Criminal Misappropriation and Criminal Breach of Trust | Legal Reasoning for CLAT PDF Download

• The offence of criminal misappropriation consists of dishonest misappropriation or conversion to his own use of any movable property.
• It takes place when the possession has been innocently come by, but where, due to a subsequent change of intention, or from the knowledge of some new fact with which the party was not previously acquainted, the retaining becomes wrongful and fraudulent.

The two essential ingredients of this section are:

• The accused misappropriated or converted to his own use another's movable property, and
• The accused did so dishonestly.

To 'misappropriate' means 'improperly setting apart for one's use to the exclusion of the owner.'
'Converts' means appropriation and dealing with the property of another without right as if it is his own property.

• The accused is not guilty when he merely retains or possesses such property.
• He is guilty only when he appropriates or converts to his own use such property.
• Further, the property must be movable property.

A man is said to do a thing 'dishonestly' when he does it with the intention of causing wrongful gain to one person or wrongful loss to another person.

It follows that:

• A mere misappropriation or conversion to one's use is not sufficient for the completion of an offence.
• The element of dishonesty is essential, and dishonesty comes into existence as soon as there is an intention of causing wrongful gain or loss.

Examples and Scenarios:

1. Where a person found a purse and put it in his pocket but was immediately afterwards arrested:

   • He was not guilty of criminal misappropriation because it could not be assumed that by the mere act of picking up the purse or putting it in his pocket, he intended to appropriate its contents to his own use.
   • Mere retention of money would not warrant a conviction under Section 403 unless there is evidence that the accused used the money.

2. Misappropriation or conversion need not be permanent, it may be for a time:

   • Example: The accused, a government servant, on duty received certain money in his possession for several months but, fearing detection, paid them into the treasury, making a false entry at the time in his books. He was held guilty of criminal misappropriation.
   • Example: A servant, authorized to collect money on behalf of his master, retained money due to non-payment of wages by his master.

3. The accused would not be guilty of the offence:

   • Where there was no information as to the circumstances under which the items were lost, and the probability was that the property was abandoned by the original owner.

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 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'.

Explanation 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 for the contribution so deducted by him. If he makes default in the payment of such contribution to the said Fund in violation of the said law, he shall be deemed to have dishonestly used the amount of the said contribution in violation of a direction of law as aforesaid.

Explanation 2:

A person, being an employer, who deducts the employee's contribution from the wages payable to the employee for credit to the Employee's State Insurance Fund held and administered by the Employee's State Insurance Corporation established under the Employee's State Insurance Act, 1948, shall be deemed to have been entrusted with the amount of the contribution so deducted by him. If he makes default in the payment of such contribution to the said Fund in violation of the said Act, he shall be deemed to have dishonestly used the amount of the said contribution in violation of a direction of law as aforesaid.

Illustrations

• A, being executor to the will of a deceased person, dishonestly disobeys the law which directs him to divide the effects according to the will and appropriates them for his own use. A has committed criminal breach of trust.
• A is a warehouse keeper. Z, going on a journey, entrusts his furniture to A, under a contract that it shall be returned on payment of a stipulated sum for warehouse-room. A dishonestly sells the goods. A has committed criminal breach of trust.
• A, residing in Calcutta, is agent for Z, residing in Delhi. There is an express or implied contract between A and Z that all sums remitted by Z to A shall be invested by A, according to Z's direction. Z remits a lakh of rupees to A, with directions to A to invest the same in Company's paper. A dishonestly disobeys the directions and employs the money in his own business. A has committed breach of trust.
• But if A, in the last illustration, not dishonestly but in good faith, believing that it will be more for Z's advantage to hold shares in the Bank of Bengal, disobeys Z's directions, and buys shares in the Bank of Bengal, for Z, instead of buying Company's paper, here, though Z should suffer loss, and should be entitled to bring a civil action against A, on account of that loss, yet A, not having acted dishonestly, has not committed criminal breach of trust.
• A, a revenue-officer, is entrusted with public money and is either directed by law, or bound by a contract, express or implied, with the Government, to pay into a certain treasury all the public money which he holds. A dishonestly appropriates the money. A has committed criminal breach of trust.
• A, a carrier, is entrusted by Z with property to be carried by land or by water. A dishonestly misappropriates the property. A has committed criminal breach of trust.