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TIPS & EXPERT ADVICE ON ESSAYS, PAPERS & COLLEGE APPLICATIONS

Explanation-1:

A person, being an employer of an establishment whether exempted under Section 17 of the Employees’ Provident Fund and Miscellaneous Provisions Act, 1952 (19 of 1952), or not 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 of the contribution so deducted by him and if he makes default in the payment of such contribution to the said Fund in violation of the said law, shall be deemed to have dishonestly used the amount of the said contribution in violation of a direction of law as aforesaid.

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Explanation-2:

A person, being an employer who deducts the employee’s contribution from the wages payable to the employee for credit to the Employees’ State Insurance Fund held and administered by the Employees’ State Insurance Corporation established under the Employees’ State Insurance Act, 1948 (34 of 1948), shall be deemed to have been entrusted with the amount of the contribution so deducted by him and if he makes default in the payment of such contribution to the said Fund in violation of the said Act, shall be deemed to have dishonestly used the amount of the said contribution in violation of a direction of law as aforesaid.

Illustrations:

(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.

(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.

(c) A, residing in Calcutta, is an 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 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 criminal breach of trust.

(d) 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.

(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.

(f) A, a carrier, is entrusted by Z with property to be carried by land or by water. A dishonestly misappropriates the money. A has committed criminal breach of trust.

Important Points:

A. Ingredients:

1. The property is entrusted to one person by another.

2. The person, who entrusts the property, has the trust upon the person entrusted, before and at the time of the entrust.

3. Such entrust may be by a contract or by any direction of law.

4. The person entrusted,—

(a) Dishonestly misappropriates or converts such property; or

(b) Dishonestly uses it for his own.

B. Punishment and nature of offence:

Breach of Trust is a different and distinct offence. It is a specific offence and it differs from theft or misappropriation, cheating. Section 406 prescribes punishment for criminal breach of trust that whoever commits criminal breach of trust shall be punished with imprisonment of either description for a term which may extend to three years, or with fine, or with both. Nature of offence: Cognizable, non-bailable, compoundable with permission of the Court in which any prosecution of such offence is pending, and triable by Magistrate of the first class.

C. Trust:

The word “Trust” is a comprehensive word. It signifies the relationship of trustee and beneficiary; bailee and bailer; master and servant; pledger and pledgee, pawner and pawnee; mortgagor and mortgagee; etc.

D. State vs. Mithalal (AIR 1956 Raj. 20):

The complainant gave certain money to the accused-goldsmith and ordered to prepare jewellery. The accused did not purchase the gold, but misappropriated the amount. The Court held that the accused committed the criminal breach of trust.

E. The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (Act No. 19 of 1952) and the Employees’ State Insurance Corporation Act (Act No. 34 of 1952) have statutory provisions directing the employer to collect certain amount from the employees, and to add certain amount as the share of the employer, and then credit such amount in the Government treasury within the stipulated dates regularly, generally monthly.

In case, if any employer collects the subscriptions from the employees, but does not credit in the Treasury, he is held liable under the offence of criminal breach of trust. [Explanations 1 & 2 of Sec. 405.]

F. Breach of a Contract:

Mere breach of a contract does not constitute the offence of the criminal breach of trust. Taking the loan comes under the contract of law. Where a debtor fails to repay the loan within the time, he cannot be sued for criminal breach of trust. Because, there is no “dishonest misappropriation” in the debtor. The creditor has to sue him in civil Court.

G. Partnership Property:

It is the general principle that a partner cannot be prosecuted for the charges of criminal breach of trust. Because the principles of the law of agency apply to the law of partnership.

Every partner is deemed as an owner of the property of the partnership. At the same time, every managing partner is liable to show the accounts to other partners.

Example:

But in certain cases, a partner is held liable. There are three partners, A, B & C, in a firm. According to the terms of the firm, A is authorised to draw the money from the bank, with the consent of other partners. In one occasion, A draws certain amount, without obtaining the consent of B and C.

Later too he does not inform it to them. After some months, when B and C find that the amount was misappropriated by A without their consent. A is held guilty of criminal breach of trust.

H. Bairo Prasad vs. Laxmibai Patena (1991 CrLJ 2535 Mad.)

The property given to bride at the time of the marriage or in any occasion by her parents or brothers is called “stridhanam”. Her husband or her in-laws have no right to appropriate that property without her consent. If they appropriate such stridhanam without her consent, it becomes the offence of criminal breach of trust. The Supreme Court gave this decision in the above case.

I. Criminal breach of trust by carrier, etc.:

Sec. 407 says that whoever, being entrusted with property as a carrier, wharfinger or warehouse-keeper, commits criminal breach of trust in respect of such property, shall be punished with imprisonment of either description for a term which may extend to seven years, and shall also be liable to fine. Nature of offence: Cognizable, non-bailable, compoundable with permission of the Court in which any prosecution of such offence is pending, and triable by Magistrate of the first class.

J. Criminal breach of trust by clerk or servant:

Sec. 408 says that whoever, being a clerk or servant or employed as a clerk or servant, and being in any manner entrusted in such capacity with property, or with any dominion over property, commits criminal breach of trust in respect of that property, shall be punished with imprisonment of either description for a term which may extend to seven years, and shall also be liable to fine. Nature of offence: Cognizable, non-bailable, compoundable with permission of the Court in which any prosecution of such offence is pending, and triable by Magistrate of the first class.

K. Criminal breach of trust by public servant, or by banker, merchant or agent:

Sec. 409 says that 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 criminal breach of trust in respect of that property, shall be punished with 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. Nature of offence: Cognizable, non-bailable, non-compoundable, and triable by Magistrate of the first class.

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