Criminal Breach of Trust – Section 405 IPC

I. INTRODUCTION

In English Law ‘Larceny’ & ‘Embezzlement’ are offences, what in India are known as theft, criminal misappropriation and criminal breach of trust. As such there is no exact equivalent in English Law of criminal breach of trust. The terms of S. 405 (Criminal Breach of Trust) IPC are very wide. To constitute criminal breach of trust there must be dishonest misappropriation by a person in whom confidence is places as to the custody or management of the property in respect of which the breach of trust is charged. In every case of criminal breach of trust, a breach of contract is implicit. In determining whether a case if of former nature or latter, it has to be seen that whether the person proceeded against had acted dishonestly.

II. INGREDIENTS

Following are the essentials of the offence of criminal breach of trust u/s 405 :-

1. Entrusting any person with any property or with any dominion over property and
2. The person entrusted :-
3. dishonestly misappropriates or converts to his own use that property; or
4. dishonestly uses or disposes of that property or wilfully suffers any other person so to do in violation :
5. of any direction of law prescribing the mode in which such trust is to be discharged or
6. of any legal contract made touching the discharge of such trust.

Illustration 1 :- A, a carries is entrusted by Z with property to be carried. A dishonestly misappropriates it. A has committed an offence u/s 405.

Illustration 2 :- A, is the executor of the will of deceased, but rather than executing the will in accordance with law, dishonestly misappropriates it to his own use. A has committed criminal breach of trust.  

III. EXPLANATION OF ESSENTIALS

• In any manner & entrusted with property – The words in any manner do not enlarge the term “entrustment”. For application of this section, there must be entrustment of property. Entrustment has different implications in different contexts but in most basic sense it means handing over the possession of property for some purpose which may not imply the conferring of any proprietary right. The ownership of property in question must remain in some person other than the accused and the latter must hold it on account of some person or in some way for his benefit. The property must be entrusted so as to create a fiduciary relationship  b/w them. As trust is confidence placed by one person in another, it must be voluntarily & freely placed. If confidence is obtained by playing trick, there is no real consent and therefore, no true entrustment.

Held :- It was held that a person who is authorized to collect money on behalf of another person is said to have been entrusted with money collected by him, though the person paying may no longer have any proprietary interest, but the person on whose behalf it was collected becomes the owner as soon as the amounts are handed over to the authorized person.

• Property – In Dalmia R.L. v. Delhi Admin. the SC held that the term property used in this section can be movable or immovable property as no adjective has been used.
• Dominion over Property – A person is said to have dominion over the property (a) when he supervises, or (b) exercises control over the property or (c) is in the charge of that property. The property in question must have been either entrusted or he must have dominion over it. As far as criminal liability is concerned there is a difference b/w a person entrusted with property and one having control or general charge over the property. In the former case, the person will be liable for the property if it is found missing and no further proof as to its actual misappropriation is require, whereas, in the dominion case the person will be liable only if it is shown that he misappropriated the property or was a party to disposal etc. of that property by any other person.

Illustration :- A, is inspector of water works who’s duty is to check the distribution of water from municipal water works. Therefore, A is said to have dominion over water belonging to the employer. But if he dishonestly misappropriates water for his own use and pays no tax on it and also does not inform to his employer, he would be guilty of criminal breach of trust.

Facts :- Respondent pledged some gold articles with SBI for securing loan. The articles which he had pledged were not ones which had been returned.

Held :- It was held that branch manager who had the power to transact business on behalf of the bank had dominion over the pledged articles and therefore he is guilty of criminal breach of trust.

• Dishonestly misappropriates or converts to his own use – Dishonest intention is the gist of this offence. It shows the existence of means rea, that is a guilty mind. It is only the intention which is essential and whether any wrongful gain or loss is actually caused is immaterial. Misappropriates means “improperly setting apart for one’s use to the exclusion of the owner“. Converts in this context means dealing with the property of another without right as if it is his own property.

Held :- Appellant alleged that her stridhan property which had been entrusted to her in laws had been dishonestly misappropriated by them and same had been proved. The accused were held guilty of Criminal Breach of Trust.

Illustration – A, a patwari is entrusted with a receipt book which he fails to return. Mere omission or failure to return the entrusted property does not amount to Criminal breach of trust.

• Dishonestly uses or disposes of that property – A user in order to be an offender under this section must have caused substantial or appreciable loss to the owner of the property or gain to the accused.

1. Trust – If there is no entrustment there is no breach of confidence or trust. The trust need not be in furtherance of any lawful object.
2. Partner – A partner can be held liable for an offence if it can be proved that he dishonestly misappropriated with the partnership property or other given positive acts under the section.

• Wilfully suffers any other person so to do – This expression means that the acts constituting criminal breach of trust must have been done deliberately or intentionally and not accidently or by inadvertence.
• In violation of any direction of law or legal contract etc. – The expression direction of law includes directions issued by authorities in exercise of their statutory power.

IV. EXPLANATION TO S. 406 & PUNISHMENT THEREOF

EXPLANATION I – It makes the employer liable for dishonest misappropriation of employees contribution to the Provident Fund or Family Pension Fund because he is deemed to have been entrusted with the amount of contribution so deducted by him.

EXPLANATION II – It makes the employer liable for dishonest misappropriation of employees contribution to the Employees State Insurance Fund because he is deemed to have been entrusted with the amount of contribution so deducted by him.