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criminal breach of trust -2 illustrative cases

TRUST definition : -

Section 3 in The Indian Trusts Act, 1882

A “trust” is an obligation annexed to the ownership of property, and arising out of a confidence reposed in and accepted by the owner, or declared and accepted by him, for the benefit of another, or of another and the owner.

In Akharbhai Nazorali v. Md. Hussain Bhai(AIR 1961 M. P. 37:) the Madhya Pradesh High Court made the following observations:

"It may be that the deduction and retention of the employees' contribution is a trust created by virtue of that very fact, or by virtue of a provision in statute or statutory rule. But even apart from the latter, the mere fact of telling the employees that it is their contribution to the provident fund scheme and then making a deduction or recovery and retaining it, constitutes the offence of criminal breach of trust. This is so obvious that nothing more need be said about it."

These observations were fully endorsed and approved by Apex Court in Harihar Prasad Dubey v. Tulsi Das Mundhra & Ors.(AIR 1981 SC 92 - where the following observations were made:

"This, in our opinion, is a correct statement of the position and we also agree with the learned Judge of the Madhya Pradesh High Court that "this so obvious that nothing more need be said about it We, therefore, think that the impugned order quashing the charge against the respondents is obviously wrong." In Basudeb Patra v. Kanai Lal Haldar(3) the Calcutta High Court observed thus:

"Whereas the illustration to s. 405 show equally clearly that the property comes into.

In State of Gujarat v. Jaswantlal Nathalal it is observed:

"Before there can be any entrustment there must be a trust meaning thereby an obligation annexed to the owner ship of property and a confidence reposed in and accepted by the owner or declared and accepted by him for the benefit of another or of another and the owner. But that does not mean that such an entrustment need conform to all the technicalities of the law of trust - see Jaswantrai Manilal Akhaney v. State of Bombay [1956] SCR 483, 498-500. 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 anther, 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."

In Sushil Kumar Gupta v. Joy Shankar Bhattacharyya - it is observed:

"The offence of criminal breach of trust is committed when a person who is entrusted in any manner with property or with dominion over it, dishonestly misappropriates it, or converts it to his own use, or dishonestly uses it or disposes it of, in violation of any direction of law prescribing the mode in which the trust is to be discharged, or of any lawful contract, express or implied, made by him touching such discharge, or wilfully suffers any other person so to do."

In Superintendent Remembrancer of Legal Affairs, West Bengal v. S.K. Roy, it is observed:

"There are, however, 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 the obligation created.

in Jaswantrai Manilal Akhaney v. State of Bombay, (A. I. R. 1956 S. C. , 575) may be seen. In that case two financial institutions a co-operative Bank and an Exchange bank were involved in a transaction. The Co-operative Bank had entrusted the Exchange Bank with some securities to keep them as securities for overdrafts that may be taken by the Cooperative Bank. Alleging Criminal breach of trust of the said securities the Exchange Bank was prosecuted. As to who was liable to be proceeded against in such a situation was considered by the Supreme Court in Jas- Wantrai's case at Sub-para (3) of para-13 which reads thus: "the entrustment was to. the Exchange Bank itself. But, it being a non-natural person, its business had to be transacted by someone who was authorised to do so on its behalf. The appellant held the power of attorney on behalf of the directors of the Bank to transact business on behalf of the bank. In that capacity the appellant had dominion over the securities. Hence the appellant can be said either to have been entrusted with the property in a derivative sense or to have dominion over the securities as a banker. "

In Superintendent and Remembrancer of Legal Affairs, W.B. v. S.K. Roy, [(1974) 4 SCC 230], this Court held:

"12. To constitute an offence under Section 409 IPC, it is not required that misappropriation must necessarily take place after the creation of a legally correct entrustment or dominion over property.

The entrustment may arise in any manner whatsoever. That manner may or may not involve fraudulent conduct of the accused. Section 409 IPC, covers dishonest misappropriation in both types of cases; that is to say, those where the receipt of property is itself fraudulent or improper and those where the public servant misappropriates what may have been quite properly and innocently received. All that is required is what may be described as entrustment or acquisition of dominion over property in the capacity of a public, servant who, as a result of it, becomes charged with a duty to act in a particular way, or, atleast honestly."

Superintendent & Rememberancer ... vs S. K. Roy 1974 AIR 794

Ordinarily, it is the ostensible or apparent scope of public servant's authority when receiving property and not its technical limitations, under some internal rules of the department or office concerned, and the use made by the servant of his actual official capacity which would, in our opinion, determine whether there is a sufficient nexus or connection between the acts complained of and the official capacity so as to bring within the ambit of section 409 Indian Penal Code.

Supreme Court of India

R. K. Dalmia vs Delhi Administration on 5 April, 1962

In Palmer's Company Law, 20th Edition, is stated at page 517 "Directors are not only agents but they are in some sense and to some extent trustees or in the position of trustees."

Directors are called trustees. They are no doubt trustees of assets which have come into their hands, or which are under their control. They are trustees of the company's money and property-agents in the transactions which they enter into on behalf of the company.

What s. 409 I.P.C. requires is that the person alleged to have committed criminal breach of trust with respect to any property be entrusted with that property or with dominion over that property in the way of his business as an agent. The expression in the way of his business' means that the property is entrusted to him in the ordinary course of his duty or habitual occupation or profession or trade'. He should get the entrustment or dominion in his capacity as agent. In other words, the requirements of this section would be satisfied if the person be an agent of another and that other person entrusts him with property or with any dominion over that property in the course of his duties as an agent. A person may be an agent of another for some purpose and if he is entrusted with property not in connection with that purpose but for another purpose, that entrustment will not be entrustment for the purposes of S. 409 I.P.C. if any breach of trust is committed by that person.the criminal breach of trust by the agent a graver offence than any of the offences mentioned is ss. 406 to 408 I.P.C. The criminal breach of trust by an agent would be a graver offence only when he is entrusted with property not only in his capacity as an agent but also in connection with his duties as an agent.

Supreme Court of India

Anil Saran vs The State Of Bihar And Another on 24 August, 1995

Until the firm is dissolved as per law and the accounts settled, all the partners have dominion in common over the property and funds of the firm. Only after the settlement of accounts and allotment of respective share, the partner becomes owner of his share. However, criminal breach of trust under s.406 is not in respect of the property belonging to the partnership firm, but is an offence committed by a person in respect of the property which has been specially entrusted to such a person under a special contract and he holds that property in fiduciary capacity under special contract. If he misappropriates the same, it is an offence.

