Section 406 IPC vs Section 316 BNS — Criminal Breach of Trust (IPC 405-409)

In India, Section 316 of the Bharatiya Nyaya Sanhita, 2023 (BNS) replaced the criminal breach of trust provisions, Sections 405 to 409 of the Indian Penal Code, 1860 (IPC), on 1 July 2024. The definition is unchanged; the maximum for simple breach of trust rises from three years (Section 406 IPC) to five years (Section 316(2)).

At a glance

The CrPC First Schedule classified Sections 406 to 409 IPC as cognizable, non-bailable and triable by a Magistrate of the first class, so the classification is unchanged.

What changed

• Minor edit — Section 316(1) (IPC 405): the definition is word for word the same; only the quotation marks around "criminal breach of trust" are dropped. Explanation 1 (Provident Fund and Family Pension Fund deductions) and Explanation 2 (Employees' State Insurance deductions) are carried over. In the Illustrations, (c) reads "Kolkata" for "Calcutta" and "one lakh of rupees" for "a lakh of rupees", and (d) reads "in illustration (c)" for "in the last illustration". The India Code IPC text prints (d) as "thought Z should suffer loss"; the BNS reads "though".
• Modified — Section 316(2) (IPC 406): "a term which may extend to three years" becomes "a term which may extend to five years". The alternatives "or with fine, or with both" are unchanged.
• Identical — Sections 316(3), (4) and (5) (IPC 407, 408 and 409): same words and same punishments, now as sub-sections of one section instead of separate sections.
• Identical — classification and compounding: the BNSS First Schedule and the compounding tables in Section 359 BNSS treat each sub-section as the CrPC treated its IPC counterpart (see "What this means in practice").

Statutory text (relevant extract)

Extract, Section 406 IPC (repealed from 1 July 2024):

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.

Extract, Section 316 BNS, sub-sections (1), (2) and (5):

(1) 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 wilfully suffers any other person so to do, commits criminal breach of trust.

(2) Whoever commits criminal breach of trust shall be punished with imprisonment of either description for a term which may extend to five years, or with fine, or with both.

(5) 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.

How it works — the ingredients

Section 316(1) has two parts.

1. Entrustment — the accused must be "in any manner entrusted with property, or with any dominion over property". Illustration (b): a warehouse-keeper given furniture under a storage contract is entrusted with it. Illustration (e): a revenue officer holding public money is entrusted with it. Explanations 1 and 2 deem an employer who deducts an employee's Provident Fund, Family Pension Fund or ESI contribution to be entrusted with the amount deducted.
2. A dishonest act in respect of that property — any one of: dishonestly misappropriating it or converting it to his own use; dishonestly using or disposing of it in violation of a direction of law or of a contract, express or implied, about how the trust is to be discharged; or wilfully suffering another person to do any of these. Illustration (a): an executor who disobeys the law directing division of the estate and keeps it commits the offence. Illustration (c): an agent who spends money remitted for investment in his own business commits it. Illustration (d) marks the line: if the agent departs from instructions in good faith, believing it to be to the principal's advantage, there is no criminal breach of trust even if loss follows, though a civil action may lie.

The aggravated forms turn on the capacity in which the property was entrusted — as a carrier, wharfinger or warehouse-keeper (316(3)); as a clerk or servant (316(4)); or as a public servant, or in the way of business as a banker, merchant, factor, broker, attorney or agent (316(5)).

Neighbouring offences: Illustration (e) to Section 303 BNS shows the boundary with theft — a warehouse-keeper who sells plate entrusted to him has not taken it out of the owner's possession, so there is no theft, "though he may have committed criminal breach of trust". Under Section 317(1) BNS, property "in respect of which criminal breach of trust has been committed" is stolen property, so a person who dishonestly receives it can be charged under Section 317.

What this means in practice

For the complainant

• The complaint or FIR should show the entrustment — the document, arrangement or position under which the property or dominion was handed over — and the dishonest act. A dispute over payment for goods sold, where ownership passed to the buyer, does not show entrustment (see Delhi Race Club below).
• Under Section 359(1) BNSS, breach of trust by a carrier, wharfinger or warehouse-keeper (316(3)) may be compounded by the owner of the property. Under Section 359(2), simple breach (316(2)) and breach by a clerk or servant (316(4)) may be compounded by the owner only with the permission of the court. Section 316(5) is not in either table. Section 320 CrPC listed Sections 407 (without permission), 406 and 408 (with permission) the same way.

