CRIMINAL BREACH OF TRUST

Introduction

Under Section 405 of the Indian Penal Code, 1860, criminal Breach of Trust is defined. Section 405 of the Indian Penal Code also provides two explanations which also include provisions from Employee’s Provident Fund and Miscellaneous Provisions Act, 1952 and Employee’s State Insurance Act,1948. Criminal breach of trust is a criminal offence and hence punishment for the same is stated under Section 406 of the Indian Penal Code. Correspondingly, Section 405 to 409 of the Indian Penal Code deals with the issue relating to criminal breach of trust and also prescribes punishment for the offence. The offence of criminal breach of trust is similar to that of embezzlement under English law.

Meaning of Criminal Breach of Trust

Section 405 of the Indian Penal Code (IPC) lays down-

“Whoever, being in any manner entrusted with property, or with any dominion over property, dishonestly misappropriates or converts to his 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.”

In simple terms, a criminal breach of trust is committing an act that disrupts the trust between two parties. A criminal breach of trust occurs when a person is entrusted, in any way, with property or possession of the property and if that person dishonestly uses, converts, or disposes of the property in violation of any legal direction or contract. Here, the important terms to be focused on are ‘entrustment’, ‘misappropriation’ and ‘dishonesty.’ Entrustment is what makes this section different; entrustment simply means trusting your property to someone else for any reason. To constitute the offence of criminal breach of trust, “it must be established that the accused was entrusted with the property or with dominion or power over the property of another and that he dishonestly misappropriated it or converted it to his use.”[i] What is entrustment? Handing over property by one person to another in such a way that the person on whose behalf the property was handed over continues to be the owner is ‘entrustment’.[ii] The word entrusted in the section is very important. Unless there is entrustment, there can be no offence under the section.[iii] The transferor and the transferee form a relationship in which the transferor remains the legal owner of the property and the transferee only has custody of it for the advantage of the transferor or someone else.[iv]

Elements of Criminal Breach of Trust

Some of the important elements of criminal breach of trust are:

• Entrustment of assets
• ‘Dishonest’ misappropriation or conversion of property.
• Such entrustment must be in trust.
• There must be the violation of any direction, or mode which is prescribed by law for discharging the trust, or any legal contract which is made for the discharge of trust.

Punishment for Criminal Breach of Trust

The criminal breach of trust is punishable under section 406 of the Indian penal Code, 1860. Section 406 reads as-

“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.”

Once the offence beneath section 405 is proved, the person will be punished as per section 406 of IPC.  Section 407 to Section 409 of the Indian Penal Code deals with different kinds of criminal breach of trust and hence has different punishments. Section 407 deals with criminal breach of trust by carrier, etc., and has prescribed punishment which may extend to seven years. Section 407 reads as-

“Whoever, being entrusted with property as a carrier, wharfinger or warehouse-keeper, commits criminal breach of trust, in respect of such property, shall be punished with imprisonment of either description for a term which may extend to seven years, and shall also be liable to fine.”

Similarly, the criminal breach of trust by clerk or servant is dealt with in Section 408 of IPC and it reads as:

“Whoever, being a clerk or servant or employed as a clerk or servant, and being in any manner entrusted in such capacity with property, or with any dominion over property, commits criminal breach of trust in respect of that property, shall be punished with imprisonment of either description for a term which may extend to seven years, and shall also be liable to fine.”

Lastly, Section 409, IPC which deals with criminal breach of trust by a public servant, or by banker, merchant, or agent states-

“Whoever, being in any manner entrusted with property, or with any dominion over the property in his capacity of a public servant or in the way of his business as a banker, merchant, factor, broker, attorney or agent, commits criminal breach of trust in respect of that property, shall be punished with 1*[imprisonment for life], or with imprisonment of either description for a term which may extend to ten years, and shall also be liable to fine.”

A person is punished for the offence of criminal breach of trust as per these sections with the maximum punishment period being 10 years and fine.

