Law and You > Criminal Laws > Bharatiya Nyaya Sanhita, 2023 > Criminal Breach of Trust (S. 316 BNS)

The concept of trust forms the backbone of both personal and commercial relationships. When one party places confidence in another to handle property or assets, the expectation is that such trust will be honoured with honesty and integrity. However, when this trust is violated through dishonest misappropriation or misuse of property, the law steps in to provide remedies and impose penalties. Under the Bharatiya Nyaya Sanhita, 2023 (BNS), the offence of criminal breach of trust is specifically addressed to safeguard such fiduciary relationships. It criminalizes acts where a person entrusted with property dishonestly converts it for their own use or disposes of it in violation of any legal contract or direction.

This offence not only undermines individual confidence but also disrupts the smooth functioning of businesses and institutions. Therefore, the BNS provides a comprehensive legal framework to identify, punish, and deter such conduct, ensuring accountability and protection of entrusted property.

Criminal Breach of Trust:

Section 316 BNS:

Criminal Breach of Trust:

(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.

Explanation 1:

A person, being an employer of an establishment whether exempted under section 17 of the Employees’ Provident Funds 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.

Explanation 2:

A person, being an employer, who deducts the employees’ 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 Kolkata, is 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 one 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 illustration (c), 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 property. A has committed 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.

(3) 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.

(4) 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.

(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.

Defining Criminal Breach of Trust (S. 316(1) BNS):

Essential Ingredients of Section 316(1) BNS:

To establish the offence of criminal breach of trust, the following elements must be proved:

• The accused was entrusted with property, or he had dominion (control) over the property;
• The accused had misappropriated the property, or converted it for their own use;
• The accused used or disposed of the property, in violation of any legal direction, or any contract (express or implied); and
• The accused had done it with a dishonest intention at the time of misappropriation or misuse.

Entrustment:

Entrustment refers to the act of voluntary handing over property or giving control over it to another person with confidence and trust that it will be used or managed according to certain directions or for a specific purpose. It creates a fiduciary relationship, where one party (the entruster) relies on the honesty of the other (the trustee). The interpretation of this Section is very wide as it takes servants, clerks, business partners, or any other person who is capable of holding a position of trust, under its ambit.

Examples of Entrustment:

• An employer gives money to an employee to deposit in the bank. The employee is entrusted with the money for a specific purpose.
• A principal gives goods to an agent to sell on their behalf. The agent has dominion over the goods and must act according to instructions.
• A customer deposits money in a bank. The bank is entrusted with the money and must handle it according to banking norms.
• A trustee holds property for the benefit of another person. The trustee is legally entrusted with property for a specific purpose.
• A gives jewellery to B for safe keeping. B is entrusted with the property and must return it on demand.
• One partner manages the firm’s funds on behalf of all partners. That partner has control (dominion) over the firm’s property.
• A gives a car to B for repair. B is entrusted with the car temporarily for a specific purpose.
• A government officer is given control over public funds. The officer is entrusted with property in an official capacity.

Examples of Non-Entrustment:

• A servant handles goods under the direct supervision of the master. The servant has only custody, not independent control (dominion).
• A buys goods from B but fails to pay the price. This is a contractual obligation, not entrustment of property.
• A borrows money from B and later fails to repay. Ownership of money passes to A; there is no obligation to use it for a specific purpose.
• Two people jointly own property without one being given exclusive control. No one is specifically entrusted with dominion over the property.
• A is given goods but accidentally loses them without any dishonest intent. This may be negligence but not entrustment-based criminal liability.
• A gives money to B as a general loan or gift. No obligation to use it in a particular way.
• A pays B in advance for goods or services, and B fails to deliver. This is usually a breach of contract, unless clear entrustment for a specific purpose is shown.

In Jaswantlal Nathalal v. State of Gujarat, AIR 1968 SC 700 case, where, the accused, Jaswantlal Nathalal, was a dealer licensed to purchase cement under the cement control regulations in force at the time. Under these regulations, cement could be obtained only for specific purposes and in accordance with the conditions imposed by the government. The accused obtained cement on the basis of such authorization, which restricted its use to a particular purpose. However, instead of using the cement for the authorized purpose, he disposed of or used it in a manner contrary to the conditions of the permit. The prosecution alleged that the cement was entrusted to the accused subject to specific conditions, and by violating those conditions, he committed criminal breach of trust under the Indian Penal Code (BNS). The Supreme Court held 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, continues to be its owner, the accused simply holds it under a duty. Further the person handing over the property must have confidence in the person taking the property so is to create a fiduciary relationship between them. When property is transferred by way of sale, even if subject to restrictions, it does not amount to entrustment. Hence, breach of such conditions does not constitute an offence under Section 405 IPC (S. 316 BNS).