Supreme Court of India

Vishwa Nath vs State Of Jammu & Kashmir on 5 January, 1983

the accused had put to personal use the Government money entrusted to him, instead of depositing the same in the proper place. The fact that the accused refunded the amount when the act of his defalcation came to be discovered, does not absolve him of the offence committed by him. The accused happened be a public servant of the Police Department and was posted as Naib-Courty. He was entrusted with the amount seized and with criminal intention he had not made any entry of the money in Rahdari Rejster, while he made its entry in the Malkhana Register No. 1, so that his misappropriation of the amount might not be detected by anybody. He committed criminal breach of trust with respect to this money over which he had complete dominion by putting the same to his use between 7th February, 1972 to 8th August, 1972. The refund of the amount after detection does not absolve him of the offence.

Delhi High Court

J.R.D. Tata vs Payal Kumar And Anr. on 5 March, 1986

Evidently a breach of contract of pledge by the pledger or pawnee will in the normal course give rise to a civil liability alone but as shall be presently seen, there may be circumstances where the alleged breach is so grave and want on that it may warrant an interfere of dishonest or fraudulent intention on the part of the pledgee in disposing of the pledged goods. In other words, every offence of criminal breach of trust involves a civil wrong in respect of which the complainant may seek redress in a civil court but every breach of trust in the absence of requisite means read is not criminal. As observed by the Supreme Court in Jaswantrai Manilal Akhaney v. The State of Bombay. : "THE same set of facts may give rise both to a civil liability and a criminal prosecution. But if there is no means rea, or if the other essential ingredients of an offence are lacking, the same facts may not sustain a criminal prosecution, though a civil action may lie".Thus, the fundamental core of the offence of criminal breach of trust is that a property must be entrusted and the dominion of the property hould be given to the trustee which carries with it the implication that the perion handing over any property 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.

(Remember in In Jaswantrai Manilal Akhaney (Supra) the facts were that under the contract entered into by the pledger Bank with the pledgee Bank, the securities owned by the pledger were to be kept by the pledgee Bank charged with the payment of an amount up to a certain limit as may from time to time have been advanced or be advanced to the pledger Bank under the overdraft arrangement. However, the pledgee Bank bad no right to deal with the securities by way of pledge, sub-pledge or assignment until certain contingencies contemplated in the contract bad arisen. The Supreme Court held that the. contract did create a trust in favor of the pledger Bank in respect of pledged securities. Apex Court observed that : "When Section 405 which defines "criminal breach, of trust" speaks of a person being in any manner entrusted with property, it does not contemplate the creation of a trust with all the technicalities of the law of trust. It contemplates the creation of a relationship whereby the owner of property makes it over to another person to be retained by him until a certain congency arises or to be disposed of by him on the happening of a certain event. The person who transfers possession of the property to the second party still remains the legal owner of the property and the person in whose favor possession is so transferred has only the custody of the property to be kept or disposed of by him for the benefit of the other party, the person so put in possession only obtaining: a special interest by way of a claim for money advanced or spent upon the safe keeping of the thing or such other incidental expenses as may have been incurred by him." Their Lordships further observed that : "WHEREsecurities have been delivered with a view to cover the repayment of any overdraft by the pledger Bank to the pledgee Bank and it is agreed that they are to be disposed of on the arising of a stipulated contingency only, then by the very fact of the delivery of the securities to the bailee the latter becomes a trustee in terms of the contract, not for all purposes, but only for the limited purpose indicated by the agreement between the parties." )


Post master keeps money with himself and makes no official entry in record. He is guilty of criminal breach of trust.

A pawnee who dishonestly disposes off the thing pledged in a manner not justified by the terms of the pledge is guilty of criminal breach of trust.

Where a printer entrusted with certain blocks by the complainant to print his catalogue and printer uses the blocks to print catalogue of rival firm , he is guilty of criminal breach of trust.

Inspector of water works whose duty is to supervise and check distribution of water from municipal water corporation , is said to have dominion over property and if he uses such water for his own benefit or for benefit for his tenants without paying taxes and gives no information to his employer , he is guilty of criminal breach of trust.

A traffic assistant in Indian Airlines corporation , demanded on behalf of the corporation certain excess amounts for trunk charges from passengers for reservation of seats. After amounts are received ,he passed receipts on behalf of the corporation . He , however , subsequently falsified the counter foil receipts , and fraudulently misappropriated the excess amounts . He was held liable for criminal breach of trust.

Supreme Court of India

R. Venkatakrishnan vs Central Bureau Of Investigation on 7 August, 2009

Criminal breach of trust by a Public servant is dealt with under s. 409.

"409. 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 of life, or with imprisonment of either description for a term which may extend to ten years, and shall also be liable to fine."

This section classes together public servants, bankers, merchants, factors, brokers, attorneys and agents. The duties of such persons are of a highly confidential character, involving great powers of control, over the property entrusted to them and a breach of trust by such persons may often induce serious public and private calamity. High morality is expected of these persons. They are to discharge their duties honestly.

The following are the essential ingredients of the offence under this section :

1) The accused must be a public servant;

2) He must have been entrusted , in such capacity with the property ;

3) He must have committed breach of trust in respect of such property. I

To constitute an offence of criminal breach of trust, there must be an entrustment, there must be misappropriation or conversion to one's own use, or use in violation of legal direction or of any legal contract: and the misappropriation or conversion or disposal must be with a dishonest intention. When a person allows others to misappropriate the money entrusted to him that amounts to a criminal appropriation of trust as defined by Section 405. The section relatable to property in a positive part and a negative part. The positive part deals with criminal misappropriation or conversion of the property and the negative part consists of dishonestly using or disposing of the property in violation of any direction and of law or any contract touching the discharge of trust."

In Raghunath Anant Govilkar Vs. State of Maharashtra and Ors, [2008 (2) SCALE 303] the court noted that Section 406 which provides the punishment for criminal breach of trust simplicitor and 409 of IPC are cognate offences in which the common component is criminal breach of trust. When an offence punishable under under Section 406 is committed by a public servant (or holding any one other of the positions listed in the Section) the offence would escalate to Section 409 of the Penal Code.

