Whether offence of S 406 or S 420 of IPC is made out if there is breach of contract?

In my view, the complainant also has not established that the accused from the inception had an intention to adduce the complainant to deliver the property and from the inception intended to cheat the accused. The complainant has relied on the fact that apart from paying the marginal money no installment was paid by the accused and from this an inference could be drawn about the intention of the accused. Reliance was placed on Illustration F to Section 415 and was submitted that this case was squarely covered under the said illustration. It is not possible to accept the submission of the learned counsel appearing on behalf of the appellant. In my view, there is no evidence on record from which an inference could be drawn that the accused from the inception had intended to cheat the complainant. In a case where there is a breach of an agreement executed between the parties merely because there is a breach and several amounts which are due and payable by one party to the other are not paid it cannot be said that the offence punishable under Section 420 or that the offence of criminal breach of trust is committed by the accused. There are catenas of judgments of the Supreme Court and this Court wherein it has been observed that in order to attract the provisions of Section 406 or Section 420 of the Indian Penal Code the ingredients of the said offence have to be established. It is no doubt true that in a given case of a breach of contract a prosecution could be launched under the provisions of Section 406 or Section 420 and at the same time simultaneously a civil suit could also be filed. However, this is not always true and in order to establish that the breach of contract had resulted into an offence punishable under Sections 406 or 420 of the Indian Penal Code there should be sufficient material on record on the basis of which such inference can be drawn. In my view, from the evidence on record, it is not possible to draw such an inference.

Bombay High Court

National Small Industries Corpn. ... vs Samudra Corporation And Anr. on 17 August, 2005

Bench: V Kanade

Citation;2005 CRLJ 3432 Bom

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Whether breach of trust without dishonest intention is offence?

In my opinion no charge is made out against Rangi Lal under Section 408, I.P.C. It should be borne in mind that mere retention of money or mere failure to return it does not necessarily raise a presumption of dishonest misappropriation. The mere fact that the payment was delayed is no ground for imputing a criminal intention. Though the ingredients of the offence of criminal breach of trust are somewhat broadly stated, there is no doubt as to their meaning. The sections dealing with the offence of criminal breach of trust were intended to punish an offence of which dishonesty is the essence. Any breach of trust is not an offence, lt may be intentional without being dishonest or it may appear dishonest without being really so.

Equivalent Citation: AIR1930Oudh321, (1931) ILR 6 LUCK 68,1931 CRLJ1678

IN THE HIGH COURT OF OUDH

Decided On: 08.04.1930

 Rangi Lall  Vs.  Emperor

Coram: Raza, J.

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How to appreciate defence of accused in case of criminal misappropriation of property?

There is no dispute that approximately 1,30,000 yards out of the cloth -entrusted to the company by the Textile Commissioner for dyeing has not been returned. By its letter dated December 4, 1950, the company admitted liability to deliver 1,29,748 yards of cloth, but this cloth has not been returned to the Textile Commissioner in spite of repeated demands. That the appellants, as directors of the company had dominion over that cloth was not questioned in, the trial court. The plea that there were other Directors of the company besides the appellants who had dominion over the cloth has been negatived by the High Court and in our judgment rightly. Direct evidence to establish misappropriation of the cloth over which the appellants had dominion is undoubtedly lacking, but to establish a charge of criminal breach of trust, the prosecution is not obliged to prove the precise mode of conversion, misappropriation or misapplication by the accused of the property entrusted to him or over which he has dominion. The principal ingredient of the offence being dishonest misappropriation or conversion which may not ordinarily be a matter of direct proof, entrustment of property and failure in breach of an obligation to account for the property entrusted, if proved, may in the light of other circumstances, justifiably lead to

-an inference of dishonest misappropriation or conversion. Conviction of a person for the offence of criminal breach of trust may not, in all cases, be founded merely on his failure to account for the property entrusted to him, or over which he has dominion, even when a duty to account is imposed upon him, but where he is unable to account or renders an explanation for his failure to account which is untrue, an inference of misappropriation with dishonest intent may readily be made.

