Abstract

Under the Penal Code a person is held liable if he, dishonestly misappropriates or converts to
his own use any movable property commits this offence. The offence of criminal
misappropriation of property is committed where the initial possession is innocent but the
retention thereof becomes wrongful and fraudulent by a subsequent conversion for his own use.

Property crimes can be classified according to whether they involve violence, fraud, stealth,
destruction, or entrepreneurialism. Violent property crime is defined here as the use of physical
force against a person to take their property; classic examples include robbery and carjacking.
Fraudulent property crime is defined as the use of deception (and not violence) to steal property;
examples include embezzlement and tax evasion. Stealthy property crime is defined as the non-
consensual, nonviolent, and no fraudulent theft of property when the owner is effectively absent;
examples include burglary and auto theft. Destructive property crime is defined as the illicit
damaging or destruction of property; examples include arson and vandalism. Entrepreneurial
property crime is defined as the illegal manufacturing, selling, buying, giving, or receiving of
property. All kinds of property crime—violent, fraudulent, stealthy, destructive, and
entrepreneurial—are quantitative variables that may vary in their rate and magnitude across
time and space. The goal of governments is to reduce such crimes; the goal of scientists is to
document and explain them.

1
Introduction
In any statistical survey of crime, offences against property would find a prominent place. This is
readily understandable, as one of the basic motives behind unlawful conduct is greed which, in the
main, directs itself towards property, the result being that the law-breaker takes or attempts to take
things that do not belong to him. The range of such activity is wide, and although much of it could,
in a broad sense, be described as theft, the Penal Code—wisely, we think,—describes it under ten
sub-heads, namely, theft, extortion, robbery and dacoity, criminal misappropriation of property,
criminal breach of trust, receiving stolen property, cheating, mischief, fraudulent dispositions of
property, and criminal trespass.

The main element common to these offences is 'dishonesty', which the Code describes as 'the
intention of causing wrongful gain to one person or wrongful loss to another', but the manner in
which dishonesty is exercised, is, in different cases, different. Thus, a pickpocket and a cheat, both
dishonestly take another person's property; but while the former does it surreptitiously, the latter
does it openly. Hence the need for these subdivisions, for a clearer understanding of the different
concepts involved. But the prime impetus in this piece of project shall be to focus solely on
offences related to criminal misappropriation of property and criminal breach of trust in Indian
law.

Although crimes against the person such as murder and rape are considered extremely heinous,
crimes against property can cause enormous loss, suffering, and even personal injury or death. In
this section, you review different classifications of nonviolent theft crimes that are called white-
collar crimes when they involve commercial theft. Upcoming sections analyse theft crimes that
involve force or threat, receiving stolen property, and crimes that invade or damage property, such
as burglary and arson.

a cursory glance about entire commentary.

Research Methodology

In this project, the researcher has adopted Doctrinal type of research. Doctrinal research is
essentially a library based study, which means that the materials needed by a researcher may be
available in libraries, archives and other data bases. Various types of books were used to get the

2
Criminal Misappropriation of Property

Section 4031 punishes a person who "dishonestly ' misappropriates or converts to his own
use any movable property". To this rather brief description of the offence, two Explanations
were added. The first merely says that a temporary misappropriation is also misappropriation. The
second Explanation is lengthy, and attempts to express three ideas.

First, a person who finds property which is not then in anybody's possession, does not act
dishonestly, if he takes it in order to keep it for the owner with the idea of restoring it to him.

Secondly, if he knows the owner, or can reasonably find out who the owner, is, and in spite of that,
he converts the property to his own use without attempting to get into touch with the owner and
informing him, then he acts dishonestly.

Thirdly, it is not necessary that the finder should know the identity of the owner; and so long as he
does not honestly believe that the owner cannot be found, his conduct is dishonest.

