This article has been written by Vishwendra Prashan. This article discusses the aggravated form of a criminal breach of trust, i.e., Section 409 of the IPC, and the punishment. This article also highlights the necessary conditions of this Section and its leading judgments.
It has been published by Rachit Garg.
Table of Contents
Introduction
Let’s assume the State Government entrusted Rs. 15 crores to a revenue officer. The Government directed him to transfer those funds to a contractor for constructing a government school. The contractor came to the revenue officer to take those funds. The revenue officer told him to sign some documents for completing formalities. But, he did not transfer those funds to the contractor and misappropriated those funds. Now, a question arises as to under which provision the revenue officer would be liable. Let’s find the answer to this question through this article.
Chapter XVII of the Indian Penal Code 1860 contains provisions regarding offences against properties. This Chapter includes Sections 378 to 462. Among these, Sections 405 to 409 deal with criminal breach of trust.
Section 405 defines criminal breach of trust. As per the Section, a person is said to have committed a criminal breach of trust when the following basic ingredients are proved in a Court of law:
- If he is entrusted with another’s property or has dominance over another’s property; and
- He must have dishonestly misappropriated that property or converted it to his use; or
- He must have dishonestly used or disposed of the property in violation of directions prescribed under the law; or
- He must have entered into a legal contract that has breached the trust; or
- He must have intentionally made other people suffer to do so.
Let’s consider that John, going on a journey, entrusts his furniture to Peter under a contract that he (Peter) must return it on payment of a stipulated sum for the warehouse room. Peter dishonestly sells the furniture. He has committed a criminal breach of trust.
However, Section 409 is an aggravated form of criminal breach of trust. The Chapter XVII of IPC provides such aggravated form. This Section deals with the criminal breach of trust by public servants, bankers, merchants, factors, brokers, attorneys, and agents.
What is the crime defined under Section 409 IPC
When public servants, bankers, merchants, factors, brokers, attorneys, and agents, being entrusted with properties or with dominion over properties, commit criminal breaches of trust in respect of those properties, they are liable under Section 409 IPC. These persons have great powers of control over the properties entrusted to them. However, they are legally bound to perform their duties in good faith. If they fail to do so, they are liable due to a breach of trust.
Illustrations:
- ‘A’ paid Rs 20,000 to a postmaster ‘X’ for a money order. ‘X’ misappropriated this money. He is liable under Section 409 of the IPC.
- A merchant ‘Z’ had to deliver goods to ‘A’. He took money from ‘A’. But, he did not deliver the goods. He was liable under this Section.
- A person ‘X’ went to a bank to transfer money to ‘C’. ‘X’ gave a cheque of Rs 2 Lakhs to a banker ‘Y’. He told ‘X’ that the bank server is down right now, so he would transfer the amount later. He also told ‘X’ to sign on the cheque. However, ‘X’ signed on the cheque but ‘Y’ transferred the amount to his own bank account.
- ‘X’ was an agent of ‘A’. ‘X’ was in Mumbai, while ‘A’ was in Kolkata. There was a contract between them that ‘X’ would invest A’s money according to his direction. ‘A’ transferred Rs. 20 Lakhs to ‘X’ for investing in his company. But, ‘X’ dishonestly disobeyed ‘A’s direction, and he invested that money in his own business. ‘X’ was liable under this Section.
Essentials of crime under Section 409 IPC
These are the essentials of the crime under this Section:
- The accused must be public servants, bankers, agents, brokers, factors, or attorneys;
- they must have entrustment of the property;
- they must have mens rea; and
- they must have committed a breach of trust regarding the property entrusted.
These essentials are proven to make the accused liable under this Section.
In R. Sai Bharathi v. J. Jayalalitha (2004), a firm purchased the property of a Government company. The Chairman of the company was a partner (accused). He had no dominion over the property of the company. Moreover, there was no relationship of trustee and fiduciary between the Chairman and the company. The Chairman had no dominion over the property. The Supreme Court held that the accused was not liable under Section 409 IPC as there was no entrustment.