Supreme Court of India

Som Narth Puri vs The State Of Rajasthan on 15 February, 1972

Section 405 merely provides, whoever being in any manner entrusted with property or with any dominion over the property, as the first ingredient of the criminal breach of trust. The words 'in any manner' in the context are significant. The section does not provide that the entrustment of property should be by someone or the amount recieved must be the property of the person on whose behalf it is received. As long as the accused is given possession of property for a specific purpose or to, deal with it in a particular manner, the ownership being in some person other than the accused, he can be said to be entrusted with that property to be applied in accordance with the terms of entrustment and for the benefit of the owner. The expression 'entrusted' in section 409 is used in a wide sense and includes all cases in which property is voluntarily handed over for a specific purpose and is dishonestly disposed of contrary to the terms on which possession has been handed over. It may be that a person to whom the property is handed over may be an agent of the person to whom it is entrusted or to whom it may belong in which case if the agent who comes into possession of it on behalf of his principal, fraudulently misappropriates the property, he is nonetheless guilty of criminal breach of trust because as an agent he is entrusted with it. A person authorized to collect moneys on behalf of another is entrusted with the money when the amounts are paid to him, and though the person paying may no longer have any proprietary interest nonetheless the person on whose behalf it was collected becomes the owner as soon as the amount is handed over to the person so authorized to collect .

Supreme Court of India

V.S. Achuthanandan vs R. Balakrishna Pillai & Ors on 10 February, 2011

(Accused 1 was the Minister for Electricity, Government of Kerala)

The analysis of the materials placed by the prosecution, the plea of defence by the accused, the decision of the Special Court and the reasoning of the High Court, Apex court was satisfied that the prosecution has established the following aspects insofar as the accused (Accused1), (Accused 3) and (Accused 6) are concerned:-

a) By awarding both the works of Idamalayar at a very high and exorbitant rate with special conditions having heavy financial implications.

b) By reducing the retention and security amount.

c) By allowing the contractor to return only fifty per cent of the empty cement bags.

Having arrived at such conclusion, it was of the view that the High Court failed to appreciate in its proper sense the materials placed by the prosecution and brushed aside several important items of evidence adduced by the prosecution. The accused persons have abused their official positions and are right fully convicted.

Supreme Court of India

Jaikrishnadas Manohardasdesai ... vs The State Of Bombay on 16 March, 1960

The first appellant was the Managing Director and the second appellant a Director and technical expert of a cloth dyeing concern known as Parikh Dyeing and Printing Mills Ltd. The

company entered into a contract with the Textile Commissioner undertaking to dye a large quantity of cloth which was supplied to the company for that purpose. In

pursuance of the contract certain quantity of cloth was dyed and delivered to the Textile Commissioner by the company but it failed to dye and deliver the balance of cloth which

remained in its possession and was not returned to the Textile Commissioner in spite of repeated demands. Ultimately the two appellants were prosecuted for criminal

breach of trust under S. 409 read with S. 34 of the Indian Penal Code and were convicted for the same in a trial by jury.

APEX COURT HELD - "Direct evidence to establish misappropriation of the cloth over which the appellants had dominion is undoubtedly lacking, but to establish a charge of criminal breach of trust, the prosecution is not obliged to prove the precise mode of conversion, misappropriation or misapplication by the accused of the property entrusted to him or over which he has dominion. The principal ingredient of the offence being dishonest misappropriation or conversion which may not ordinarily be a matter of direct proof, entrustment of property and failure in breach of an obligation to account for the property entrusted, if proved, may in the light of other circumstances, justifiably lead to an inference of dishonest misappropriation or conversion. Conviction of a person for the offence of criminal breach of trust may not, in all cases, be founded merely on his failure to account for the property entrusted to him, or over which he has dominion, even when a duty to account is imposed upon him, but where he is unable to account or renders an explanation for his failure to account which is untrue, an inference of misappropriation with dishonest intent may readily be made.

The two appellants were liable to account for the cloth over which they had dominion and. they failed to account for the same and therefore each had committed the offence of criminal breach of trust.In such a case, if accused Nos. 1 and 2 (Appellants 1 & 2) alone were concerned with the receipt of the goods, if they were dealing with the goods all the time, if they were receiving communications from the Textile Commissioner's office and sending replies, to them, and if the part played by each of them is apparent from the manner in which they are shown to have dealt with this contract, then it is a case of two persons entrusted with the goods and a breach of trust obviously being committed by both of them'.

Supreme Court of India

Chelloor Mankkal Narayan ... vs State Of Travancore-Cochin on 10 November, 1952

Bench: M. Patanjali Cji, B. K. Mukherjea, S. R. Das, V. Bose, G. Hassan

The appellant and accused No. 2 Ramachandra Iyer were appointed joint receivers of a textile business, known as Sitaram Spinning and Weaving Mills Limited . Appellant was to enter fresh agreements with other person which in their opinion would best serve the interest of the mills. The appellant agreed to sell P.W. 1 , 100 bales of goods produced by the mills on condition of receiving a premium of 23,100 Rs over and above the sale price . The amount was neither remitted to credit of company nor brought to company's accounts.

Court held - "It follows almost axiomatically from this definition that the ownership or beneficial interest in the property in respect of which criminal breach of trust is alleged to have been committed, must be in some person other than the accused and the latter must hold it on account of some person or in some way for his benefit. In the case before us, it is not disputed that if the sum of Rs. 23,100 was paid by P. W. 1 to the appellant by way of illegal gratification to induce the latter to make an allotment of cloth in his favour, there could be no question of entrustment in such payment. The payee would then receive the money on his own behalf and not on behalf of or in trust for anybody else. The criminality of an act of this character would consist in illegal receipt of the money and the question of subsequent misappropriation or conversion of the same would not arise at all.