Misappropriation:

Misappropriation means dishonestly taking or using someone else’s property for one’s own use, or for an unauthorized purpose. It involves a conversion of property from its intended purpose to an improper or personal use.

Examples of Misappropriation:

• A gives ₹10,000 to B to deposit in a bank. B instead spends it on shopping.
• A gives goods to B (agent) to sell. B sells them but keeps the money.
• An employee is entrusted with company funds for business expenses. The employee uses part of it for personal travel.
• A gives a laptop to B for official work. B starts using it for personal business and refuses to return it.
• A trustee uses trust funds to invest in their own business.
• A gives money to B for a specific payment. B temporarily uses it for personal needs, intending to return it later. Even temporary dishonest use can be misappropriation.
• A gives B money to buy books. B instead uses it to buy clothes.

Dishonest Intention:

Doing anything with the intention of causing wrongful gain to one person or wrongful loss to another is called dishonest intention. Dishonest intention is crucial, distinguishing this offence from civil breach of trust. Negligence does not constitute dishonest intention. In cases where property is entrusted, even public officials like Ministers are held accountable for just and fair handling of public property.

Judicial Interpretation:

In R. K. Dalmia vs Delhi Administration, AIR 1962 SC 1821 case, the Supreme Court held that the word property used in s. 405 of the IPC (S. 316 BNS) could not be confined to movable property since the section itself did not so qualify it. The word ‘property’ was much wider than the expression. The question whether a particular offence could be committed in respect of any property depended not on the meaning of the word ‘property’ but on whether that property could be subjected to that offence. ‘Property’ in a particular section could, therefore, mean only such kind of property with respect to which that offence could be committed, The funds of the Bharat Insurance Company referred to in the charge amounted to property within the meaning of s. 405 of the Indian Penal Code (S. 316 BNS).

In Smt. Rashmi Kumar vs Mahesh Kumar Bhada, AIRONLINE 1996 SC 699 case, where, the appellant, Smt. Rashmi Kumar, and the respondent, Mahesh Kumar Bhada, were married according to Hindu rites and rituals. Before the marriage and at the time of bidai (farewell), the appellant was given jewellery (gold and silver ornaments), cash, and other household goods by her parents, brothers, and relatives. These items were claimed to be her stridhana property and were entrusted to the respondent‑husband, with witnesses present, for safe custody. The appellant alleged that she was treated with cruelty in the matrimonial home and was eventually driven out of the house along with her three children without being allowed to take her stridhana property with her. The appellant made a clear demand for the return of her jewellery and household goods (stridhana). The respondent refused to return them, despite repeated requests. The appellant filed a private criminal complaint alleging that the respondent had dishonestly retained and misappropriated her stridhana property entrusted to him — amounting to an offence under Section 406 IPC (criminal breach of trust). The Supreme Court held that the custody or entrustment of the stridhana with the husband does not amount to partnership in any sense of the term nor does the stridhana becomes a joint property. The Court observed that where, a wife entrusted her stridhana property to her husband or family member, and they dishonestly misappropriated or converted it, it constitutes criminal breach of trust. No special agreement is needed to prove this.

In Mohammed Sulaiman vs Mohammed Ayub 9 December 1964 case, the Supreme Court of India held that Section 405 of the Indian Penal Code requires doing something wrong to the property in form of, dishonestly misappropriating or using the property to satisfy his own purpose or to capitalize it for one’s own use, or dispose of that property is contrary to a law that prescribes how to discharge such trust or in violation of any contract, express or implied. The apex court also held that a mere dispute which is of civil nature does not attract the provisions of this section.

Punishment for Criminal Breach of Trust S. 316(2):

Imprisonment of either description for a term which may extend to five years, or with fine, or with both.

