Indian Penal Code, 1860
Section 405
repealedCriminal 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 off 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 wilfully suffers any other person so to do, commits “criminal breach of trust”.
Why this exists
This section protects the relationship of trust that exists whenever one person hands over property or authority over property to another, such as an employee, agent, partner, or custodian. It exists because such trust is essential to business, employment, and everyday transactions, and the law needed a specific offence for betraying it, distinct from simple theft since the property was handed over voluntarily. Under the Bharatiya Nyaya Sanhita, 2023, this offence corresponds to Section 316.
How courts read it
Courts have long held that the essential ingredients are (1) entrustment of property or dominion over it, and (2) dishonest misappropriation, conversion, use, or disposal of that property in violation of a legal duty or contract. Courts distinguish this from theft because the accused originally possessed the property lawfully, and from mere breach of contract because dishonest intention is required, not just a civil default.
Common misconceptions
- Myth: It's only a civil dispute if you eventually intend to return the money.
Fact: Intending to repay later does not cancel out the dishonest act of misappropriating entrusted property at the time it happened. - Myth: This only applies to bank employees or accountants.
Fact: It applies to anyone entrusted with property or dominion over property, including friends, partners, and casual custodians.