On the other hand, if the money was paid by P. W. 1 as an extra price for the bales of cloth which he was allowed to purchase and the accused received it on behalf of or as agent of the mills, the money would, strictly speaking, be the property of the mills, and if the accused in violation of his legal duties appropriated such money to himself without bringing it into the mills' accounts, there is no doubt that he would be guilty of criminal breach of trust. The question for determination is, whether the money was given by P. W. 1 to the accused for and on behalf of the mills or was it given to him personally as a motive and reward for showing him some favour? In both these letters P. W. 1 says that the appellant promised to give him 100 bales of Sitaram piece goods in return for which he was to pay the accused a secret profit of Rs. 10,000. This indicates that the money was intended to be paid to the accused as his own personal profit and it was not an item of additional or extra price for the goods purchased, which was demanded by or paid to the accused on behalf of the mills

The subject of criminal breach of trust, as stated in the charge, was a sum of Rs. 23,100 and the definite allegation against the accused was that he and his co-receiver functioning as public servants neither remitted this amount to the credit of the company, nor brought it to the company's accounts, but dishonestly misappropriated the same with the intention of causing illegal loss to the company and illegal gain to themselves. No doubt the charge, which we have set out in the beginning, refers to the two accused having custody of the company's goods, but the charge nowhere indicates that the offence consisted in wrongful use or disposal of these goods in violation or any direction of law, and it was not stated also what these directions of law were.

In our opinion, it would not be proper to make an order for retrial in this case. In the first place, the charge of accepting illegal gratification upon which alone any retrial could be ordered, was definitely abandoned by the prosecution at the time of the trial. In the second place, the accused has fully served out the sentence of imprisonment during the period that the appeal was pending in this court and a further trial would not be proper in the interests of justice. We, therefore, allow the appeal and set aside the order of the High Court and direct that the accused be acquitted. The fine if paid, should be refunded to him."

Allahabad High Court

Gurmez Singh vs State Of Uttar Pradesh And Anr. on 3 February, 1989

Facts - In the instant case a First Information Report was lodged on 20-11-87 at Police Station Sungarhi by the complainant Daljit Singh (Opp. Party 2 in the instant petition), who was one of the partners of National Financing Company in which, it was clearly alleged that the truck was surrendered to the complainant by Gurmez Singh on 24-5-87 out of his own free-will owing to his inability to pay regular instalments in accordance with terms agreed between the Company and the accused. The truck had been surrendered to the complainant - in a most rickety and bad condition. Thereafter, the truck was given for repairs to Balbir repairs to Balbir Singh, a partner of the aforesaid National Financing Company. After the truck had been completely repaired and rennovated and while it was stationed at the painter's shop at bye-pass road, applicant Gurmez Singh arrived there at about 3-30 p.m. on 20-11-87 and on the pretext of taking a trial of the vehicle and by taking key from Balbir Singh, another partner of the National financing Company, he sped away the vehicle and when he did not return for quite sometime a search was made and ultimately a report was lodged the same day at Police Station Sungarhi by Daljeet Singh whereupon a case under Sections 406/420, I.P.C. was registered against the applicant. The Police during investigation found the truck abandoned on the road side near Bareilly road ahead of Jahanabad tri-junction, which the police seized and on concluding the investigation, the police submitted charge-sheet against the applicant Gurmez Singh under Sections 406/420, I.P.C.

Contention raised - Criminal case is to be quashed as its a case of civil liablity .

High court held - "The case against the applicant under Sections 406/420, I.P.C. is liable to be adjudicated upon by Criminal Court inasmuch as the facts of the present case stand on a quite different footing than the facts disclosed in the case ,the application under Section 482, Cr. P.C. preferred by Gurmez Singh, applicant, is rejected as devoid of merit. The Judicial Magistrate concerned is directed to decide the case within three months from today in accordance with law without being prejudiced by the observations made in the body of the judgment."

Supreme Court of India

Inder Sain vs State Of Punjab on 4 May, 1973

The appellant was working as an Assistant Accountant with the Company, namely, M/s. Crompton Greaves Limited (for short "the company") in its Branch Office at Jullundur during the relevant period. The said Company deals in the supply and sale of foreign products such as transformers, switch gears etc. The appellant, being Assistant Accountant, was in overall in-charge of the Accounts Department and was responsible for credit control. He also used to maintain all the account books required under the Companies Act. The procedure for supply of goods was that when customers and dealers placed orders, challans of which were to be prepared by the Sales Department and they were sent to the Assistant Accountant for the purpose of credit control. He was to ensure that in case the challans were against payment, the payment had been received and recorded in the books of account. Otherwise, he was to ensure that documents were sent through' bank as per the credit policy of the Company. Admittedly, the challans were initialled by the appellant. The same were then sent to the godown for despatch of the goods to the transport company. The record of the goods which were received from the Head Office or from other suppliers was maintained by the godown people while the record of sales was maintained by the Assistant Accountant. He was to decide finally for effecting despatches of the supply of the goods to the customers and dealers. The payments were received through bank in cash from the customers and dealers. Some time cash also used to be collected personally from the customers by some representatives of the Company or the Assistant Accountant.

M/s. S. B. Saini Brothers, Ludhiana (for short 'the Firm') was one of the dealers of the Company. They used to make regular purchases of all kinds of products of the Company and some times on credit. The Company had been sending an account to the Firm. During the process of reconciliation of the Company's account with the Firm, it was revealed that a number of recoveries had been made by the appellant on behalf of the Company and the amounts so collected by him were not credited in the account of the said Firm maintained with the Company. P.W. 3 conducted an enquiry and sent a complaint to the Superintendent of Police for registration of a case against the appellant. ' On its basis a F.I.R. was registered and the investigation commenced.

APEX COURT HELD - ", what the facts establish is that the appellant was entrusted with the receipts and that the amounts received from the dealers had to be credited and if they are not properly accounted for, then responsibility squarely was on him. To that extent, the prosecution, in the instant case, has established the entrustment as well as making false accounts. As to what happened between him and the Firm would not absolve him from the liability." His convinction was accordingly upheld.

