BNS s. 316: Criminal breach of trust

Case

Criminal Appeals Nos. 7 to 9 of 1961

Bench

Raghubar Dayal, S.K. Das, K. Subbarao (judgment by Raghubar Dayal, J.)

Provisions

Indian Penal Code, 1860, s. 405 (criminal breach of trust) (now Bharatiya Nyaya Sanhita, 2023, s. 316(1))
Indian Penal Code, 1860, s. 409 (criminal breach of trust by public servant, banker, merchant or agent) (now Bharatiya Nyaya Sanhita, 2023, s. 316(5))

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Headnote

Criminal breach of trust · IPC s. 405 (BNS s. 316(1)) · IPC s. 409 (BNS s. 316(5)) · Meaning of property · Entrustment with dominion · Agent in the way of business

Held

1. We are of opinion that there is no good reason to restrict the meaning of the word 'property' to movable property only when it is used without any qualification in s. 405 or in other sections of the Indian Penal Code Whether the offence defined in a particular section of the Indian Penal Code can be committed in respect of any particular kind of property will depend not on the interpretation of the word 'property' but on the fact whether that particular kind of property can be subject to the acts covered by that section. [SCR p. 277]
2. One may have dominion over property but may not exercise any power which he could exercise with respect to it. Non-exercise of the power will not make the dominion entrusted to him, nugatory. [SCR p. 281]
3. We are therefore of opinion that Dalmia and Chokhani were entrusted with the dominion over the funds of the Bharat Insurance Company in the Banks. [SCR p. 289]
4. This may be so, but Chokhani [...] dominion over the funds on account of Raghunath Rai's signing blank cheques. The signing of the blank cheques merely facilitated Chokhani's committing breach of trust. [SCR p. 291]
5. 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. [SCR p. 298]
6. 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. [SCR p. 298]

Result

We therefore dismiss these appeals. [SCR p. 404]

Editorial note: subsequent treatment

Editorial note: the Court's reading that 'property' in s. 405 is wider than 'movable property' is cited in Vijay Kumar Ghai v. State of West Bengal (2022).

Case

Criminal Appeal No. 43 of 1963

Bench

J.R. Mudholkar, Raghubar Dayal (judgment by J.R. Mudholkar, J.)

Provisions

Indian Penal Code, 1860, s. 405 and s. 409 (now Bharatiya Nyaya Sanhita, 2023, s. 316(1) and s. 316(5))
Indian Penal Code, 1860, s. 403 (dishonest misappropriation of property) (now Bharatiya Nyaya Sanhita, 2023, s. 314)

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Headnote

Criminal breach of trust · IPC s. 405 (BNS s. 316(1)) · IPC s. 409 (BNS s. 316(5)) · IPC s. 403 (BNS s. 314) · Partner and partnership property · Entrustment of dominion by special agreement

The case, in the Court's words

In this appeal from the judgment of the Bombay High Court the question which falls to be considered is whether a partner can be convicted under s. 409, Indian Penal Code on the ground that his failure to account for monies belonging to the firm in which he was a partner amounts to criminal breach of trust. [SCR p. 430]

Held

1. Upon the plain reading of s. 405, I.P.C. it is obvious that before a person can be said to have committed criminal breach of trust it must be established that he was either entrusted with or entrusted with dominion over [...] which he is said to have converted to his own use or disposed of in violation of any direction of law etc. [SCR p. 433]
2. Every partner has dominion over property by reason of the fact that he is a partner. This is a kind of dominion which every owner of property has over his property. But it is not dominion of this kind which satisfies the requirements of s. 405. In order to establish "entrustment of dominion" over property to an accused person the mere existence of that person's dominion over property is not enough. It must be further shown that his dominion was the result of entrustment. [SCR p. 433]
3. Therefore, as rightly pointed out by Harris C.J., the prosecution must establish that dominion over the assets or a particular asset of the partnership was, by a special agreement between the parties, entrusted to the accused person. If in the absence of such a special agreement a partner receives money belonging to the partnership he cannot be said to have received it in a fiduciary capacity or in other words [...] to have been "entrusted" with dominion over partnership properties. [SCR p. 433]
4. It is obvious that an owner of property, in whichever way he uses his property and with whatever intention will not be liable for [...] 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 [SCR p. 434]
5. If he chooses to use any of them for his own purposes he may be accountable civilly to the other partners. But he does not thereby commit any misappropriation. [SCR p. 435]