1
Indian Penal Code, 1860

3
But these ideas could be expressed more briefly, and perhaps more clearly, than the existing
Explanation, which seems to be unnecessarily lengthy and still somewhat incomplete. It may
read:—

"Explanation 2.—It is not dishonest misappropriation for a person who finds property not
in the possession of any other person, to take it for the purpose of protecting it for, or of
restoring it to the owner, but it is such misappropriation if he appropriates it to his own
use,—

(a) when he knows, or has the means of discovering the owner, or

(b) when he does not in good faith believe that the owner cannot be discovered, or

(c) before he has used reasonable means to discover and give notice to the owner, and allowed
a reasonable time for the owner to claim the property."

Illustration (c) to section 403 indicates when one of two joint owners could be regarded as
committing misappropriation of a chattel belonging to both and in the possession of the other. It
says, 'A' and 'B' being joint owners of a horse, 'A' takes the horse out of 'B's possession, intending
to use it. Her+=99+]=/- as 'A' has a right to use the horse, he does not dishonestly misappropriate
it. But if 'A' sells the horse and appropriates the whole proceeds to his use, he is guilty of an offence
under this section."

If 'A' and 'B' were partners and the horse partnership property, and if 'A' sold the horse and
appropriated the proceeds to his own use, the legal situation would be the same and 'A' would be
guilty of the offence. Under the Partnership Act2, "subject to contract between the partners, the
property of the firm shall be held and used by the partners exclusively for the purposes of the
business". The Supreme Court has however held3—

"It is obvious that an owner of property in whichever way he uses his property and with
whatever intention will not be liable for misappropriation, and that would be so even if he
is not the exclusive owner thereof. As already stated, a partner has undefined ownership
along with the other partners over all the assets of the partnership. If he chooses to use any

2
Section 15, Indian Partnership, Act, 1932.
3
Velji Raghavji v. State, (1965) 2 S.C.R. 429, 434.

4
 of them for his own purposes, he may be accountable to the other partners. But he does not
thereby commit any misappropriation."

If this general statement of law were to be applied to every case, the result would be unfortunate,
and dishonest partners, dishonestly dealing with partnership property, would be immune from
punishment. We are confident that the Supreme Court did not intend such a consequence. To
remove the possibility of any misunderstanding on the subject, another illustration expressly
dealing with partners, should be added. While making the position clear, the illustration will
exclude from penal liability cases where the partner has a right to use the property. For example,
the partnership agreement may authorise the partner to appropriate the proceeds but with an
obligation to make adjustment at the end of a specified period. Partnership agreement of this type,
under which the other partners are only "sleeping" partners, are not uncommon.

Thus, it was proposed accordingly that the following illustration be added after illustration (C):—
"A and B are partners in a firm which carries on the business of jewellers. A takes a jewel which
is the property of the firm, intending to show it to a prospective customer. Here, as A has a right
to do so, A does not dishonestly misappropriate. But if A sells the jewel and appropriates the whole
proceeds to his own use, without authority to do so under the Partnership agreement, he is guilty
of an offence under this section."

In contrast with section 403 which specifically refers to "movable property", section 404 refers to
dishonest misappropriation or conversion to own use of "property" in the possession of a person
at the time of his death. The omission of the word "movable" is clearly deliberate, and the Supreme
Court has said so. This view of the matter will be brought out by inserting the word "any" after the
words "to his own use", and before the word "property".

Sec. 404. Dishonest misappropriation of property possessed by deceased person at the time
of his death:

Whoever, dishonestly misappropriates or converts to his own use property, knowing that such
property was in the possession of a deceased person at the time of that person’s decease, and has
not since been in the possession of any person legally entitled to such possession, shall be punished
with imprisonment of either description for a term which may extend to three years and shall also

5
be liable to fine; and if the offender at the time of such person’s decease was employed by him as
a clerk or servant, the imprisonment may extend to seven years.4

Illustration:

Z dies in possession of furniture and money. His servant A, before the money comes into the
possession of any person entitled to such possession dishonestly misappropriates it. A has
committed the offence defined in this Section.