For the accused and defence advocate

• All forms are non-bailable, so bail is a matter for the court. Section 479(1) BNSS (release after detention for one-half of the maximum term, or one-third for a first-time offender) does not apply to an offence where life imprisonment is one of the punishments, which excludes Section 316(5). On a reading of the text, for Section 316(2) the one-half point is now measured against five years rather than three.
• Where the facts show deception at the start, not entrustment, the charge should be tested against Section 318 BNS (cheating); Delhi Race Club holds the two cannot coexist on the same facts.
• For a public servant or agent, Section 316(5) requires that the entrustment came "in his capacity of a public servant" or "in the way of his business" — property entrusted to the same person for some other purpose falls outside it (see R. K. Dalmia below).

For employers

• Explanations 1 and 2 apply to deductions from wages for PF, Family Pension Fund and ESI. Deduction followed by default in payment "in violation of the said law" or "the said Act" is deemed dishonest use.

Judgments that still matter

R. K. Dalmia v. Delhi Administration, [1963] 1 S.C.R. 253 (1962 INSC 123) — 5 April 1962. A three-Judge Bench (judgment delivered by Raghubar Dayal J.) upheld convictions under Section 409 IPC of the Chairman and an agent of an insurance company who diverted its bank funds. The Court held that the word "property" in Section 405 is not restricted to movable property, and that the company's funds in bank accounts were "property" within that section. It held that "in the way of his business" means entrustment "in the ordinary course of his duty or habitual occupation or profession or trade", and rejected the argument that a person with only joint power to operate an account could not commit the offence. The report does not show paragraph numbers. The words construed are repeated in Sections 316(1) and 316(5) BNS.

Smt. Rashmi Kumar v. Mahesh Kumar Bhada, [1996] Supp. 10 S.C.R. 347 (1996 INSC 1507) — 18 December 1996. On a reference to a three-Judge Bench (K. Ramaswamy, S.B. Majmudar and G.T. Nanavati JJ.) to re-examine Pratibha Rani v. Suraj Kumar, the Court held that where a wife entrusts her stridhana property to her husband or another family member who dishonestly misappropriates it, he commits criminal breach of trust, and no further special agreement need be proved. It stated that "The expression 'entrustment' carries with it the implication that the person handing over any property... continues to be its owner." It set aside the High Court's order quashing the complaint, holding that the court could not sift evidence at the cognizance stage. The report does not show paragraph numbers.

Delhi Race Club (1940) Ltd. & Ors. v. State of Uttar Pradesh & Anr., [2024] 8 S.C.R. 670 (2024 INSC 626) — 23 August 2024. J.B. Pardiwala and Manoj Misra JJ. quashed a summoning order under Section 406 IPC over unpaid dues for goods supplied. The Court held that once property in goods passes to the buyer, the buyer is not entrusted with the seller's property: "Without entrustment of property, there cannot be any criminal breach of trust" (para 36). Noting that the IPC had been replaced by the BNS from 1 July 2024 (para 41), it held that cheating and criminal breach of trust "cannot coexist simultaneously in the same set of facts" (para 43). The case applied the IPC; its reasoning is on words that Section 316(1) BNS repeats.

Which law applies to your case

Section 358(2) BNS keeps alive any penalty or punishment incurred under the IPC and allows proceedings to be instituted, continued or enforced "as if that Code had not been repealed"; on a reading of that provision, a breach of trust committed before 1 July 2024 is charged under Sections 405 to 409 IPC. Procedure for matters pending on that date continues under the CrPC (Section 531(2)(a) BNSS). Article 20(1) of the Constitution bars a penalty greater than the law in force at the time of the offence, so, on a reading of that Article, the five-year maximum in Section 316(2) cannot be applied to earlier conduct. See which law applies to an offence before 1 July 2024.

Frequently asked questions

What is the BNS equivalent of Section 406 IPC? Section 316(2) of the Bharatiya Nyaya Sanhita, 2023 replaces Section 406 IPC, and Section 316(1) replaces the definition in Section 405. Simple criminal breach of trust is now punishable with imprisonment of either description up to five years, or fine, or both; Section 406 IPC allowed up to three years.

