What is IPC Section 406?
IPC Section 406 lays down the punishment for the offence of "criminal breach of trust," which is defined in Section 405 of the IPC. It applies to any person who, being entrusted with property, or with dominion over property, dishonestly misappropriates or converts it to their own use, dishonestly uses or disposes of it in violation of any legal directive or express/implied contract, or wilfully allows another person to do so. It was one of the most frequently invoked provisions in matters ranging from business and partnership disputes, employee or agent embezzlement, misuse of jointly-managed funds and cooperative society assets, to matrimonial disputes involving a wife's stridhan (personal property) retained by in-laws or a husband.
Section 406 sits within Chapter XVII of the IPC ("Of Offences Against Property") and is distinct from Section 420 (cheating), since it does not require any deception at the time property changes hands — the entrustment may be entirely legitimate, with the dishonest intent forming only later, at the point the property is misused or withheld.
Important Update: IPC to BNS Transition
With effect from 1 July 2024, the Indian Penal Code has been replaced by the Bharatiya Nyaya Sanhita (BNS), 2023 for offences committed on or after that date. The substance of Section 406 IPC now corresponds to Section 316(2) of the BNS, which consolidates criminal misappropriation and criminal breach of trust into a single, restructured section, while keeping the basic punishment unchanged. FIRs registered before 1 July 2024 continue to be tried under IPC 406; incidents after that date are registered under the corresponding BNS provision. If you are unsure which law applies to your case, it is best to get this confirmed by a lawyer before filing or responding to a complaint.
Legal Provision — Text of Section 406 IPC
This provision must be read together with Section 405 IPC, which defines "criminal breach of trust" itself, and Section 24 IPC, which defines "dishonestly." A charge under Section 406 cannot succeed unless the basic ingredients of criminal breach of trust under Section 405 are first established. The IPC also prescribes enhanced punishment (up to 10 years) under Sections 407–409 where the breach is committed by a carrier, banker, agent, or public servant/employee in respect of property entrusted to them in that capacity.
Punishment Under Section 406
| Imprisonment | Up to 3 years (simple or rigorous), at the discretion of the court |
|---|---|
| Fine | No fixed limit — decided by the court based on the facts and value of property involved; imprisonment, fine, or both may be imposed |
| Nature of Offence | Cognizable — police can register an FIR and investigate/arrest without prior court order |
| Bailable / Non-Bailable | Non-bailable — bail is not a matter of right and must be applied for before the court |
| Compoundable | Compoundable with the permission of the court, by the owner of the property in respect of which the breach was committed |
| Triable By | Magistrate of the First Class |
| Limitation Period | 3 years from the date of the offence under Section 468 CrPC, since the maximum punishment does not exceed 3 years (subject to the court's power to condone delay) |
Where the breach is committed by a person acting as a clerk or servant (Section 408), or by a public servant, banker, merchant, agent, attorney, or trustee (Section 409), the punishment is significantly higher — imprisonment extending up to 10 years, along with fine, reflecting the higher degree of trust reposed in such persons.
Key Ingredients / Essential Elements
For a conviction under Section 406, the prosecution must prove each of the following elements beyond reasonable doubt:
Entrustment of property or dominion over it
The accused must have been given property, or control/dominion over property, by the complainant — this can arise from an employment relationship, partnership, agency, family arrangement, or any express or implied contract.
Dishonest misappropriation or conversion
The accused dishonestly misappropriated the property for their own use, or converted it in a manner inconsistent with the terms of the entrustment.
Dishonest use or disposal in violation of direction/contract
Alternatively, the accused dishonestly used or disposed of the property in violation of any legal directive prescribing how the trust is to be discharged, or of any express or implied contract governing it.
Dishonest intention at the time of misappropriation
Unlike cheating, the dishonest intent need not exist at the time property is entrusted — it is sufficient if it forms later, at the point the accused misappropriates or misuses the property.
Resulting wrongful loss or wrongful gain
The misappropriation or breach results in wrongful loss to the person who entrusted the property, or wrongful gain to the accused (or both).
What Should You Do — For Complainants and For the Accused
Section 406 cases commonly arise between people who had an existing relationship of trust — business partners, employers and employees, family members, or spouses — which makes them different from cases involving strangers. What you should do next depends entirely on which side you're on.
If Property Entrusted to Someone Has Been Misappropriated
- Gather documentary proof of the entrustment — agreements, bank statements, handover records, WhatsApp/email communication, or witness accounts.
- Send a written notice or demand to the person, clearly recording what was entrusted and requesting its return or account, before escalating.
