IPC 406 in the new BNS 2023

If you have been named in an FIR or notice under this section, the section number alone does not decide the outcome — the facts, the evidence and the procedure do. Many cases turn on procedural lapses, bail strategy and the exact ingredients of the offence.

Criminal breach of trust is the offence that applies when something was handed over legitimately and then misused — money given to an agent, goods given to a transporter, jewellery given for making, or funds held by a partner or employee. Under the BNS the definition sits at Section 316(1) and the ordinary punishment at Section 316(2), and the punishment has been increased significantly.

What the section requires

For the offence to be made out, these ingredients have to be established:

• property, or dominion over property, was entrusted to the accused
• the accused dishonestly misappropriated it, converted it to their own use, or used or disposed of it in violation of a direction of law or of the terms of the trust
• the accused was acting in a manner inconsistent with the entrustment, rather than merely failing to perform a contract

What changed from the IPC

The maximum punishment rose from three years under IPC 406 to five years under BNS 316(2), a substantial increase for one of the most commonly charged commercial offences. The definition itself is carried over. The aggravated forms are retained and renumbered: breach of trust by a carrier or warehouse keeper, by a clerk or servant, and by a public servant, banker, merchant or agent, the last of which now sits at Section 316(5) and continues to carry up to life imprisonment. The BNS also added a specific provision at Section 316(3) for breach of trust in respect of property entrusted for a fixed period.

How this section is distinguished from related offences

The distinction between criminal breach of trust and cheating decides a great many of these cases, and it turns on when the dishonest intention arose. In criminal breach of trust the property was handed over lawfully and honestly, and the dishonesty came later, in how it was dealt with. In cheating, now BNS 318, the intention to deceive existed at the moment the property was obtained. The two are mutually exclusive on the same facts, though they are frequently charged together in the alternative. Equally important is the line between a criminal offence and a civil dispute: a failure to repay a loan, or a breach of contract, does not become criminal breach of trust merely because money was not returned. Courts regularly quash such FIRs as attempts to give a civil recovery dispute a criminal colour, and the presence or absence of entrustment is what separates the two.

How the case proceeds

With the maximum now at five years, the offence remains within the bracket where the Arnesh Kumar directions on arrest apply. Investigation in these matters is documentary rather than testimonial: what was entrusted, on what terms, and what became of it. Where the accused is a public servant, banker, merchant or agent, Section 316(5) applies instead, carrying up to life imprisonment, and the procedural position changes entirely, so identifying which sub-section is invoked is the first thing to establish.

Evidence that usually decides these cases

These cases are decided on documents. What matters is the material establishing the entrustment and its terms — the agreement, the invoice, the challan, the receipt, the resolution or the partnership deed — followed by the trail showing what happened to the property. Bank statements, ledgers, stock registers and audit reports are the usual battleground, and the question is normally whether the movement of funds was consistent with the terms on which they were held. Accounts maintained in the ordinary course carry more weight than statements prepared after the dispute arose. Where the property is goods, delivery records and gate passes establish possession. Correspondence in which the accused acknowledges holding the property on the complainant's behalf is often the most damaging single document, and correspondence showing the complainant treating the transaction as a sale or a loan is often the most useful for the defence.

How courts approach sentencing

The ordinary offence under BNS 316(2) carries up to five years, or a fine, or both. The aggravated forms carry more: breach of trust by a carrier or warehouse keeper, and by a clerk or servant, attract higher maxima, and breach of trust by a public servant, banker, merchant, broker, attorney or agent under Section 316(5) carries up to life imprisonment. Sentencing tends to reflect the amount involved, the position of trust occupied, and whether restitution has been made.

Defences that commonly apply

The strongest defence is usually that there was no entrustment — that the transaction was a sale, a loan or an advance, under which the property became the accused's own and the obligation was to pay rather than to account. Absence of dishonest intention is the next line: a commercial failure, a loss in the ordinary course of business, or an inability to pay is not misappropriation. Where the complainant has already filed or could file a civil suit on the same facts, and particularly where the criminal complaint came afterwards, the argument that the FIR is an abuse of process to recover a civil debt is frequently successful in quashing proceedings. Delay in complaining, especially where accounts were settled or acknowledged in the interim, is also material.