In this case, on a search of the factory on December 29, 1952, the cloth remaining to be delivered by the company was not found. At the trial, the appellants sought to explain the disappearance of the cloth from the factory premises where it was stored, on the plea that it was old and was eaten up by white-ants and moths, and had been thrown away as rubbish. This plea of the appellants was not accepted by the High Court and we think rightly. No information was given at any time to the Textile Commissioner after December 4, 1950, that the cloth had been eaten up by white-ants and moths, and was therefore thrown away or otherwise destroyed. Nor was any evidence led in support of the plea by the appellants.

In this court, counsel for the first appellant contended that failure to return the cloth may give rise to a civil liability to make good the loss occasioned thereby, but in the circumstances of the case, the first appellant cannot be found guilty of the offence of criminal breach of trust. Counsel submitted that the first appellant had left Bombay in 1950 and had settled down in Ahmedabad and was attending to a factory in that town, that thereafter the first appellant was involved in insolvency proceedings and was unable to attend to the affairs of the company in Bombay, and if, on account of the pre-occupation of the first appellant at Ahmedabad, he was unable to visit Bombay and the goods were lost, no criminal misappropriation can be attributed to him. But the case pleaded by the appellant negatives this submission. The first appellant in his statement before the trial court admitted that he often went to Bombay even after he had migrated to Ahmedabad and-that he visited the mill premises and got the same opened by the Gurkha watchman and he found that the heap of cloth lying in the mill was getting smaller every time he visited the mill and on inquiry, he was told by the watchman that every day one basketful of sweepings was thrown away. He also stated that he was shown several places in the compound of the factory where pits had been filled up with these sweepings, and that he found a small heap lying by the side of the " Tulsipipe gutter" and also in the warehouses in the mill premises. It is clear from this statement and other evidence on the record that even after he migrated to Ahmedabad, the first appellant was frequently visiting the factory at Bombay. The evidence also discloses that meetings of Directors were held from time to time, but the minutes of the Directors' meetings have not been produced. The books of account-of the company evidencing disbursements to the Directors of remuneration for attending the meetings and the expenses for the alleged collection and throwing away of the sweepings have not been produced. It is admitted by the first appellant that the letter dated November 27, 1952, was written by the second appellant under his instructions. In his statement at the trial, the first appellant stated that he was informed of the letter dated November 26, 1952, from the Textile Commissioner and that hecould not attend the office of that officer because he was busy attending to the insolvency proceedings and that he deputed the second appellant to attend the office and to explain and discuss the position. Be then stated, "We had informed the Commissioner that the company was prepared to pay for the cloth remaining after deducting the amount claimed as damages". The letter dated November 27, 1952, was evidently written under the direction of the first appellant and by that letter, liability to pay for the cloth after certain adjustments for losses alleged to be suffered by the company in carrying out the contract was admitted. By the letter dated December 4, 1950, liability to deliver the cloth was admitted and by the letter dated November 27, 1952, liability to pay compensation for the loss occasioned to the Government was affirmed. The appellants who were liable to account for the cloth over which they had dominion have failed to do so, and they have rendered a false explanation for their failure to account. The High Court was of the opinion that this false defence viewed in the light of failure to produce the books of account, the stock register and the complete absence of reference in the correspondence with the Textile Commissioner about the cause of disappearance established misappropriation with criminal intent.

Supreme Court of India

Jaikrishnadas Manohardasdesai ... vs The State Of Bombay on 16 March, 1960

Equivalent citations: 1960 AIR 833, 1960 SCR (3) 329,1960 CRLJ 1250

Bench: Gajendragadkar, P.B.

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When offence of criminal breach of trust is made out against bank officers?

