IPC 406 – Provision and Punishment for Criminal Breach of Trust

Section 406 IPC is dealing with the punishment clause of Criminal Breach of trust, defined under section 405 of the Indian Penal Code, 1860. So basically by its own heading of section 405, it is to be clear that, when any “person” putting their trust on “someone” for transferring the possession of some property to “someone” and that “someone” thereafter breaches the trust of the “person” by retaining the property by some forge way or by any other act, then such type of activities done by any person has come under the ambit of criminal act under the provision of Indian Penal Code, 1860. The offenses of criminal breach of trust, as defined under section 405, is very similar to the offense of embezzlement under the English law.

Furthermore, to constitute the offense of criminal breach of trust under section 405, it must be established that the accused was entrusted with some property or power over the property of other person and that the person with mala-fide intention misappropriated it or converted it to their use. In short, the section reads as ‘dishonest misappropriation’ or ‘convert the property to own use’ some other person’s property. Criminal breach of trust and criminal misappropriation (under Section 403) is distinct from each other in the context of the fact that in the criminal breach of trust, the accused person is entrusted with property or control over the property.

Provisions under IPC: –

That the provision related to Criminal Breach of Trust is mentioned under Chapter VI (of offenses against the body) from section 405 to 409. Whereas section 405 defines Criminal Breach of Trust, section 406 provides punishment of offense defining u/s 405 and section 407-409 sets when some specific people and their punishment commit the wrong of breach of trust.

Although Section 405 has a wide ambit, however ‘entrustment’ of the property is an essential ingredient for an offense to be punished under S.406 of IPC.

Some of the other essential elements of the offense of Criminal Breach of Trust under Sec. 405 are the following: 

1. giving a charge of their property to any person in whom confidence is placed or providing any power over property;
2. Also, the person is entrusted:-
   1. •  With mala-fide intention misappropriates the property or converts the property to his use or,
      • With the mala-fide intention uses or disposes of that property or willfully suffers any person of any contracts which is legal made touching the discharge of such kind of trust.

Section 405 of the IPC extends to the entrustment of all type – whether, to clerks, servants, business persons or some other persons, just one thing is taken into consideration that, they are holding a position of trust. Entrustment need not be express always, and it may be implied.

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Punishment (Under Section 406 IPC) 

Whoever commits offenses defined under section 405 of IPC shall be punished with imprisonment which may extend to three years, or with fine, or with both.

Case laws: –

In the State of Gujarat vs. Jaswantlal Nathalal (AIR 1968 SC 700.) Supreme Court held pronounce that the expression ‘entrustment’ carries with it the implication that the person handing over any property or on whose behalf that property is handed over to another person, they continue to be its owner.

Further, the person who is handing over the property must have confidence in the person taking the property. To create a relationship based on trust between them. Only the transaction of sale cannot amount to an entrustment. If the accused had infringed or violated the conditions of purchase, the only legal help is to prosecute him under the law.

Stridhan and Criminal Breach of Trust: –

Basically, In Stridhan it includes all kind of gifts given by the husband to his wife before their wedding; Also, gifts given by the husband or as we can say (groom) and his family, or other guests or persons, and the wife’s (bride) parents to the wife at the time of marriage, and any type of gifts given to her after the marriage by an person including her parents, her husband and his husbands family, or anybody else. In Stridhan it may include jewelry, apartments, vehicles or any other item. Stridhan is considered as the exclusive property of the wife according to the Hindu Marriage Act, and the definition is accepted by judicial authorities for other purposes too.

Though Misappropriation of Stridhan by the husband or husband’s side is a punishable crime by the provision of law defined in IPC u/s 406 (“punishment for criminal breach of trust“), the definition is given u/s 405, while sections 407- section 409 defines the penal provision for breach of trust in some specific relationships. The spectrum of relationships covered by these sections which include the relationship between sender and carrier of property or goods, and between an owner of the property and their employee, and between the owner of property and banker, and between public and public officials, and between an owner of the property their attornies or agents. Section 406 provides three years simple or rigorous imprisonment, both part, i.e., 407 and section 408 provides seven years simple or rigorous imprisonment, and section 409 prescribes severe punishment from ten years – life imprisonment. By some section 406 can be more correctly described as “punishment for criminal breach of trust simpliciter” in the light of these undoubtedly severe sections. There are many contradictory views regarding that the components of the Stridhan which has been gifted by the husband or the husband’s side. Some experts say that taking back such kind gifts creates only civil liability, while some of in the opinion that this may attract IPC section 406 (Criminal Breach of Trust), which is a criminal provision.

If we talk about some other aspect of the term Stridhan, any gifts given by the wife’s side to the husband or husband’s family are to be returned if and when the marriage collapses. Because If these kinds of gifts are deemed by the court to have been given “in consideration of marriage” (or as we can say as a price for marriage), then this is considered as dowry, and the husband’s side may be liable under the provision of Dowry Act for the imprisonment and /or a fine or both for demanding these items or accepting these items.

