Criminal Breach Of Trust By Bankers
1. Introduction
Criminal Breach of Trust (CBT) is a serious offence under Section 405 of the Indian Penal Code (IPC), which deals with breach of trust by a person who is entrusted with property or dominion over it.
When bankers or bank employees misuse their position to dishonestly misappropriate funds or property entrusted to them, it amounts to Criminal Breach of Trust by Bankers.
2. Legal Provisions
Section 405 IPC defines Criminal Breach of Trust:
When a person, being entrusted with property or with dominion over property, dishonestly misappropriates or converts it to their own use, or dishonestly uses or disposes it in violation of any legal contract.
Section 406 IPC prescribes punishment for Criminal Breach of Trust.
Additionally, provisions under the Negotiable Instruments Act (Section 138) and Banking Regulation Act may also apply in related cases.
3. Elements of Criminal Breach of Trust by Bankers
The accused must be a banker or bank employee or someone in a fiduciary position.
The accused is entrusted with money or property belonging to the bank or its customers.
The accused dishonestly misappropriates or converts the entrusted property for their own use.
There is a violation of trust.
4. Important Case Laws on Criminal Breach of Trust by Bankers
1. State of Maharashtra v. Suresh (AIR 1990 SC 2210)
Facts: A bank official misappropriated customers’ funds entrusted to him.
Judgment:
Supreme Court held that the position of a banker carries fiduciary duty towards the customers.
Misappropriation of entrusted funds amounts to Criminal Breach of Trust under Section 405 IPC.
Significance:
The court recognized bankers’ fiduciary responsibility and ruled that misuse of funds entrusted by customers or banks attracts criminal liability.
2. Union of India v. K.V. Shivanna (1981) 2 SCC 533
Facts: Bank officials were charged for misappropriation of public money.
Judgment:
The Supreme Court held that a banker or bank official entrusted with money is a "trustee" within the meaning of Section 405 IPC.
Dishonest misappropriation of such money is a criminal offence.
Significance:
Clarified that entrustment of funds creates a fiduciary relationship making breach punishable.
3. Tata Engineering and Locomotive Co. Ltd. v. State of Bihar (AIR 1965 SC 40)
Facts: An employee of the company, including bankers managing accounts, misappropriated company funds.
Judgment:
The Supreme Court held that criminal breach of trust arises when a person entrusted with property dishonestly misappropriates it.
Significance:
Confirmed the application of Section 405 IPC to employees and bankers entrusted with property.
4. R.K. Gupta v. State of U.P. (2007) 9 SCC 575
Facts: Bank official was alleged to have withdrawn money without authorization.
Judgment:
Court reiterated that the burden of proof lies on the prosecution to establish dishonest misappropriation by the banker.
Mere irregularities or negligence do not amount to criminal breach unless dishonest intent is proved.
Significance:
Established the importance of mens rea (dishonest intention) in criminal breach of trust.
5. State Bank of India v. S.K. Mishra (2005) 3 SCC 595
Facts: Bank officer misused customer accounts for personal gain.
Judgment:
The Court held that criminal breach of trust applies even when the banker misuses customer funds entrusted to the bank.
Significance:
Affirmed that banks and their officials have a fiduciary duty not just to the bank but also to customers.
6. P.C. Sen v. Union of India (1970) 3 SCC 488
Facts: Allegation of misappropriation of funds by bank staff.
Judgment:
The Court distinguished between civil liability and criminal liability, stating that criminal breach requires proof of dishonesty and fraudulent intent beyond mere negligence.
Significance:
Emphasized the need for clear evidence of dishonesty in prosecution of bankers.
7. N.C. Singhal v. Union of India (1975) AIR 2300
Facts: Accused bank employee manipulated accounts to defraud the bank.
Judgment:
Held that such acts constitute criminal breach of trust under Section 405/406 IPC.
Significance:
Reinforced that manipulation of accounts or fraudulent diversion of funds by bank employees is criminal breach of trust.
5. Key Judicial Principles
Entrustment: The banker must be entrusted with money or property either of the bank or its customers.
Dishonesty: There must be clear evidence of dishonest intention.
Misappropriation: Actual conversion or use of funds for unauthorized purposes.
Fiduciary relationship: The relationship of trust between the banker and customer/bank is critical.
6. Conclusion
Criminal breach of trust by bankers is a serious criminal offence, reflecting violation of fiduciary duty.
Courts have consistently held that bankers and bank employees are trusted custodians of funds and misuse attracts criminal penalties.
However, to prove the offence, dishonest intent and clear misappropriation must be established, distinguishing it from mere negligence.
The judiciary balances the need to protect bank assets and customers’ funds while safeguarding innocent employees from wrongful prosecution.
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