(High Court Of Judicature At Allahabad)

Criminal Miscellaneous Case No. 2371 Of 1981 | 26-05-1983

K.L. Sachdeva v. Rakesh Kumar Jain

FACTS : - The opposite party is engaged in publication of books under the name and style of N.J. Publishers, Varanasi. The applicant carries on the business in printing at New Delhi under the name of M/s. Skylark Printers. The allegations of the opposite party in the complaint filed by him on July 31, 1979, in the court of the Chief Judicial Magistrate, Varanasi, giving rise to these proceedings are that he bad asked the applicant to print and bind 1, 100 copies of his publication, namely, Indian Mythology. The opposite party had also told the applicant that the latter was to obtain instructions from M/s. Bhartiya Vidya Prakashan, Delhi Branch, New Delhi, who are the sole distributor and agent for and on behalf of the opposite party. The prints were to be handed over to the said distributor at New Delhi. The applicant, it was further alleged, handed over 300 copies only upto January 22, 1977, but not the rest despite notice given by the opposite party on January 22, 1977. On September 6, 1978, it is further stated the accused met the opposite party by chance in Varanasi. The complainant asked him for the remaining copies which the accused denied. On February 19, 1981, the Judicial Magistrate II, Varanasi, directed charge to be framed against the applicant for an offence under Section 406, IPC. It was observed that no case was made out for offence under Section 420/427, Penal Code. The charge was framed accordingly against the applicant for offence under Section 406, Penal Code on April 14, 1981. Aggrieved, he filed this application under Section 482, Code of Criminal Procedure, 1973.

COURT HELD - " there does not arise to case of entrustment made to the accused. It is well settled that the property which becomes the subject matter of the criminal breach of trust remains in the ownership of the owner, but is placed in the hands of another who becomes its trustee and on his dishonest misappropriation thereof conversion to his own use or disposal in breach of any direction or law prescribing the mode in which the trust was to be discharged, or of any legal direction, express or implied, made regarding the discharge of such trust, the provisions of Sections 405 and 406 would be attracted, but not otherwise. At best the case put forward by the complainant in the instant case might be considered to be as of breach of contract; the dispute is in essence, it would appear, civil in nature. The sum and substance is that the applicant was required by the opposite party under a contract to print and hand over certain number of copies of the book and in breach of the same, the accused did not make available 800 copies though he passed on 300 copies alright. Taken on its face, this may not constitute an offence under Section 406 of the Penal Code. " (HIGH COURT EXERCISING POWERS UNDER SECTION 482 QUASHED THE CASE.)

Allahabad High Court

C.L. Sagar (Advocate) vs Ms. Mayawati, D/O Sri Prabhu Dayal ... on 24 September, 2002

FACTS - Ms Mayawati, respondent No. 1, was the Vice-President and petitioner was a member of Bahujan Samaj Party at the relevant time. The petitioner lodged a cornplaint bearing No. 5278 of 1997 in the Court of C.J.M., Bareilly against respondent No. 1 and another alleging that on 21-3-1996 respondent No. 1 came to Amla-Bareilly to hold public meeting. The petitioner met her in the circuit-house where she assured him of a party ticket to contest the Assembly election from Faridpur constituency on his paying rupees fifty thousand. He believed her and paid the amount. Subsequently, her Private Secretary R. K. Vidyarthi, the other accused issued him receipt acknowledging payment of the said amount. Respondent No. 1 also nominated him as the District President of Bahujan Samaj Party. On 22-8-1996 she came to Bareilly and demanded further sum of rupees ten thousand, to which the petitioner expressed his inability to pay. On his refusal, she became annoyed and in the public meeting declared to have removed him from Presidentship of the district saying "Bari Lambi Muchhay hai. Bare Imandar Bantey ho. Baeman Kahin Ka." This statement of respondent No. 1, according to the petitioner has harmed his reputation and he is looked down upon by the general public. It is urged, the aforesaid statement made in the public meeting was published in daily newspapers in the heading "Bare Be-abaru hokar teray kuchay say hum niklay". Subsequently , the petitioner lodged the case of criminal breach of trust and also of defamation.

COURT HELD - " In the case on hand, it is not the case of the petitioner that he had entrusted rupees fifty thousand to respondent No. 1 and that she misappropriated the same. Rather his assertion in the complaint is that on being assured of a party ticket to contest the Assembly election, he paid her rupees fifty thousand and in support thereof he relied upon the receipt issued by her Private Secretary, the co-accused. The case of respondent No. 1 is that the petitioner, being the district President of Bahujan Samaj Party, deposited rupees fifty thousand in party's account of General Election, Lok Sabha/Vidhan Sabha, 1996 to meet the election expenses of Faridpur Vidhan Sabha Constituency. The allegation as made in the complaint that on her assurance to provide ticket to contest the Assembly election, he made such deposit, is false and baseless and the same does not find mention in the receipt which he relied upon in support of such allegation. Besides such discrepancies, on facts as alleged in the complaint, no offence under Section 406, I.P.C. is made out against respondent No. 1."


Delhi High Court

R.P. Sablok vs Smt. Kaushalya Devi on 12 March, 1982

the legal relationship of the bank with its customer is of a creditor and a debtor. The amount deposited is not a trust with the bank; money paid to the bank ceases to be the money of the depositor; it becomes the money of the bank with the only stipulation that the sum equal deposited with the bank is to be paid when asked for or in the case of fixed deposit receipt when it becomes due in accordance with the terms agreed upon between the parties and the depositor.

The Bank, therefore, cannot be termed as a trustee. The legal relationship between the depositor and a bank was simply a relationship of creditor and debtor .

Jagroop Singh vs State Of Punjab 1980 CriLJ 68

The prosecution case as set up at the trial was as under:

The petitioner was working as a Sarpanch of village Dirba in the year 1973. On July 3, 1973, Shri Ajaib Singh, Block Development Officer, Sunam (P.W. 1) checked the records of the Gram Panchayat and found Rs. 13,398.68 P. as cash in hand with the petitioner. Similarly, on Jan. 23, 1974, Shri Jatinder Pal, Sub-Divisional Magistrate (P.W. 3) conducted the inquiry and he found Rs. 21,359.21 P. as cash in hand with the petitioner. The petitioner, it is alleged, on both these occasions was asked to deposit the said amounts, which he promised to do so by his written undertakings, which are Exhibits PA and PD. On his failure to do so, the case under Section 409, I.P.C.