Important Points:

A. Ingredients:

1. The property must be movable property.

2. It must belong to the complainant.

3. The accused must have misappropriated the property or converted it to his own use.

4. The accused did so dishonestly.

B. Dishonestly:

‘Dishonestly’ is one of the essential ingredients of the offence of criminal misappropriation. This
word signifies mens rea of the accused.

Narayan Singh vs. State of M.P. (1986 CrLJ 1481)5

The accused was the Chairman of the Samithi. He collected certain dues from its members
payable to the Government. It was the duty of the Chairman to credit all such amount in
Government Treasury.

He did not remit during the tenure and even after the completion of his period. The Madhya
Pradesh High Court held that the accused was guilty of the offence of criminal misappropriation.

C. Kartick Chandra Mukerjee vs. B.N. Banerji (AIR 1954 Cal. 547)6

4
http://www.legalserviceindia.com/articles/crbt.htm, accessed on 23rd April 2016
5
AIR 1960 SC 889
6
AIR 1998 SC 2676.

6
The accused obtained loan mortgaging his lands to the complainant/Bank. The State acquired that
land under Land Acquisition Act, and paid compensation to the accused.

The Bank prosecuted the accused alleging that the accused criminal misappropriated the bank
amount. The Supreme Court held that the compensation amount legally belonged to the accused,
and he did not commit the offence of criminal misappropriation. It advised that it was a civil debt,
and the complainant had to sue the accused under the Civil Procedure Code, 1908.

E. Partnership Property:

While disposing the case J.G. Patil vs. M.K. Patel (1972 CrLJ 945 Guj.), the Supreme Court held
that a partner cannot be convicted on the allegation of criminal misappropriation in respect of
partnership property.

F. Finder of Goods:

Finder of goods should take appropriate steps to handover the goods to their real owners. He should
not appropriate them as soon as they are found. He may appropriate them after certain reasonable
time and after taking appropriate and reasonable steps taken to find out the real owner. It depends
upon the circumstances and facts of the case. [Refer to Topic “Finder of Goods” in Contract-I &
II Notes.]

G. Section 404 is the aggravated form of Section 403:7

Ingredients of both the Sections are similar, except that the movable property belongs to a
deceased. The object of Sec. 404 is to give protection of property of a deceased, and get transferred
such property to the legal heirs/successors of a deceased in a proper way.

H. Sathi Prasad vs. State of U.P. (AIR 1973 SC 448)

In an occasion of a murder, the accused-police constable was deputed at the dead body. One of the
relatives of the deceased removed ornaments from the body of the deceased. The accused/
constable saw it, and slapped the relative and took those ornaments from him. After enquiry into

7
AIR 1974 SC 794, (1974) CrLJ 678 (SC)

7
the murder case, the constable did not return the ornaments to the heirs of the deceased. The
Supreme Court held that it was an offence under Sec. 404.8

I. Bhopa Sara Bharwad vs. State of Gujarat (1986 CrLJ 518)

While the deceased and accused were going to the outskirts of the village, several eye-witnesses
had seen them, and they also observed that the deceased wore golden ornaments.

In the next day, the body of deceased, without ornaments, was found in a well of outskirts. The
ornaments of the deceased were found on the persons of the accused. The accused were convicted
under Sees. 302, 201,404 read with 34.9

Criminal Breach of Trust

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 willfully suffers any other person so to do, commits criminal
breach of trust.’10

The next five sections (sections 405 to 409) deal with criminal breach of trust. According to the
definition in section 405, it means dishonest misappropriation or conversion to his own use of

8
AIR 1974 SC 794, (1974) CrLJ 678 (SC)
9
AIR 1998 SC 2676.
10
Section 405, Indian Penal Code, 1872.

8
property which has been entrusted to the offender, or dishonest disposal of such property contrary
to any agreement or any direction of law. The definition is, in our opinion, satisfactory, and the
illustrations to that section, which are six in number, bring out the idea clearly.

Criminal Breach of Trust is defined under Section 405 of the Indian Penal Code, 1860. The section
in a nutshell reads 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.

