Indian Penal Code Section 403:
The fraudulent appropriation of property. Whoever dishonestly misappropriates or converts to his own use any movable property shall be punished with imprisonment for a term that may not exceed two years, a fine, or both. Illustrations
a. A takes property belonging to Z out of Z’s possession in good faith, believing at the time that the property is his. A is not guilty of larceny, but he is guilty of this offense if, after realizing his error, he dishonestly appropriates the property for his own use.
A, who is on cordial terms with Z, enters Z’s library in Z’s absence and removes a book without Z’s permission. In this case, A has not committed larceny if he believed he had Z’s implied consent to remove the book for the purpose of reading it. However, if A later sells the book for his own profit, he is in violation of this section.
A and B are co-owners of a horse, and A intends to use it by removing it from B’s possession. As A has permission to use the steed, he does not steal it dishonestly. However, if A sells the horse and uses the entire proceeds for his own benefit, he is in violation of this section. I.— Explanation A temporary dishonest misappropriation is a misappropriation as defined by this section. Illustration A discovers a Government promissory note bearing a void endorsement that belonged to Z. A, knowing that the note belongs to Z, pledges it to a financier as collateral for a loan with the intention of returning it to Z in the future. A has violated the terms of this section. 2.— Explanation A person who finds unclaimed property and takes it for the purpose of protecting it for the owner or returning it to the owner is not guilty of dishonestly taking or misappropriating the property; however, he is guilty of the offense defined above if he appropriates the property 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 harmed him. What are reasonable means or a reasonable time in this situation is a matter of fact. It is not necessary for the finder to know who the owner of the property is or that a particular person is the owner; it is sufficient if, at the time of appropriation, he does not believe the property to be his own or believes in good faith that the owner cannot be located. Illustrations
a. A discovers a rupee on the highway without knowing to whom it belongs. A acquires the rupee. A has not committed the violation outlined in this section.
b) A discovers a letter containing a bank note on the road. He determines the recipient of the missive based on its direction and contents. He accepts the note as his own. He has committed an offense pursuant to this section.
(c) A discovers a check payable to the bearer. He cannot speculate on the identity of the person who lost the check. However, the name of the person who drew the check appears. A is aware that this individual can direct him to the recipient of the cheque. A takes the check without endeavoring to identify its proprietor. He has committed a violation of this section.
A observes Z dropping his wallet containing cash. A initially intends to return the purse to Z, but ultimately appropriates it for his own use. A has violated the terms of this section.
e) A discovers a wallet containing money without knowing to whom it pertains; he later learns that it belongs to Z and appropriates it for his own use. A is culpable of violating this provision.
A discovers a valuable ring but is unaware of its owner. A promptly sells it without attempting to locate the proprietor. A is culpable of violating this provision. The classification of crimes Punishment—Two years in prison or a fine, or both—Non-cognizable—Bailable—Triable by any Magistrate—Compoundable by the owner of the misappropriated property with the court’s permission. comments The fraudulent conversion or misappropriation of property. The phrase ‘converts to his own use’ implies that the property is used or dealt with in violation of the owner’s rights. State of Madras v. Ramaswami Nadar, AIR 1958 SC 56. Ingredients It has been determined that the terms ‘dishonestly’ and ‘misappropriate’ are required elements of an offense under section 403. Any dispute involving the recovery of money is strictly civil in nature. Therefore, a criminal complaint regarding this matter is inadmissible. State of Jharkhand v. U. Dhar, AIR 2003 SC 974.