Court held - "The petitioner admitted the amount of Rupees 21359.21 P. as the cash in hand with him, but he gave the explanation that the amount in question was not embezzled by him

It may be highlighted that not a single villager had complained against the petitioner. Rather the Members of the Panchayat and the other villagers had come in defence and supported the petitioner's version. The ingredients of misappropriation, , are not (satisfied in the present case. Firstly, the criminal intention to misappropriate the Panchayat's money dishonestly is not proved. Secondly the petitioner had not caused any wrongful loss to the Panchayat or has gained personally by keeping the amount in question with him for spending it for the welfare of the village and the Panchayat in accordance with the wishes of the villagers.The irregularities committed by the petitioner do not come within the mischief of Section 409, I.P.C. It may, at the best, call for some departmental action. Moreover, it was the Panchayat money and the Panchayat is not a complainant in the present case.."


Punjab and Haryana High Court in Balram Singh v. Sukhwant Kaur, 1992 Cri LJ 792 HELD that the offence of criminal breach of trust is a continuing offence. (however, its not entirely laying down the correct law)


Supreme Court of India

State Of Punjab vs Sarwan Singh on 2 April, 1981

Respondent Sarwan Singh was acquitted of the charge under s. 406 of the Indian Penal Code. It appears that the respondent-accused was charged under s. 406 of the Penal Code for misappropriating the amounts deposited with him as a cashier of the Tanda Badha Co-operative Society, District Patiala. The challan was presented against the accused on the 13th October, 1976. The trial court after recording the evidence acquitted the respondent of the charge under s. 408 but convicted the respondent of the charge under s. 406 and sentenced him to rigorous imprisonment for one year and to pay a fine of Rs. 1,000/-. The respondent then filed the appeal to the High Court which allowed the appeal and acquitted the respondent mainly on the ground that the prosecution launched against the respondent was clearly barred by limitation under ss. 468 and 469 of the Code of Criminal Procedure.

Court held - ". The object of the Criminal Procedure Code in putting a bar of limitation on prosecutions was clearly to prevent the parties from filing cases after a long time, as a result of which material evidence may disappear and also to prevent abuse of the process of the court by filing vexatious and belated prosecutions long after the date of the offence. The object which the statutes seek to subserve is clearly in consonance with the concept of fairness of trial as enshrined in Art. 21 of the Constitution of India. It is, therefore, of the utmost importance that any prosecution, whether by the State or a private complainant must abide by the letter of law or take the risk of the prosecution failing on the ground of limitation. The prosecution against the respondent being barred by limitation the conviction as also the sentence of the respondent as also the entire proceedings culminating in the conviction of the respondent herein become non-est. For these reasons given above, we hold that the point of law regarding the applicability of Section 468 of the Code of Criminal Procedure has been correctly decided by the Punjab and Haryana High Court. This Court has also taken the same view in a number of decisions. The result is that the appeal fails and is dismissed. The respondent will now be discharged from his bail bonds."

Calcutta High Court

Dinabandhu Banerjee vs Nandini Mukherjee on 15 June, 1993

"Now let us look to the language of the relevant parts of Section 403 and Section 405 of the Indian Penal Code for ascertaining whether the offence of dishonest misappropriation or for that matter, criminal breach of trust is a continuing offence. Dishonest misappropriation or conversion to one's own use is the crux of the offence of dishonest misappropriation punishable under Section 403, I.P.C. Now, the dictionary meaning of the word 'misappropriate' is 'to put to a wrong use; to take dishonestly for oneself (vide, Chambers Twentieth Century Dictionary).

The dictionary meaning of the word 'appropriate' is 'to make to be the private property of anyone, to take to oneself as one's own' (ibid). It is thus evident that every wrong use will not necessarily be misappropriation. Misappropriation rather marks the point where the transition takes place from non-offending possession, control or use to offending or dishonest possession, control or use. It is this transitional phenomenon and this process of transformation which converts the possession or use of a property to dishonest misappropriation.

Once this transitional phenomenon, that is, the process of transformation is complete and dishonest misappropriation takes place the subsequent wrong user of the property or the continuance of such wrong user is not a part of the phenomenon of misappropriation although such continuance of user or repetition of user may be also morally and legally wrong. But then such subsequent wrong user or continuance of wrong user or retention of the property wrongfully will not be a continuance or repetition of the offence of dishonest misappropriation as defined in Section 403. The same feature of transitional phenomenon of converting the complexion of the possession or user marks the precipitation and completion of the offence of criminal breach of trust as defined in Section 405.

By definition the offence of dishonest misappropriation or for that matter, criminal breach of trust must be tainted at the point of its commission by a process of transformation, by a transitional phenomenon converting the complexion of the possession, user or dealing of the property and once that transitional phenomenon is over and the conversion is complete by answering at that amount the definition of dishonest misappropriation or criminal breach trust as contained in the relevant section of the Indian Penal Code, the subsequent continuance of the possession, user or dealing of the property even if it is morally wrong and legally untenable will be lacking the transitional factor of contemporaneous conversion of the complexion of the user from one type to a different type and therefore it cannot be said that the subsequent user is a continuing offence of the same type which was initially committed in changing the complexion of user.

In order to constitute a continuing offence the acts complained of must at every moment of continuance reflect all the ingredients necessary for constituting the offence. As we have seen conversion or transitional phenomenon of complexional change of the user being one of the salient ingredients of the offence of dishonest misappropriation or for that matter, criminal breach of trust, such transitional phenomenon obviously cannot recur or endure after the conversion or change of complexion of the user is complete. In the circumstances it cannot be said that retention or subsequent dealing of the misappropriated property, although wrong, will constitute any such offence as stated above because the definition of such offence does not make such wrongful subsequent use a continued part or a repetition of the offence. I have therefore no hesitation to hold that the offence of dishonest misappropriation defined in Section 403 or the offence of criminal breach of trust defined in Section 405, I.P.C. is not a continuing offence because such offence, by definition, takes place where an act is committed once and for all".

Shamlal v. state of Punjab , 2001 Cr LJ 2987 (P&H)

Presence of an arbitration clause in the agreement does not bar criminal proceedings under section 406 IPC. Both civil and criminal remedy can be pursued if the facts prove both.

Supreme Court of India

Suryalakshmi Cotton Mills Ltd vs Rajvir Industries Ltd. & Ors on 9 January, 2008

"A cheque being a property, the same was entrusted to the respondents. If the said property has been misappropriated or has been used for a purpose for which the same had not been handed over, a case under Section 406 may be found to have been made out. It may be true that even in a proceeding under Section 138 of the Negotiable Instruments Act, the appellant could raise a defence that the cheques were not meant to be used towards discharge of a lawful liability or a debt, but the same by itself in our opinion would not mean that in an appropriate case, a complaint petition cannot be allowed to be filed."

