Mere Commercial Transaction Without 'Entrustment' Of Property For Specified Purpose Won't Attract Criminal Breach Of Trust: Kerala High Court

The Kerala High Court has reiterated that there ought to be an express or implied trust of property or entrustment for any specific purpose in order to attract the liability for criminal breach of trust as provided under Section 406 IPC. 

Justice P. Somarajan explained that the mere existence of a commercial transaction and deposit of amount with any person or institution would not attract criminal breach of trust as defined under Section 405 IPC. 

"A deposit of amount with a person, if it is intended for keeping the same without the liability of interest or any premium payable on that account would attract the criminal liability under Section 406 IPC, if it was dishonestly misappropriated, converted or dispossessed in violation of any direction prescribing the mode of its user or any legal contract. On the contrary, when the deposit is for the purpose of incurring interest, failure to return the amount as agreed would not canvass the criminal liability under Section 406 IPC, unless it constitutes entrustment of the said amount or any dominion over the property for any specific purpose either express or implied or to utilise the periodical interest for any such specific purpose, either express or implied. In short, a mere deposit of amount with any banker, financial institution or any person, if it is for getting interest, unless satisfies the abovesaid cardinal ingredients, cannot be brought under the purview of criminal breach of trust as defined under Section 405 IPC and no criminal liability can be fastened for the offence punishable under Section 406 IPC," the Bench observed. 

The prosecution case is that the revision petitioner, who is the 1st accused person in the case, along with other accused were conducting a partnership business, namely M/S Rajappan Achary, and accepted fixed deposit from various persons. It is alleged that the accused persons thereafter misappropriated the amount for their own use.

The complainant, who was one of the victims of such alleged misappropriation, claimed that although he was paid a certain amount as interest, the principal amount and the interest accrued thereafter had not been paid as agreed. 

The courts below held the revision petitioner guilty of the offence under Section 406 IPC. 

In the present revision petitioner, the Court was thus faced with the question as to whether criminal liability could be extended under Section 406 IPC when there is neither express nor implied trust and whether both the courts below were justified in convicting the accused for the said offence without satisfying the existence of either express or implied trust. 

Holding that express or implied trust of property or entrustment for any specific purpose is a requisite ingredient for attracting the offence of criminal breach of trust under Section 406 IPC, the Court proceeded to note that in the present case, a specific amount had been deposited with the accused on a specific condition that it would be returned with periodical interest thereof. 

It thus held that failure to comply with the agreement would not attract the offence punishable under Section 406 IPC.

The conviction and sentence imposed on the accused was thus set aside. 

Counsel for the Revision Petitioner: Advocate Pirappancode V.S. Sudhir

Counsel for the Respondent: Senior Public Prosecutor C.N. Prabhakaran

Citation: 2023 LiveLaw (Ker) 675 

Case Title: Rajappan Assari v. State of Kerala 

Case Number: Crl. Rev. Pet. No. 1177 OF 2005

Click Here To Read/Download The Order