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Criminal Breach of Trust

Divi Jain - III rd year, NLIU , Bhopal
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Section 405. Criminal breach of trust

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 aim of this paper is to explore how the supreme courts & the high courts ,in their various rulings have incorporated this concept of Live divided my project broadly under 4 categories:
1. What Is Criminal Breach Of Trust.
2. Entrustment
3. Property
4. Criminal Misappropriation

What Is Criminal Breach of Trust
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 defined u/s 403. 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. Entrustment.

As the title to the offence itself suggests, entrustment or 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 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 a 405, IPC governs 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 Jaswantlal Nathalal,
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.

In Jaswant Rai Manilal Akhaney vs State of Bombay,
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,
The accused, a sub-inspector (SI) of police, 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 cannal and hurriedly going towards a field. He appeared to be carrying something in his dhoti folds. The accused searched him and found a bundle containing currency notes. The accused took the bundle 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 SI for a particular purpose and Tika Ram had trusted the accused to return the money once the accused satisfied himself 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 the Supreme Court held that when the wife entrusts 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.

The definition in a 405 does not restrict the property to movables or immoveable alone. 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 s 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 subject to the acts covered by that section. Dominion Over Property

The word 'dominion' connotes control over the property. 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 held29 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.

Explanations (1) and (2) to the section provide that an employer of an establishment who deducts employee's contribution from the wages payable to the employee to the credit of a provident fund or family pension fund or employees state insurance fund, shall be deemed to be entrusted with the amount of the contribution deducted and default in payment will amount of the contribution deducted and default in payment will amount to dishonest use of the amount and hence, will constitute an offence of criminal breach of trust. In Employees State Insurance Corporation vs S K Aggarwal, the Supreme Court held that the definition of principal employer under the Employees State Insurance Act means the owner or occupier. Under the circumstances, in respect of a company, it is the company itself which owns the factory and the directors of the company will not come under the definition of 'employer.' Consequently, the order of the High Court quashing the criminal proceedings initiated u/ss 405 and 406, IPC was upheld by the Supreme Court

Dishonest misappropriations 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 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 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.

Proof of intention, which is always a question of the guilty mind or mens rea of the person, is difficult ot establish by way of direct evidence. In Krishan Kumar V UOI, the accurse was employed as an assistant storekeeper in the Central Tractor Organisation (CTO) at Delhi. Amongst other duties, his duty was the taking of 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 defence 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 to sustain a conviction under this section. Similarly, in Jaikrishnadas Manohardas Desai vs State of Bombay, 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, 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 to warrant conviction under this section.

Hence its 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 position of 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 includes both movable as well as immoveable 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.

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