This article has been written by Ms. Akanksha Choudhary, a 3rd year BA.LLB (Hons.) Student from CMR University, School of Legal Studies, Bengaluru.

INTRODUCTION

The Indian Penal Code, 1860’s Section 405 defines criminal breach of trust. The Workers’ Provident Fund and Miscellaneous Provisions Act, 1952, and the Employees’ State Insurance Act, 1948 are also referenced in Section 405, as are two more explanations. Criminal breach of trust is a felony, and Section 406 of the Indian Penal Code outlines the punishment for it. On the other hand, criminal breach of trust is covered under Sections 405 through 409 of the Indian Penal Code, which also provide punishment for the offence. Criminal breach of trust is treated equally to embezzlement under English law.

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.”

What Is Criminal Breach of Trust?

The criminal breach of trust offence as it is defined in this section is similar to the embezzlement offence under English law. The heart of a criminal breach of trust, according to the provision, is “dishonest misappropriation” or “conversion to own use” of another person’s property, which is nothing more than the criminal misappropriation offence described in section 403. The fundamental difference between the two is that the person accused of criminal breach of trust is given possession of, or power over, the subject of the trust. Entrustment of property is necessary before any violation of this rule may occur, as the name of the offence suggests. The area contains a wide variety of languages. The phrases are used “in any manner entrusted with property.” This means that it covers all entrustments, whether they are given to employees, subordinates, business partners, or other people in a position of trust. In a 405, IPC, the phrase “entrusted” governs both the words “or with any authority over the property” and the words “with the property” immediately after it. In Smt. Rashmi Kumar vs. Mahesh Kumar Bhada (1996), the Supreme Court of India ruled that a wife who entrusts her stridhan and further transfers control to her husband or another family member and the husband or that other family member dishonestly misappropriates that property (stridhana) has committed a criminal breach of trust and is subject to punishment under Section 406 of the Indian Penal Code, 1860.

Two reasons are given in Section 405 of the Indian Criminal Code of 1860: 

1. According to the first interpretation, it is considered an entrustment if an employer withholds an employee’s contribution from pay that is a part of the employee’s provident fund or family pension fund. Employers are considered to have utilised deducted funds dishonestly when they fail to pay them to family pension funds or provident funds.
2. The second argument is that it is considered an entrustment of the deducted amount if an employer withholds an employee’s contribution from pay that is a share of the employee’s state insurance fund managed by the Workers’ State Insurance Corporation. 

The corporation is considered to have utilised the money dishonestly if it does not deposit the money into the state insurance fund for its employees once it has been so deducted. The principal employer under the Employees State Insurance Act, 1948 is implied to include the occupier or owner, according to the Supreme Court’s ruling in Employees State Insurance Company vs. S.K. Aggarwal (1998). Thus, the director of the business will not be included by the definition of employer. Based on these case-specific conclusions, the Supreme Court ruled that the criminal charges brought against the director under Section 405 of the IPC, 1860, were illegal.

Essentials of a Criminal Breach of Trust 

• Asset entrustment “Dishonest” misappropriation or property conversion are two essential components of a criminal breach of trust. 
• Trust must be the basis of every entrustment. 
• Any legal contract that is made for the discharge of the trust, or any order or method specified by law, shall not be broken.

Entrusted

For this to constitute an offence, there must be an “entrustment” of property as defined by Section 405 of the Indian Penal Code, 1860. The term “entrustment” as used in this Part is sufficiently vague and general to cover other characteristics. Hence, everyone in a position of trust, including clerks, servants, executives, agents, and others, is considered to be entrusted.  In the case of Som Narth Puri vs. the State of Rajasthan (1972), the Hon’ble Supreme Court decided that the term “entrustment” is wide enough to include any things that are voluntarily given up for a specific reason or motivation. Entrustment can also be implied rather than spoken, as was found in the case of State of Madhya Pradesh vs. Pramode Mategaonkar (1965).

Misappropriated

Another crucial element of criminal breach of trust is “dishonest misappropriation.” In Section 24 of the Indian Criminal Code, 1860, dishonesty is defined as the intentional act of giving undue profit to one person and unjust loss to another.  Moreover, the phrases unlawful gain and unjust loss are defined under Section 23 of the Indian Penal Code, 1860. In contrast to wrongful loss, which is defined as a loss caused by unlawful means to a person who is legally entitled to the property, wrongful gain is defined as a gain obtained by an individual who does not have a legal claim to the property. The accused must utilise the property dishonestly for an unauthorised purpose in order to violate this Part’s main requirement. According to Section 405 of the Indian Penal Code, 1860, mismanagement of finances by itself does not constitute an offence.

Punishment

According to the Indian Penal Code, 1860, criminal breach of trust is a cognizable (cases in which police can make an arrest without a warrant) and non-bailable offence. The punishment for a criminal breach of trust depends on the type of offender who committed the crime.

1. A criminal breach of trust is punished by up to three (three) years in jail, a fine, or both, according to Section 406 of the Indian Criminal Code, 1860. 
2. When a carrier, warehouse, wharfinger, etc. violates a criminal trust, according to Section 407 of the Indian Penal Code of 1860. The accused may be sentenced to up to 7 (seven) years in prison, a fine, or both.
3. When a clerk or servant violates a criminal trust, they may be punished by imprisonment for a term that may be extended up to 7 (seven) years, a fine, or both, according to Section 408 of the Indian Penal Code, 1860. 
4. A criminal breach of trust by a public employee, banker, merchant, agent, etc. is punishable by life in jail, a term of up to ten (10) years in prison, or both, according to Section 409 of the Indian Penal Code, 1860.

CONCLUSION

Section 405 of the IPC covers all requirements for the offence that must be met. The person transferring the property must have faith in the person receiving it in order for there to be a fiduciary relationship between the two of them or for him to be named as trustee. To impose control over property, the accused must be in a position of jurisdiction over it. Real estate consists of both mobile and immovable items. There must be proof that the accused misappropriated or illegally utilised the property. For a criminal breach of trust to be upheld, the intent to misappropriate must be established. According to Section 405 of the Indian Penal Code, 1860, entrustment and dishonest theft of property are the two main components of criminal breach of trust. As a result, both requirements of the criminal breach of trust must be satisfied in order to establish an offence under Section 406 of the Indian Penal Code, 1860.  According to the sort of person who did the conduct, Section 406 of the Indian Penal Code, 1860 lists the penalties for criminal breach of trust as up to three years in jail, a fine, or both.

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