- File a written complaint at the local police station, or approach the jurisdictional Magistrate under Section 156(3)/200 CrPC (now BNSS) if police are reluctant to register the FIR.
- For matrimonial stridhan disputes, consider filing alongside Section 498A IPC (cruelty) where relevant, since the two are frequently connected in practice.
- Consider a parallel civil suit for recovery or accounts, since civil and criminal remedies for breach of trust can run together.
- Engage a criminal lawyer early to help distinguish a genuine breach of trust from what might otherwise be treated as a civil dispute.
If an FIR / Complaint Is Filed Against You
- Do not ignore a police notice or summons — non-appearance can lead to a non-bailable warrant.
- Do not make statements to the police without a lawyer present; anything you say can be used as evidence.
- Gather documents showing the property was used or accounted for in accordance with the terms of entrustment, or that any shortfall arose from a genuine business loss rather than dishonest intent.
- Apply for anticipatory bail under Section 438 CrPC (now Section 482 BNSS) before arrest if you anticipate one.
- Explore quashing of the FIR under Section 482 CrPC (now Section 528 BNSS) before the High Court if the dispute is essentially a civil accounting or contractual disagreement.
- Consider settlement and compounding with the complainant where appropriate — Section 406 disputes are frequently resolved once accounts are settled or the property/its value is returned.
Civil Dispute vs Criminal Breach of Trust — The Most Important Distinction
Indian courts have repeatedly cautioned against converting a purely civil or commercial dispute — such as a business loss, an unsettled account, or a failed joint venture — into a criminal case under Section 406 merely to pressure the other party. A shortfall in accounts, or an inability to return money invested in a legitimate but unsuccessful venture, does not by itself establish dishonest misappropriation; there must be clear evidence that the accused intentionally converted the property to their own use or disposed of it in violation of the terms of entrustment.
FIR Filing & Bail Process Under Section 406
Filing the Complaint / FIR
Since Section 406 is cognizable, the police are legally bound to register an FIR on a complaint disclosing a cognizable offence. If they refuse, the complainant can approach the Superintendent of Police in writing, or move the Magistrate under Section 156(3) CrPC/BNSS.
Investigation
The Investigating Officer records statements, examines financial and documentary records, and may arrest the accused, seeking police or judicial custody remand from the Magistrate as needed.
Bail Application
Being non-bailable, bail is not automatic. The accused may apply for anticipatory bail before arrest, or regular bail after arrest, before the Magistrate, Sessions Court, or High Court depending on the stage and gravity of allegations.
Chargesheet & Trial
On completion of investigation, a chargesheet is filed before the Magistrate. If the court finds sufficient material, charges are framed and the trial proceeds with evidence and cross-examination.
Compounding / Settlement (Optional)
With the court's permission, the owner of the property can compound (settle) the offence, often resulting in acquittal or discharge — common where the property or its value is returned or a compromise is reached.
Important / Landmark Cases on Section 406
The following judgments are frequently relied upon by both complainants and defence lawyers in Section 406 matters. This is general legal information for awareness — always have a lawyer verify how a precedent applies to your specific facts.
R.K. Dalmia v. Delhi Administration, AIR 1962 SC 1821
The Supreme Court gave an expansive interpretation to the term "property" under Section 405, holding that it is not restricted to movable property alone and covers both movable and immovable property in appropriate cases.
Jaikrishnadas Manohardas Desai v. State of Bombay, AIR 1960 SC 889
The Supreme Court held that to establish criminal breach of trust, it is not necessary to prove the precise mode of misappropriation; it is sufficient to show that the accused was entrusted with property and failed to account for it as required, in circumstances indicating dishonest intent.
Surendra Prasad Verma v. State of Bihar, (1973) 2 SCC 467
The Supreme Court held that where the accused had exclusive access and control over property (such as keys to a safe) and could not satisfactorily explain a shortfall, an inference of criminal breach of trust could reasonably be drawn.
S.W. Palanitkar & Ors. v. State of Bihar, (2002) 1 SCC 241
The Court reiterated that for offences under Sections 406 and 420, the essential ingredients must be independently and specifically established, and cautioned against criminal prosecution being used to pressure resolution of what is essentially a civil or contractual dispute.
Rashmi Kumar v. Mahesh Kumar Bhada, (1997) 2 SCC 397
The Supreme Court held that stridhan (a wife's personal property, including gifts received at marriage) remains her exclusive property, and if entrusted to her husband or in-laws for safekeeping, its dishonest retention or refusal to return it can constitute criminal breach of trust under Section 406.