S.S.

JAIN SUBODH LAW COLLEGE

DISHONEST MISAPPROPRIATION AND CRIMINAL BREACH OF

TRUST

SUBMITTED TO SUBMITTED BY
MR. ZEESHAN HASHMI VAIBHAV SHARMA

ASSISTANT PROFESSOR OF LAW 8TH SEMESTER (SEC – B)

 DECLARATION

I, Vaibhav Sharma, do hereby declare that, this research project titled ‘DISHONEST
MISAPPROPRIATION AND CRIMINAL BREACH OF TRUST’ is an outcome of the
research conducted by me under the guidance of Mr. Zeeshan Hashmi (Assistant Professor of
Law) at S.S. Jain Subodh Law College in fulfilment for the award of the degree of B.A.LL.B.
at the University of Rajasthan.

I also declare that, this work has taken assistance from other sources and necessary
acknowledgements for the same have been made at appropriate places.

I further declare that, this work has not been submitted either in whole or in part, for any
degree or equivalent in any other institution.

09-11-20

Vaibhav Sharma

S.S. Jain Subodh Law College

 CERTIFICATE

This is to certify that the research project titled ‘DISHONEST MISAPPROPRIATION AND
CRIMINAL BREACH OF TRUST’ submitted by Vaibhav Sharma in fulfilment for the
award of the degree of B.A.LL.B from Rajasthan University at S.S. Jain Subodh Law College
is the product of research carried out under my guidance and supervision.

Mr. Zeeshan Hashmi

Assistant Professor of Law

S.S. Jain Subodh Law College

 ACKNOWLEDGEMENT

I acknowledge with profundity, my obligation to Almighty God and my parents for giving me
the grace to accomplish my work, without which this project would not have been possible.

I express my heartfelt gratitude to my respected faculty Mr. Zeeshan Hashmi (Assistant

Professor of Law) for providing me with valuable suggestions to complete this research
project.

I am especially grateful to all my faculty members at S.S. Jain Subodh Law College who
have helped me imbibe the basic research and writing skills.

Lastly, I take upon myself, the drawbacks and limitations of this study, if any.

09-11-2020

Vaibhav Sharma

S.S. Jain Subodh Law College

 CONTENTS

 Introduction

 Dishonest missapropriation
 Ingridients
 Illustrations
 Dishonest misappropriation or conversion to one’s own use
 Moveable property

 Dishonest misappropriation of property possessed by deceased person at the time of

his death
 Ingredients

 Criminal breach of trust

 Punishment
 Illustrations
 Ingridients

 Criminal breach of trust by a carrier

 Ingridients

 Crimininal breach of trust byclerk or servent

 Ingredients

 Criminal breach of trust by public servent

 Ingredients

 Differences between dishonest misappropriation and criminal breach of trust

 Conclusion
 References
 INTRODUCTION
The word misappropriation means “to steal something that you have been trusted to manage
and use it for own benefit” and dishonest means “intended to mislead or cheat” and Breach of
trust generally meaning is “a failure to act responsibly for someone who has given you
something to keep safe” 1. This gives the general meaning of dishonest misappropriation and
breach of trust. Crime against property is any criminal act that destroys another's property, or
that deprives an owner of property against the owner's will. The criminal law generally
considers these crimes less serious than violent crimes, or crimes against persons, but they
can still constitute very serious felony charges.

At early British common law, there was only one kind of crime against property;
larceny. There was also only one punishment for larceny in those times: death. As time went
on and judges became more and more reluctant to execute people for pick-pocketing and
petty theft, many crimes that bore striking resemblance to larceny were classified as
something else so that the death penalty could be avoided. In the United States today, where
life and liberty are categorically valued above property, no crime against property is
considered serious enough to warrant the death penalty. The offences against property are
envisaged in Chapter XVII of the Penal Code. Offences concerning the deprivation of
property (SS.378-424): The following offences created by the Code fall under this head2—
(a) Theft (SS. 378-382).
(b)Extortion (SS. 383-389).
(c) Robbery (SS. 390, 392-394, 397, 398 & 401).
(d) Dacoity (SS. 391, 395-400 & 402)
(e)Criminal misappropriation of property (SS. 403 & 404).
(f)Criminal breach of trust (SS. 405-409).
(g) Receiving stolen property (SS. 410-414).
(h)Cheating (SS. 415-420).
(I)Fraudulent deeds and disposition of property (SS. 421-424)

1
https://dictionary.cambridge.org/dictionary/english
2
GAUR , K. D ,TEXTBOOK ON IPC , FIFTH EDITION, UNIVERSAL LAW PUBLISHING
 DISHONEST MISAPPROPRIATION
Chapter XVII, Section 403 of Indian panel code known as dishonest misappropriation of
property meaning dishonestly mis-appropriates 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. The word misappropriation means a dishonest
appropriation and use of another’s property for sole purpose of capitalizing it for its own use.
According to above definition there are two essential requirements of criminal
misappropriation:
(A) Dishonest misappropriation or conversion of property for a person’s own use.
(B) Such property must be movable.
(C) Dishonest intension

ILLUSTRATIONS:3
(a) A takes property belonging to Z out of Z's possession, in good faith, believing, at
the 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 for 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.

