Criminal Misappropriation and Criminal Breach of Trust
Chapter Fifty-One
Syllabus topic 1, "Offences under Indian Penal Code"
Pages 246 to 250 of 802
In one line
Misappropriation is keeping property that came into your hands innocently; criminal breach of trust is betraying property that was deliberately entrusted to you; and receiving stolen property is dealing in what somebody else took.
In the wording a student can write in an exam: by section 316(1) of the Bharatiya Nyaya Sanhita, 2023 whoever, being in any manner entrusted with property or with any dominion over property, dishonestly misappropriates or converts it to his own use, or dishonestly uses or disposes of it in violation of any direction of law or of any legal contract touching the discharge of the trust, or wilfully suffers any other person to do so, commits criminal breach of trust.
Why possession at the start decides everything
Theft, misappropriation and breach of trust are distinguished by how the accused came to hold the property.
In theft he never held it lawfully. He took it out of another's possession.
In misappropriation he came by it innocently, usually by finding it, and the wrong happened later, when he decided to keep it.
In breach of trust he was given it on purpose, and the wrong is the betrayal of the confidence that gave it to him. That is why the punishments rise so steeply where the entrustment was professional.
The provisions themselves
Section 314, dishonest misappropriation. Dishonestly misappropriating or converting to his own use any movable property: not less than six months, extending to two years, and fine.
Explanation 1. A dishonest misappropriation for a time only is a misappropriation within the section. Its illustration is a man who pledges another's promissory note as security for a loan, intending to restore it later.
Explanation 2, the finder's position. A person who finds property not in anyone's possession and takes it in order to protect it for, or restore it to, the owner does not take it dishonestly and commits no offence. He is guilty if he appropriates it to his own use when he knows or has the means of discovering the owner, or before he has used reasonable means to discover and notify the owner and has kept the property a reasonable time for the owner to claim it. What are reasonable means and a reasonable time is a question of fact, and the finder need not know who the owner is: it is enough that at the time of appropriating he does not believe it to be his own or in good faith believe the real owner cannot be found.
Section 315, property of a deceased person. Dishonestly misappropriating property known to have been in the possession of a deceased person at death and not since in the possession of anyone legally entitled: three years and fine, rising to seven years where the offender was employed by the deceased as a clerk or servant.
Criminal Misappropriation and Criminal Breach of Trust
Section 316(1), criminal breach of trust, as set out above. Explanation 1 deems an employer who deducts an employee's provident fund contribution from wages to have been entrusted with it, and to have dishonestly used it in violation of a direction of law if he defaults in paying it to the Fund. Explanation 2 does the same for the Employees' State Insurance Fund contribution.
Section 316(2) to (5), the graded punishments. Simple criminal breach of trust: five years, or fine, or both. By a carrier, wharfinger or warehouse-keeper: seven years and fine. By a clerk or servant: seven years and fine. By a public servant, or in the way of his business as a banker, merchant, factor, broker, attorney or agent: imprisonment for life, or up to ten years, and fine.
Section 317, stolen property. Sub-section (1) defines it. Dishonestly receiving or retaining stolen property, knowing or having reason to believe it stolen: three years, or fine, or both. Receiving or retaining property known or believed to have been transferred by dacoity, or received from a person known or believed to belong to a gang of dacoits: life, or rigorous imprisonment up to ten years, and fine. Habitually receiving or dealing in stolen property: life, or up to ten years, and fine. Voluntarily assisting in concealing, disposing of or making away with stolen property: three years, or fine, or both.
The finder's rule, worked through
A finder is not a thief. The property was not in anyone's possession, so nothing was taken out of possession.
Nor is he a criminal for picking it up. Explanation 2 protects the person who takes it to protect or restore it.
He becomes guilty at the moment he decides to keep it, if either of two things is true: he knows or has the means of discovering the owner; or he has not yet used reasonable means to find and notify the owner and kept the property a reasonable time.
The two illustrations show the line. A man who finds a purse, later discovers whose it is and keeps it is guilty. A man who finds a valuable ring and sells it immediately without attempting to discover the owner is guilty.
Section 316(5) is where the heavy sentences are
Life imprisonment for a criminal breach of trust is available where the entrustment was in the capacity of a public servant, or in the way of business as a banker, merchant, factor, broker, attorney or agent.
The reason is that the trust was professional. These are the people the public has no choice but to trust, and the law prices the betrayal accordingly.
Criminal Misappropriation and Criminal Breach of Trust
The two Explanations to section 316(1) extend the section into employment law. An employer who deducts a provident fund or State insurance contribution from wages and does not pay it over is deemed to have been entrusted with it and deemed to have used it dishonestly. That is a deeming provision on both ingredients, and it is what makes non-payment a criminal offence rather than a civil default.