The Apex Court of the country i.e., Supreme court quoted that the sections under 498a and 406 under the Indian penal code are widely misused, and for no reason, the husband and his family members are prosecuted and send behind bars thereby, tarnishing the reputation of the family, these sections are termed as a “legal terrorism”. Hence the apex court in a very recent judgment of “Arnesh Kumar Vs. The state of Bihar” has given some compulsory or obligatory proposal of guidelines which are as follows: –

1. All the State Governments to instruct its police officers not to directly arrest when a case under Section 498-A of the IPC is lodged but it’s necessary to satisfy themselves about the requirements for arrest under the framework laid down above flowing from Section 41, Cr.PC;
2. The police officer or in charge may provide a check-list under section 41(1)(b)(ii) of the Criminal Procedure Code which shall forward  and furnish the reasons and materials which necessitated the arrest while producing the accused person before the Magistrate for further detention;
3. The magistrate may pursue the report furnished by police, and only after recording its satisfaction, the magistrate authorizes detention.
4. Notice send (for appearing in court) in terms of Section 41A of Cr.P.C.must be reach before accused within 14 days from the date of filing the case.
5. Giving detention without recording any reason by Judicial Magistrate shall be liable for a departmental inquiry by the appropriate HC.
6. Once FIR under 498a/406 is lodged the apprehension of arrests may create even with the guidelines and safeguards as to be mandatorily implemented by the police officials. The police officer can follow the guidelines and can arrest the person.

Read Also: 8 Legal Documents to Check Before Buying Property

Conclusion

Lastly, I will conclude this article with If we have to make a person liable under the discussed provision, it is not only sufficient to establish that the property has not been mismanaged, also, It has to be established that the accused has put the property to his use with the mala-fide detention or to some unauthorized use. And Negligence does not come under the ambit of ‘dishonestly keeping the property in possession,’ it’s an exception.

The wrong of breach of trust under Section 406 is cognizable, and a warrant should, ordinarily, an issue in the first aspect. The wrong is not bailable. It is only compoundable with Court permission when the value of the property does not exceed Rs. 250 and not compoundable otherwise, and is triable by a Magistrate of the first or second class.

Learn From These Mistakes Before You Learn Unfair Trade Practices In India

Introduction To Unfair Trade Practices

Oxford dictionary defines the word ‘unfair’ as something that is not fair or just. Similarly, the term ‘Unfair trade practices’ encompasses a broad range of torts carried out by acts of deception or wrongful conduct. Unfair trade practices can happen in any line of business but it is found mostly in cases of intellectual property. Examples include trade secret misappropriation, unfair competition, false and misleading advertisements, dilution and disparagement.

The World Bank and the Organisation for Economic Cooperation and Development (OECD) Model Law, enumerate the following to be unfair trade practices –

a) Firstly, the distribution of false and misleading information that can potentially harm the business interests of another firm.

b) Secondly, the distribution of false or misleading information to consumers, which includes distribution of information lacking a reasonable basis, related to the price, character, method or place of production, properties, and suitability for use, or quality of goods; false or misleading comparison of goods in the process of advertising.

c) Thirdly, fraudulent use of a trademark, firm name, labeling of product or packaging.

d) Fourthly, unauthorized receipt and leak of confidential information related to business or trade.

Position Of Unfair Trade Practices in India

In India, the term ‘unfair trade practice’ has been defined under Section 2(1)(r) of the Consumer Protection Act, 1986. It reads as –

“unfair trade practice” means a trade practice which, for the purpose of promoting the sale, use or supply of any goods or for the provision of any service, adopts any unfair method or unfair or deceptive practice including any of the following practices, namely;—

(1) the practice of making any statement, whether orally or in writing or by visible representation which,—

(i) falsely represents that the goods are of a particular standard, quality, quantity, grade, composition, style or model;

it refers to the false representation that goods possess a standard quality, quantity, grade, style or model.

(ii) falsely represents that the services are of a particular standard, quality or grade;

it refers to the false representation that services contain a particular standard, quality or a grade.

(iii) falsely represents any re-built, second-hand, reno­vated, reconditioned or old goods as new goods;

it refers to the false representation of old goods as new goods.

(iv) represents that the goods or services have sponsor­ship, approval, performance, characteristics, accesso­ries, uses or benefits which such goods or services do not have;

it refers to the representation of goods or services have benefits which in reality such goods or services do not have.

(v) represents that the seller or the supplier has a spon­sorship or approval or affiliation which such seller or supplier does not have;

the representation that the seller or the supplier has sponsorship, approval or affiliation which the seller or the supplier does not have.

(vi) makes a false or misleading representation concern­ing the need for, or the usefulness of, any goods or services;

it refers to the false or misleading representation relating to the usefulness of goods or services.

(vii) gives to the public any warranty or guarantee of the performance, efficacy or length of life of a product or of any goods that are not based on an adequate or proper test thereof;

it refers to assuring the public any kind of warranty or guarantee related to the performance, efficiency or life of a product or of any goods that aren’t based on an adequate or proper examination.