The language of this section has been structured in a manner that it has a wide ambit, however
‘entrustment’ of property is an essential element for an offence to be penalized under S.405 of IPC.

The essential ingredients of the offence 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,

(a) of any direction of law prescribing the mode in which such trust is to be discharged,
or;

(b) of any legal contract made touching the discharge of such trust.

S.409 of the Indian Penal Code defines such breach of trust by public servants or banker, merchants
or agents. In such cases 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.

The author has cited various judgments on cases pertaining to criminal breach of trust. Finally in
conclusion the author is of the opinion that the existing provisions penalizing such offences are
sufficient and needs no amendment. However the need of the hour is to ensure adequate
enforceability.

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What does Criminal Breach of Trust mean?

The offence of criminal breach of trust, as defined under section 405 of IPC, 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. 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.”11

Later an explanation was added to it by an amendment in the year 1973, and was later renumbered
as explanation 1 in the year 1975. In the same year, another explanation was added to it. The
explanations to this section are:

Explanation 112: 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 213: 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’

11
http://www.legalserviceindia.com/articles/crbt.htm, accessed on 23rd April 2016
12
Ins.by Act 40 of 1973, sec 9 (w.e.f 1/11/1973).
13
Ins by Act 33 of 1988, sec 27 (w.e.f. 1/8/1988).

10
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.

Essentials for Criminal Breach of Trust

The essential ingredients of Criminal breach of trust are:

 The accused must be entrusted with property or dominion over it.

 He must have dishonestly misappropriated the property or converted it to his own use or
disposed of it in violation of such trust14.

There are two distinct parts involved in the commission of the offence of criminal breach of trust.
The first consists of the creation of an obligation in relation to the property over which dominion
or control is acquired by the accused. The second is a misappropriation or dealing with the property
dishonestly and contrary to the terms of obligation created.15 The principal ingredients of Criminal
Breach of Trust are thus ‘entrustment’ and ‘dishonest misappropriation’.

Entrustment: As the title to the offence itself suggests, entrustment of a property is an essential
requirement before any offence 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. In common parlance, it embraces
all cases in which a thing handed over by one person to another for specific purpose. The term
‘entrusted’ is wide enough to include in its ambit all cases in which property is voluntarily handed
over for specific purpose and is dishonestly disposed of contrary to terms on which possession has
been handed over.16 Entrustment need not be expressed, it can be implied.17

The definition in a 405 does not restrict the property to movables or immoveable alone. In R K
Dalmia v. Delhi Administration18, the Supreme Court held that the word ‘property’ is used in the

14
JRD Tata v Payal Kumar (1987) CrLJ 447 (Del).
15
Superintendent and Remembrance of Legal Affairs v. SK Roy (1974) 4 SCC 230.
16
Somnath Puri v State of Rajasthan (1972) 1 SCC 63.
17
State of Madhya Pradesh v Pramode Mategaonkar (1965) 2 CrLJ 562 (MP).
18
AIR 1962 SC 1821

11
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 section19.

The word ‘dominion’ connotes control over the property. In Shivnatrayan v. State of
Maharashtra20, 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 held21 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 Aggarwal22, 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.

19
Shivnarayan Joshi v State of Maharashtra AIR 1980 SC 439
20
AIR 1980 SC 439
21
Velji Raghavji Patel v State of Maharashtra AIR 1965 SC 1433.
22
AIR 1998 SC 2676.

12
 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 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 of the person, is difficult to
establish by way of direct evidence. In Krishan Kumar V Union of India23, the accused was
employed as an assistant storekeeper in the Central Tractor Organization (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

23
AIR 1959 SC 1390

13
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 to sustain a conviction under this section. Similarly, in Jaikrishnadas Manohardas
Desai vs State of Bombay24, 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 Bihar25, 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.

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.

24
AIR 1960 SC 889
25
AIR 1973 SC 488

14
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 moneys26. 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 misappropriation27.

