Criminal Breach of Trust -Section 405-409 IPC

Building trust takes time but destroying it takes only seconds. There are so many instances when you cannot take care of the property, and you engage another person to take care of it in the manner as may be set out. When you entrust your property to someone to take care of, that person must take care with utmost good faith and not commit any fraud or use that property for his use.

This article will discuss what a criminal breach of trust is, its essential features, how do you prove criminal breach of trust, punishment for criminal breach of trust, is a criminal breach of trust and criminal misappropriation the same, and the difference between the criminal breach of trust and cheating.

What is a Criminal Breach of Trust?

Section 405 – 409 of the Indian Penal Code deals with the Criminal Breach of Trust.

When a person is entrusted with some movable or immovable property or has control over the property, converts or misappropriates the property for his use, uses or disposes of that property dishonestly, in violation of any law or direction in which manner the trust is to be discharged, or where the person has entered into a contract (express or implied) to discharge the trust or duty in the prescribed manner, then that person is said to have committed criminal breach of trust.

Explanation

Suppose the employer deducts a certain amount as provident fund, employee’s state insurance fund, or family pension fund from the employee’s salary or wages. In that case, such employer shall be deemed to have been entrusted with the said deducted amount. Therefore, the employer will have to pay the deducted amount to the employee. If the employer does not repay the collected amount as a provident fund to the employee, then he will be liable for dishonestly misappropriating or using the said amount.

In Employees State Insurance Corporation Vs. S K Aggarwal, the Supreme Court had held that the ‘principal employer’ under the Employees State Insurance Act means the ‘occupier’ or ‘owner’. Therefore, concerning the company, the company’s director will not be termed as the ’employer’ of the company because the company is the factory owner. Hence, the Supreme Court upheld the quashing of the criminal proceeding issued against the director initiated under section 405 of IPC.

Some examples of Criminal breach of trust are:

• X had entrusted his furniture to Y, a warehouse keeper, before going for a journey. On the condition that X would pay the warehouse charge for storing the furniture on his return from the journey. Y had dishonestly sold the furniture. Here, Y has committed a criminal breach of trust.
• X entrusted his property to Y, a carrier, to carry the goods by water or land. Y dishonestly misappropriates the property. As a result, y has committed a criminal breach of trust.
• X, an agent residing in Calcutta working for Y, residing in Delhi. X and Y enter into a contract that all the sum that X receives on Y’s behalf shall be invested by X following the direction of Y. X receive 2 Lakhs on Y’s behalf and Y directs X to invest in W Company. However, X does not invest the said amount in W Company; instead invests the same in Company P, believing that it will be profitable for Y, but X suffers loss. Y has not committed a criminal breach of trust in such a case as he has not acted dishonestly.

What are the essential features of the Criminal Breach of Trust?

To constitute a criminal breach of trust, there have to be the following essential features:

Firstly, entrustment; the property must be in possession of the accused. In other words, the accused should be entrusted with the property in question. Entrustment can be made to any of the following persons, namely; servants, clerks, agents, business partners, or such other person who can hold the property as a ‘trust.’

Secondly, the person in whose possession the property is should have dishonestly misappropriated or used the property for his use or disposed of the property against the trust.

Thirdly, the property which is entrusted need not be limited to moveable property. It covers immovable property also (R K Dalmia Vs. Delhi Administration).

How do you prove the Criminal Breach of Trust?

For a criminal breach of trust, there has to be a dishonest intention, and the property must be in possession of the accused. It is not necessary to prove misappropriation. There is mens rea, or guilty mind is enough to establish a criminal breach of trust.

In Krishan Kumar Vs. Union of India, the accused worked as an assistant storekeeper in the Central Tractor Organization at Delhi. Along with other duties, he was also responsible for delivering the consignment of goods received by rail for the Central Tractor Organization. The accused had received the delivery of a wagonload of iron and steel from Tata Iron and Steel Co. Tatanagar. The goods were taken from the railway depot but were not delivered to Central Tractor Organization. The accused had given a false statement regarding the goods. The prosecution was also unable to prove where and how misappropriation had taken place.

Hence, the Supreme Court had held that it is not necessary to prove misappropriation as the prosecution had proved that the accused had received the goods and removed the same from the railway depot.

What is the punishment for a Criminal Breach of Trust?

A criminal breach of trust is a cognizable and non-bailable offence under IPC. Following are the punishment bestowed depending on the person who has committed the offence.

• Whoever is guilty of committing a criminal breach of trust shall be liable for imprisonment for three years or with a fine or both (Section 406).
• A criminal breach of trust is committed by a carrier, warehouse, wharfinger, etc. it shall be liable for imprisonment of seven years or with a fine or both (Section 407).
• When a clerk or servant commits a criminal breach of trust, he/she shall be liable for imprisonment for seven years or with a fine or both (Section 408).
• When a public servant or banker, merchant or agent, etc., commits a criminal breach of trust, he/she shall be liable for imprisonment for life or with imprisonment for ten years or with a fine or both (Section 409).

Is Criminal Breach of Trust and Criminal Misappropriation the same?

When a person dishonestly misappropriates or disposes of any moveable property for his use is called Criminal misappropriation. Though criminal breach of trust involves criminal misappropriation, they are different.

Let us look into the differences:

Provision: Criminal misappropriation is defined under section 403 of the Indian Penal Code, 1860. Whereas, Criminal breach of trust is defined under Section 405 of the Indian Penal Code, 1860.
Relationship: There is no contractual relationship in criminal misappropriation, whereas; there can be an express or implied contract.
Nature of Property: in criminal misappropriation, the property is moveable only. In a criminal breach of trust, the property can be moveable as well as immovable.
Misappropriation: in criminal misappropriation, the property is misappropriated for his use only, whereas, in criminal breach of trust, the property can be misappropriated, disposed of, or conversed for his use.
Possession: in criminal misappropriation, the property may or may not be in possession of the person who has misappropriated, whereas, in criminal breach of trust, the property has to be entrusted with the person committing the offence.
Punishment: the punishment for criminal misappropriation is two years imprisonment or with fine or both, whereas; the punishment for criminal breach of trust is three years imprisonment or with fine or both.

What is the difference between Criminal Breach of Trust and Cheating?

The offence of criminal breach of trust and cheating cannot co-exist in the same set of facts and are directly opposed to each other.

Conclusion

Criminal Breach of Trust is an offence where a person in a dominant position or who is entrusted with the property misappropriates or uses the property for his use or against the direction of the law or contract. The main ingredient of criminal breach of trust is entrustment, dishonest intention, and misappropriation. The criminal breach of trust can be for moveable as well as immovable property. The punishment for a criminal breach of trust is three years, ten years, or life imprisonment, depending upon the person entrusted with the property. To prove the offence of criminal breach of trust, there has to be entrustment and dishonest intention. However, it is not necessary to prove misappropriation or how or where the property is used. A person should not be charged with cheating and criminal breach of trust as both offences have different intricacies.