Criminal Misappropriation & Criminal Breach of Trust

Criminal misappropriation and criminal breach of trust mentioned in chapter XVIIth of Indian Penal Code, the title under offences against Property. Section 403 & Section 405 of the Indian penal code, 1860 deals with Criminal Misappropriation of Property, Criminal breach of trust respectively. Section 403 of the Indian penal code deals with criminal misappropriation and prescribes the penalization for the offence. Also, Section 405 & 406 of the Indian penal code deals criminal breach of trust and ascribe punishment for the same in the respective section.

Criminal misappropriation of property

Section 403 provides that, “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.
For example, Sumit takes property belonging to Pratibha out of Pratibha’s possession, in good faith, believing, at any time when he takes it, that the property belongs to himself. Sumit is not guilty of theft. But if Sumit, after discovering his mistake, dishonestly appropriates the property to his own use, he is guilty of an offence under this section. Another one Sumit, being on friendly terms with Pratibha, goes into Pratibha’s library in Pratibha’s absence, and takes away a book without Pratibha’s express consent. Here, if sumit was underneath the impression that he had Pratibha’s implicit consent to take hold of the book for the aim of reading it, Sumit has not committed theft. But, if sumit subsequently sells the book for his own profit, he is guilty of an offence under this section.

Explanations

  1. A dishonest misappropriation for a time only is a misappropriation within the meaning of this section.
  2. The person who finds property not in the possession of any other person, and take such property for the purpose of protecting it for, or of resorting it to, the owner does not take or misappropriate it dishonestly, and is not guilty of this offence; but he’s gulti of the offence mentioned above if he appropriate it to his own use, when he knows or has the means of discovering the owner, or before he has used reasonable means to discover and give notice to the owner and has kept the property for a reasonable time to enable the owner to claim it.
Explanation 1st refers to only those cases where there is a “Dishonest misappropriation” of property, it also gives emphasis on, that section 403 includes temporary as well as permanent misappropriation of that description.
Whereas explanation 2nd makes it clear that abandoned cannot form a proper subject of an offence under this section, to constitute this offence property appropriated must be owned by somebody. Hence require finders of goods, before appropriating the property found, to make an attempt to find the owner, if they have means of doing so, the finder must wait until a reasonable time to allow the owner to claim the property before he appropriates.
 
  • What are reasonable means or what is a reasonable time in such cases, is a question of fact.
  • It is not necessary that the finder of goods knows who is the owner of the property, or that any particular person is the owner of it; it is sufficient if, at the time of appropriating it, he does not believe it to be his own property, or in good faith believes that real owner cannot be found.

Ingredients

To constitute the offence of misappropriation the following ingredients must be established:
  • Dishonest misappropriation or conversion of property for a person’s own use
  • The property must be movable.

Dishonest misappropriation or conversion to one’s own use

To constitute this offence it is not necessary that the property should be taken with dishonest intention, the possession of the property may come innocently and then by a subsequent change in the intention of accused, or knowledge of some new facts which with previously party is not aware., the retaining of property becomes wrongful & fraudulent.
The essence of this offence is that some property belonging to another person comes into the possession of the accused innocently, misappropriated or converted by the accused for his own use.
Mere retaining of an article found does not amount to criminal misappropriation. 
Appropriate to one’s own use or misappropriation means set apart for one’s own use to the exclusion of others. Setting apart an article found for the purpose of one’s own use, which leads to unable the true owner to use his own thing, termed to be committed an offence of misappropriation.
In the case of Ram Dayal, A girl found a necklace, handed over to another girl D. B, the brother of A represented D that the necklace belongs to a man whom he knows, thus took it in his possession. On inquiry by a police officer, it was found that the representation of B is found to be untrue, hence held guilty of committing criminal misappropriation of property.
it was held in case of, U. Dhar vs State of Jharkhand, that the word ‘dishonestly’ and ‘misappropriate’ are necessary ingredients of an offence under section 403. Any dispute being about the recovery of money is pure of civil nature. Hence a criminal complaint regarding such a matter is not maintainable.
 
another case of Ramaswami Nadar vs State of Madras held that, The words ’converts to his own use’ necessarily connote the use or dealing with the property in derogation of the rights of the owner.
 

