BNS Section 316: Criminal Breach of Trust

Offence

Breach of trust, as the title suggests, involves an act that contradicts bona fide trust placed by one person in another in a specific context. Usually, breach of trust is a civil matter which usually involves a dispute over business dealings, family affairs or employment related disputes. However, breach of trust can also be a criminal act in some cases, and this section provides for such criminal breach of trust.

Unlike other crimes which have physical traces to them, criminal breach of trust can be a little more subtle. And so it has to be defined clearly and specifically in order for it to be prosecuted under criminal law. This section has been divided into five subsections, with the first subsection defining the meaning of criminal breach of trust for the purposes of this section and the remaining subsections defining the punishment for the various aspects of this offence. Let a take a look at them one by one.

Subsection (1) defines criminal breach of trust as an act of dishonest misappropriation of property by a person who has been entrusted with the care of such property. As you can see, this crime has two facets two it:

Misappropriation of property

Breach of trust

So when breach of trust entails a criminal act, it becomes criminal breach of trust as against general breach of trust which simply involves contradicting a prior understanding or agreement between two persons. This section describes five actions as criminal breach of trust:

Misappropriation of entrusted property

Convert entrusted property for own use

Dishonestly use entrusted property

Dispose of entrusted property

All of these actions shall be considered unlawful or illegal if they:

Violate any direction of law - referring to general principles of trust established under the law or any specific direction provided by the law in relation to that property

Violate any legal contract - referring to any expressed or implied contract between the owner of the property and the trustee who has been entrusted with the property

Wilfully suffers any other person to do so - referring to engaging or employing another person to carry out the misappropriation on their behalf.

In short, if any person misappropriates any property entrusted to him or her by any means described above, then he or she is in criminal breach of trust and shall be prosecuted under the provisions of this section. Two explanations have been provided to further clarify the definition of this offence.

Explanation 1 clarifies that while in general it may seem like it is the employee who commits criminal breach of trust against an employer, it is not always so. In case of salaried employees, employers are usually required to deduct a certain amount of their income as contributions towards a retirement scheme for that employee, usually in the form of a provident fund. In this case, the employee is trusting the employer with his or her hard earned money so that he or she can make use of it in times of need. If such funds are not available to the employee at such a time despite having regularly allowed deductions from his or her remuneration towards this fund, then it shall be considered a criminal breach of trust under the provisions of this section

Similarly, Explanation 2, clarifies that deductions made from employee remuneration towards contributions for Employees’ State Insurance Fund shall also be considered as property entrusted to an employer by an employee and any problems with access to such funds by the employee shall be considered criminal breach of trust. Let us take a look at the illustration provided to demonstrate the effect of this section.

(a) 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 to his own use. A has committed criminal breach of trust. Dishonest misappropriation of property possessed by deceased person at the time of his death.

An executor of a will is a legal position with certain legal obligations under the law. Any deviance in the performance of these legal obligations is not just a breach of trust but a violation of the law. As it has been mentioned, A has failed in his fundamental duty as an executor by disregarding the provisions of the will and misappropriating the property entrusted to him for his own use. A has committed criminal breach of trust.

(b) 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 legal contract creates legal obligations for the parties involved. Breaching these obligations is illegal and punishable by law. And when the breach is done with malicious or dishonest intentions, then it amounts to a criminal breach of trust. In this example, A and Z have a contract wherein Z has been appointed as caretaker of Z’s furniture. So there is no scope of confusion of misunderstanding as to the nature of the transaction. Selling any property is the prerogative of the owner of the property. So Z has not only breached the contract by failing to take care of Z’s furniture, he has also violated property rights of Z. This makes the act a criminal breach of trust and punishable under the provisions of this section.

(c) A, residing in Kolkata, is agent for Z, residing at 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 one 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 criminal breach of trust.

Again, here A has not only breached the predetermined contract which was to invest the money remitted by Z according to his instructions. By diverting the money into his own business without Z’s knowledge or authorisation is a preach of Z’s property rights. Because even if A claims that he intends to return the money or reinvest it according to Z’s directions after a while, the employment of property towards any endeavour is solely the prerogative of the owner of such property. And the money, being Z’s property, has not been invested according to his express wishes. This amounts to criminal breach of trust and is prosecutable under this section.

(d) But if A, in illustration (c), 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.

This illustration displays the nuanced difference between breach of trust and criminal breach of trust. Breach of trust, as explained before, is when the legal obligations created by an agreement or contract between two persons remain unfulfilled due to circumstantial reasons. This can lead to a civil dispute and tried as a civil case under the provisions of the Contracts Act or any other related act. However, for it to be a criminal breach of trust, there has to be a malicious intent, to serve self interest at the cost of others. Here even though A stands to gain from his action through a bigger commission, he has not done it with malicious intent and not at the cost of Z, but rather to the benefit of Z. Due to the lack of malicious intent, A cannot be tried for criminal breach of trust although he can be sued by Z for breach of contract in a civil court.

(e) 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 revenue officer has the responsibility of collecting public money due to the government and holding it on behalf of the government. It is government property entrusted to the officer through an agreement in his or her employment contract. Besides, government employees are also governed by laws that are specifically enacted to create a clear cut framework for government employees. So A’s action is a breach of both, a contract and the law.

(f) 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.

This is a contract entered into by two private parties and if A would have failed to deliver the property due to any circumstantial reason, it would amount to breach of contract or a simple breach of trust. However, A had no such reason to fail in delivering the property except a malicious intent to misappropriate the property for own use. So A has committed a criminal breach of trust.

The remaining subsections define the punishment for the various aspects of criminal breach of trust. Let us take a look.

Subsection (2) defines the punishment for committing criminal breach of trust

Subsection (3) defines punishment for criminal breach of trust committed by warehouse keepers, carriers and wharfingers who have been entrusted with the care and transport of property.

Subsection (4) defines punishment for criminal breach of trust committed by a clerk or servant entrusted with care and stewardship of owner’s property,

Subsection (5) defines punishment for criminal breach of trust committed by a professional such as, public servant, a banker, factor, broker, attorney or agent.

Punishment

The punishment for criminal breach of trust has been categorised according to seriousness of such breach of trust. Let us take a look.

The above actions may not be an offence under this section if:

However, there may be other sections under the BNS under which the above actions can be prosecuted and while they may be disqualified under the provisions of this section, such actions will still be punishable under the provisions of those respective sections of the BNS.