Criminal Breach of Trust

Chapter 17 of the Indian Penal Code (IPC),1860, titled ‘of offences against property‘, deals with all the criminal offences associated with property. One such offence is the Criminal Breach of Trust.

Section 405 of Chapter 17 includes provisions for Criminal Breach of Trust. The crime of criminal breach of trust is similar to embezzlement under the Common Law.

According to the definition under the act, a person is guilty of the offence of criminal breach of trust when he ‘dishonestly misappropriates‘ or ‘converts‘ or ‘illegally disposes of‘ property entrusted to him.

Consequently, for an offence to fall under the ambit of criminal breach of trust, the prerequisite of entrustment of property must be fulfilled.

Furthermore, a thorough reading of the language used in the section imply that the words ‘in any manner entrusted with property‘ extends to all types of entrustments, whether it be to clerks, servants, business partners or other persons. But, they must hold a “position of trust“.

An amendment in 1975 added Explanation I to the section. In the same year, yet another explanation was added as follows:

Explanation 1

An individual under the capacity of an employer deducting the employee’s contribution from the wages towards ‘Provident Fund or Family Pension Fund‘ shall be considered to be entrusted with the amount of the contribution deducted by him.

Therefore, any default or illegal violation in the payment of such a contribution to the said fund would be considered dishonest and used in violation of the law.

Explanation 2

An individual under the capacity of an employer deducting the employee’s contribution from the wages towards ‘Employees’ State Insurance Fund” shall be entrusted with the amount of the contribution so deducted by him.

Therefore, any default or illegal violation in the payment of such contribution to the said fund is considered dishonestly used in violation of the law.

Key Ingredients Of Criminal Breach Of Trust

The key requirements for the said offence could be summarised as follows:

• Entrustment of Property

  As previously discussed, entrustment of a property must be present to constitute the offence of criminal breach of trust.

  The meaning of ‘entrusted’ is non-exhaustive and would encapsulate cases in which the property deliberately is handed over for a particular purpose. Furthermore, such property ends up being dishonestly misappropriated or disposed of. Such a misappropriation, disposition, or conversion would contradict the settings under which possession may be entrusted. Entrustment must not always be expressed; it may be implied as well. Furthermore, for the offence, the definition is not limited to the movable or immovable property alone. In the landmark case of R K Dalmia v. Delhi Administration, the Apex Court upheld the extensive use of the word ‘property under the Code. Furthermore, the term ‘dominion’ used in the section signifies the right to exercise control over property. The judicial pronouncement of Shivnatrayan v. the State of Maharashtra indicated that ‘a director of a company was in the position of a trustee and being a trustee of the assets, which has come into his hand, he had dominion and control over the same‘.

  Furthermore, for a partnership firm, even though each partner has a claim over partnership property, such dominion would not satisfy the prerequisite of Section 405. Under the partnership, there could not be an entrustment of dominion until otherwise agreed between partners initiating the said entrustment.

• Dishonest Misappropriation or Conversion

  Dishonest misappropriation is the second most crucial element under Section 405. As per Section 24 of IPC, 1860, dishonesty refers to ‘wrongful gain or loss to an individual’. Furthermore, wrongful gain and loss have been defined under Section 23 of IPC.

  For an offence to be constituted, it should be established that the accused has dishonest intentions due to which he either himself used the property or made some unauthorised use of it.

  Therefore, ‘Dishonest intention to misappropriate’ brings home the charge of criminal breach of trust. However, to prove the presence of a guilty mind with direct evidence may be difficult.

  Punishment for criminal breach of trust

  Section 406 of the IPC lays down the punishment for criminal breach of trust. An accused guilty of committing the offence may be punished with imprisonment of either a maximum of three years or with a fine or both.

Aggravated form of Criminal Breach of Trust

Sections 407,408, and 409 contain the three forms of aggravated criminal breach of trust. The aggravated form appears when the individual entrusted with the property is not a stranger.

• Section 407- Criminal Breach of Trust by Carrier

  Consistent with Section 407 IPC, 1860, an individual is entrusted with the property under the carrier’s capacity, wharfinger or warehouse-keeper. Such a trusted person happens to misappropriate the property, and commits crime. Such an individual can be imprisoned of either description for a term which may extend to 7 years and fine.

  The offence committed under the said section would be:

• Cognizable,
• Non-bailable,
• Compoundable and
• Triable by magistrate of first class

• Section 408 – Criminal breach of trust by clerk or servant.

  Consistent with Section 408 of the code, an individual is entrusted with the property or the dominion over the property under the capacity of a clerk or servant. He then commits a criminal breach of trust by misappropriating said property. Said individual is punished with imprisonment of either description for a term extending up to 7 years and a fine. The section is not application if the accused is not a clerk or servant.

  The offence committed under said section would be cognizable, non-bailable, non-compoundable, and triable by a magistrate of first class.

• Section 409 – Criminal breach of trust by a public servant, or by banker, merchant, or agent

  In line with section 409 of the code, any individual can be entrusted with property or dominion over property under the capacity of a public servant or as a banker, merchant, factor, broker, attorney or agent. Such an individual can commit a criminal breach of trust upon the misappropriation of said property. He would then be imprisoned for life or with imprisonment of either description for a term that may extend to 10 years and a fine.

  The offence committed under the section would be:

• Cognizable,
• Non-bailable,
• Compoundable and
• Triable by a magistrate of first class.

Conclusion

Section 405 governs the offence of criminal breach of trust. Section 406 incorporates the punishment for the same. For the offence to be committed, the entrustment of property and dishonest misappropriation of such property is necessary.

Furthermore, when an individual under the trust relationship commits such misappropriation, it amounts to an aggravated form of criminal breach of trust.

The property could either be movable or immovable. Furthermore, dishonest intentions should be proved.