Has the punishment for criminal breach of trust changed under the BNS? Only for simple criminal breach of trust, where the maximum rises from three to five years under Section 316(2) BNS. Breach by a carrier, wharfinger or warehouse-keeper (Section 316(3)) and by a clerk or servant (Section 316(4)) remains up to seven years and fine. Breach by a public servant, banker, merchant, factor, broker, attorney or agent (Section 316(5)) remains imprisonment for life or up to ten years, and fine.

Is criminal breach of trust bailable under the BNS? No. The First Schedule to the Bharatiya Nagarik Suraksha Sanhita, 2023 lists every criminal breach of trust offence, Section 316(2) to (5) BNS, as cognizable and non-bailable, triable by a Magistrate of the first class. The CrPC First Schedule classified Sections 406 to 409 IPC the same way, so the classification has not changed.

Can criminal breach of trust be compromised? Yes, in part. Under Section 359(1) BNSS, breach of trust by a carrier, wharfinger or warehouse-keeper (Section 316(3)) may be compounded by the owner of the property. Under Section 359(2), simple breach (Section 316(2)) and breach by a clerk or servant (Section 316(4)) may be compounded by the owner only with the permission of the court. Section 316(5) is not listed. Section 320 CrPC treated Sections 406 to 408 IPC the same way.

What is the difference between criminal breach of trust and cheating? Criminal breach of trust under Section 316 BNS starts with entrustment of property, or of dominion over it, followed by dishonest misappropriation or misuse. Cheating under Section 318(1) BNS turns on deception that induces the person deceived to deliver property, or to do or omit something that causes or is likely to cause harm. In Delhi Race Club v. State of Uttar Pradesh (2024 INSC 626), the Supreme Court held that the two offences cannot coexist in the same set of facts and that without entrustment there is no criminal breach of trust.

Is an employer who deducts PF or ESI but does not deposit it guilty of criminal breach of trust? Explanations 1 and 2 to Section 316 BNS deem an employer who deducts the employee's contribution for a Provident Fund or Family Pension Fund, or for the Employees' State Insurance Fund, to have been entrusted with the amount. If the employer defaults in paying it into the fund in violation of the law, the employer is deemed to have dishonestly used it. The same Explanations were in Section 405 IPC.

Which law applies to a breach of trust committed before 1 July 2024? Section 358(2) BNS saves any penalty or punishment incurred under the IPC and lets proceedings continue as if it had not been repealed, so on a reading of that text a breach of trust committed before 1 July 2024 is charged under Sections 405 to 409 IPC. Article 20(1) of the Constitution bars a heavier penalty than the law then in force, so, on a reading of that Article, the five-year maximum in Section 316(2) cannot be imposed for earlier conduct.

Related

• Cheating: IPC 415-420 vs BNS 318
• Theft: IPC 378-382 vs BNS 303-307
• Compromise in a criminal case — compounding under BNSS 359
• Cheque bounce and cheating — NI Act 138 and BNS 318
• Section 482 CrPC — inherent powers of the High Court
• Offence before 1 July 2024 — which law applies
• Sections 410-414 IPC vs Section 317 BNS — Stolen Property
• Section 320 CrPC vs Section 359 BNSS — Compounding of Offences

Sources

• Bharatiya Nyaya Sanhita, 2023 (Gazette text): Sections 303 (Illustration (e)), 316, 317(1) and 358.
• Indian Penal Code, 1860 (India Code text): Sections 405 to 409 with the amendment footnotes to Section 405.
• Bharatiya Nagarik Suraksha Sanhita, 2023 (Gazette text): Sections 359, 479 and 531, and the First Schedule entries for Section 316(2) to (5) BNS.
• Code of Criminal Procedure, 1973: Section 320 and the First Schedule entries for Sections 406 to 409 IPC.
• Constitution of India: Article 20(1).
• Judgments read in full text: R. K. Dalmia v. Delhi Administration (1963_1_253_404_EN.md); Smt. Rashmi Kumar v. Mahesh Kumar Bhada (S_1996_10_347_365_EN.md); Delhi Race Club (1940) Ltd. v. State of Uttar Pradesh (2024_8_670_699_EN.md).

This page explains the statutory text and the judgments cited as they stand. It is not legal advice; for a specific case, consult an advocate.