(c) A and B, being joint owners of a horse, A takes the horse out of B's possession,
intending to use it. Here, as A has a right to use the horse, he does not dishonestly
misappropriate it. But, if A sells the horse and appropriates the whole proceeds to his
own use, he is guilty of an offence under this section.

3
Criminal manual, Universal’s
(A) DISHONEST MISAPPROPRIATION OR CONVERSION TO ONE’S
OWN USE:

For an offence under this section it is not necessary that the property should be taken
with dishonest intention, the possession of the property may come innocently and then by
subsequent change of intention, or knowledge of some new facts with which the party was
not previously acquainted, the retaining of that property becomes wrongful or fraudulent. The
essence of offence under this section is that some property belonging to another which comes
into the possession of the accused innocently is misappropriated or converted by the accused
to his own use. There must be actual conversion of the thing misappropriated to the accused's
own use. Mere retaining of an article found does not amount to criminal misappropriation.
Misappropriation or conversion need not be permanently, it may be even for a time.
Illustrations (a), (b) and (c) show that the original taking was innocent but the offence of
criminal misappropriation is constituted because of subsequent dishonest conversion or
appropriation. Where 'A' took possession of a stray cattle and it was not shown that the cattle
was stolen property, and he dishonestly retained it, he was liable under this section. But
where a person found a purse on the pavement of a temple and put it in his pocket, but was
immediately thereafter arrested, it was held that he was not guilty of criminal
misappropriation, for it could not be assumed that by the mere act of picking up the purse or
putting it in his pocket he intended to appropriate its contents about to his own use.

In Ram Dayal,4' a girl 'A' found a gold necklace and she handed it over to 'another girl' C. B,
brother of A represented to C that the necklace belonged to a man of his acquaintance, and
thus took it in his possession. On inquiry by a police officer a few hours later, B repeated the
representation but afterwards gave up the necklace. The representations were proved to be
untrue to the knowledge of the accused B. He was, therefore, held guilty of criminal
misappropriation.

(B) MOVEABLE PROPERTY: Only movable property can be the proper

subject-matter of an offence under this section. A bull set at large in accordance with Hindu
religions usage is not 'property' of any one, and not the subject of ownership by any person,

4
1886 P.R. NO. 24 OF 1886
as the original owner has surrendered all his rights as its proprietor and has given the animal
freedom to go anywhere it liked.

It was held in Gadgayya v. Purun Siddeshwar5, that the property of an idol or a temple must
be used for the purposes of that idol or temple and any other use of that property, being
dishonest, would amount to criminal misappropriation. Where A is employed to collect
money and he collects and retains money so collected from the debtor of his master, because
money is due to him as wages, he would be guilty under this section.

In Narain Singh v. State of M.P6, it was held that where the accused happened to be the
Chairman of a Samiti and he retained a certain amount from money which he had recovered
from members of the Samiti and retention continued even after he ceased to be the Chairman,
the act of retention would not amount to criminal breach of trust, because an offence of
criminal breach of trust involves entrustment which is absent in this case. Amounts recovered
from members were dues and receipts were issued to them in respect of the same, the act of
the accused would amount to criminal misappropriation punishable under section 403 of the
act.

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

5
1897 Unrep. Cr. C. 919
6
1986 Cri. L.J. 1481 (M.P.)
INGREDIENTS:

(1) The property must be movable property.

(2) Such property was in possession of the deceased at the time of his death

(3) The accused misappropriated it or converted it to his own use

(4) The accused did so dishonestly

 CRIMINAL BREACH OF TRUST

The offence of Criminal Breach of Trust has been given its statutory position in Sections 405
409 of the Penal Code. The definition of this offence as enumerated in S.405 of the Code
reads as under:
Section 405. 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 willfully suffers any other person
so to do, commits "criminal breach of trust".7

PUNISHMENT
Section 406 Punishment for criminal breach of trust is about whoever committee 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.