Distinctions that carry marks
| Theft, s.303 | Misappropriation, s.314 | Breach of trust, s.316 | |
|---|---|---|---|
| How the accused got it | Took it | Came by it innocently, usually by finding | It was entrusted to him |
| When the dishonesty arises | At the taking | After he has it | After the entrustment |
| Property | Movable | Movable | Property or dominion over property |
| Maximum | Three years | Two years, with a six month minimum | Five years, rising to seven, and to life under sub-section (5) |
| Section 314 | Section 315 | |
|---|---|---|
| Whose property | Anyone's | A person who has died, not since possessed by anyone legally entitled |
| Maximum | Two years and fine | Three years and fine; seven if the offender was the deceased's clerk or servant |
| Section 317(2) | Section 317(4) | |
|---|---|---|
| Conduct | Dishonestly receiving or retaining stolen property | Habitually receiving or dealing in it |
| Maximum | Three years, or fine, or both | Life, or ten years, and fine |
A worked example
Ramesh finds a wallet containing eight thousand rupees and an identity card on a train.
Is picking it up an offence? No. Explanation 2 to section 314 protects a person who takes found property in order to protect it for, or restore it to, the owner.
He reads the identity card and keeps the money. Now he is guilty under section 314, because he appropriated it to his own use knowing the owner, and the punishment is not less than six months extending to two years, and fine.
Change the facts. Suppose the wallet had nothing identifying in it, and Ramesh handed it to the station master, who kept the money. The station master is in the same position, and the fact that he received it from Ramesh does not make it an entrustment by the owner.
A different case. Suppose Ramesh is a courier who is given a sealed parcel to deliver and opens it and keeps the contents. He was entrusted with the property, so it is criminal breach of trust under section 316, and because he is a carrier, sub-section (3) applies: seven years and fine.
Change his occupation. If he is a bank manager who applies a customer's deposit to his own use, sub-section (5) applies: imprisonment for life, or up to ten years, and fine, because the entrustment was in the way of his business as a banker.
Criminal Misappropriation and Criminal Breach of Trust
Change it again. Suppose Ramesh runs a small factory, deducts provident fund contributions from his workers' wages every month and never pays them to the Fund. Explanation 1 to section 316(1) deems him to have been entrusted with the deducted amount and to have dishonestly used it in violation of a direction of law. It is criminal breach of trust.
And once more. Suppose Ramesh buys a motorcycle at a very low price from a man he knows to be a member of a gang of dacoits, believing it to be stolen. Section 317(3) applies: imprisonment for life, or rigorous imprisonment up to ten years, and fine.
What beginners get wrong
Thinking a finder commits an offence by picking something up. He does not, and Explanation 2 says so.
Thinking misappropriation must be permanent. Explanation 1 says a misappropriation for a time only is within the section.
Thinking entrustment means a formal trust. The words are "in any manner entrusted with property, or with any dominion over property", which is very wide.
Missing the professional sub-section. Section 316(5) is the difference between five years and imprisonment for life, and it turns entirely on the capacity in which the property was held.
Limits and criticism
Section 314 carries a minimum of six months for what may be a very small sum kept by a finder, and no proviso answering to the community service proviso for petty theft.
"Reasonable means" and "a reasonable time" are questions of fact with no guidance. A finder cannot know in advance how long he must keep a found article.
The provident fund Explanations create criminal liability for a commercial default. They are defended as the only effective sanction for a widespread abuse, and criticised as converting a debt into a crime.
Section 317(4) punishes habitual receiving with imprisonment for life without defining habitual, and the receiver who sustains theft is treated more severely than most thieves.
Quick revision
Section 314. Dishonest misappropriation or conversion of movable property: six months to two years, and fine. Explanation 1: for a time only counts. Explanation 2: the finder's rule.
Section 315. Property of a deceased person: three years, or seven if the offender was his clerk or servant.
Section 316(1). Criminal breach of trust: entrustment with property or dominion, and dishonest misappropriation, conversion, use or disposal in violation of law or contract, or wilfully suffering another to do so. Explanations deem provident fund and State insurance deductions to be entrusted and dishonestly used on default.
Section 316(2) to (5). Five years generally; seven for a carrier, wharfinger or warehouse-keeper; seven for a clerk or servant; life or ten years for a public servant, banker, merchant, factor, broker, attorney or agent.
Criminal Misappropriation and Criminal Breach of Trust
Section 317. Receiving or retaining stolen property, three years; from a dacoity or a gang of dacoits, life or ten years; habitual dealing, life or ten years; assisting in concealment or disposal, three years.
The organising idea. How the accused came to hold the property decides which offence it is.
Test yourself
1. When does a finder of lost property commit an offence? When he appropriates it to his own use knowing or having the means of discovering the owner, or before he has used reasonable means to discover and notify the owner and kept the property a reasonable time for the owner to claim it.
2. What distinguishes criminal breach of trust from misappropriation? In breach of trust the property was entrusted to the accused, or he was given dominion over it, and the wrong is the betrayal of that entrustment. In misappropriation there was no entrustment; the property came into his hands innocently.
3. Which capacities attract imprisonment for life under section 316? A public servant, and a person entrusted in the way of his business as a banker, merchant, factor, broker, attorney or agent, under sub-section (5).
4. What do the two Explanations to section 316(1) deem? That an employer who deducts an employee's provident fund or Employees' State Insurance contribution from wages is entrusted with that amount, and that on default in paying it to the Fund he is deemed to have dishonestly used it in violation of a direction of law.
5. Is a misappropriation for a short time an offence? Yes. Explanation 1 to section 314 provides that a dishonest misappropriation for a time only is a misappropriation within the section.
The rest of this subject
These notes are cut from the University's printed syllabus. Open the syllabus itself, or the past papers, for the same subject.