Criminal Breach of Trust IPC (2024)

Section 405 of the Indian Penal Code, 1860, outlines the offence of criminal breach of trust. According to this provision, it involves dishonestly misappropriating or converting another person’s property for personal use.

Section 405 of Indian Penal Code

Section 405 of Indian Penal Code states:

“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 wilfully suffers any other person so to do, commits criminal breach of trust.”

What is Criminal Breach of Trust?

In simple terms, a criminal breach of trust occurs when someone is entrusted with another person’s property and dishonestly misuses or takes advantage of it for their own benefit. For instance, if someone gives their bicycle to a person for repairs, but that person instead uses it for personal reasons, it would be considered a breach of trust. In such cases, the person who breached the trust is held accountable for their dishonest actions.

It’s important to note that the term “property” mentioned in the section encompasses both movable and immovable assets. The Supreme Court, in the case of R.K. Dalmia v. Delhi Administration (1962), has interpreted the word “property” in Section 405 IPC to have a broad meaning that includes various types of assets, not just limited to physical objects.

The term “entrust” holds great significance in Section 405 IPC. It refers to the act of handing over property to another person for specific purposes. However, it’s important to note that entrusting the property to someone does not grant them full ownership or proprietary rights over it. While they may have significant control or authority over the property, they cannot claim lawful ownership. The person entrusted with the property can misuse, convert, use, or dispose of it.

Criminal Breach of Trust Examples

Examples of Criminal Breach of Trust can include:

• An employee misappropriates funds entrusted to them by their employer.
• A financial advisor uses clients’ funds for personal investments without their knowledge or consent.
• A trustee diverts trust funds for their personal use.
• A partner in a business misusing company funds for personal expenses.

Which Section of IPC Defines Criminal Breach of Trust?

Section 405 IPC addresses the offence of criminal breach of trust committed by an individual in relation to a property, whether it is movable or immovable, which they have been entrusted with or have dominion over. The offence occurs when the person dishonestly uses the property for their own purposes, misappropriates it, or disposes of it in violation of any legal obligations or contracts related to the discharge of such entrusted property. If the person willingly allows another individual to commit such acts, they also commit the offence of criminal breach of trust.

Illustrations:

• A, an officer entrusted with public money dishonestly uses it for personal reasons. A has committed a criminal breach of trust.
• A entrusts his furniture to B, who owns a furniture shop, for repair while A travels. However, B dishonestly sells the furniture instead. B has committed a criminal breach of trust.

How To Prove Criminal Breach of Trust?

Certain essential elements must be present for a criminal breach of trust. To prove the offence of Criminal Breach of Trust, the following factors generally need to be established:

Entrustment of property to the accused: The property must be entrusted to the person who later commits the breach of trust. Without the initial act of entrusting, the offence cannot be established.

Dishonest misappropriation or conversion of property: The accused must dishonestly misappropriate or convert the entrusted property for their own use or intentionally cause another person to use it in a wrongful manner.

Violation of law, contract, or trust: The breach of trust involves a violation of a law, contract, or trust that governs the relationship between the parties involved.

Section 409 of the Indian Penal Code specifically addresses cases of breach of trust by public servants, bankers, merchants, or agents. In such situations, a fiduciary relationship exists between the parties, with public servants holding positions of higher responsibility due to the trust placed in them. Consequently, the punishment for breaching this trust is more severe, including the possibility of life imprisonment, in contrast to the punishments typically imposed on common offenders.

Punishment for Criminal Breach of Trust

The punishment for the offence of criminal breach of trust under Section 405 IPC is imprisonment for a period of 3 years, a fine, or both. It is a non-bailable offence and falls under the category of cognisable offences, meaning that the police can arrest the accused without a warrant. A first-class Magistrate conducts the trial for this offence.

Section 407 IPC: Criminal Breach of Trust By Carrier, Wharfinger or Warehouse-Keeper

Section 407 talks about a criminal breach of trust by carrier, wharfinger or warehouse-keeper. It says that if the carrier, wharfinger or warehouse-keeper is entrusted with property, and they commit a criminal breach of trust in respect of such property, they shall be punished with imprisonment for a term that may extend to 7 years along with a fine.

Section 408 IPC: Criminal Breach of Trust By Clerk, Servant, etc.

Section 408 talks about a criminal breach of trust by a clerk, servant or someone employed as a clerk or servant who has been entrusted in any manner with property or dominion over such property. In such a case, they shall be punished with imprisonment for a term that may extend to 7 years, along with a fine.

Section 409 IPC: Criminal Breach of Trust by a Public Servant, etc.

Section 409 deals with criminal breach of trust by a public servant or in the way of his business as a banker, merchant, factor, broker, attorney, or agent who has been entrusted with property or dominion over such property. They shall be punished with imprisonment for life or a term of ten years, along with a fine.

