Criminal breach of trust is the offence of dishonestly misappropriating or converting to one's own use, or disposing of, property that has been entrusted to the accused or over which the accused has dominion. Under Indian law, criminal breach of trust is defined in Section 405 of the Indian Penal Code, 1860 (now Section 316 of the Bharatiya Nyaya Sanhita, 2023) and punished under Sections 406-409 IPC depending on the capacity of the offender.
Legal definition
Section 405 of the Indian Penal Code, 1860 provides the statutory definition:
Section 405: 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."
The punishment varies by the capacity of the offender:
- Section 406 IPC (simple CBT): Imprisonment up to three years, or fine, or both
- Section 407 IPC (by carrier, wharfinger, or warehouse-keeper): Imprisonment up to seven years, and fine
- Section 408 IPC (by clerk or servant): Imprisonment up to seven years, and fine
- Section 409 IPC (by public servant, banker, merchant, agent): Imprisonment up to life, or imprisonment up to ten years, and fine
The essential ingredients are: (1) entrustment of property or dominion over property; (2) dishonest misappropriation, conversion, use, or disposal of that property; and (3) such act must be in violation of a legal direction or contract governing the trust.
New law equivalent: Under the BNS, 2023, Section 316 consolidates the definition and punishment of criminal breach of trust. The graduated punishment framework based on the offender's capacity is retained, with Section 316(2) covering public servants, bankers, merchants, and agents (corresponding to the former Section 409 IPC).
How courts have interpreted this term
R.K. Dalmia v. Delhi Administration [AIR 1962 SC 1821]
The Supreme Court delivered the most comprehensive interpretation of "entrustment" under Section 405 IPC. The Court held that entrustment is not limited to cases of express trust but includes any situation where property is handed over for a specific purpose. The concept of "dominion over property" was given a wide meaning: it includes any situation where the accused has the power to dispose of the property, even if the title remains with the owner. The Court noted that directors of a company are entrusted with company property and can be prosecuted under Section 409 for misappropriation.
Pratibha Rani v. Suraj Kumar [(1985) 2 SCC 370]
The Supreme Court held that stridhan (a woman's personal property) entrusted to the husband or in-laws constitutes entrustment for the purposes of Section 405 IPC. If the husband or in-laws misappropriate the wife's stridhan, they are liable for criminal breach of trust. This judgment established that the entrustment need not be formal or documented.
Velji Raghavji Patel v. State of Maharashtra [(1965) 2 SCR 720]
The Court clarified that a dishonest intention must exist at the time of misappropriation, not at the time of entrustment. Unlike cheating, where dishonest intent must be present at inception, criminal breach of trust involves a person who receives property lawfully but subsequently forms a dishonest intention to misappropriate it. This temporal distinction is fundamental to differentiating CBT from cheating.
Why this matters
Criminal breach of trust is one of the most important offences in Indian commercial and corporate law. It applies whenever a person in a position of trust — whether an employee, agent, director, banker, or public servant — dishonestly deals with property entrusted to them. The offence is particularly relevant in the following contexts:
Corporate governance: Directors and officers of companies who misappropriate corporate funds or assets face prosecution under Section 409 IPC (now Section 316(2) BNS), which carries punishment up to life imprisonment. This provision is a critical enforcement tool alongside the Companies Act, 2013.
Employment relationships: Employees entrusted with company property, funds, or confidential information can be prosecuted under Section 408 IPC if they misappropriate such property. This covers situations ranging from cashiers embezzling cash to employees diverting business to personal entities.
Matrimonial disputes: Following Pratibha Rani, criminal breach of trust charges are frequently invoked when a husband or in-laws misappropriate the wife's stridhan or dowry articles.
For practitioners, the key challenge in CBT cases is establishing the entrustment element. The prosecution must demonstrate that the property was handed over to or placed under the dominion of the accused for a specific purpose. Mere possession of property without entrustment does not constitute CBT. Similarly, the misappropriation must be "dishonest" — a bona fide dispute about the use of property or an honest mistake in accounting does not attract criminal liability.
Related terms
Related offences:
Related concepts:
Frequently asked questions
What is the difference between cheating and criminal breach of trust?
The fundamental difference is in how the accused obtains the property. In cheating, the accused obtains property through deception from the beginning. In criminal breach of trust, the accused receives property lawfully through entrustment but subsequently misappropriates it. The dishonest intent in cheating is at inception; in CBT, it arises after the entrustment.
Is criminal breach of trust a cognizable offence?
Simple CBT under Section 406 IPC is a non-cognizable and bailable offence. However, CBT by a public servant, banker, or agent under Section 409 IPC (Section 316(2) BNS) is a cognizable and non-bailable offence, reflecting the greater responsibility of persons in fiduciary positions.
Can a company director be prosecuted for criminal breach of trust?
Yes. The Supreme Court in R.K. Dalmia (1962) held that directors are entrusted with company property and can be prosecuted under Section 409 IPC for dishonestly misappropriating or disposing of company funds or assets. This extends to any person who exercises dominion over company property.
Can criminal breach of trust be compounded?
Simple CBT under Section 406 IPC is compoundable by the person to whom the property was entrusted, with the permission of the court under Section 320 CrPC (Section 359 BNSS). However, CBT by a public servant under Section 409 IPC is non-compoundable.
This entry is part of the Veritect Indian Legal Glossary, a comprehensive reference of Indian legal terminology grounded in statutory text and judicial interpretation.
Last updated: 2026-03-27. Veritect provides this content for informational purposes and does not constitute legal advice.