Breach of Trust and Remedies: Complete Notes (Part I)

Part I draws together the consequences of breach of trust: the civil remedies spread across the Act, the offence of criminal breach of trust, and the rules of limitation and procedure that govern trust litigation. This consolidated note covers Topics 37 to 39.

1. Civil Remedies

Type	Remedies	Sources
Personal	Compensation for loss with interest in listed cases, no set-off, joint and several liability; account of profits	Sections 23, 24, 27, 51, 88
Proprietary	Following and tracing; charge on blended funds; constructive trust of a fiduciary's gain; retransfer of wrongly bought property	Sections 62, 63, 65, 66, 88
Specific	Mandatory orders, injunctions against threatened breach, declarations, execution of the trust by the court	Sections 59, 61, 63
Protective	Removal and replacement of trustees, receiver, control of discretion, suspension of powers after decree	Sections 45, 49, 60, 73, 74
Among wrongdoers	Contribution, indemnity from gainers, impounding a guilty beneficiary's interest	Sections 27, 33, 68

Proprietary remedies rank ahead of unsecured creditors and capture increases in value, but yield to a bona fide purchaser for value without notice (Sections 64 and 96).

2. Criminal Breach of Trust

Under Section 316 of the BNS (formerly Sections 405 to 409 of the IPC), 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 allows another to do so, commits criminal breach of trust. Provident fund and ESI deductions not deposited are deemed dishonest use.

Section 316(2), any person: up to five years, or fine, or both.
Section 316(3), carrier, wharfinger or warehouse keeper: up to seven years and fine.
Section 316(4), clerk or servant: up to seven years and fine.
Section 316(5), public servant, banker, merchant, factor, broker, attorney or agent: life, or up to ten years, and fine.

Entrustment is essential (R.K. Dalmia, 1962); a wife's stridhan held by her husband or in-laws is held in trust (Pratibha Rani, 1985); cheating requires dishonesty at inception and is generally antithetical to criminal breach of trust on the same facts (Delhi Race Club, 2024). An honest civil breach is not a crime, and courts quash attempts to criminalise purely civil disputes.

3. Limitation and Procedure

No limitation (Limitation Act, Section 10): for suits against an express trustee, his legal representatives or non-purchasing assigns, to follow trust property or its proceeds or for an account; religious and charitable endowments are deemed so vested and their managers deemed trustees. Constructive trustees and purchasers for value are generally outside the section.
Specific periods: 12 years (immovable) and 3 years (movable) from knowledge of a transfer for value by the trustee; 12 years for recovery of endowment property transferred by a previous manager; 3 years under the residuary article.
Parties (Order XXXI, CPC): trustees represent beneficiaries in suits with outsiders, beneficiaries may be joined, and all trustees must be parties; suits are brought by or against the trustees, not "the trust".
Forum: the District Court hears summary petitions under Sections 7, 11, 22, 34, 36, 46, 53, 72 and 74; contested matters proceed by suit; private trust disputes are not arbitrable; public trusts follow Section 92 CPC.

⚠ Key point

Part I in one line: a beneficiary can recover his loss or the trustee's profit, reach the trust property or its proceeds ahead of creditors, stop a threatened breach and replace a bad trustee; dishonest misappropriation by anyone entrusted with property is also a crime under Section 316 of the BNS; and claims to follow property against an express trustee are never time barred, with trustees representing beneficiaries against outsiders and the District Court supervising through summary petitions.

4. The Topics of This Part

Topic 37: Civil remedies for breach of trust
Topic 38: Criminal breach of trust under the BNS and the former IPC
Topic 39: Limitation and procedure in trust litigation