyendra Nath mukherji v emperor I.L.R. [1947] 1 cal. 97. referred to. 409 The king v. Grubb, [1915] 2 K.B. 683, held in applicable.

JUDGMENT: 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 of 1963. 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, Ahmedabad, 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 Gov- ernment  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  9-4- 62,  BSS applied to the Deputy Engineer  (construction  sub- division, Ahmedabad) 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 dispute. 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  for- the respondent is that  in  anticipation  of allotment  to  BSS  Kaushik  &  Co.  had  utilized  for  the construction work in question forty bags of cement belonging

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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  judg- ment  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 alleged. 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  particular purpose. 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 Maharashtra(1). (1)  [1965] 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

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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) [1956] 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

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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 is dismissed. R.K.P.S.                           Appeal dismissed. (1)  [1915] 2 K. B. 683.  413