ILLUSTRATIONS8:
(a) A, being executor to the will of a deceased person, dishonestly disobeys the law which
directs him to divide the effects according to the will, and appropriates them to his own use.
A has committed criminal breach of trust.
(b) A is a warehouse-keeper. Z, going on a journey, entrusts his furniture to A, under a
contract that it shall be returned on payment of a stipulated sum for warehouse-room. A
dishonestly sells the goods. A has committed criminal breach of trust.
(c) A, residing in Dhaka, is agent for Z, residing at Chittagong. There is an express or implied
contract between A and Z, that all sums remitted by Z to A shall be invested by A, according
to Z's direction. Z remits a lakh of taka to A, with directions to A to invest the same in
Company’s paper. A dishonestly disobeys the directions and employs the money in his own
business. A has committed criminal breach of trust.
(d) But if A, in the last illustration, not dishonestly but in good faith, believing that it will be
more for Z's advantage to hold shares in the Bank of Bengal, disobeys Z's directions, and

7
MISHRA, PROF. S.N, INDIAN PANEL CODE, CENTRAL LAW PUBLICATIONS
8
CRIMINAL MANUAL ,Universal’s
buys shares in the Bank of Bengal, for Z, instead of buying Company's paper, here, though Z
should suffer loss, and should be entitled to bring a civil action against A, on account of that
loss, yet A, not having acted dishonestly, has not committed criminal breach of trust.
(e) A, a revenue-officer, is entrusted with public money and is either directed by law, or
bound by a contract, express or implied, with the Government, to pay into a certain treasury
all the public money which he holds. A dishonestly appropriates the money. A has committed
criminal breach of trust.
(f) A, a carrier, is entrusted by Z with property to be carried by land or by water. A
dishonestly misappropriates the property. A has committed criminal breach of trust.

INGREDIENTS:

(1) Entrusting any person with property or with any domination over property;

(2) The person entrusted-

(a) Dishonestly misappropriates or converts to his own use that property or

(b) Dishonestly uses or disposes of that property or willfully suffers any other so to do in
violation-

(i) Of any direction law prescribing the mode in which such trust is to be discharged, or

(ii) Of any legal contract made touching the discharge of such trust.

In the case of  State of Gujarat vs. Jaswantlal Nathalal,9 the government sold cement to the
accused only on the condition that it will be used for construction work. However, a portion
of the cement purchased was diverted to a godown. The accused was sought to be prosecuted
for criminal breach of trust. The Supreme Court held that 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. A mere transaction of sale cannot amount to an
entrustment. If the accused had violated the conditions of purchase, the only remedy is to
prosecute him under law relating to cement control. But no offence of criminal breach of trust
was made out.
9
AIR 1968 SC 700
In Jaswant Rai Manilal Akhaney vs. State of Bombay,10 It was held that when securities are
pledged with a bank for specific purpose on specified conditions, it would amount to
entrustment. Similarly, properties entrusted to directors of a company would amount to
entrustment, because directors are to some extent in a position of trustee. However, when
money was paid as illegal gratification, there was no question of entrustment.

In the case of State of UP vs. Babu Ram,11 the accused, a sub-inspector (SI) of police, had
gone to investigate a theft case in a village. In the evening, he saw one person named Tika
Ram coming from the side of the canal and hurriedly going towards a field. He appeared to
be carrying something in his dhoti folds. The accused searched him and found a bundle
containing currency notes. The accused took the bundle and later returned it. The amount
returned was short by Rs. 250. The Supreme Court held that the currency notes were handed
over to the SI for a particular purpose and Tika Ram had trusted the accused to return the
money once the accused satisfied him about it. If the accused had taken the currency notes, it
would amount to criminal breach of trust.

The following are the aggravated forms of Criminal Breach of Trust:-

1. Criminal Breach of Trust by a carrier, wharfinger or warehouse-keeper.
(S.407)
Punishment.—Imprisonment of either description for 7 years and fine. (S.407)

2. Criminal Breach of Trust by a clerk or servant. (S.408)

Punishment. — Imprisonment of either description for 7 years and fine. (S.408)

3. Criminal Breach of Trust by public servant, banker, merchant, factor, broker, attorney or
agent. (S.409)
Punishment— Imprisonment of either description for 10 years and fine. (S.409)

1. CRIMINAL BREACH OF TRUST BY A CARRIER

10
AIR 1956 SC 575
11
AIR1958 ALL 584
Section 407: 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.

INGREDIENTS:

(1) The accused is a carrier, warehouse-keeper or wharfinger

(2) The accused was entrusted with the property

(3) The accused commits criminal breach of trust of the entrusted property.

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

class.

2. CRIMINAL BREACH OF TRUST BY CLERK OR SERVENT

Section 408: 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.

INGREDIENTS:

(1) The accuse was a clerk or servant

(2) The accused was entrusted with the property

(3) The accused committed criminal breach of trust in respect of such property.