Result

in the result we allow the appeal and set aside the conviction and sentence passed against him. [SCR p. 435]

Editorial note: subsequent treatment

Editorial note: the passage on entrustment of dominion was quoted and approved in Pratibha Rani v. Suraj Kumar (1985) and is discussed in Rashmi Kumar v. Mahesh Kumar Bhada (1996).

Case

Criminal Appeal No. 684 of 1982

Bench

Syed Murtaza Fazal Ali, Sabyasachi Mukharji, A. Varadarajan (judgment by Fazal Ali, J. (for himself and Sabyasachi Mukharji, J.); A. Varadarajan, J. dissented)

Provisions

Indian Penal Code, 1860, s. 405 and s. 406 (now Bharatiya Nyaya Sanhita, 2023, s. 316(1) and s. 316(2))
Code of Criminal Procedure, 1973, s. 482 (inherent powers of the High Court)

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Headnote

Criminal breach of trust · IPC s. 405 and s. 406 (BNS s. 316(1), 316(2)) · Entrustment · Stridhan · Civil and criminal remedy together · Quashing of complaint (CrPC s. 482)

Held

1. To this extent, therefore, we overrule this decision and hold that with regard to the stridhan property of a married woman, even if it is placed in the custody of her husband or in-laws they would be deemed to be trustees and bound to return the same if and when demanded by her. The Supreme Court in a large number of cases has held that the fundamental core of the offence of criminal breach of trust. is that a property must be entrusted and the dominion of the property should be given to the trustee. [SCR p. 217]
2. In order to establish " entrustment of dominion" over property to an accused person the mere existence of that person's dominion over property is not enough. It must be further shown that his dominion was the result of entrustment. Therefore, as rightly pointed out by Harris, C.J. the prosecution must establish that dominion over the assets or a particular asset of the partnership was by a special agreement between the parties, entrusted to the accused person. [SCR p. 219]
3. 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. [SCR p. 219]
4. Furthermore, the High Court has gravely erred in holding that the property could only be claimed by filing a properly constituted civil suit or in accordance with the provisions of the Dowry Prohibition Act or the Hindu Marriage Act as the case may be. This proposition, in our opinion, is wholly incorrect [SCR p. 221]
5. It is well settled by a long course of this Court that for the purpose of exercising its power under s. 482 Cr.P.C. to quash a FIR or a complaint the High Court would have to proceed entirely on the basis of the allegations made in the complaint or the documents accompanying the same per se. It has no jurisdiction to examine the correctness or otherwise of the allegations. In case no offence is committed on the allegation and the ingredients of s.405 & 406, I.P.C. are not made out, the High Court would be justified in quashing the proceedings. [SCR p. 223]

Result

We, therefore, allow this appeal, set aside the judgment of the High Court and restore the complaint filed by the appellant and direct that the accused may be summoned, if not already summoned, and put on trial in accordance with law. [SCR p. 225]

Editorial note: subsequent treatment

Editorial note: decided by a majority of 2 to 1 (Varadarajan J. dissented). In Rashmi Kumar v. Mahesh Kumar Bhada (1996) a Bench of three Judges, on a reference, expressed respectful agreement with the majority view and held that it needed no reconsideration; the case is also discussed in Krishna Bhatacharjee v. Sarathi Choudhury (2015) and Maya Gopinathan v. Anoop S.B. (2024).

Case

Criminal Appeal No. 1273 of 2022 (arising out of SLP (Crl) No. 9509 of 2019)

Bench

Dr Dhananjaya Y Chandrachud, A S Bopanna (judgment by Dr Dhananjaya Y Chandrachud, J.)

