This Article is written by Atmiya & this article discuss the concept of Criminal Breach of Trust: Introduction, Essentials, Explanation.
Table Of Contents
- Introduction
- What is Criminal Breach of Trust
- Essentials of Criminal Breach of Trust
- Section 406: Punishment of criminal breach of trust
- Criminal Breach of Trust by Particular Group of People
- Conclusion
- References
Introduction
Criminal Breach of Trust is the violation of a trust by a person when that person is entrusted with property, either movable or immovable, by another person who by law or by domination was entrusted with the same property. Criminal Breach of Trust is defined in the Section 405 Chapter XVIII of the Indian Penal Code, 1860. And section 406 deals with the punishment for the offence of criminal breach of trust. The Criminal Breach of Trust is similar to the offence of embezzlement in English law. Section 407, 408 and 409 of the Indian Penal Code, 1860 deals with the criminal breach of trust by carrier, wharfinger, or warehouse-keeper, etc., criminal breach of trust by clerk or servant and criminal breach of trust by public servant or banker, merchant, or agent respectively.
In this article, we will delve deeper into the concepts of criminal breach of trust, will explore and analyse its essentials through illustrations and landmark case laws and will understand the punishment for the offence of Criminal Breach of Trust.
What is Criminal Breach of Trust?
The chapter XVIII, section 405 of the Indian Penal Code, 1860 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”.
Hence, Criminal Breach of Trust when summarised can be understood as the dishonest misappropriation of other’s property or conversion to own use of other’s property, which is called dishonest misappropriation, defined under section 403 of the IPC,1860. The only difference between the section 405 and section 403 is the entrustment of the property or dominion over the property by the accused.
Illustrations:
A, is a revenue officer who collects and holds public money. He is directed by law or by a contract which is implied that he must submit or invest the public money he holds into a certain scheme. A violates his duty and uses the money for his personal use. The revenue officer, A is guilty for the offence of criminal breach of trust.
But if A invests the public money in a better scheme rather than the specific scheme which he was directed to do, then his intention was not dishonest and he will not be charged with the offence of criminal breach of trust.
The language of the section is wide. As observed in the case of R.K. Dalmia v. Delhi Administration, the Supreme Court held that the scope of the word ‘property’ cannot be limited to the movable property, it includes both movable or immovable property.
Essentials of the Criminal Breach of Trust
The criminal breach of trust is a criminal offence. There are certain essentials which must be present to attract the offence of criminal breach of trust. Which are -:
- Accused must be entrusted or must have dominion over the property of the victim.
- Accused must have guilty mind i.e., mens rea or dishonest intention to misappropriate the property or dishonestly converted the property to its own use.
- Either the contract or the trust of the victim must have breached.
So, the most vital ingredients which need to be present for attracting the offence of criminal breach of trust are ‘entrustment with the property’ and another is ‘dishonest misappropriation’ of the victim’s property.
- Entrustment
The word ‘entrust’ is not defined in the IPC. Its literal meaning is handing over the possession of the property to another person without giving the ownership of the property. A fiduciary relationship is formed between the person handing the property and the person receiving it. The breach of the trust by the person who was entrusted with the property is a must to prove the offence of criminal breach of trust.
In a recent case of Gurukanwarpal Kirpal Singh v. Surya Prakasam & Ors. 2022, the Supreme Court held that the entrustment of property is sine qua non to attract the offence of section 405 of IPC. Without the entrustment of property, no offence of criminal breach of trust will be levied.
The word ‘dominion’ indicates the control over the property. In the landmark case of Shivnatrayan v. State of Maharashtra, the Supreme Court held that the director being a trustee of company’s assets, has the dominion over the company. But in a partnership firm, though partners have dominion over the property but that dominion need to be entrusted through special agreement.
In another landmark case of Employees State Insurance Corporation v. S K Aggarwal, Supreme Court upheld the High court’s decision that the directors of the company does not fall under the definition of ‘employer’ as per the Employees State Insurance Act, because company itself was the owner of the factory in the given circumstances.
