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Criminal Breach Of Trust Sec 405 IPC

Criminal breach of trust is defined under Section 405 of the Indian Penal Code, 1860. This section describe it as 'dishonest misappropriation' or 'conversion to own use' another person's property. Criminal breach of trust and criminal misappropriation (under Section 403) is distinguished from each other in terms of the fact that in criminal breach of trust, the accused is entrusted with property or with dominion or control over the property. this section has been structured in a manner that it has a wide ambit, however 'entrustment' of the property is an essential element for an offense to be penalized under Sec405 of IPC.

The provision for Criminal Breach of Trust is mentioned in Chapter XVII under Section 405 of Indian Penal Code.

Section 405, of Indian Penal Code, 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.'

The essential ingredients for the offense of criminal breach of trust are:

  1. The accused must be entrusted with the property or with dominion over it,
  2. The person so entrusted must use that property, or;
  3. The accused must dishonestly use or dispose of that property or wilfully suffer any other person to do so in violation,
    1. of any direction of law prescribing the mode in which such trust is to be discharged, or;
    2. of any legal contract made touching the discharge of such trust.
       

Sec 409 of the Indian Penal Code defines such breach of trust by public servants or banker, merchants or agents. In such case-situations, the concerned parties share a fiduciary relationship particularly. Public servants are entrusted more than ordinary people and thus have positions of greater responsibility. Thus, any such breach of trust attracts more stringent punishment- to the extent of life imprisonment, unlike punishment which is met out to common offenders.

Meaning Of The Criminal Breach Of Trust

The offense of criminal breach of trust, as defined under section 405 of IPC, is similar to the offense of 'embezzlement' under the English law. A reading of the section suggests that the gist of the offense of criminal breach of trust is 'dishonest misappropriation' or 'conversion to own use' another's property, which is nothing but the offense of criminal misappropriation defined under this section.

The only difference between the two is that in respect of criminal breach of trust, the accused is entrusted with property or with dominion or control over the property. As the title to the offense itself suggests, entrustment or property is an essential requirement before any offense under this section takes place. The language of the section is very wide.

The words used are 'in any manner entrusted with 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" found in Section 405, IPC governs not only the words "with the property" immediately following it but also the words "or with any dominion over the property."

Meaning of Entrustment:

As the title to the offense itself suggests, entrustment of a property is an essential requirement before any offense in this section takes place. The language of this section is very wide. The words used are, 'in any manner entrusted with 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 word entrust is not a term of art. The term 'entrusted' is wide enough to include in its ambit all cases in which property is voluntarily handed over for a specific purpose and is dishonestly disposed of contrary to terms on which possession has been handed over. Entrustment need not be expressed, it can be implied.

In R K Dalmia vs Delhi Administration the Supreme Court held that the word 'property' is used in the Code in a much wider sense than the expression 'moveable 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 offense 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 subject to the acts covered

In Shivnatrayan vs State of Maharashtra, 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[xii] that though every partner has dominion over property by virtue of being a partner, it is not a dominion which satisfies the requirement of s 405, as there is no 'entrustment of dominion, unless there is a special agreement between partners making such entrustment.

Misappropriation:

Dishonest misappropriation is the essence of this section. Dishonesty is as defined in Sec.24 IPC, causing wrongful gain or wrongful loss to a person. The meaning of wrongful gain and wrongful loss is defined in Sec. 23, IPC. In order to constitute an offense, 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 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.

Difference Between Criminal Misappropriation & Criminal Breach of Trust

The Offences of Criminal Misappropriation and Criminal Breach of Trust are given under the head of crime against property in IPC.

Section 403, IPC defines Dishonest misappropriation of property as, "Whoever dishonestly mis-appropriates or converts to his own use any movable property."