Provisions

Indian Penal Code, 1860, s. 405 (criminal breach of trust) (now Bharatiya Nyaya Sanhita, 2023, s. 316(1))
Indian Penal Code, 1860, ss. 415 and 420 (cheating) (now Bharatiya Nyaya Sanhita, 2023, s. 318)

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Headnote

Criminal breach of trust · IPC s. 405 (BNS s. 316(1)) · Entrustment · Breach of contract is not breach of trust · Quashing of cognizance

The case, in the Court's words

The issue which presents itself for determination in these proceedings is whether the ingredients of the offences of cheating and criminal breach of trust have been made out on the face of the complaint. [para 10]

Held

1. The offence of criminal breach of trust contains two ingredients: (i) entrusting any person with property, or with any dominion over property; and (ii) the person entrusted dishonestly misappropriates or converts to his own use that property to the detriment of the person who entrusted it. [para 20]
2. The basic requirement to bring home the accusations under Section 405 are the requirements to prove conjointly (1) entrustment, and (2) whether the accused was actuated by the dishonest intention or not misappropriated it or converted it to his own use to the detriment of the persons who entrusted it. As the question of intention is not a matter of direct proof, certain broad tests are envisaged which would generally afford useful guidance in deciding whether in a particular case the accused had mens rea for the crime. [para 21]
3. "Entrustment" of property under Section 405 of the Penal Code, 1860 is pivotal to constitute an offence under this. 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". [para 22]
4. However, an alleged breach of the contractual terms does not ipso facto constitute the offence of the criminal breach of trust without there being a clear case of entrustment. No element of entrustment has been prima facie established based on the facts and circumstances of the present matter. [para 23]

Result

We accordingly allow the appeal and set aside the impugned judgment and order of the High Court dated 12 July 2019. [para 25]

Editorial note: subsequent treatment

Editorial note: the judgment reproduces and applies the passage on entrustment from Vijay Kumar Ghai v. State of West Bengal (2022) and the statement of ingredients in Anwar Chand Sab Nanadikar v. State of Karnataka (2003).

Case

Criminal Appeal arising out of SLP (Criminal) No. 4415 of 2023

Bench

Aniruddha Bose, Sanjay Kumar (judgment by Aniruddha Bose, J.)

Provisions

Indian Penal Code, 1860, ss. 405 and 406 (now Bharatiya Nyaya Sanhita, 2023, s. 316(1) and s. 316(2))

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Headnote

Criminal breach of trust · IPC s. 405 and s. 406 (BNS s. 316(1), 316(2)) · Commercial dispute · Dishonest misappropriation · Quashing of complaint

Held

1. For Section 405 IPC to be attracted, the following have to be established: (a) the accused was entrusted with property, or entrusted with dominion over property; (b) the accused had dishonestly misappropriated or converted to their own use that property, or dishonestly used or disposed of that property or wilfully suffer any other person to do so; and (c) such misappropriation, conversion, use or disposal should be in violation of any direction of law prescribing the mode in which such trust is to be discharged, or of any legal contract which the person has made, touching the discharge of such trust. [para 8]
2. A mere wrong demand or claim would not meet the conditions specified by Section 405IPC in the absence of evidence to establish entrustment, dishonest misappropriation, conversion, use or disposal, which action should be in violation of any direction of law, or legal contract touching the discharge of trust. [para 9]
3. We do not find any material to come to a prima facie finding that there was dishonest misappropriation or conversion of any material for the personal use of the appellant in relation to gas supplying work done by the respondent no.2. The said work was done in course of regular commercial transactions. [para 14]
4. To make out a case of criminal breach of trust, it is not sufficient to show that money has been retained by the appellants. It must also be shown that the appellants dishonestly disposed of the same in some way or dishonestly retained the same. The mere fact that the appellants did not pay the money to the complainant does not amount to criminal breach of trust. [para 15]

Result

We accordingly set aside the impugned judgment and quash the Criminal Complaint Case No.7990 of 2020 as also the summoning order issued on 18.08.2021. The appeal stands allowed in the above terms. [para 21]

Editorial note: subsequent treatment

Editorial note: paras 8, 9 and 15 reproduce passages from Deepak Gaba v. State of Uttar Pradesh (2023) and Binod Kumar v. State of Bihar (2014), which the Court applied.