Moveable Property

To constitute this offence, the subject matter must moveable property. A bull set at large in accordance with the hindu religions usage is not property of any one, and not the subject of ownership by any person, as the original owner has surrendered all his rights as its proprietor and has given the animal to go anywhere it liked.
 

The distinction between Theft and Criminal Misappropriation

In case of theft, the intention behind doing the act is dishonest or a malafide with irrational motive and the person who is committing theft is cautious about the act, that he is doing wrong.
Whereas in the case of criminal misappropriation in starting it may possible that there is no dishonest intention on the part of the finder of goods for misappropriating the goods, but the accused is guilty of an offence if after due time the property is detained with the wrong person illegally without the knowledge of the actual owner of the property. Later after some time, with the ill intention to commit misappropriation of the property for his own use.
The second difference is that in theft the consent of the true owner is not known to the party and in case of misappropriation the true owner gave consent to the person for using the property and later maliciously the person used it for his own purpose.
Lastly, the moment when someone took the property of the owner dishonestly he committed the offence of theft. Rather in case of misappropriation, the offence is committed when the person denies giving the property to the true owner, he committed the offence of misappropriation without the consent of the true owner in his own favour. Then the offence of misappropriation is committed.

Criminal breach of trust

Section 405 IPC deals with criminal breach of trust. It provides that in order to constitute the offence of criminal breach of trust, it must be proved that the accused was entrusted with some property or has dominion or power over the property of another, and he dishonestly misappropriated it or converted it to his own use.
Whoever, being in any manner entrusted with property, or with any dominion over property, dishonestly misappropriated 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”.
 

Explanations

  • 1. A person, being an employer of an establishment whether exempted under section 17 of the Employees Provident fund and Miscellaneous Provision Act, 1952 (19 of 1952), or not, who deducted the employee’s contribution from the wages payable to the employees for the 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 contribution so deducted by him and if he makes default in the payment of such contribution to the said fund, violation of the said law, shall be deemed to have dishonestly used the amount of said contribution in violation of the direction of law as aforesaid.
  • 2. A person, being an employer, who deducted the employee’s contribution from the wages payable to the employees for the credit to the employee’s state Insurance Fund held and administered by the Employees’ State Insurance Corporation establishment under the employees’ State Insurance Act, 1948,  shall be deemed to have been entrusted with the amount of contribution so deducted by him and if he makes default in the payment of such contribution to the said fund, violation of the said law, shall be deemed to have dishonestly used the amount of said contribution in violation of the direction of law as aforesaid.
For Example, Aftab, residing in Calcutta, is an agent for Ambedkar, residing at delhi. There is an express or implied contract between Aftab & ambedkar, that all the sum remitted by Ambedkar to aftab, shall be invested by Aftab, according to ambedkar’s direction. Ambedkar remits a lakh of rupees to aftab, with direction aftab to invest the same in company’s paper, aftab dishonestly disobey the directions  and employ the money in his own business. Aftab has committed criminal breach of trust. 
  • Explanation 1st, make the employer liable for dishonest misappropriation of employees contribution to provident fund or family personal fund because the employer deemed to have entrusted the amount of contribution so deducted.
  • Explanation 2nd, make the employers liable for dishonest misappropriation of employee’s contribution to the employee’s state insurance fund as it is deemed to entrust with the amount of contribution so deducted by them.

Ingredients

  • Entrusting any person with property or with ay dominion over property
  • The person entrusted-
  • Dishonestly misappropriated or converts to his own use that property; or
  • Dishonestly uses or dispose of that property or wilfully suffers any other person so to do 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.

In any manner entrusted with property

The essence to constitute this offence, there must be entrustment of property. Entrust means handing over possession of property for some purpose which may not imply the conferrig the proprietary right. And the property entrusted must be dishonestly misappropriated  by a person in whom the confidence is placed., in respect of which breach of trust is committed.
In Case Pushpa kumar v. state of sikkim, the conductor of the bus driver entrusted with collection of money on the behalf of  Sikkim nationalised transport, but conductor not render any account to the transport authority, the High Court held that the essence of criminal breach of trust is fulfilled , hence accused is said to the committed the offence of criminal breach of trust. 
Later on, it is submitted that the above High Court decision was not correct, the Supreme Court in the case of Somnath v. State of Rajasthan, person entrusted to collect money on behalf of another, entrusted with the money when the accounts are paid to him, and though the person paying may no longer have any proprietary interest, nevertheless the person who entrust with money, becomes the owner as soon as the account handed over to him, hence not guilty of offence.
The property to constitute this offence, may be moveable or immovable, because the word property is used in this section without any adjective, but must be the property belongs to the complainant. It’s not bothering point that the complainant on whose behalf the property entrusted is the owner of it or not provided there is entrustment of property.

