CRIMINAL BREACH OF TRUST UNDER THE INDIAN PENAL CODE

INTRODUCTION

The offence of criminal breach of trust, as defined under section 405 of IPC, is similar to the offence of embezzlement defined under English Law. Section 405 suggests that the gist of the offence of criminal breach of trust is ‘dishonest misappropriation’ or ‘conversion to own use’ another’s property, which is nothing but the offence of criminal misappropriation that is defined under section 403 of the Indian Penal Code. The only difference between the two offences is that in respect of criminal breach of trust, the accused is entrusted with property or with dominion or control over the property. Here entrustment or property is an essential requirement before any offence takes place under this section.

MEANING AND DEFINITION OF CRIMINAL BREACH OF TRUST UNDER IPC

Section 405 of the Indian Penal Code states that whoever, being in any manner entrusted with property, or with any dominion over property, dishonestly misappropriates or converts to one’s 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’.

ESSENTIAL INGREDIENTS OF CRIMINAL BREACH OF TRUST

The essential ingredients of the offence of criminal breach of trust are:

  1. a person must be entrusted with property or with dominion over it, and
  2. he must have dishonestly misappropriated the property or converted it to his own or dishonestly disposed of it, and
  3. such misappropriation, conversion, use, or disposal has been done in violation of such trust.[1]
  1. Entrustment of property or dominion over property

Entrustment of assets or control over some assets to a person who holds no proprietary rights is a must for the offence of criminal breach of trust. Here the word ‘entrustment’ refers to the voluntary handing over of possession of a property or dominion over the property for a specific purpose to another person in a fiduciary or contractual arrangement. It covers all types of entrustments, whether to clerks, servants, business partners, or others, as long as they are in a position of ‘trust.’ Entrustment may either be expressed or implied.

Here property implies any asset. The term ‘dominion’ denotes control over assets. It was decided in Shivnatrayan v. State of Maharashtra[2] that a corporate director was in the position of a trustee and that as a trustee of the assets that had come into his possession, he had dominion and control over them.

  • Dishonest Misappropriation, Conversion for own use, or dishonest disposal of Property

There must be misappropriation, conversion for own use, or disposal of property to constitute the offence of criminal breach of trust. Mode or manner of misappropriation or conversion or disposal of the property is not crucial to be established; proving dishonest intention is sufficient. In the case, Jaikrishnadas Manohardas Desai v. State of Bombay[3], it was held that criminal breach of trust can be inferred by proving that there was entrustment of property, or dominion over property, and the person who was entrusted with it failed to account for it.

  • Violation of direction of law or legal contract

There must be a violation of the direction of law or a Contract or trust. The direction of law refers to statutory as well as departmental directions, rules, practices, and directions issued by authorities in the exercise of their administrative powers.

ILLUSTRATIONS

  1. A, being executor to the will of a deceased person, dishonestly disobeys the law which directs him to divide the effects according to the will, and appropriates them to his own use. A has committed a criminal breach of trust.
  2. A, a revenue-officer, is entrusted with public money and is either directed by law or bound by a contract, express or im­plied, with the Government, to pay into a certain treasury all the public money which he holds. A dishonestly appropriates the money. A has committed a criminal breach of trust.
  3. X is a mechanic who is in charge of car maintenance. Y entrusts his car to X, with the agreement that it would be returned after payment of a certain fee for service. X sells the automobile in a dishonest manner. X has committed a criminal breach of trust.

PUNISHMENT FOR CRIMINAL BREACH OF TRUST

The punishment for the offense of criminal breach of trust is dealt with under Section 406 for ‘simple’ criminal breach of trust, the definition of which is contained in Section 405 of the IPC. It provides for imprisonment of up to 3 years, or fine, or both.

The punishment for aggravated forms of criminal breach of trust (under Sections 407 to 409) is mentioned in Section 407. It provides for punishment up to 7 years as well as a fine for the commission of the offence by a specific category of persons (for instance, a carrier, clerk, servant, banker, merchant, agent, among others) under sections 407 and 408, and life imprisonment/ imprisonment up to 10 years as well as fine in case of Section 409.

JUDICIAL PRONOUNCEMENT

  1. State of Gujarat vs Jaswantlal Nathalal[4]

In this case, the government sold cement to the accused only on the condition that it will be used for construction work. However, a portion of the cement purchased was diverted to a godown. The accused was sought to be prosecuted for criminal breach of trust. The Supreme Court held that the expression ‘entrustment’ carries with it the implication that the person handing over any property or on whose behalf that property is handed over to another, continues to be its owner.

Further, the person handing over the property must have confidence in the person taking the property. so as to create a fiduciary relationship between them. A mere transaction of sale cannot amount to an entrustment. If the accused had violated the conditions of purchase, the only remedy is to prosecute him under law relating to cement control. But no offence of criminal breach of trust was made out.

  • Jaswant Rai Manilal Akhaney  vs  State of Bombay[5]

In this case, it was held that when securities are pledged with a bank for a specific purpose on specified conditions, it would amount to entrustment. Similarly, properties entrusted to directors of a company would amount to entrustment, because directors are to some extent in a position of trustee. However, when money was paid as illegal gratification, there was no question of entrustment.

REFERENCES

  1. Sood, Jyoti Dogra. “PSA PILLAI’S CRIMINAL LAW.” (2018): 357-360.
  2. Ratanlal Ranchhoddas. Ratanlal & Dhirajlal’s the Indian Penal Code (Act XLV of 1860). New Delhi :Wadhwa & Co., 2007.
  3. https://blog.ipleaders.in/criminal-misappropriation-and-breach-of-trust/
  4. https://lawcorner.in/criminal-breach-of-trust-in-ipc/
  5. https://www.lawctopus.com/academike/criminal-breach-trust/
  6. https://www.legalserviceindia.com/articles/crbt.htm

[1] JRD Tata v Payal Kumar, (1987) Cr LJ 447 (Del) : 1986 (2) Crimes 449; State of Himachal Pradesh v RItu Raj, (1992) 1 Crimes 311 (HP).

[2] Shivnatrayan v State of Maharashtra, AIR 1980 SC 439.

[3] Jaikrishnadas Manohardas Desai v State of Bombay, AIR 1960 SC 889.

[4]  State of Gujarat v Jaswantlal Nathanlal AIR 1968 SC 700.

[5] AIR 1956 SC 575.

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