Criminal Breach of Trust Case Laws

Jaswantlal Nathalal v. State of Gujarat(1967)

In the landmark case of Jaswantlal Nathalal v. State of Gujarat (1967), the issue revolved around a contract for the construction of a building for the government litho-printing press, which was awarded to the respondent by the government of Gujarat. During the contract, 5 tons or 100 bags of cement were delivered to the respondent by the Deputy Engineer of the Construction sub-division in Ahmedabad. The respondent transferred 40 bags of cement to a godown and used the remaining 60 bags for the construction site. The appellant filed a case accusing the respondent of criminal breach of trust.

The Supreme Court examined the concept of “entrustment” in relation to the offence of criminal breach of trust. It was established that when one person entrusts their property to another, they continue to retain ownership of the property, and a fiduciary relationship exists between them. However, in the present case, the cement was sold to the respondent to be used for construction. Consequently, after the delivery of the cement to the respondent, the government no longer had any right or control over it. The Court concluded that for the respondent to be prosecuted, they would have had to violate a law related to cement control. In this case, since there was no breach of any trust relationship, the Court held that the respondent could not be charged with criminal breach of trust.

State of UP v. Babu Ram Upadhya (2000)

In the case of State of UP v. Babu Ram Upadhya (2000), the respondent, who was a Superintendent of Police, was investigating a theft case in a village. Lalji, an ex-patwari of Mohinuddinpur, was accompanying him during the investigation. On their way back in the evening, they noticed Tika Ram crossing a canal and heading towards a field while appearing to be carrying something concealed in his dhoti. As Tika Ram’s behaviour seemed suspicious, the Superintendent of Police conducted a search and found a bundle of currency notes on him. The accused, Babu Ram Upadhya, took possession of the bundle but later returned it to Tika Ram. However, upon counting the currency notes, Tika Ram discovered that Rs. 250 were missing.

The Supreme Court analysed the circ*mstances of the case. It concluded that there was an entrustment of property, as the currency notes were initially taken into the custody of the Superintendent of Police. Furthermore, it was determined that the accused had exercised control and dominion over the property and had converted it for his own use. Based on these findings, the Court held that the accused had committed an offence under Section 409 of the Indian Penal Code, which pertains to criminal breach of trust by a public servant or in the course of a profession as a banker, merchant, factor, broker, attorney, or agent.

Jaswant Rai Manilal Akhaney v. State of Bombay (1956)

In the case of Jaswant Rai Manilal Akhaney v. State of Bombay (1956), the accused held the position of Managing Director at the Exchange Bank of India. The Court observed that the accused had full control over the bank’s accounts, and it was implausible to believe that he was unaware of the bank’s obligation to repay money to the Cooperative Bank as an overdraft. Therefore, it was deemed that the accused must have had knowledge of this fact, and it cannot be assumed otherwise. The Court also acknowledged that the accused may have made a mistake of law, believing that he had legal justification for dealing with the securities involved.

The Court held that securities pledged for specific purposes with a bank should be considered as being entrusted to the bank. Similarly, properties entrusted to the directors of a company would also be regarded as an entrustment since the directors serve as trustees of the company to some extent. However, if the money was paid as illegal gratification, the concept of entrustment would not apply.

Rashmi Kumar v. Mahesh Kumar Bhada (1996)

In the case of Rashmi Kumar v. Mahesh Kumar Bhada (1996), the appellant and the respondent were a married couple under the Hindu Marriage Act. They had three children. The appellant alleged that she had suffered cruelty in her matrimonial home, where she was not treated with respect. Eventually, she was expelled from the house, along with her three children, by her in-laws. The appellant had entrusted her belongings, received from her family members and relatives before and after her marriage, to her husband. She demanded the return of her sadhana property, which had been entrusted to her husband.

The Supreme Court held that the ownership of the wife’s sadhana property remains with her, and she entrusts it to her husband, who has dominion over it. Suppose the husband or any member of his family breaches this entrustment by dishonestly using the property for their own purposes or misappropriating it. In that case, they can be held liable for the offence of criminal breach of trust under Section 405 of the Indian Penal Code. Accordingly, they shall be subjected to punishment for the said offence.

Conclusion

Criminal Breach of Trust refers to an offence in which a person entrusted with property or assets dishonestly misappropriates or converts it for their own use or for the use of someone else in violation of the terms of the entrustment. It involves a betrayal of the trust placed in the person responsible for handling the property. It is a crime against property.

Various legal provisions in different jurisdictions govern the Criminal Breach of Trust offence. For example, in India, it is defined under Section 405 of the Indian Penal Code, 1860. The section encompasses acts such as embezzlement, misappropriation, or unauthorised use of entrusted property, and it applies to individuals who are entrusted with property or have control and dominion over it.

To establish the offence of Criminal Breach of Trust, certain key elements must be present, including the existence of entrustment of property, the dishonest misappropriation or conversion of the property, and a violation of law, contract, or trust by the accused. The punishment for this offence varies depending on the jurisdiction and the severity of the breach, but it typically involves imprisonment, fines, or both.