- Dishonest Misappropriation
There must be a guilty mind i.e., mens rea or dishonest misappropriation or conversion to own use of the entrusted property by the accused to constitute the offence of criminal breach of trust. The dishonest intention to cause loss to the owner must be proved to bring a charge of criminal breach of trust.
In the case of Jaikrishnadas Manohardas Desai v. State of Bombay, it was held that if a person entrusted with the property or has dominion over the property fails to account for it, then his/her intention and misappropriation will come to account.
Whereas, in the case of Surendra Prasad Verma v. State of Bihar, the court held that because the accused was in solely charge of the keys of iron safe, he is to liable. Unless he could prove that he parted with the keys. It was also held that even the temporary misappropriation of the entrusted property may be a valid ground for criminal breach of trust.
- Violation of a legal contract or breach of trust
There must be a violation of a legal contract which is created when a person entrusted his property to another person. The victim must have a trust upon the person to whom he entrusted his property and that person i.e., accused must have violated it.
As in the case of State of Gujrat v. Jaswantlal Nathala, the government entered a contract to sell cement to the accused for construction work. But the accused violated the contract. The Supreme Court held that a mere breach of contract of sale cannot constitute the criminal breach of trust. The word ‘entrustment’ implies that a person giving the entrustment of property must be the owner of the property.
Section 406: Punishment for criminal breach of trust
The punishment for the offence of criminal breach of trust is defined in the section 406 of the Indian Penal Code, 1860. The punishment is of either three years of imprisonment or with fine or with both.
Criminal Breach of Trust by Particular Group of People
The punishment for the criminal breach of trust done by strangers has less harsh punishment than the offence committed by the people who enjoy special trust. The punishment for Criminal Breach of Trust by particular group of people is defined under section 407, 408 and 409.
Section 407 talks about the enhanced punishment given to carrier, wharfinger or warehouse-keeper when they commit criminal breach of trust. They shall be punished for either seven years or with a fine or both.
Section 408 talks about the criminal breach of trust committed by a clerk or servant when they are in any way entrusted with the property and committed breach. They shall either be liable for imprisonment of either seven years or for a fine.
Section 409 states that any public servant entrusted with the property as a way of business i.e., of a banker, broker, merchant, attorney, or agent breaches the trust in respect of the property, then the person will be liable for an imprisonment up to a term of ten years or shall be liable for a fine. Also, the entrustment should be relatable to the post which the public servant holds.
In the case of Superintendent and Remembrancer of Legal Affairs v. SK Roy, a public servant collected cash premiums from Pakistani policyholders from a branch of LIC. Then he misappropriated the cash. The key question before the Supreme Court was whether this act will be punished under section 409 of IPC. The court held that it did. Without considering the technicality of the powers of the public servant, he will be liable under section 409 of the IPC.
Conclusion
The offence of criminal breach of trust is stated in the Indian Penal Court, 1860 under section 405. Its punishment is mentioned under section 406. The criminal breach of trust is a criminal offence. The three essentials must be fulfilled i.e., accused must be entrusted or must have dominion over the property of the victim, accused must have guilty mind i.e., mens rea or dishonest intention to misappropriate the property or dishonestly converted the property to its own use and either the contract or the trust of the victim must have breached. The property here can be both movable and immovable.
Proving the dishonest intention is crucial to establishing the charge of criminal breach of trust. Education on stringent laws and effective implementation can help address this common offence in various aspects of life. From daily routines to white-collar crimes with specific deterrence for public servants. The existing provisions in Indian Penal Code are considered sufficient, however reporting cases is crucial.
References
- Section 405, Indian Penal Code, 1860
- Section 406, section 407, section 408, and section 409 of IPC, 1860
- “2022 LiveLaw (SC) 701 Indian Penal Code, 1860; Section 405 – An alleged breach of the contractual terms does not ipso facto cons.” LiveLaw, 18 August 2022,
- Jain, Divi. “Criminal Breach of Trust”. legalserviceindia
- “Criminal Breach of Trust – LAW Notes.” LAW Notes, 23 January 2023,
- Rehman, Aashiya. “Criminal Breach of Trust.” iPleaders, 8 May 2023,
- Trigunayat, Samarth. “Criminal Breach Of Trust – Academike.” Lawctopus, 20 August 2014,