In 1969, the Monopolies and Restrictive Trade Practices Act, 1969 came into effect. The main motive behind this legislation was to categories ‘unfair trade practices’ into fixed categories. Section 36A of the Act deems the following to be unfair –

 36 A (1): False representation of products or services, including false description, guarantee, warranty or performance of a product or service.
36 A (2): The Advertisement of false bargain price.
36 A (3): Contests, lotteries, games of chance or skill for promotion of the sale.
36 A (4): Selling goods not in conformity with the law.
36 A (5): Hoarding, destruction, refusal to sell the goods. 

Also, unfair trade practice must cause some “loss or injury” to the consumer.

The problem with these fixed, water-tight compartments of unfair trade practices was that it was too narrow and not enough to curb the human minds who could invent new methods of unfair trade via scientific and technological advancement.

Due to this, in the case of Society for Civic Rights v. Colgate Palmolive India (Pvt.) Ltd., the apex court was of the view that the phrase “and thereby causes loss or injury to the consumers of such goods and services” is of an implied nature and it is not mandatory for actual loss or damage to happen. Mere unfair trade practice as outlined under Section 36A is enough to prove injury or loss.

Conclusion

Carrying out trade or business is one’s fundamental right to freedom as envisaged under Article 19 of the Constitution of India. However, trade and business must be a fair game and hence must be open to all. No business must infringe the rights of another by any means as mentioned above in the two acts.

5 Ugly Truth About Legal Agreements A Start-up Can’t Ignore

21st Century is technology-driven and every day new start-ups are coming up and getting themselves registered. But amidst this process, some of the important legal agreements that should not be ignored are-

1. Employee appointment contract

This is a formal agreement or understanding that determines the states the connection between an employee and a business including pay scale and desires of the business. Likewise alluded to as work contracts, they are regularly executed for a predefined timeframe of work.

In simpler terms, it is an understanding between a business and an employee at the time of hiring the employee. It is a blueprint of the correct idea of their business relationship. It particularly concentrates on what remuneration the representative will get in return for particular work performed. A business contract causes the start-up to draw in and hold key representatives.

Read Also: The 2018 Amendment to The Companies Act, 2013

2. Rent Agreement

A lease understanding is controlled by the Rent Control Act. The company can approach the court in case of any misunderstanding or dispute. What the civilities give to the occupant can’t be disturbed or pulled back even on an inability to pay the lease. The Rent Control Act is thought to be firmly for the benefit of both parties.

Segment 105 of the Transfer of Property Act, 1882 characterizes rent to be an assertion drafted if there should arise an occurrence of leasing property. Normally leasing property suggests that the proprietor has given his rights to make the most of his property to the inhabitant for a specific timeframe, and the occupant can appreciate the said property without obstruction. The interests of the property are exchanged to the inhabitant. The inhabitant can protect his rights over the property as his own particular since an exchange of intrigue has occurred. The understanding arrives at an end in light of the terms and states of the agreement. Rent is both transferable and inheritable since the intrigue lies with the occupant.

3. Trademark deed

Section 38 stipulates that Trademarks are frequently either allocated completely or transmitted mostly, with or without the generosity of the business. All transmissions or assignments ought to be enlisted with the Registrar of TradeMarks on article 23 or 24 of the Trade Marks. This deed helps in saving the rights of the business. No other person or company can copy the rights of business.  

4. Franchise Agreement

The Franchise Agreement is a lawful official understanding which diagrams the franchisor’s terms and conditions for the franchise. It likewise diagrams the commitments of the franchisor and the commitments of the franchise. The establishment understanding is marked at the time an individual settles on the choice to enter the establishment framework.

5. Business Non-disclosure Agreement

To keep the functioning of the business in line, it is important to utilize a Non-Disclosure Agreement (NDA) to secure the company’s restrictive data. Having an NDA frame secures the company licensed innovation, similar to the competitive innovations, from getting into the wrong hands. This agreement protects the company from any disclosure of secrets.

6. Memorandum Of Understanding (MOU)

A Memorandum of Understanding or MOU is a formal assertion between at least two partners. Organizations and associations can utilize MOUs to build up official organizations. MOUs are prevalent in worldwide relations of companies. MOUs may likewise be utilized to alter existing legitimate arrangements between partners and/or companies.

7. Bank Account Opening Resolution Agreement

This Agreement is framed after a proper board meeting, approving certain people to open and work with the Bank record of a company. As a company is a different legitimate organization; the board determination for the opening bank account is required to be handled by certain people for financial purposes. In the event that the Company wishes to have Bank accounts with different banks, at that point, isolate Board Resolutions must be executed for each of the banks in which account is to be opened.

Read Also: An Overview To Indian Contract Act 1872

8. Social Media Policy Agreement

An online networking approach which can be saved with the Social Media Policy Agreement is a corporate set of accepted rules that gives rights to workers who post content on the Internet either as an aspect of their responsibilities or as a private individual. This Agreement has all the conditions regarding the data or messages posted on the internet or social media.  It can be consolidated into a representative handbook or utilized as a solitary strategy report. This Standard Document has incorporated notes with imperative informative and drafting tips.