Whereas, Section 405,IPC defines Criminal breach of trust as, "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."
Basis of Difference Criminal Misappropriation Criminal Breach of Trust
Provision under IPC,1860 Offence of criminal misappropriation is defined under section 403 of Indian Penal Code, 1860 Offence of Criminal Breach of Trust is  defined under section 405 of  Indian Penal Code,1860
Relationship In misappropriation, there is no contractual relationship But in Criminal Breach of Trust, there is a contractual relationship  of the offender regarding the property.
Possession In misappropriation, the property is obtained by some casualty or otherwise. In criminal breach of trust, the property is obtained due to the  truest vested by the owner on the  offender.
Misappropriation The property is misappropriated by the offender for his own use. In criminal breach of trust, the property is misappropriated for his own personal use. A breach of trust  includes criminal misappropriation,  but the converse is not always true.
Nature of Property In, Criminal misappropriation the property is always movable in nature. Whereas, in criminal breach of trust,  the nature of property can either  be movable or immovable
Punishment Offence of Criminal Misappropriation is punishable with imprisonment of either description for a term which may extent to 2 years or with fine, or with both (Sec.403,IPC) Offence of Criminal Breach of Trust  is punishable with imprisonment  of either description for a term which  may extent to 2 years or with fine,  or with both (Sec.406,IPC)

Criminal Breach Of Trust By A Public Servant, Banker, Merchant Or Agent

As already seen in the previous sections, the acts of misappropriation or breach of trust done by strangers is treated less harshly than acts of misappropriation or breach of trust who enjoy special trust and are also in a position to be privy to a lot of information or authority or on account of the status enjoyed by them, say as in case of a public servant.

That is why Sections 407 & 408 provide for enhanced punishment of punishment up to seven years in case of commission of offence of criminal breach of trust by persons entrusted with property as a carrier or warehouse-keeper.In respect of public servants a more stringent punishment of life imprisonment or imprisonment up to ten years with fine provided. This is because of the special status and the trust which a public servant enjoys in the eyes of public as a representative of the government or government-owned enterprises.

The persons having fiduciary relationship between themselves have a greater responsibility for honesty as they have more control over the property entrusted to them, due to their social relationship. A mere carelessness to observe the rules of treasury ipso facto cannot make one guilty of criminal breach of trust.

There must be something more than carelessness, i.e., there should be dishonest intention to keep the government out of moneys. Where under the rules, a public servant is required to lodge in the treasury any government by the registers in his hands and the public servant removes the excess from the office cash book, he is guilty of misappropriation.

Moneys paid to Post Master for money order are public money; as soon as they are paid they cease to be the property of the remitters and misappropriation of such moneys will fall under this section. It is not necessary under the section that the property in respect of which the offense is committed must be shown to the property of the State.

Under section 409 of IPC, the entrustment of property or dominion should be in the capacity of accused as a public servant or in the way of his business as a banker, broker or merchant etc. The entrustment should have the nexus to the office held by the public servant as a public servant. Only then this section will apply.

In Superintendent and Remembrancer of Legal Affairs v SK Roy, the accused, a public servant in his capacity in Pakistan unit of Hindustan Co-operative Insurance Society in Calcutta which was a unit of LIC, although not authorized to do so directly realized premiums in cash of some Pakistani policyholders and misappropriated the amounts after making false entries in the relevant registers.

To constitute an offense of Criminal Breach of trust by a public servant punishable under Section 409 IPC, the acquisition of dominion or control over the property must also be in the capacity of a public servant. The question before the court was whether the taking of money directly from policyholders, which was admittedly unauthorized, would amount to acting in his capacity as a public servant.

The Supreme Court held that it is the ostensible or apparent scope of a public servant's authority when receiving the property that has to be taken into consideration. The public may not be aware of the technical limitations of the powers of the public servants, under some technical limitations of the powers of the public servants, under some internal rules of the department or office concerned.

It is the use made by the public servant of his actual official capacity, which determines whether there is sufficient nexus or connection between the acts complained of and the official capacity so as to bring the act within the scope of the section. So in case, it was held that the accused was guilty of an offense under s 409.

In order to sustain the conviction under Section 409, it is required to prove:
  • Entrustment of a property of which accused is duty bound to account for;
  • Commission of Criminal Breach of Trust.

The prosecution dealing with cases of criminal breach of trust by a public servant is required to prove not only that the accused was a public servant but also was in a capacity entrusted with property or with domination over the same and he committed breach of trust in respect of that property.

It is not necessary that the property entrusted to a public servant should be of government. But what is important is that the property should have been entrusted to a person in his capacity as a public servant.

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