SECTION 406 IPC - Indian Penal Code - Punishment for criminal breach of trust

DESCRIPTION OF SECTION 406, IPC.

Section 406, Indian Penal Code (“IPC”) prescribes punishment for the offence of ‘criminal breach of trust’. The offence of criminal breach of trust is defined under Section 405, IPC.

In order to understand Section 406, IPC it is important that we first look at Section 405, IPC.

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”.

Explanation 1 — A person, being an employer of an establishment whether exempted under section 17 of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (19 of 1952) or not who deducts the employee’s contribution from the wages payable to the employee for credit to a Provident Fund or Family Pension Fund established by any law for the time being in force, shall be deemed to have been entrusted with the amount of the contribution so deducted by him and if he makes default in the payment of such contribution to the said Fund in violation of the said law, shall be deemed to have dishonestly used the amount of the said contribution in violation of a direction of law as aforesaid.

Explanation 2 — A person, being an employer, who deducts the employees’ contribution from the wages payable to the employee for credit to the Employees’ State Insurance Fund held and administered by the Employees’ State Insurance Corporation established under the Employees’ State Insurance Act, 1948 (34 of 1948), shall be deemed to have been entrusted with the amount of the contribution so deducted by him and if he makes default in the payment of such contribution to the said Fund in violation of the said Act, shall be deemed to have dishonestly used the amount of the said contribution in violation of a direction of law as aforesaid.

Section 406: Punishment for criminal breach of trust

Whoever commits criminal breach of trust shall be punished with imprisonment of either description for a term which may extend to three years, or with fine, or with both.

The crux of Section 406, IPC lies in our understanding of what constitutes ‘criminal breach of trust’ under Section 405, IPC

WHAT IS ‘CRIMINAL BREACH OF TRUST’ UNDER SECTION 405, IPC?

The offence of ‘criminal breach of trust’ is defined under Section 405, IPC.

In order to constitute the offence of criminal breach of trust, it must be established by the prosecution that the accused i.e., the person who is alleged to have committed the offence was entrusted with the property or with dominion/ power over the property of another and that he dishonestly misappropriated it or converted it to his own use or dishonestly disposed it off, in violation of a legal direction or contract. It is important to note that such misappropriation, or conversion or disposal must have been carried out by the accused with a dishonest intention.

The essential ingredients that go into the making of an offence under Section 405, IPC are:

1. That the accused must have been entrusted with property or dominion over property of another;

2. That the accused must have:

• Dishonestly misappropriated or converted to his own use that property,

• Dishonestly used or disposed of that property or wilfully suffered/allowed/permitted any other person to do so, in violation of –
  -any directions of law prescribing the mode in which such trust is to be discharged, or
  -any legal contract made touching upon the discharge of such trust.

So as to understand Section 405, IPC better, let us imagine the following –

• 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 criminal breach of trust.

• A is a warehouse-keeper. Z going on a journey, entrusts his furniture to A, under a contract that it shall be returned on payment of a stipulated sum for warehouse room. A dishonestly sells the goods. A has committed criminal breach of trust.

• A, residing in Calcutta, is agent for Z, residing at Delhi. There is an express or implied contract between A and Z, that all sums remitted by Z to A shall be invested by A, according to Z's direction. Z remits a lakh of rupees to A, with directions to A to invest the same in Company's paper. A dishonestly disobeys the directions and employs the money in his own business. A has committed criminal breach of trust. But if A, not dishonestly but in good faith, believing that it will be more for Z's advantage to hold shares in the Bank of Bengal, disobeys Z's directions, and buys shares in the Bank of Bengal, for Z, instead of buying Company’s paper, here, thought Z should suffer loss, and should be entitled to bring a civil action against A, on account of that loss, yet A, not having acted dishonestly, has not committed criminal breach of trust.

• 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 criminal breach of trust.

• A, a carrier, is entrusted by Z with property to be carried by land or by water. A dishonestly misappropriates the property. A has committed criminal breach of trust.

Entrustment

‘Entrustment’ means that the beneficial interest in the property (subject matter of the offence) was vested in some person other than the accused, and that the accused held that property on behalf of that person in capacity of a trustee.

In other words, a relationship should exist between the transferor-victim and the transferee-accused, either by way of a legal contract or a legal direction, under which the transferor remains the legal owner of the entrusted property and the transferee has only the custody of that property for the benefit of the transferor himself or someone else.

At best, the transferee-accused only gets to receive a limited right to the property entrusted to them, which covers the cost of safekeeping, but never gets to acquire the right to dispose of that property against the terms of the trust.

Misappropriation or conversion to one’s own use

Under Section 405, IPC the accused must have dishonestly misappropriated or converted the property for their own use or to the use of someone else, without the consent of the owner.

‘Misappropriation’ means dishonest appropriation, and use of another person’s property for the sole purpose of capitalising it for one’s own use.

The word ‘appropriate’ means to set apart or assign the property to oneself or to another to the exclusion of the owner.

Dishonest Intention

As per Section 24, IPC, dishonest intention means doing an act with the intention of causing wrongful gain to one person or wrongful loss to another person.

Under Section 405, IPC the accused must have entertained a dishonest intention while committing the offence of criminal breach of trust i.e., the accused must have intended to cause wrongful loss to the person who entrusted him with the property.

Such an act should have been done deliberately, intentionally and not by accident or inadvertence.

WHAT IS ‘PUNISHMENT FOR CRIMINAL BREACH OF TRUST’ UNDER SECTION 406?

Section 406, IPC is the penal provision for the offence of ‘criminal breach of trust’ that has been defined under Section 405, IPC.

When an accused commits the offence of criminal breach of trust as per Section 405, IPC, he would be liable to be punished under Section 406, IPC with imprisonment for a term which may extend to three years, or with fine, or with both.

IS CRIMINAL BREACH OF TRUST THE SAME AS EMBEZZLEMENT?

Criminal breach of trust is similar to embezzlement, which is the misappropriation of funds or assets that have been entrusted to someone for a specific purpose. However, the specific definitions and legal consequences of these offenses can vary depending on the jurisdiction.

ARE THERE OTHER VERSIONS OF THE OFFENCE OF CRIMINAL BREACH OF TRUST?

There are many penal provisions in the IPC which comprise the aggravated versions of the basic offence of ‘criminal breach of trust’ under Section 405, IPC i.e., these are offensive, penal situations which borrow their fundamental criminality from Section 405, IPC and build upon its intensity.

In other words, the base, essential crime is that of ‘criminal breach of trust’ (under Section 405, IPC) which is made further worse by the attendant circumstances that are captured under its aggravated versions, which are:

Section 407, IPC – Criminal breach of trust by carrier, etc.

Whoever, being entrusted with property as a carrier, wharfinger or warehouse-keeper, commits criminal breach of trust in respect of such property, shall be punished with imprisonment of either description for a term which may extend to seven years, and shall also be liable to fine.

Section 408, IPC – Criminal breach of trust by clerk or servant.

Whoever, being a clerk or servant or employed as a clerk or servant, and being in any manner entrusted in such capacity with property, or with any dominion over property, commits criminal breach of trust in respect of that property, shall be punished with imprisonment of either description for a term which may extend to seven years, and shall also be liable to fine.

Section 409, IPC – Criminal breach of trust by public servant, or by banker, merchant or agent.

Whoever, being in any manner entrusted with property, or with any dominion over property in his capacity of a public servant or in the way of his business as a banker, merchant, factor, broker, attorney or agent, commits criminal breach of trust in respect of that property, shall be punished with imprisonment for life, or with imprisonment of either description for a term which may extend to ten years, and shall also be liable to fine