( dishonour of the cheque is not criminal breach of trust , although proceedings under 138 of Negotiable instruments act can be initiated)


(By the contract of loan, one of the parties delivers to another, either something not consumable so that the latter may use the same for a certain time and return it, in which case the contract is called a commodatum; or money or other consumable thing, upon the condition that the same amount of the same kind and quality shall be paid, in which case the contract is simply called a loan or mutuum.)

Calcutta High Court

Anz Grindlays Bank P.I.C. And Anr. vs Shipping And Clearing (Agents) ... on 15 July, 1991

receipt of deposits and the repayment of the sums deposited to the depositor or their successors-in-title is an essential part of the business of banking. The relation between banker and the customer who pays money into the bank is the ordinary relation of a debtor and creditor with a superadded obligation arising out of the custom of the bankers to honour the customer's drafts. No question of possession of or property in the deposit arises. The obligation is mutuum not commodatum. Once the deposit is made there remains only a debt due from the banker to the customer. Money deposited with a bank is also not trust money which the trustee must preserve and not use; on the contrary it is lent for use and the bank is not a trustee but a debtor to the depositor. The difference between property and possession of deposits does not come in question; the only obligation under which a bank lies is to repay a like sum in the like currency

Now the law is well-settled that when moneys are deposited in a Bank, the relationship that is constituted between the banker and the customer is one of debtor and creditor and not trustee and beneficiary. The banker is entitled to use the moneys without being called upon to account for such user, his only liability being to return the amount in accordance with the terms agreed upon between him and the customer". The Supreme Court, however, qualified that general statement with the remark that "there might be special arrangement under which a banker might be constituted a trustee, but apart from such an arrangement, his position qua banker is that of a debtor and not a trustee" It has, however, been held that though ordinarily a deposit of an amount in the current account of a Bank creates a debt it does not necessarily involve a contract of loan. The question whether a deposit amounts to a loan depends upon the terms of the contract under which the deposit is made.

In Velji Lakhansey and Company v. Dr. Banaji, (1955) 25 Comp Cas 395, the Bombay High Court has thrown further light on the relation between banker and customer by holding that the relation between a banker and its customer is that of a debtor and creditor and any amount due by the banker to the customer in that relationship cannot be claimed by the customer from the bank as a preferential creditor if the bank is wound up. But a customer may give certain specific direction to the bank and constitute the bank his agent. If the bank acts as an agent and not as a debtor, then the agency brings about a fiduciary relationship which lasts until the agency is terminated. Therefore, if the customer were to give directions to the bank that a certain amount must be paid to a certain person, then till that amount is paid pursuant to the directions of the customer, the agency would continue and the bank would hold the amount not as a debtor of the customer but in the capacity of a trustee and the amount would be impressed with a trust.


A brief discussion of the nature, character and concomitants of stridhan. Stridhan which is the absolute property of a married women during coverture. Sir Gooroodas Banerjee in 'Hindu Law of Marriage and Stridhana' while describing the nature of stridhan quoted Katyayana thus:

"Neither the husband, nor the son, nor the father, nor the brother, has power to use or to alien the legal property of a woman. And if any of them shall consume such property against her own consent he shall be compelled to pay its value with interest to her, and shall also pay a fine to the king... Whatever she has put amicably into the hands of her husband afflicted by disease, suffering from disease, or sorely pressed by creditors, he should repay that by his own freewill. "

(P.341) At another place while referring to the nature of a husband's rights over stridhan during coverture, the author referring to Manu says thus:

" .. and by the law as expounded by the commentators of the different schools, the unqualified dominion of the husband is limited to only some descriptions of the wife's property, while as regards the rest he is allowed only a qualified right of use under certain circumstances specifically defined."

(p.340) Similarly, while describing the nature of stridhan generally, which is known as saudayika, the author says thus:

"First, take the case of property obtained by gift. Gifts of affectionate kinderd, which are known by the name saudayika stridhana, constitute a woman's absolute property, which she has at all times independent power to alienate, and over which her husband has only a qualified right, -namely, the right of use in times of distress."

The entire classical text on the subject has been summarised by N.R. Raghavachariar in 'Hindu Law' (5th Edn) at page 533 (section 487) where the following statement is made:

"487. Powers During Coverture.

Saudayika, meaning the gift of affectionate kindred, includes both Yautaka or gifts received at the time of marriage as well as its negative Ayautaka. In respect of such property, whether given by gift or will, she is the absolute owner and can deal with it in any way she likes. She may spend, sell or give it away at her own pleasure by gift or will without reference to her husband and property acquired by it is equally subject to such rights. Ordinarily, the husband has no manner of right or interest in it. But in times of extreme distress, as in famine, illness or imprisonment, or for the performance of indispensable duty the husband can take and utilise it for his personal purposes, though even then he is morally bound to restore it or its value when able to do so. But this right is purely personal to him and cannot be availed of by a holder of a decree against the husband, and if the husband dies with out utilising the property for the liquidation of his debts, his creditors cannot claim to proceed against it in the place of her husband."

To the same effect is Maines' treatise on Hindu Law at page 728. The characteristics of Saudayika have also been spelt out by Mulla's Hindu law at page 168 (section 113) which gives a complete list of the stridhan property of a woman both before and during coverture, which may be extracted thus:

"113. Manu enumerates six kinds of stridhana:

1. Gifts made before the nuptial fire, explained by Katyayana to mean gifts made at the time of marriage before the fire which is the witness of the nuptial (adhyagni).

2. Gifts made at the bridal procession, that is, says Katyayana, while the bride is being led from the residence of her parents to that of her husband (adhyavanhanika)

3. Gifts made in token of love, that is, says Katyayana, those made through affection by her father-in-law and mother-in-law (pritidatta), and those made at time the of her making obeisance at the feet of elders (padavan danika).

4. Gifts made by father.

5. Gifts made by mother.

6. Gifts made by a brother."

It is, therefore, manifest that the position of stridhan of a Hindu married woman's property during coverture is absolutely clear and unambiguous; she is the absolute owner of such property and can deal with it in any manner she likes - she may spend the whole of it or give it away at her own pleasure by gift or will without any reference to her husband. Ordinarily, the husband has no right or interest in it with the sole exception that in times of extreme distress, as in famine illness or the like, the husband can utilise it but he is morally bound to restore it or its value when he is able to do so. It may be further noted that this right is purely personal to the husband and the property so received by him in marriage cannot be proceeded against even in execution of a decree for debt.