Nature of Criminal Breach of Trust under Section 316(2):

The offence is Cognizable, Non-bailable and triable by Magistrate of the first class.

Special Cases of Criminal Breach of Trust:

Criminal Breach of Trust by Carrier, etc. Section 316(3) BNS:

A carrier is a person or company that transports goods from one place to another (e.g., truck operators, transport companies). A wharfinger is a person who manages a wharf (dock) where goods are loaded/unloaded and temporarily stored. A warehouse keeper is a person who stores goods in a warehouse for others.

Essential Ingredients of Section 316(3) BNS:

To establish the offence of criminal breach of trust, the following elements must be proved:

• The accused is a carrier, wharfinger or warehouse-keeper;
• He committed the offence of Criminal Breach of trust; and
• He committed the offence with the property entrusted to him as a carrier, wharfinger or warehouse-keeper.

Section 316(3) BNS provides enhanced punishment when criminal breach of trust is committed by persons who are engaged in the business of transporting or storing goods. According to Section if a transporter, dock handler, or warehouse owner—who is trusted with goods—dishonestly misuses or steals them, they will face stricter punishment under law.

Punishment under Section 316(3) BNS:

Imprisonment of either description for a term which may extend to seven years, and shall also be liable to fine.

Nature of Offence under Section 316(3) BNS:

The offence is Cognizable, Non-bailable and triable by Magistrate of the first class.

Criminal Breach of Trust by Clerk or Servant Section 316(4) BNS:

Essential Ingredients of Section 316(4) BNS:

To establish the offence of criminal breach of trust, the following elements must be proved:

• The accused is a clerk or servant or employed as a clerk or servant;
• He committed the offence of Criminal Breach of trust; and
• He committed the offence with the property entrusted to him as clerk or servant or employed as a clerk or servant.

Section 316(4) BNS applies to a person who is employed as a clerk or servant and is entrusted, in that capacity, with property or given control (dominion) over it, and who subsequently commits criminal breach of trust in respect of such property. It means that when an employee, by virtue of their employment, is given possession or authority over property and then dishonestly misappropriates it, converts it for personal use, or deals with it in violation of the employer’s directions or any legal contract, they commit an offence under this section.

Punishment under Section 316(4) BNS:

Imprisonment of either description for a term which may extend to seven years, and shall also be liable to fine.

Nature of Offence under Section 316(4):

The offence is Cognizable, Non-bailable and triable by Magistrate of the first class.

Criminal Breach of Trust by Public Servant, or by Banker, Merchant or Agent. Section 316(5):

Essential Ingredients of Section 316(5) BNS:

To establish the offence of criminal breach of trust, the following elements must be proved:

• The accused is a public servant, a banker, merchant, factor, broker, attorney or agent;
• He committed the offence of Criminal Breach of trust; and
• He committed the offence with the property entrusted to him as a public servant, a banker, merchant, factor, broker, attorney or agent.

Section 316(5) BNs applies to persons who are entrusted with property or given control over it in a special capacity, such as a public servant or in the course of their profession as a banker, merchant, factor, broker, attorney, or agent. It means that when such individuals receive property because of the position of trust and responsibility attached to their office or business, and they subsequently dishonestly misappropriate, convert, or misuse that property or deal with it in violation of any legal direction or contract, they commit criminal breach of trust under this section. The law treats this offence more seriously because these roles involve a higher degree of confidence and fiduciary duty from the public or clients, and any abuse of that trust can have wider social and economic consequences.

Punishment under Section 316(5) BNS:

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 under Section 316(5)

The offence is Cognizable, Non-bailable and triable by Magistrate of the first class.

Judicial Analysis:

In J.M. Akhaney v. State of Bombay, AIR 1956 SC 575 case, where the Exchange Bank pledged securities entrusted to it by the Cooperative Bank. The accused, as Managing Director of the Exchange Bank, transferred these securities to a third party in violation of their contract. The court clarified that for an offence under Sec. 409 IPC (Section 316(5) BNS), entrustment doesn’t necessitate a formal trust relationship but implies a transfer of property to be retained or disposed of by another until a certain event occurs. Although the Cooperative Bank didn’t borrow from the Exchange Bank, the accused, with authority to transact on behalf of the bank, had control over the securities, fulfilling the entrustment requirement. The accused’s disposal of the securities, causing loss to the pledger and gain to the pledgee, constituted dishonest intention under Sec. 409 IPC (Section 316(5) BNS).

