Criminal Breach of Trust

Sections 405 to 409 of the IPC deal with criminal breach of trust. Section 405 defines it, section 406 prescribes punishment for it and the rest of the sections deal with aggravated form of criminal breach of trust.

Section 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”.

Section 406. Punishment for criminal breach of trust – Whoever commits criminal breach of trust shall be punished with imprisonment of either description for a term which may extend to three years, or with fine, or with both.

Essential Ingredients of Section 405

The essential ingredients of criminal breach of trust are-

  • The accused must be entrusted with property or dominion over it
  • He must have dishonestly misappropriated the property or converted it to his own use or disposed it of in violation of such trust.

Entrustment

Entrustment as clear in the section is an essential requirement for the offence of criminal breach of trust to take place. The language of the section, however, is very wide and  thus includes all kinds of entrustment- whether to clerks, servants, business partners etc, provided that they occupy a position of trust. Thus it included all the cases in which property is voluntarily handed over for a specific purpose. Entrustment can be express or implied.[1]

Entrustment implies that the person handing over any property or on whose behalf the property has been handed over to another, continues to be its owner. The person handing over the property must have confidence in the person taking the property so as to create a fiduciary relationship between them and thus when a person obtains the possession by a trick, it cannot be said to be entrustment. In the case of Kundan Tillumal[2], the accused falsely represented himself to be a tinner and obtained possession over utensils by promising that he will repair them and return them the same day. However, he did not return the utensils and since it was found that he was not a tinner, he was held guilty of cheating and not criminal breach of trust.

In State of Gujarat v Jaswantlal Nathalal[3], the government sold cement to the accused only on the condition that it would be used for construction work but it was diverted to a godown instead. The Supreme Court held that mere sale does not amount to entrustment and hence the accused is not liable for criminal breach of trust and can only be made liable under the law relating to cement control.

In Jaswant Rai Manilal Akhaney v State of Bombay[4], it was held that when securities are pledged with a bank for a specific purpose on specified conditions, it would amount to entrustment.

In Suresh Tolani v State of Rajasthan[5], an agent of LIC collected premium amount from a policy holder but instead of depositing it, he pocketed the same. He was held guilty for misappropriation and not breach of trust.

Property

The definition in section 405 includes both movable as well as immovable property.

Dominion over property

The word dominion implies control over the property. It was held in Shivnarayan v State of Maharashtra[6], that a director of a company being in the position of a trustee of the assets, has dominion and control over the same.

Explanations (1) and (2) of section 405 clearly state that an employer who deducts employee’s contributions from the wages to credit to the provident fund or family pension fund or employees state insurance fund, is deemed to be entrusted with that amount.

Misappropriation

Dishonest misappropriation is the essence of this section. Dishonesty is defined in section 24 of IPC, as causing wrongful gain or wrong loss to a person. Wrongful gain is gain by unlawful means of property when the person is not legally entitled to the property. Wrongful loss is the loss by unlawful means of property when the person losing it is legally entitled to that property.

To constitute the offence of criminal breach of trust, it has to be proved that the person dishonestly put the property to his own use or to some unauthorized use.

Even a temporary misappropriation would be sufficient to form this offence.

In violation of trust or any direction of law

It is necessary that the dishonest act is in violation of any direction of law or any contract relating to the carrying out the trust

Section 407

Section 407 provides for punishment of a term which may extend to seven years plus fine, when criminal breach of trust is committed by a person to whom property was entrusted as a carrier, wharfinger, or warehouse keeper.

Section 408

Punishment for a term which may extend to seven years plus fine is laid down for criminal breach of trust committed by a person who being a clerk or servant was entrusted with the property.

Section 409

This section provides a punishment which may extend to ten years plus fine when criminal breach of trust is committed by someone in the capacity of a public servant, banker, merchant or agent.

Relevant cases

Superintendent and Remembrance of Legal Affairs v SK Roy: [7]The accused in his capacity as a public servant, although not authorized to do so, directly realized premiums in cash from some policy holders and misappropriated the amount. He was held guilty under section 409.

Somnath Puri v State of Rajasthan: [8]The accused, being an employee of Indian Airlines, took excess money from passengers and pocketed the same. He was held guilty under section 409.


[1] State of Madhya Pradesh v Pramode Mategaonkar (1965) 2 Cr LJ 562 (MP)

[2] (1942) Kar 288.

[3]AIR 1968 SC 700

[4] AIR 1956 SC 575

[5] 2001 Cr LJ 2110

[6] AIR 1980 SC 439

[7] AIR 1974 SC 794

[8] AIR 1972 SC 1490

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