Public servants
Section 21 of the IPC defines the term ‘public servants’. According to this Section, the following persons are public servants:
- Repealed by the Adaptation of Laws Order, 1950;
- Every Commissioned Officer in Military, Naval or Air Forces;
- Every Judge including any person empowered by law to discharge any adjudicatory functions;
- Every officer of a Court of Justice, including a liquidator, receiver or commissioner, who investigates or reports on any matter of law or fact, or makes, authenticates, keeps any document, or takes charge or disposes of any property, or executes any judicial process, or administers any oath, or interprets, or preserves order in the Court, and every person specially authorized by a Court of Justice to perform any of such duties;
- Every juryman, assessor, or member of panchayat assisting a Court of Justice or public servant;
- Every arbitrator or other person to whom matter is referred by any Court or any other competent public authority;
- Every person who is empowered by law to place or keep any person in confinement;
- Every Government officer whose duty is to prevent offences, to give information about offences, to bring offenders to justice, and to protect public health and safety;
- Every officer who is empowered by the Government to carry out contracts in the name of the Government to carry out sale deeds or purchases, who will keep record of all authenticated documents, and who will prevent the infraction of law;
- Every officer whose duty is to take, receive, keep or expend any property, to make any survey or assessment or to levy any rate or tax for any secular common purpose of any village, town or district, or to make, authenticate or keep any document for the ascertaining of the rights of the people of any village, town or district;
- Every person who is empowered to prepare, publish, maintain or revise an electoral roll or to conduct an election or part of an election;
- Every person-
- In the service or pay of the Government or remunerated by fees or commission for the performance of any public duty by the Government;
- In the service or pay of a local authority, a corporation established by or under a Central, Provincial or State Act or a Government Company as defined in Section 617 of the Companies Act, 1956.
Bankers
They are the ones who receive money to be withdrawn again as the owners have occasion for it. The word ‘bankers’ includes cashiers or shroffs.
In the case of S. Jayaseelan v. State of SPF (2002), the cashier received repayment of loan instalments. He issued receipts and made entries in the passbook but did not show the repayments in the ledger books. The Madras High Court held that the cashier had dishonest intentions. This Court reduced his sentence from 2 years to 18 months because he had paid the amount back.
Merchants
They deal in the purchase and sale of goods. They especially import and export goods.
Agents
They are employed to do any act for another person or an entity. Moreover, they are also employed to represent a client in dealings with third parties. Agents are bound to exercise their authority under all lawful instructions. Their principals give them such instructions from time to time.
The trustee of a temple is an agent of the deity, and if he misappropriates temple jewels, he is guilty under Section 409.
The term ‘agents’ is not restricted to persons who carry on the profession of agents. The requirements of the Section would be satisfied if the person is an agent of another and another person entrusts him:
- with property or;
- with any dominion over the property.
Moreover, the entrustment must be related to his duties as an agent.
Brokers
They are agents employed to make bargains and contracts between other persons in trade, commerce, and navigation. In common parlance, they are agents employed by one party only to make a binding contract with another.
Factors
They are mercantile agents entrusted with the possession or control of goods, wares, or merchandise for sale on commission.
In the case of Pramod Parmeshwarlal Banka v. State of Maharashtra (2011), the complainant took a loan from the company against his shares. The company did not refund shares to him after the repayment of the loan. The complainant filed a complaint against four accused persons. He alleged that the accused persons had shares entrusted, so they are liable under Section 406 IPC read with Section 114 IPC. The Magistrate convicted only one accused (Vijay Agarwal) under Section 406 IPC and acquitted the remaining accused persons.
The complainant filed a revision petition against the order of the Magistrate in the Sessions Court. The Sessions Judge directed the Magistrate to prosecute all the offenders under Section 409 read with Section 34 IPC.
The offenders filed revision petitions before the Bombay High Court. The High Court observed that the Indian Penal Code has no provisions of vicarious liability on the part of the Managing Directors or the Directors when the accused is a company. Such liability would arise only when the statute has provisions for the same. The High Court observed that the order of the Magistrate was right because only Vijay Agarwal was involved in this case. The Court held that Vijay Agarwal was liable under Section 409 of the IPC. According to this Court, the charge under Section 409 was tenable even though the accused were not bankers or public servants but factors.