CRIMINAL BREACH OF TRUST The next charge we shall deal with is one arising under Section 409 of the IPC with which the accused herein have also been convicted of by the special judge. The punishment for criminal breach of trust by a public servant is provided under Section 409. However we must herein make reference of definition of criminal breach of trust simplicitor which reads as under Section 405:

"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 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 willfully suffers any other person so to do, commits `criminal breach of trust'."

The punishment for criminal breach of trust is provided in Section

406. Punishment for aggravated forms of criminal breach of trust is provided in Section 407 toSection 409.

The terms of the section are very wide. It applies to one who is in any manner entrusted with property or dominion over property. The section does not require that the trust should be in furtherance of any lawful object. The section provides inter alia, that if such a person dishonestly misappropriates or converts to his own use property entrusted to him he commits criminal breach of trust. There are separate offences by which criminal breach of trust may be committed. This section requires :

1) Entrusting any person with property or with dominion over property.

2) That person entrusted (a) dishonestly misappropriates or converting to his own use that property; or (b) dishonestly using or disposing of that property or willfully suffering any other person so to do in violation -

(i) of any direction of law prescribing the mode in which such trust is to be discharged, or

(ii) of any legal contract made touching the discharge of such trust.

In Onkar Nath Mishra and Ors. vs. State (NCT of Delhi) and Anr., [(2008) 2 SCC 561] this court noted that in the commission of the offence of criminal breach of trust, two distinct parts are involved. The first consists of  the creation of an obligation in relation to the property over which dominion or control is acquired by the accused. The second is misappropriation or dealing with the property dishonestly and contrary to the terms of the obligation created.

Criminal breach of trust by a public servant has been dealt with under Section 409 which reads as under:

"409. Criminal breach of trust by public servant, or by banker, merchant or agent.-- Whoever, being in any manner entrusted with property, or with any dominion over property in his capacity of a public servant or in the way of his business as a banker, merchant, factor, broker, attorney or agent, commits breach of trust in respect of that property, shall be punished with 1[imprisonment for life], or with imprisonment of either description for a term which may extend to ten years, and shall also be liable to fine."

Since we have dealt with the said issue in detail in K Venkatkrishnan v. Central Bureau of Investigation (Criminal Appeal 76 of 2004 decided today), we need not deal with it here again.

However, it is important to mention here that more recently this court in State of Punjab v. Pritam Chand and Ors., 2009 (2) SCALE 457 opined:  "The ingredients of offence under Section 405 are

(i) entrusting any person with property or with dominion over the property, (ii) the person entrusted (a) dishonestly misappropriated or converted to his own use the property or (b) dishonestly used or disposed of the property or willfully suffered any other person so to do in violation (i) of any direction of law prescribing mode in which such mode is to be discharged or

(ii) of any legal contract made touching the discharge of trust."

Further, more the court in Sharon Michael and Ors. v. State of Tamil Nadu and Anr., 2009 (1) SCALE 627 noted thus:

"Ingredients of Section 409 of IPC read as under:

(i) The accused must be a public servant;

(ii) He must have been entrusted, in such capacity, with property.

(iii) He must have committed breach of trust in respect of such property."

Therefore, in view of the principles of law extracted above in our opinion there is no doubt that the offences relating to criminal breach of trust stands established against the accused. They were the officers in the Funds Department of Andhra Bank. In the said capacity they had been entrusted with the funds of the Bank. In that sense they had dominion over a thing. The money which was transferred to the account of A3 was the money  belonging to the Bank. Only the said accused had the power to transfer it to the account of A3.

In the present case, the same has been done dishonestly to cause wrongful gain to A3 and in the process wrongful loss has been caused to the Bank. The instruments based on which the funds of Andhra Bank were transferred to the account of A3 were not physically available with Andhra Bank at the time the accused persons authorized the transfer of the funds of Andhra Bank to the account of A3.

Supreme Court of India

Mir Nagvi Askari vs C.B.I on 7 August, 2009

Bench: S.B. Sinha, Cyriac Joseph
Citation: AIR2010SC528, (2009)15SCC643, 

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