Difference Between Criminal Breach of Trust and Criminal Misappropriation

Many a time, we are confused between these two concepts i.e., criminal breach of trust and criminal misappropriation, but they vary a lot in meaning. Criminal Breach of trust is a conversion of property which was entrusted to someone whereas, criminal misappropriation occurs when the possession has been acquired legitimately, but the retaining has been wrongful and fraudulent as a result of a subsequent change of intention or discovering new facts/information. The meaning of criminal breach of trust is laid down in Section 405 of the IPC whereas, Section 403 of IPC deals with criminal misappropriation. Section 403 of IPC reads as “Whoever dishonestly misappropriates or converts to his use any movable property, shall be punished with imprisonment of either description for a term which may extend to two years, or with fine, or with both.” In a criminal breach of trust, there is a contractual relationship, either express or implied. Whereas, in criminal misappropriation, no contractual relationship exists. In a criminal breach of trust, a person is entrusted with the property but in contrast, in criminal misappropriation, the property comes into possession to the offender accidentally or in some natural manner, and then it is converted by him for his use.

Landmark Cases Dealing with Criminal Breach of Trust

Some of the landmark cases dealing with criminal breach of trust are listed below:

1. Jaswanthlal Nathalal v State: In this case, prima facie, the state sold cement exclusively for construction work. A portion of the cement received was diverted to a godown. This amounted to a criminal breach of trust, according to the court. Moreover, this case helped in defining entrustment as when the possession remains in the same hands as the original owner while the entrustment is held by someone else.[v]
2. Sohan Lal v Emperor: This is a case of dishonest misappropriation of property for the own use.[vi]
3. Superintendent and Remembrancer of Legal Affairs, WB v SK Roy: Misappropriation of property by making false entries is punishable under section 409 of IPC.[vii]
4. State of UP v Babu Ram: In a village, the accused, a sub-inspector (SI), investigated a theft case. In the evening, he saw Tika Ram hurrying across a field, coming from the canal’s side. In the folds of his dhoti, he seemed to be carrying something. When the accused searched him, he found currency notes in a bundle. The accused took the bundle and returned it later. The amount returned was 250 rupees short. The SC held that the currency notes were given to the sub-inspector for a specific purpose and that Tika Ram had trusted the accused to return the money once the accused was satisfied with it. It would be a criminal breach of trust if the accused had taken the currency notes.[viii]
5. K. Dalmia v Delhi Administration: The word property was to be interpreted in a wider sense. It held that whether an offence has been committed under this act will be determined based on how property has been interpreted.[ix]
6. Mohammad Adil v PP:  held headmaster liable for criminal breach of trust.
7. Mohammed Sulaiman vs Mohammed Ayub: Section 405 IPC requires doing of something to property which would indicate either misappropriation or conversion or its use or disposal in contravention of any legal contract, express or implied. A mere dispute of civil nature will not attract the provisions of this section.[x]
8. Rashmi Kumar vs Mahesh Kumar Bhada: According to the Supreme Court, a husband or specific member of the family, who dishonestly misappropriates or steals a wife’s stridhana property for his use, or permits another person to do so, commits criminal breach of trust.[xi]

Conclusion

Hence, all the requirements have to be met for the offence to fall under Section 405 of IPC. To create a fiduciary relationship between two parties or to place him in a position of trustee, the person giving over the property must have confidence in the person taking it. The accused must be in a position in which he has dominion over the property so he can exercise control over it. The term property encompasses both movable and immovable property. There has to be proof that the accused has wrongfully used the property for his own or an unauthorized purpose. For criminal breach of trust to stand, the intention to misappropriate must be proved.

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[i] K D Gaur, Criminal Law- Cases and Materials (2019) India, LexisNexis. 9^th Edition Pg. 642

[ii] Surendra Pal Singh vs. State of Uttar Pradesh, AIR 1957 All 122

[iii] Ramaswami Nadar v. State of Madras, AIR 1958 SC 56

[iv] K D Gaur, Criminal Law- Cases and Materials (2019) India, LexisNexis. 9th Edition Pg. 642

[v] SCA/938/2012

[vi] 31 Ind Cas 651

[vii] AIR 1974 SC 794: (1974) 4 SCC 230: 1974 SCR (3) 348

[viii] Appeal (crl.) 279-281 of 1995

[ix] 1963 SCR (1) 253

[x] Mohammed Sulaiman vs Mohammed Ayub, AIR 1965 SC 1319

[xi] (1997) 2 SCC 397