Indian Penal Code Section 405:
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 legal direction prescribing the manner 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 1[Explanation 2[1].—A person, being an employer, who deducts the employee’s contribution from the wages payable to the employee for 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 the contribution so deducted by the employee. 4[Explanation 2.—An employer who deducts the employees’ contribution from the wages payable to the employee for credit to the Employees’ State Insurance Fund held and administered by the Employees’ State Insurance Corporation established under the Employees’ State Insurance Act, 1948 (34 of 1948), shall be deemed to have been entrusted with the amount of the contribution so deducted by him, and if he makes default in the payment of such contribution to t]he Employees’ State Insurance Corporation, he shall Illustrations
A, as executor of a deceased person’s will, dishonestly disobeys the law requiring him to divide the estate according to the will and appropriates the assets for his own use. A has engaged in illicit violation of confidence.
A is a logistics manager. Z, who is leaving on a trip, entrusts his furniture to A with the agreement that it will be returned upon payment of a specified quantity for warehouse space. A sells the products fraudulently. A has engaged in illicit violation of confidence.
(c) A, who resides in Calcutta, is Z’s emissary in Delhi. There is an explicit or implicit agreement between A and Z that all funds sent by Z to A must be invested per Z’s instructions. Z transfers one lakh rupees to A with instructions to invest the funds in Company’s paper. A disobeys the instruction dishonestly and invests the money in his own business. A has committed a felony trust violation.
(d) However, if A believes that it will be more advantageous for Z to hold shares in the Bank of Bengal, he disobeys Z’s instructions and purchases shares in the Bank of Bengal instead of Company’s paper. Even though Z suffers a loss and has the right to bring a civil action against A, he has not committed a criminal breach of trust because he acted in good faith.
(e) A, a revenue-officer, is entrusted with public funds and is either directed by law or committed by an express or implied contract with the government to deposit all public funds into a specific treasury. A fraudulently appropriates the funds. A has engaged in illicit violation of confidence.
Z entrusts A, a carrier, with property to be transported by land or water. A misappropriates the property dishonestly. A has engaged in illicit violation of confidence. Comments Criminal Confederation State of Kerala v. Padmanabham Nair, 1999 Cr LJ 3696 (Supreme Court). Sanction for prosecution is not required when a public servant is charged with conspiracy to perpetrate breach of trust. Criminal violation of trust: Significance and scope It must be proven that the beneficial interest in the property over which the alleged offense was committed was vested in a person other than the defendant, and that the defendant held the property on behalf of that person. A relationship is formed between the transferor and transferee in which the transferor retains ownership of the property and the transferee either has legal custody of the property for the transferor’s benefit or has custody of the property for the benefit of the transferor or someone else. The transferee acquires, at most, a limited special interest in the property entrusted to him, limited to a claim for his charges in respect of its safe retention, and under no circumstances does he acquire the right to dispose of the property contrary to the condition of the entrustment; Jaswantrai Manilal Akhaney v. State of Bombay, AIR 1956 SC 575. Entrustment The word “entrusted” in the section is crucial; if there is no entrustment, there can be no violation of the section; Ramaswami Nadar v. State of Madras, AIR 1958 SC 56.