Criminal Breach of Trust

Author: Sumedha Ray

---

Introduction

Criminal Breach of trust as defined under Section 405 of The Indian Penal Code, 1860[1] states that 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 willfully suffers any other person so to do, commits criminal breach of trust. The concept of criminal breach of trust can be divided broadly under 4 categories:

1. What is criminal breach of trust
2. Entrustment
3. Property
4. Criminal Misappropriation

Criminal Breach of Trust-Entrustment

The offence of criminal breach of trust as defined under this Section is similar to the offence of embezzlement under the English law. A reading of the Section 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 under Section 403[2]. The only difference between the two is that in respect of criminal breach of trust, the accused is entrusted with the property or with dominion or control over the property. Entrustment, as the title to the offence itself suggests, entrustment of property is an essential requirement before any offence under this Section takes place. The language of the Section is very wide. The words used are ‘in any manner entrusted with the property.’ So, it extends to entrustments of all kinds whether to clerks, servants, business partners or other persons, provided they are holding a position of trust. The term “entrusted” in Section 405governs not only the words “with the property” immediately following it but also the words “or with any dominion over the property.”

In State of Gujarat vs. JaswantlalNathalal[3], 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 with them. A mere transaction of sale cannot account to an entrustment. If the accused had violated the conditions of purchase, the only remedy is to prosecute him under the law relating to cement control. But no offence of criminal breach of trust was made out.

In JaswantRaiManilalAkhaney vs. State of Bombay[4], it was held that when securities are pledged with a bank for 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.

In State of UP vs. Babu Ram[5], the accused, a sub-inspector had gone to investigate a theft case in a village. In the evening, he saw one person named Tika Ram, coming from the side of the canal, hurriedly going towards a field. He appeared to be carrying something. The accused searched him and found a bundle of currency notes. The accused took the bundles and later returned it. The amount returned was short by Rs. 250. The Supreme Court held that the currency notes were handed over to the Sub Inspector for a particular purpose and Tika Ram had trusted the accused to return the money once the accused satisfied him about it. If the accused had taken the currency notes, it would amount to criminal breach of trust.

In Rashmi Kumar vs Mahesh Kumar Bhada[6], The Supreme Court held that when the wife entrust her Stridhana property with the dominion over that property to her husband or any other member of the family and the husband or such other member of the family dishonestly misappropriates or converts to his own use that property, or willfully suffers and other person to do so, he commits criminal breach of trust.

Property-

The definition in Section 405 does not restrict the property to movables or immovable alone. In R.K Dalmia vs. Delhi Administration[7], The Supreme Court held that the word ‘property’ is used in the Code in a much wider sense than the expression ‘movable property.’ There is no good reason to restrict the meaning of the word ‘property’ to moveable property only, when it is used without any qualification in Section 405. Whether the offence defined in a particular section of IPC can be committed in respect of any particular kind of property, will depend not on the interpretation of the word ‘property’ but on the fact whether that particular kind of property can be subjected to the acts covered by that Section Dominion over property. The word ‘dominion’ connotes control over the property.

In Shivnarayan vs. State of Maharashtra[8], it was held that a director of a company was in the position of a trustee and being a trustee of the assets, which has come into his hand, he had dominion and control over the same. However, in respect of partnership firms, it has been held that though every partner has dominion over property by virtue of being a partner, it is not a dominion which satisfies the requirements of Section 405, as there is no ‘entrustment of dominion’, unless there is a special agreement between making such entrustment.

Misappropriation-

Dishonest misappropriation is the essence of this Section. Dishonesty as defined under Section 24 of The IPC, causing wrongful gain or wrongful loss to a person. The meaning of wrongful gain and wrongful loss is defined in Section 23 of IPC. In order to constitute an offence, it is not enough to establish that the money has not been accounted for or mismanaged. It has to be established that the accused has dishonestly out the property to his own use or to some unauthorized use. Dishonest intention to misappropriate is a crucial fact to be proved to bring home the charge of criminal breach of trust. Proof of intention, which is always a question of the guilty mind or Mena Rea of the person, is difficult to establish by way of direct evidence.

In Krishnan Kumar vs. Union of India[9], the accused was employed as an assistant storekeeper in the Central Tractor Organization (CTO) at Delhi. Amongst other duties, his duty was to take the delivery of consignment of goods received by rail for CTO. The accused had taken delivery of a particular wagonload of iron and steel from Tata Iron and Steel Co., Tatanagar and the goods were removed from the railway depot but did not reach the CTO. When questioned, the accused gave a false explanation that the goods had been cleared, but later stated that he had removed the goods to another railway siding, but the goods were not there. The defense version of the accused was rejected as false. However, the prosecution was unable to establish how exactly the goods were misappropriated and what was the exact use they were put to. In this context, the Supreme Court held that it was not necessary in every case to prove in what precise manner the accused person had dealt with or appropriated the goods of his master. The question is one of intention and not direct proof of misappropriation. The offence will be proved if the prosecution establishes that the servant received the goods and that he was under a duty to account to his master and had not done so. In this case, it was held that the prosecution has established that the accused received the goods and removed it from the railway depot. That was sufficient enough to sustain a conviction under this Section.

Similarly, in JaikrishnadasManohardas Desai vs. State of Bombay[10], it was held that dishonest misappropriation or conversion may not ordinarily be a matter of direct proof, but when it is established that property, is entrusted to a person or he had dominion over it and he has rendered a false explanation for his failure to account for it, then an inference of misappropriation with dishonest intent may readily be made. In Surendra Prasad Verma vs. State of Bihar[11], the accused was in possession of the keys to a safe. It was held that the accused was liable because he alone had the keys and nobody could have access to the safe, unless he could establish that he parted with the keys to the safe. As seen in the case of criminal misappropriation, even a temporary misappropriation could be sufficient enough to warrant conviction under this Section.

CONCLUSION–

Hence, it is clear that for an offence to fall under this Section all the four requirements are essential to be fulfilled. The person handing over the property must have confidence in the person taking the property so as to create a fiduciary relationship between them or to put him in a position for trustee. The accused must be in such a position where he could exercise his control over the property i.e., dominion over the property. The term property included both movable as well as immovable property within its ambit. It has to be established that the accused has dishonestly put the property to his own use or to some unauthorized use. Dishonest intention to misappropriate is a crucial fact to be proved to bring home the charge of criminal breach of trust.

[1] Section 405, The Indian Penal Code, 1860.

[2] Section 403, The Indian Penal Code, 1860.

[3] 1968 AIR 700, 1968 SCR (2) 408.

[4] 1956 AIR 575, 1956 SCR 483.

[5] 1961 AIR 751, 1961 SCR (2) 679.

[6] 1996 AIR 732.

[7] 1962 AIR 1821, 1963 SCR (1) 253.

[8] AIR 1980 SC 439, 1980 CriLJ 388, (1980) 2 SCC 465.

[9] 1959 AIR 1390, 1960 SCR (1) 452.

[10] 1960 AIR 833, 1960 SCR (3) 329.

[11] AIR 1973 SC 488, 1972 CriLJ 1202.

---

About the Author: Sumedha is a fourth-year law student at Symbiosis Law School, Pune.

---