The offence of Criminal Breach of Trust is mentioned under Chapter XVII of Indian Penal Code, 1860 under the heading ‘Offences against Property’. The definition of Criminal Breach of Trust is provided under Section 405 of Indian Penal Code, 1860. Section 406 states punishment for criminal breach of trust. Section 407 to 409 deals with aggravated forms of criminal breach of trust.
Section 405 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”.
[Explanation 1].—A person, being an employer 3[of an establishment whether exempted under section 17 of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (19 of 1952) or not] who deducts the employee’s contribution from the wages payable to the employee for credit to a Provident Fund or Family Pension Fund established by any law for the time being in force, shall be deemed to have been entrusted with the amount of the contribution so deducted by him and if he makes default in the payment of such contribution to the said Fund in violation of the said law, shall be deemed to have dishonestly used the amount of the said contribution in violation of a direction of law as aforesaid.]
[Explanation 2.—A person, being an employer, who deducts the employees’ contribution from the wages payable to the employee for credit to the Employees’ State Insurance Fund held and administered by the Employees’ State Insurance Corporation established under the Employees’ State Insurance Act, 1948 (34 of 1948), shall be deemed to have been entrusted with the amount of the contribution so deducted by him and if he makes default in the payment of such contribution to the said Fund in violation of the said Act, shall be deemed to have dishonestly used the amount of the said contribution in violation of a direction of law as aforesaid.]”
Essential Ingredients
The following are the essential ingredients for the offence of criminal breach of trust:
(i) Entrustment
It is one of the most important essentials to constitute the offence of criminal breach of trust. The term “in any manner entrusted with property” in the section includes all kinds of entrustment within its scope. It also includes those cases, during which the owner voluntarily hands over his/her property to the accused in any manner and it’s then dishonestly misappropriated. Entrustment can be either expressed or implied.
Case: State of Uttar Pradesh vs Babu Ram[1]
In this case, the accused was the sub-inspector of police. He was in charge of a case relating to theft. At night the accused saw a man running, he suspected that he was hiding something. When the accused caught the victim, he saw a bundle of currency with him. The accused took the money for confirmation purposes and said that he will return the money if it is proven that the money is not related to the theft case. Later, the accused returned the money and Rs. 250 was short. The court observed that the victim had given the money to the accused for a particular purpose, and therefore he was entrusted with the property which belonged to the victim. It was held that the accused misappropriated the property and was held guilty for criminal breach of trust.
(ii) Property or Dominion over the Property
The word property used in the section is not restricted to movable property. In the case of RK Dalmia vs Delhi Administration[2]. The court observed that the term ‘property’ used in the Section 405 usually refers to moveable property. But if the section does not restrict itself to moveable property, then all kinds of property are covered in this offence.
The word ‘Dominion over the Property’ means control over the property. In the case of Shivnarayan vs State of Maharashtra[3]it was held that the director of the company is the trustee of the company and being the trustee, he/she is handed over some assets which belong to the company then the director is said to have dominion (control) over the property.
According to Explanation 1 & 2 of Section 405, if an employer deducts a certain amount from the salary of the employee to credit that amount in employees provident fund or pension fund or employee state insurance fund. If such entrustment is misappropriated by the employer, then he/she will be held liable under this section. In the case of Employees State Insurance Corporation vs SK Aggarwal[4], the court observed that the term employer, within the definition of principal employer which has been defined under Employees State Insurance Act, 1948[5], does not include director. Thus, a managing director cannot be held liable for criminal breach of trust under section 405 & 406 of Indian Penal Code, 1860.
(iii) Misappropriation of Entrusted Property
In order to convict a person under this section, one has to prove the dishonest intention of the accused. The word “Dishonesty” has been defined under Section 24 of IPC, 1860. According to this section, Dishonesty means causing wrongful gain or wrongful loss to someone. The meaning of words “wrongful loss” and “wrongful gain” is defined under Section 23 of IPC, 1860. It has to be proved that the accused has dishonestly used the property for his own purpose.
Punishment for Criminal Breach of Trust
Punishment for criminal breach of trust has been defined under Section 406 of IPC, 1860. According to this section, whoever commits criminal breach of trust will be punished with imprisonment which can be extended to 3 years, or with fine or both.
Aggravated form of Criminal Breach of Trust
Section 407,408 & 409 of Indian Penal Code, 1860 deals with the offences of Criminal Breach of Trust by Clerk, Servant, Carrier etc.
Criminal Breach of Trust by carrier, warehouse-keeper or wharfinger
It has been defined under Section 407 of IPC, 1860. According to this section, if any carrier, warehouse-keeper or wharfinger is entrusted with the property (not necessary that it is a movable property) and dishonestly misappropriated that property for his/her own use, then in that case he/she will be punished under this section. They will be punished with imprisonment which can be extended to 7 years along with a fine.
Criminal Breach of Trust by clerk or servant
It has been defined under Section 408 of IPC, 1860. According to this section, if any clerk or servant is entrusted with the property (not necessary that it is a movable property) and dishonestly misappropriated that property for his/her own use, then in that case he/she will be punished under this section. They will be punished with imprisonment which can be extended to 7 years along with a fine.
Criminal Breach of Trust by public servant, banker, merchant or agent
It has been defined under Section 409 of IPC, 1860. According to this section, if any public servant, banker, merchant or agent is entrusted with the property (not necessary that it is a movable property) and dishonestly misappropriated that property for his/her own use, then in that case he/she will be punished under this section. They will be punished with life imprisonment or imprisonment which can be extended to 10 years along with a fine.
[1] AIR 1961 SC 751
[2] AIR 1962 SC 1821
[3] AIR 1980 SC 439
[4] AIR 1998 SC 2676
[5] https://www.esic.nic.in/Tender/ESIAct1948Amendedupto010610.pdf
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