Dominion over property

The property entrusted with the accused or he must have dominion over property. A person is said to have dominion of a property, if he supervie, or exercises control over the property.
The inspector of water works whose duty is to supervise and check the distribution of water in different villages from the municipal water works is said to have dominion over the water belonging to municipal water works, if the inspector uses the water for his own purpose, it is said to have committed the offence of criminal breach of trust.
Is it to note that there is a difference between a person entrusted with property and one having control or general charges over the property.
 

Dishonestly misappropriated or converts to his own use

Dishonest intention is the prerequisite for committing this offence, however appropriation of a property is assertion of claim, if it is unfounded does not invoke this section. Mere retention of goods by person without misappropriation does not constitute this offence.
 

Dishonestly used or disposes of that property

A user in order to commit this offence must cause substantial  or appreciable loss to the owner of the property and gain to the accused. Where a printer uses certain blocks entrusted to him to print the complainants’ catalogue for the purpose of printing a rival firms’s catalogue, he would be guilty of criminal breach of trust.
 

 Wilfully suffers any other person so to do

This expression means that the act constituting criminal breach of trust has been done deliberately or intentionally, the person must have an idea that what he’s doing is wrong or contrary to law and not by accident or misfortune.

Violation of Legal Contract

The simple rule is that where a person takes goods on approval under an agreement that the property therein was to pass only if he exercised his option to take them and paid cash in full for certain goods and in part for others, the trust continues till the option is exercised, and cash payment made and such person liable for criminal breach of trust, if he sells them without such payments.
 

Section 406

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 fines, or with both.
 

Distinction between Criminal Misappropriation  and Criminal Breach of Trust

  • In criminal breach of trust the conversion of property based on the fiduciary relationship whereas in case of criminal misappropriation the possession of property may come in any way
  • In criminal breach of trust there must be some kind of contractual relation between the parties either expressed or implied, there is no such relationship in case of criminal misappropriation
  • Criminal breach of trust, the offender is lawfully entrusted with the property and dishonestly misappropriated the same and wilfully suffers any other person to do so, instead of discharging trust  attached to it, but in criminal misappropriation the property came in the possession of offender by casually, accidentally or otherwise and then is converted by him for own use.

Conclusion

Section 403 provides that, “dishonest misappropriation of property”, Whoever dishonestly misappropriated 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.
Section 405 IPC deals with criminal breach of trust. It provides that in order to constitute the offence of criminal breach of trust, it must be proved that the accused was entrusted with some property or has dominion or power over the property of another, and he dishonestly misappropriated it or converted it to his own use. criminal breach of trust and criminal misappropriation can’t be considered as a similar offence. there is no legally binding relationship of the blamed with the real proprietor for the property if there should be an occurrence of criminal misappropriation.
it applies to the change of the property where the guilty party gets ownership of the property by any setback or at any rate where property must be versatile and he clearly abused it. On account of criminal breach of trust, there is a lawful legally binding relationship of the blamed with the genuine proprietor for the property. Property can be either moveable or immovable. It applies to the change of property held by an individual in a guardian limit. Further, the proprietor or we can say the account holder and the litigant ought to have a guardian relationship with one another.
 
 

References

1. Jhandu, 1886 P.R No. 27 of 1886
2. Bandhu, 1885, 8 All. 51
3. AIR 2003 SC 974
4. AIR 1958 SC 56
5. Lake v. Simmons, 1927 A.l.J 487
6. Bimala Charan Roy, 1913, 35 All. 361
7. Keshav chandra Boral V Nitya nand biswas, 1901,6 C.w.N 203
8. Ratanlal & Dhirajlal, the Indian Penal Code, Ed 35th, LexisNexis PUblication, P.no.1013
9.Kedarnath AIR 1965 All. 233
10. Dhayalal dalpatram, 1959, 61 Bom. L.R 885.

Leave a Comment

Your email address will not be published.