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

class.

3. BREACH OF TRUST BY PUBLIC SERVENT

 Section 409: 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.

INGREDIENTS:

(1) The accuse was a public servant, or merchant, or broker, or an attorney or an agent,

(2) The accused was entrusted with the property

(3) The accused committed a criminal breach of trust in respect of the property entrusted.

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

class.

In Vishwa Nath v. State of Jammu and Kashmir 12the accused happened to be a head
constable and was charged under section 409. The facts and circumstances of the case clearly
establish that there was an embezzlement of the Government money by the accused inasmuch
as the accused had put to personal use money entrusted to him, instead of depositing the same
in the proper place. He committed criminal breach of trust with respect to this money over
which he had complete dominion by putting the same to his use. Held, the refund of the
amount after detection did not absolve him of the offence.

DIFFERENCE BETWEEN DISHONEST MISAPPROPRIATION AND CRIMINAL

BREACH OF TRUST:

BASIS OF DIFFERENCE CRIMINAL CRIMINAL BREACH OF

Provision under IPC,1860
Relationship
MISAPPROPRIATION
Offence of criminal
misappropriation is defined
under section 403 of Indian
Penal Code, 1860
In misappropriation, there
is no contractual
relationship
TRUST
Offence of Criminal Breach
of Trust is defined under
section 405 of Indian Penal
Code, 1860
But in Criminal Breach of
Trust, there is a contractual
relationship of the offender

12
AIR 1983 SC 174

Possession In misappropriation, the
property is obtained by
some casualty or otherwise.
Misappropriation The property is
misappropriated by the
offender for his own use.
Nature of Property In, Criminal
misappropriation the
property is always movable
in nature.
Punishment Offence of Criminal
Misappropriation is
punishable with
imprisonment of either
description for a term
which may extent to 2
years or with fine, or with
both (Sec.403,IPC)
CONCLUSION
regarding the property
In criminal breach of trust,
the property is obtained due
to the truest vested by the
owner on the offender.
In criminal breach of trust,
the property is
misappropriated for his
own personal use. A breach
of trust includes criminal
misappropriation, but the
converse is not always true.
Whereas, in criminal breach
of trust, the nature of
property can either be
movable or immovable.
Offence of Criminal Breach
of Trust is punishable with
imprisonment of either
description for a term
which may extent to 2 years
or with fine, or with both
(Sec.406,IPC)
Dishonest misappropriation is the essence of this section. Dishonesty is as defined in sec.24,
IPC, causing wrongful gain or wrongful loss to a person. The meaning of wrongful gain and
wrongful loss is defined in sec 23, IPC. In order to constitute an offence, it is not enough to
establish that the money has not been accounted for or mismanaged. It has to be established
that the accused has dishonestly put the property to his own use or to some unauthorized use.
Dishonest intention to misappropriate is a crucial fact to be proved to bring home the charge
of criminal breach of trust. Hence it’s clear that for an offence to fall under this section all the
four requirements are essential to be fulfilled. The person handing over the property must
have confidence in the person taking the property, so as to create a fiduciary relationship
between them or to put him in position of trustee. The accused must be in such a position
where he could exercise his control over the property i.e., dominion over the property. The
term property includes both movable as well as immoveable property within its ambit. It has
to be established that the accused has dishonestly put the property to his own use or to some
unauthorized use. Dishonest intention to misappropriate is a crucial fact to be proved to bring
home the charge of criminal breach of trust.

It is submitted that the offence of criminal breach of trust is very much common in today’s
world. It happens during the daily routine of a common man’s life. From offices to the
marriage ceremonies, everywhere its presence can be traced. Not only in the truest sense but
also there are many cases of white collar crimes, where the person without any intention
involves in such crimes. The best way to get rid of such crime is by educating people about
the stringent laws regarding this offence. In case of same by public servant, the laws are more
stringent and thus they deter the public servant to commit such crimes.

In this way this section is satisfactory in itself. The provisions laid down in the Indian Penal
Code are enough to cope up with the problem of Criminal Breach of Trust. The only thing
required is the effective implementation as well as application of law as many of the cases go
unreported and through regular investigations they wouldn’t go unnoticed.

REFERENCES:
 INDIAN PANEL CODE, PROF. S. N. MISHRA, CENTRAL LAW
PUBLICATIONS
 TEXTBOOK ON INDIAN PENAL CODE, K.D. GAUR, FIFTH EDITION,
UNIVERSAL LAW PUBLISHING
 P. S. A. PILLAI’S CRIMINAL LAW, K I VIBHUTE, ELEVENTH EDITION,
LEXISNEXIS