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 a misappropriation of such moneys will fall under this
section28. It is not necessary under the section that the property in respect of which the offence is
committed must be shown to 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 Remembrance of Legal Affairs v SK
Roy29, 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 policy holders and misappropriated the amounts after
making false entries in the relevant registers.

To constitute an offence of Criminal Breach of trust by a public servant punishable under s 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 policy

26
Lal Raoji, (1928) 30 Bom. L.R. 624
27
Daya Shanker, (1926) I Luck. 345.
28
Juala Prasad, (1884) 7 All. 174 (F.B.)
29
AIR 1974 SC 794, (1974) CrLJ 678 (SC)

15
holders, 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 offence under s 409.

An employee of the Indian Airlines, who took excess money from the passengers and pocketed
the same by falsifying reports, was held guilty under s 409 and the Prevention of Corruption Act,
194730.

In order to sustain conviction under section 409, it is required to prove:

1. Entrustment of property of which accused is duty bound to account for;

2. Commission of Criminal Breach of Trust31.

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
property32.

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 servant33.

Views of Judges & Courts in Various Cases

30
Somnath Puri v State of Rajasthan AIR 1972 SC 1490.
31
Kailash Kumar Sanwatia v State of Bihar (2003) 7 SCC 399
32
Jiwan Das vs State of Haryana AIR 1999 SC 1301.
33
Sardar Singh v State of Haryana (1977) 1 SCC 463

16
In State of Gujarat vs Jaswantlal Nathalal34, 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 Bombay35, 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 Ram36, 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 canal 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 Bhada37, 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

34
State of Gujarat v Jaswantlal Nathanlal AIR 1968 SC 700.
35
AIR 1956 SC 575.
36
AIR 1961 SC 751.
37
(1997) 2 SCC 397.

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misappropriates or converts to his own use that property, or willfully suffers and other person to
do so, he commits criminal breach of trust. Even failure to handover marriage gifts and ornaments
received from in laws to the wife on being driven out amounts to criminal breach of trust38. Taking
away such gifts and cash offerings from her by in laws also amounts to misappropriation.

Conclusion

Various suggestions were provided by various law commissions in order to amend the laws related
to criminal breach of trust. The most important one being submitted by the Fifth Law Commission:

1. Section 408 (criminal breach of trust by clerk or servant) should be brought in tune with
its proposed s 381 of the IPC so that breach of trust by any employee in respect of his
employer’s property can be brought within purview of section 408.

2. The maximum punishment (of life imprisonment) provided for criminal breach of trust by
public servant etc, should be scaled down to rigorous imprisonment for a term up to
fourteen years.

Hence it’s 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

38
Madhusudan Malhotra v Kishore Chandra Bhandari (1988) SCC (Cr) 854.

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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.

It is submitted that the offence of criminal breach of trust is very much common in today’s world.
It happens during the daily routine of a common man’s life. From offices to the marriage
ceremonies, everywhere its presence can be traced. Not only in the truest sense but also there are
many cases of white collar crimes, where the person without any intention involves in such crimes.
The best way to get rid of such crime is by educating people about the stringent laws regarding
this offence. In case of same by public servant, the laws are more stringent and thus they deter the
public servant to commit such crimes.

In this way this section is satisfactory in itself. The provisions laid down in the Indian Penal
Code are enough to cope up with the problem of Criminal Breach of Trust. The only thing
required is the effective implementation as well as application of law as many of the cases go
unreported and through regular investigations they wouldn’t go unnoticed.

Bibliography

Books
P S A Pillai, CRIMINAL LAW, 12th edition. June 1, 2014, LexisNexis

K.D. Gaur, TEXTBOOK ON INDIAN PENAL CODE, 5th edition. 2015, Universal Law
Publishing

K. D. Gaur, “CRIMINAL LAW: CASES AND MATERIALS”, 6th ed. 2009, LexisNexis
Nagpur.

Website Sources
manupatrafast.in
scconline

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