Attorneys
They are appointed by other persons to do something in their absence. Attorneys have the authority to act for another person.
Property
The definition in Section 409 of the IPC does mean that the property may be only movable.
Moreover, the Kerala High Court in Damodara Panicker v. State of Kerala (2019) held that both movable as well as immovable properties are the subject matters of criminal breach of trust.
Entrustment
The term “entrustment” means to hand over something in trust. In other words, one person hands over his property to another person. The other person must hold a position of trust.
However, this ingredient is the most important one because the absence of this ingredient will not lead to any offence under Section 409. Therefore, the prosecution must prove that there was some entrustment of property.
Entrustment may not always be expressed. It may be implied as well.
Dominion over the property
The term “dominion” means control over the property.
How is a criminal breach of trust different from criminal misappropriation of property
| Criminal Breach of Trust | Criminal Misappropriation of Property |
| Sections 405 to 409 of the IPC deal with criminal breach of trust. | Section 403 of the Code deals with criminal misappropriation of property. |
| There are contractual relationships between the offenders and the owners regarding the properties. | There are no such contractual relationships. |
| The offenders obtain possession of the properties because of entrustment by the owners of the offenders. | The offenders obtain possession by casualties. |
| The offenders misappropriate the properties for their personal use. | The offenders dishonestly misappropriate the properties for their own use. |
| The properties may either be movable or immovable. | The properties are always movable. |
| Section 406 deals with the punishment for such an offence | Section 403 deals with punishment. |
| It is punishable with imprisonment up to 3 years, or with a fine, or both. | It is punishable with imprisonment up to 2 years, or with a fine, or both. |
Punishment under Section 409 IPC
As per Section 409 of the IPC, if public servants, bankers, merchants, factors, attorneys, or agents commit a criminal breach of trust, they are punishable with the following:
- Life imprisonment, or
- Imprisonment of up to 10 years along with a fine.
As per the provisions of criminal breach of trust (Sections 405 to 409) in Chapter XVII of the Code, two circumstances may take place:
- Acts of criminal breach of trust on the part of the persons who enjoy the special trust and are also in a position of authority (Section 409); and
- Acts of criminal breach of trust done by any other person who may be a common person, carrier, clerk, or servant (Sections 406, 407, and 408).
However, the Indian legislature treats the first circumstance more harshly than the latter one. For example, in respect of public servants, the Courts provide much more stringent punishment in the form of life imprisonment or imprisonment of up to 10 years along with a fine. Public servants enjoy special status and trust in the eyes of the public as representatives of the government or government-owned enterprises. A breach of such trust makes punishment much more severe, as per Section 409.
In the case of Sudhir Shantilal Mehta v. C.B.I, (2009), the bank officials who allowed advance credits on banker’s cheques to a customer violating Departmental instructions acted in breach of the direction of the law. The officials had dominion over the money belonging to the bank. They dishonestly used that money to confer a benefit on the customer. Hence, the Court held that the officials were liable under Section 409 of the IPC.
In the case of Sadhupati Nageswara Rao v. State of Andhra Pradesh (2012), the appellant (an agent) was entrusted with the distribution of rice under the ‘Food for Work Scheme’ to the workers on the production of coupons. He misappropriated 67.65 quintals of rice. The SHO registered an FIR against the appellant under Sections 409 and 420 IPC. The Magistrate convicted him under Section 409 and not under Section 420 IPC. The Magistrate sentenced him to simple imprisonment for 6 months and a fine of Rs 1,000 only. The appellant filed an appeal before the Andhra Pradesh High Court against the order of the Magistrate. The High Court dismissed the appeal. Thereafter, he filed a Special Leave Petition before the Supreme Court to challenge the order of the High Court. His Council contended that the alleged offence occurred in 2002, and the Court may show some leniency on the sentence awarded by the Magistrate. The Supreme Court upheld the conviction as the evidence proved that there was entrustment of property to the accused. The Supreme Court also held that courts cannot show leniency when awarding sentences on the grounds of sympathy or delay. This rule especially applies where the accused has to distribute essential commodities under any Government schemes for the benefit of the public at large.
