Law of Trusts
Criminal Breach of Trust under the BNS and the Former IPC
A breach of trust under the Indian Trusts Act is a civil wrong. When it is accompanied by dishonest misappropriation, it may also be a crime. Criminal breach of trust was defined and punished by Sections 405 to 409 of the Indian Penal Code, 1860, and since 1 July 2024 by Section 316 of the Bharatiya Nyaya Sanhita, 2023 (BNS). The criminal concept of "trust" is much wider than the Trusts Act's: it covers anyone entrusted with property. This note explains the offence, its punishments, the key judgments, and its relationship with civil remedies.
1. The Definition
Section 316(1), Bharatiya Nyaya Sanhita, 2023 (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". |
The definition carries forward Section 405 of the IPC. Two Explanations deem an employer who deducts an employee's contribution to a provident fund or the Employees' State Insurance fund and fails to pay it in to have dishonestly used the amount in violation of a direction of law.
2. The Ingredients
Ingredient | Meaning |
|---|---|
Entrustment | The accused was entrusted with property, or with dominion over it, "in any manner". The property must have been handed over on the understanding that it would be used or returned in a particular way. This is the foundation of the offence |
Dishonest act | He (a) dishonestly misappropriated or converted it to his own use, or (b) dishonestly used or disposed of it in violation of a direction of law or a legal contract about how the trust was to be discharged, or (c) wilfully allowed another to do so |
Dishonest intention | "Dishonestly" means with intention to cause wrongful gain to one person or wrongful loss to another. Mere failure to return or account, without dishonest intent, is not enough |
"Trust" in this offence is not limited to trusts under the Trusts Act. Agents, partners, employees, bankers, carriers, warehouse keepers, company directors, husbands holding a wife's stridhan, and trustees in the strict sense may all be "entrusted".
3. Punishments
BNS provision | Offender | Punishment | Former IPC |
|---|---|---|---|
316(2) | Any person | Imprisonment up to five years, or fine, or both | 406 (up to three years) |
316(3) | Carrier, wharfinger or warehouse keeper entrusted as such | Imprisonment up to seven years, and fine | 407 |
316(4) | Clerk or servant entrusted as such | Imprisonment up to seven years, and fine | 408 |
316(5) | Public servant, banker, merchant, factor, broker, attorney or agent, entrusted in that capacity | Imprisonment for life, or up to ten years, and fine | 409 |
The BNS increased the punishment for the basic offence from three to five years. The aggravated forms reflect the greater trust placed in professionals and public officers. A trustee of a private or public trust who dishonestly misappropriates trust funds is punishable under Section 316(2), or under Section 316(5) where he is entrusted as an agent, banker or public servant.
4. Key Judgments
📖 R.K. Dalmia v Delhi Administration (Supreme Court, 1962) Held: Entrustment is the essential ingredient. Once entrustment and dishonest misappropriation are proved, the offence is made out; the word "property" is used in a wide sense, and entrustment can arise in many ways, including to persons controlling a company's funds. |
📖 Pratibha Rani v Suraj Kumar (Supreme Court, 1985) Held: A wife's stridhan remains her absolute property even when placed in the custody of her husband or in-laws, who hold it as trustees. If they dishonestly refuse to return it, they commit criminal breach of trust. The marriage does not turn her property into joint property (Topic 58). |
📖 Delhi Race Club (1940) Ltd v State of Uttar Pradesh (Supreme Court, 23 August 2024) Held: Cheating and criminal breach of trust are distinct and, on the same facts, generally antithetical: cheating requires dishonest intention at the inception of the transaction, while criminal breach of trust requires lawful entrustment followed by dishonest misappropriation. The Court regretted that courts often fail to see the distinction, and quashed a summoning order that did not apply it. Mere non-payment of a price for goods sold is generally neither. |
5. Civil and Criminal Proceedings
- Different purposes: civil proceedings restore the trust and compensate the beneficiary; criminal proceedings punish dishonest conduct. Both may proceed for the same facts.
- Dishonesty is the dividing line: a trustee who makes an honest but unauthorised investment commits a civil breach of trust (Section 23) but not the offence. Criminal law requires dishonest intent.
- Abuse of criminal process: the Supreme Court has repeatedly warned against giving purely civil disputes, such as commercial non-payment, a criminal colour to pressure the other side; courts quash such complaints where the ingredients of entrustment and dishonest misappropriation are not disclosed.
- Restitution: criminal courts may order return of property or compensation to the victim, but the civil court remains the forum for full accounts and proprietary relief.
⚠ Key point Criminal breach of trust (BNS, Section 316; formerly IPC, Sections 405 to 409) is committed by a person entrusted with property or dominion over it who dishonestly misappropriates or converts it, or uses or disposes of it in violation of law or contract, or wilfully suffers another to do so. Punishment is up to five years generally, seven years for carriers, warehouse keepers, clerks and servants, and life or ten years for public servants, bankers, merchants, brokers, attorneys and agents. Entrustment is essential (R.K. Dalmia, 1962); stridhan is held in trust (Pratibha Rani, 1985); cheating and criminal breach of trust are distinct and generally cannot coexist on the same facts (Delhi Race Club, 2024). An honest civil breach is not a crime. |
6. Related Topics and Provisions
- Breach of trust and liability (Topic 17)
- Civil remedies for breach of trust (Topic 37)
- Judgments on benami and constructive trusts (Topic 58): Pratibha Rani
- Employee benefit trusts (Topic 52): provident fund deductions