How a case under this section typically progresses

Investigation in these matters is generally document-heavy and slower than in offences against the person, since it involves obtaining bank records and examining accounts. A charge sheet follows, and trial for the ordinary offence is before a magistrate. Petitions to quash the FIR on the ground that the dispute is purely civil are commonly filed early, before the investigation concludes, and where they succeed they end the matter at that stage. Where Section 316(5) is invoked, the case is tried by a Court of Session and takes considerably longer. Parallel civil proceedings for recovery frequently run alongside and are not stayed by the criminal case.

Documents worth gathering early

Assemble everything that records the arrangement under which the property was handed over: the agreement or purchase order, delivery challans, invoices, receipts, the partnership deed or board resolution, and the terms of employment where an employee is involved. Obtain complete bank statements for the relevant accounts and period, together with ledgers, stock registers and any audit report covering the transaction. Preserve email and message correspondence in original form, particularly anything in which either side describes the nature of the transaction, since the characterisation used at the time carries much more weight than the one advanced after the dispute. Where a civil suit, arbitration or insolvency proceeding is pending on the same facts, keep those pleadings with the criminal papers.

Note on bail and cognizability. Whether an offence is cognizable, and whether it is bailable, is set by the First Schedule to the Bharatiya Nagarik Suraksha Sanhita (BNSS) 2023, not by the BNS section itself. Because that classification decides whether police can arrest without a warrant and how bail is approached, check it for your specific section with an advocate rather than relying on a general summary.

If you have been named under this section

The single most important question is whether there was an entrustment at all, because without it the offence cannot stand however unsatisfactory the commercial outcome was. Assemble the document that records the arrangement — the agreement, the purchase order, the delivery challan, the partnership deed, the terms of employment — since that is what determines whether property was entrusted or simply sold, lent or advanced. Where the complaint arises from a business dispute already being litigated civilly, that parallel proceeding is directly relevant, because a criminal complaint filed after a civil suit has begun invites the argument that it is pressure rather than prosecution.

Common misunderstandings

"The maximum is still three years."
It is five years under BNS 316(2). The three-year maximum belonged to IPC 406 and applies to offences committed before 1 July 2024.

"Any failure to return money is criminal breach of trust."
It is not. The offence requires entrustment of property followed by dishonest misappropriation. An unpaid loan or a broken contract is a civil dispute, and FIRs of that kind are frequently quashed.

"Breach of trust and cheating are the same thing."
They differ on when the dishonest intention arose. Cheating requires it at the moment the property was obtained; breach of trust involves lawful entrustment followed by later misappropriation.

"Repaying the money ends the prosecution."
Repayment is relevant and often influences how a matter is resolved, but the offence is complete when the misappropriation occurs and the prosecution is brought by the State.

Related BNS sections

• BNS 316 — Criminal breach of trust
• BNS 318 — Cheating (IPC 420)
• BNS 314 — Dishonest misappropriation of property (IPC 403)
• BNS 317 — Dishonestly receiving stolen property (IPC 411)

Which code applies to your case

The Bharatiya Nyaya Sanhita 2023 replaced the Indian Penal Code 1860 with effect from 1 July 2024, and the change is not retrospective. The date the offence is alleged to have been committed decides which code governs it. An offence alleged to have occurred on or after 1 July 2024 proceeds under the BNS. An offence alleged to have occurred before that date continues to be investigated, tried, appealed and punished under the IPC, even where the FIR was registered later. Cases from the transition period frequently cite both numbering systems, which is why the old section number remains worth knowing.

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General information for understanding the IPC→BNS change, not legal advice. The BNS restructured many offences — confirm the exact section, sub-section and punishment with a licensed advocate.