In the case of State of MP v. Prempal (1991), a post-master misappropriated money entrusted to him. The State contended that the post-master (accused) was liable under Section 409 IPC. The Magistrate acquitted the accused on the following grounds:
- The accused returned the whole amount before being challenged.
- He had given receipts for various sums deposited in the account.
- He denied that he had made entries of deposit in the passbook of the depositor. So, there was no proof that the accused had received various sums.
The State challenged the acquittal by filing an appeal before the Madhya Pradesh High Court. The High Court held that his acquittal on those grounds was improper. The Court said that the accused had received the money. If public servants entrusted with government funds misappropriate those funds, a refund of the same would not absolve them of the offence. The High Court set aside the acquittal and convicted the accused under Section 409 IPC. The accused was sentenced to imprisonment till the rising of the Court and to pay a fine of Rs 300, in default to undergo rigorous imprisonment for 3 months.
In the case of Inder Sen Jain v. State of Punjab (1994), the accused was working as an assistant accountant in a company. He received certain recoveries on behalf of the company from a firm. But he did not credit them to the account of the said firm. The Learned Magistrate of First Class convicted the accused with a rigorous imprisonment of one and a half years under Section 409 IPC and a rigorous imprisonment of one and a half years under Section 477A IPC. The accused (appellant) challenged this conviction before the Additional Sessions Judge. He acquitted the appellant The State challenged this acquittal before the Punjab and Haryana High Court. The High Court held that the Additional Sessions Judge was wrong in his judgment because he ignored the evidence of the prosecution witnesses. The accused challenged the judgment of the High Court before the Supreme Court. However, the Supreme Court upheld the conviction, but considering the time factor and age of the accused, it reduced the sentence to six months of rigorous imprisonment under each count.
In the case of State of Himachal Pradesh v. Karanvir (2006), a prosecution witness deposited money with a postmaster for purchasing National Savings Certificates (NSCs). The prosecution witness had filled out all the required forms and received a receipt regarding the deposit. But he did not receive any NSCs even after a month. An inquiry was conducted regarding this matter. The postmaster (respondent) deposited money in the Post Office when he came to know about the inquiry. After lodging the FIR, the Chief Judicial Magistrate convicted the accused (postmaster) under Section 409 of the Code and sentenced him to undergo simple imprisonment for six months along with a fine of Rs 1000. The respondent filed an appeal before the Sessions Judge. The Sessions Judge dismissed the appeal. The respondent filed a revision petition before the Himachal Pradesh High Court. The High Court set aside the conviction as the prosecution could not prove the misappropriation. The State filed an appeal before the Supreme Court against the judgment of the High Court. The Supreme Court observed that the offence happened 15 years ago. Moreover, he deposited the misappropriated amount with interest even before filing the FIR. The Supreme Court held that the accused was punishable with a fine of Rs 4,000 apart from Rs 1,000 imposed by the Trial Court. Moreover, in default of the payment of the said amount, he would be punishable with simple imprisonment for three months.
Burden of proof
In the case of Shyam Lal v. State of Himachal Pradesh (2022), the Himachal Pradesh High Court has held that the prosecution must prove the following:
- The accused had entrustment of property in the capacity of a public servant, and
- he had committed a criminal breach of trust relating to that property.
Moreover, the burden is upon the accused to show that he used the property for the purpose for which it was entrusted to him. This is possible only in the following circumstances:
- When the accused has admitted the fact of entrustment; or
- when the prosecution has proved the fact of entrustment.
Liability of directors under Section 409 IPC
The directors of the companies are not only agents but also trustees of the companies’ assets that come into their hands. In other words, they have dominion and control over those assets. Thus, if they misappropriate those assets for their own use, they can come within the mischief of this Section.
