Section 405 IPC: Criminal Breach of Trust, Section 316 BNS and Case Laws

Section 405 IPC: Definition of 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".

In substance, entrustment or dominion over property must be followed by dishonest misappropriation, conversion, use or disposal contrary to a legal direction or contractual obligation, or wilful permission of such conduct.

Essential ingredients of criminal breach of trust

1. Entrustment or dominion: The accused must have been entrusted with property or have control over it in a legally relevant capacity.
2. Dishonest conduct: Misappropriation, conversion, use or disposal must involve dishonesty; a mere contractual failure or civil dispute is not automatically a criminal offence.
3. Breach of duty: The dishonest dealing must contravene the applicable legal direction or express or implied contract governing the trust, or the accused must wilfully allow another person to do so.

Explanations relating to employee contributions

Explanation 1: Provident fund contributions

- 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: Employees' State Insurance contributions

- 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.

These explanations address employee contributions deducted from wages but not deposited as required by law. The statutory conditions and the relevant period must be considered.

Statutory illustrations under Section 405 IPC

1. 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 appropriate them to his own use. A has committed criminal breach of trust.
2. 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.
3. 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 direction and employs the money in his own business. A has committed criminal breach of trust.
4. But if A, in the last illustration, 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, though 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.
5. 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.
6. 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.

Punishment: IPC Section 406 and BNS Section 316

Under IPC Section 406: Criminal breach of trust was punishable with imprisonment of either description for up to three years, or fine, or both. Section 405 defined the offence but did not itself prescribe this general punishment.

Under BNS Section 316(2): The general punishment is imprisonment of either description for up to five years, or fine, or both. Other subsections of Section 316 prescribe higher punishment for specified categories, including carriers, clerks or servants, and public servants or certain professional fiduciaries.

For conduct before 1 July 2024, the IPC and applicable saving provisions must be examined. A later increase in punishment cannot retrospectively be imposed contrary to Article 20(1) of the Constitution.

Criminal breach of trust and civil disputes

Failure to repay money or perform a contract does not by itself establish criminal breach of trust. Courts examine the nature of entrustment, control over property, dishonest intention, and the alleged diversion of property. Whether the facts also support a civil remedy is a separate question.

The original article referred to Jaswantrai Manilal Akhaney v. State of Bombay, AIR 1956 SC 575, and Ramaswami Nadar v. State of Madras, AIR 1958 SC 56, in discussing entrustment. It also cited State of Kerala v. Padmanabham Nair, 1999 Cri LJ 3696 (SC), concerning prosecution sanction and conspiracy. These references should be read in their full factual and procedural contexts.

Section 405 IPC: Case laws and citations

The following citations are preserved from the original page for legal research. Some are abbreviated or historical and should be verified against the full reported judgments before citation in pleadings.

1. Per Lord Haldane in Lake v. Simmons, 1927 ALJ 487
2. C.M. Narayan AIR SC 478
3. Devakinandan (1958) 60 Bom LR 1413
4. Thakarsi AIR 1949 Nag. 620
5. Pushpa Kumar v. State of Sikkim 1978 Cri. LJ 1379
6. Som Nath v. State of Rajasthan 1972 Cri. LJ 897
7. Kundan Tillumal AIR 1942 Kar. 288
8. Dahyalal Dalpatram (1959) 61 Bom LR 885
9. Bimala Charan Roy (1913) 35 All. 361
10. Kesar Singh 1969 (Cri.) LJ 1595
11. M.G. Mohat v. Shivaputrappa and another 1984 Cri. LJ 969 (Kart.)
12. Anil Saran v. State of Bihar 1996 Cri. LJ 408 (SC)
13. Nirmalabai AIR 1953 Nag. 813
14. Welch's Case (1846) 1 Den 199
15. Adinarayan Iyer (1907) 17 MLJ 413
16. Pratibha Ram v. Suraj Kumar 1985 Cri. LJ 817 SC
17. Kailash Kumar Sanwatia v. State of Bihar 2003 Cri. Lj. 4313 (SC) Keshab
18. Chandra Boral v. Ntya Nand Biswas (1901) 6 CWN 203
19. Okhoy Cooman Shaw  (1874) 13 Beng LR 307
20. R.K. Dalmia v. Delhi Administration AIR 1962 SC 1821
21. Nemchand Parakh AIR 1938 Mad. 639
22. Kedarnath AIR 1965 All. 233
23. Gurumahanty Appalasamy (1894) 1 Weir 464
24. Jage Ram (1951) 4 Punj. 286
25. Shailendra Nath Mitter (1943) 1 Cal 493
26. Khitish Chandra Deb Roy (1924) 51 Cal 796
27. Madho Singh v. Kamala Devi 1992 Cri. LJ 1858 (Bom)
28. Balram Singh v. Sukhwant Kaur 1992 Cri. LJ 792 (P7 H)
29. Employees State Insurance Corporation v. S.K. Aggarwal AIR 1998 SC 2676

Official statutory sources

• India Code: Search the Indian Penal Code, 1860 (Sections 405 and 406)
• India Code: Search the Bharatiya Nyaya Sanhita, 2023 (Section 316)
• Ministry of Home Affairs: Criminal law commencement notifications