In Sudhir Shantilal Mehta v. CBI, 7th Aughust 2009 case, where the appellant Sudhir Shantilal Mehta, his brother Harshad Mehta, was alleged to have been involved in financial dealings connected with fraudulent securities transactions; the Central Bureau of Investigation prosecuted the case claiming that the accused persons dishonestly obtained large sums of money from banks by using fake or unsupported bank receipts (BRs) and by misrepresenting that genuine securities backed the transactions, whereas in reality the securities were either non-existent or reused, and the funds so obtained were diverted for stock market operations, resulting in wrongful loss to banks and wrongful gain to the accused, with Sudhir Mehta allegedly participating in the handling and routing of these funds as part of a larger criminal conspiracy, leading to charges including criminal conspiracy, cheating, and criminal breach of trust under the Indian Penal Code (Now BNS). The Supreme Court upheld charges against bank officials who allowed unauthorised advance credits in violation of departmental instructions under Section 409 IPC (Section 316(5) BNS).

Distinguishing between Theft and Criminal Breach of Trust:

Theft → “Taking what is not given”

Criminal Breach of Trust → “Misusing what was given in trust”

Theft	Criminal Breach of Trust
Whoever, intending to take dishonestly any movable property out of the possession of any person without that person’s consent, moves that property in order to such taking, is said to commit theft.	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.
Theft is defined under Section 303(1) BNS.	Criminal breach of trust is defined under Section 316(1) BNS.
There is no entrustment of a property.	There is entrustment of a property.
Property is taken by accused without permission.	Accused receives property from entruster and then misuse it.
The offence is unlawful beginning.	There is no offence when there is entrustment. Offence comes into play when the accused misuse the entrusted property.
Offence involves taking away of the property.	Offence involves misappropriation or conversion of the property.
There is no special relation between the accused and the victim.	There is a fiduciary or trust-based relationship between the accused and the victim.
Example: A steals a wallet from B’s pocket.	Example: A gives money to B for safekeeping, B uses it for himself

Distinguishing between Theft and Criminal Breach of Trust:

Misappropriation → “I never had your property lawfully, but I take it”

Breach of Trust → “You gave me property to keep or use for a purpose, and I betray that trust”

Criminal Misappropriation	Criminal Breach of Trust
It involves dishonestly taking or converting property not entrusted to the offender	It involves dishonestly misusing or converting property entrusted to the offender
Section 314 BNS deals with the criminal misappropriation.	Section 316 deals with the criminal breach of trust.
No entrustment is required in criminal misappropriation.	Entrustment is essential in criminal breach of trust.
In criminal misappropriation, property may or may not be in possession; intention to dishonestly convert arises at the outset.	In criminal breach of trust property is lawfully possessed or received first and then misused
Criminal misappropriation involves unauthorized appropriation or use of property	criminal breach of trust involves misuse, conversion, or betrayal of trust regarding entrusted property.
In criminal misappropriation, there is no owner’s consent	In criminal breach of trust, owner initially consents by entrusting the property.
No fiduciary or trust relationship necessary in criminal misappropriation.	Fiduciary/trust-based relationship usually exists in criminal breach of trust (e.g., agent, clerk, public servant)
Example: A finds a lost purse and takes it for himself.	Example: A receives money from B to deposit in a bank but uses it for personal expenses.

Conclusion:

Criminal breach of trust, governed by the Bharatiya Nyaya Sanhita (BNS), continues to play a crucial role in protecting relationships built on confidence and fiduciary responsibility. The law makes it clear that when property is entrusted to a person—whether in personal, professional, or official capacity—it must be used strictly in accordance with the purpose and conditions attached to it. Any dishonest misappropriation or misuse not only harms the individual victim but also undermines trust in commercial and social dealings.

The provisions emphasize the importance of entrustment, dishonest intention, and misuse of property as the core elements of the offence. By prescribing stricter punishments for certain categories such as public servants and professionals, the law reinforces accountability where the degree of trust is higher. The offence of criminal breach of trust serves as a safeguard against abuse of confidence, ensuring that trust—an essential foundation of society—is not exploited for personal gain.

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