In the case of Narindra Kumar Jain v. State of MP (1996), the manager of a rice mill caused the disappearance of 1500 quintals of paddy from a huge stock of the material entrusted to him. The Chief Judicial Magistrate acquitted the manager of the charges. The High Court convicted him under Section 409 IPC. The manager filed an appeal before the Supreme Court. The Supreme Court held that the accused was liable under Section.
Leading judgments
Bonela Swaminathan v. State of A.P. (2000)
In this case, the accused was convicted of misappropriating bank money. He was convicted under Sections 409 and 420 IPC and sentenced to rigorous imprisonment for one year. He remitted the entire amount to the bank.
The Supreme Court reduced his sentence to the period already undergone (i.e., 3 months).
Badal Chandra Pathak v. State of Jharkhand (2013)
In this case, the accused (contractor) was entrusted with the work of bridge construction under the Jawahar Rojgar Yojna. He misappropriated Rs. 37,147 and did not complete the construction work. The Jharkhand High Court held that the accused was liable under Section 409 of the IPC. This Court reduced the sentence imposed upon him (i.e., simple imprisonment of 1 year and a fine of Rs. 5,000) to the period already undergone by him in custody (i.e., 6 months and 25 days) and enhanced the fine to Rs. 50,000.
Conclusion
In common parlance, some specific kind of person commits a criminal breach of trust under Section 409 of the Indian Penal Code, 1860. A breach of trust always includes criminal misappropriation, but a criminal misappropriation may not always be a breach of trust.
To prosecute the accused under the Section, there must be a malafide intention to misappropriate the entrusted properties. Such properties may not always be owned by the government. Moreover, it is mandatory to prove this fact. Generally, the burden of proof lies on the prosecution. But this burden may shift to the accused in special circumstances.
Frequently Asked Questions (FAQs)
What is the nature of the offence under Section 409 of IPC?
The offence under this Section is cognizable, non-bailable, and non-compoundable.
Who is suitable for taking cognizance of such an offence?
The offence under Section 409 of the IPC is triable by a Magistrate of the first class.
What is the reason behind the stringent punishment under this Section?
Persons mentioned in Section 409 enjoy special powers of control over the entrusted properties. Moreover, the public expects huge trust from such persons. Hence, if these persons breach public trust and misappropriate the properties, they are liable under this Section. However, the punishment under the Section is stringent.
Can a Magistrate grant bail under Section 409 IPC?
Yes, a Magistrate can grant bail in this Section based on the facts and circumstances of the case. However, if the Magistrate rejects the bail, the accused may approach the Sessions Court or High Court.
After filing an FIR against the accused, he may approach the Sessions Court or High Court for anticipatory bail.
Are the below-mentioned persons public servants? Are they punishable under Section 409?
- President of Co-operative Society, and
- Secretary of Co-operative Society
No, the above-mentioned persons are not public servants. In Shanmugham v. State of TN (1997) and Rabindra Nath Bera v. State of West Bengal (2012), the Courts held that the President and Secretary of the Co-operative Society are not public servants within the meaning of Section 21 of the IPC.
Is there any difference between criminal breach of trust and theft?
Yes, there is a difference between a criminal breach of trust and theft. The difference is discussed below:
| Criminal breach of trust | Theft |
| Sections 405-409 deal with criminal breach of trust. | Sections 378-382 deal with theft. |
| The property is lawfully obtained with the owner’s consent but dishonestly misappropriated by the person to whom it is entrusted. | There is a wrongful taking of movable property without the owner’s consent. |
| The property involved is either movable or immovable. | The property involved is always movable. |
| The offence is complete when the offender dishonestly misappropriates the entrusted property for his own use. | The offence is complete when the offender dishonestly takes away the property. |
References
- https://blog.ipleaders.in/all-about-section-409-and-447-ipc/#:~:text=Section%20409%20and%20447%20of,punishment%20for%20criminal%20trespass%20respectively.
- Ratanlal & Dhirajlal, The Indian Penal Code, 36th Edition, 2020.
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