In Bhai Sher Jang Singh & Anr. v. Smt. Virinder Kaur the Punjab & Haryana High Court observed thus:

It might be that some of the articles which were presented to her are for the use of both the spouses but the ornaments and things of the like nature are certainly meant for her and her alone. When she makes an allegation in the complaint that either her husband or her parents-in-law had converted to their own use the ornaments forming the part of her stridhan which she had entrusted to them, the Court has to give legal effect to such allegation and to assume that such ornaments had been made the subject matter of criminal breach of trust. It is settled law that even in a criminal complaint the complainant is under no obligation to plead the legal effect of the allegations made. All that is required is that the facts constituting a complaint should be specifically mentioned so that the Court may be able to perform its duty of punishing the accused under the appropriate provision of law if such allegations are made out. Further more, in a case like this a complaint cannot be quashed without giving the aggrieve wife an opportunity of proving that the ornaments had been given to her at the time of her marriage for her use only." (this position of law was approved by Apex Court in Pratibha Rani vs Suraj Kumar & Anr on 12 March, 1985)

In State of Punjab vs. Pritam Chand & Ors. [2009 (2) SCALE 457], it has been held:

"4. Section 406 IPC deals with punishment for criminal breach of trust. In a case under Section 406 the prosecution is required to prove that the accused was entrusted with property or he had dominion over the property and that the accused misappropriated or converted the property to his own use or used or disposed of the property or willfully suffered any person to dispose of the property dishonestly or in violation of any direction of law prescribing the mode in which the entrusted property should be dealt with or any legal contract express or implied which he had entered into relating to carrying out of the trust."

Supreme Court of India

Bhaskar Lal Sharma & Anr vs Monica on 27 July, 2009

A woman's power of disposal, independent of her husband's control, is not confined to saudayika but extends to other properties as well. Devala says: "A woman's maintenance (vritti), ornaments, perquisites (sulka), gains (labha), are her stridhana. She herself has the exclusive right to enjoy it. Her husband has no right to use it except in distress...." In N.R. Raghavachariar's Hindu Law -- Principles and Precedents, (8th Edn.) edited by Prof. S. Venkataraman, one of the renowned Professors of Hindu Law para 468 deals with "Definition of Stridhana". In para 469 dealing with "Sources of acquisition" it is stated that the sources of acquisition of property in a woman's possession are: gifts before marriage, wedding gifts, gifts subsequent to marriage etc. Para 470 deals with "Gifts to a maiden". Para 471 deals with "Wedding gifts" and it is stated therein that properties gifted at the time of marriage to the bride, whether by relations or strangers, either Adhiyagni or Adhyavahanika, are the bride's stridhana. In para 481 at page 426, it is stated that ornaments presented to the bride by her husband or father constitute her Stridhana property. In para 487 dealing with "powers during coverture" it is stated that saudayika meaning the gift of affectionate kindred, includes both Yautaka or gifts received at the time of marriage as well as its negative Ayautaka. In respect of such property, whether given by gift or will she is the absolute owner and can deal with it in any way she likes. She may spend, sell or give it away at her own pleasure.

It is thus clear that the properties gifted to her before the marriage, at the time of marriage or at the time of giving farewell or thereafter are her stridhana properties. It is her absolute property with all rights to dispose at her own pleasure. He has no control over her stridhana property. Husband may use it during the time of his distress but nonetheless he has a moral obligation to restore the same or its value to his wife. Therefore, stridhana property does not become a joint property of the wife and the husband and the husband has no title or independent dominion over the property as owner thereof."

It was furthermore held:

"...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. Entrustment is not necessarily a term of law. It may have different implications in different contexts. In its most general significance, all its imports is handing over the possession for some purpose which may not imply the conferment of any proprietary right therein. The ownership or beneficial interest in the property in respect of which criminal breach of trust is alleged to have been committed, must be in some person other than the accused and the latter must hold it on account of some person or in some way for his benefit...."

The offence of criminal breach of trust as defined in Section 405 of the IPC may be held to have been committed when a person who had been entrusted in any manner with the property or has otherwise dominion over it, dishonestly misappropriates it or converts it to his own use, or dishonestly uses it, or disposes it of, in violation of any direction of law prescribing the mode in which the trust is to be discharged, or of any lawful contract, express or implied, made by him touching such discharge, or willfully suffers any other person so to do.

The essential ingredients for establishing an offence of criminal breach of trust as defined in Section 405 and punishable under Section 406 IPC with sentence for a period up to three years or with fine or with both, are:

(i) entrusting any person with property or with any dominion over property;

(ii) the person entrusted dishonestly misappropriating or converting to his own use that property; or dishonestly using or disposing of that property or wilfully suffering any other person so to do in violation of any direction of law prescribing the mode in which such trust is to be discharged, or of any legal contract made touching the discharge of such trust.

Supreme Court of India

Smt. Rashmi Kumar vs Mahesh Kumar Bhada on 18 December, 1996

In view of the finding that stridhana property is the exclusive property of the wife on proof that she entrusted the property or dominion over the stridhana property to her husband or any other member of the family, there is no need to establish any further special agreement to establish that the property was given to the husband or other member of the family. It is always a question of fact in each case as to how property came to be entrusted to the husband or any other member of the family by the wife when she left the matrimonial home or was driven out therefrom. No absolute or fixed rule of universal application can be laid down in that behalf. It requires to be established by the complainant or the prosecution, depending upon the facts and circumstances of the case, as to how and in what manner the entrustment of the stridhana property or dominion over her stridhana came to be made to the husband or any other member of the family or the accused person, as the case may be.

Supreme Court of India

Harmanpreet Singh Ahluwalia & Ors vs State Of Punjab & Ors on 5 May, 2009

If any dowry has been given, the same would attract the provisions of the special act in preference to the general statute. Furthermore, if any article is given by way of dowry, the question of entrustment thereof for or on behalf of the bride would not arise.

. Criminal breach of trust -2 illustr

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