Criminal Misappropriation and Criminal Breach of Trust

Meaning

The word “misappropriation” means a dishonest appropriation and use of another’s property for the sole purpose of capitalizing it for one’s own use. Criminal misappropriation text place when the position has come innocently, but it continued due to subsequent change of intention or after knowledge of some new facts with which the party was not previously acquainted. The retaining a property becomes wrongful and fraudulent when the fact is known.

Section 403 and 404, IPC relate to the criminal misappropriation of property. Section 403 defines criminal misappropriation and prescribes the punishment for the offence and section 404 deals with misappropriation of a deceased person’s property.

Section 403 of The Indian Penal Code – Dishonest misappropriation of property.

Whoever dishonestly misappropriates or converts to his own use any movable property, shall be punished with imprisonment of either description for a term which may extend to two years, or with fine, or with both.

Illustrations

(a) A takes property belonging to Z out of Z’s possession, in good faith, believing, at any time when he takes it, that the property belongs to himself. A is not guilty of theft; but if A, after discovering his mistake, dishonestly appropriates the property to his own use, he is guilty of an offence under this section.

(b) A, being on friendly terms with Z, goes into Z’s library in Z’s absence, and takes away a book without Z’s express consent. Here, if A was under the impression that he had Z’s implied consent to take the book for the purpose of reading it, A has not committed theft. But, if A afterwards sells the book for his own benefit, he is guilty of an offence under this section.

Ingredients

To constitute the offence of misappropriation the following ingredients must be established:

1. Dishonest misappropriation or conversion of property.
2. The property must be movable.
3. The movable property must belong to the complainant.

It has been held that the word ‘dishonestly’ and ‘misappropriate’ are necessary ingredients of an offence under section 403. Any dispute being about the recovery of money is purely of civil nature. Hence a criminal complaint regarding such a matter is not maintainable, U. Dhar vs State of Jharkhand, AIR 2003 SC 974.

The words ’converts to his own use’ necessarily connote the use or dealing with the property in derogation of the rights of the owner; Ramaswami Nadar vs State of Madras, AIR 1958 SC 56.

Finder of goods

If the intention was not dishonest at the time possession was taken a subsequent change of intention does not make the possession illegal. Explanation to the section emphasizes that in case of the finder of goods, if he has taken all precautions to ascertain the true owner and kept the goods for a reasonable time for restoring it to the true owner, he can use the property for himself if the true owner is not found. But if immediately misappropriate the property he would be liable under the section.

Misappropriation of a deceased’s property

Section 404 is an aggravated form of criminal misappropriation. The section is meant to afford protection to the property of a deceased which under the circumstances needs special protection. The section is intended to punish strangers and servants you can have possibly no right or interest in the effects of a dead man.

Section 404 in The Indian Penal Code – 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 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.

Ingredients

1. The property must be movable property.
2. Such property was in possession of the diseased at the time of his death.
3. The accused misappropriated it or converted into his own use.
4. The accused did so dishonesty.

The offence is non-cognizable, bailable, non-compoundable and triable by magistrate of the first class.

Criminal Breach of Trust

Section 405 IPC defines criminal breach of trust. It states that in order to constitute the offence of criminal breach of trust, it must be established that the accused was entrusted with property or with dominion or power over the property of another and that that he dishonestly misappropriated it or converted it to his own use.

Section 405 in The Indian Penal Code – 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”.

Ingredients

1. Entrustment of the property by one person to another or any dominion over property.
2. Such entrustment must be in trust.
3. Misappropriation or conversion by the person who received the property in trust of his own use.
4. There must be the violation of any direction, or mode which is prescribed by law for discharging the trust, or any legal contract which is made for the discharge of trust.
5. The property must be misappropriated or converted dishonestly.

“Entrustment” means handling over the property by one person to the another person in such a manner so that the person on whose behalf the property is handed over continuous to be owner. [Surendra Pal Singh vs. State of Uttar Pradesh, AIR 1957 All 122] The word entrusted in the section is very important unless there is entrustment, there can be no offence under the section. [Ramaswami Nadar v. State of Madras, AIR 1958 SC 56]

Section 405 IPC requires doing of something with respect to property which would indicate either misappropriation or conversion or its use or disposal in contravention of any legal contract, express or implied. A mere dispute of civil nature will not attract the provisions of this section. [Mohammed Sulaiman vs Mohammed Ayub, AIR 1965 SC 1319]

Section 406 in The Indian Penal Code – Punishment for criminal breach of trust.

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

Section 407 in The Indian Penal Code -Criminal breach of trust by carrier, etc.

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

Section 408 in The Indian Penal Code – Criminal breach of trust by clerk or servant.

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

Section 409 in The Indian Penal Code – Criminal breach of trust by public servant, or by banker, merchant or agent.

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

Difference between Criminal Misappropriation and Criminal Breach of Trust

In criminal misappropriation, the property comes into possession of the accused in some natural manner. Whereas in criminal breach of trust the property comes in possession of the accused either by an express entrustment or by some process.

Author – Mayank Shekhar

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References

1. K.D. Gaur, Textbook on Indian Penal Code, Fifth Edition 2014
2. Ratanlal and Dhirajlal, Indian Penal Code, Thirty-Fifth Edition
3. SCC Online

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