Temporary Misappropriation Cannot Constitute Criminal Breach Of Trust Unless Entrustment And Dishonest Intention Are Proved: Supreme Court

Applying these requirements, the Court restored the acquittal of a Telephone Department cashier charged under Section 409 of the Indian Penal Code, 1860.

The Court was hearing an appeal against a Bombay High Court judgment which reversed the appellant’s acquittal, convicted him of criminal breach of trust and sentenced him to one year’s rigorous imprisonment with a fine of ₹5,000.

A Bench of Justice Ujjal Bhuyan and Justice Atul S. Chandurkar, while refering to R. Venkatakrishnan vs. Central Bureau of Investigation, (2009) observed: “It is also important to note that ‘dishonest intention’ is an essential element for constituting an offence of criminal breach of trust. This aspect has been considered in detail in R. Venkatakrishnan (supra) that was relied upon by the learned Senior Advocates for the appellant. It was observed therein that breach of trust simplicitor would not be an offence as long as it was not associated with an intention that was dishonest. Referring to the term ‘dishonest’ as defined in Section 24 of the Penal Code, it was held that an offence of breach of trust would be complete only when the misappropriation of such property had been made dishonestly. Even temporary misappropriation would fall within the ambit of the said offence.”

“It would, therefore, be necessary to examine as to whether the prosecution has brought on record any material to indicate entrustment of property to the appellant as well as the element of ‘dishonest intention’ on his part leading to misappropriation of property”, the Bench added.

Senior Advocates B.H. Marlapalle and Sudhanshu S. Choudhari appeared for the appellant. Advocate Shrirang B. Varma appeared for the State of Maharashtra.

Background

The appellant was serving as a Cashier-cum-Counter Clerk with the Telephone Department. The prosecution alleged that he collected telephone charges amounting to ₹8,73,737 from customers over a period of about three months.

According to the prosecution, ₹3,88,035 was deposited in the Government account after a delay, while ₹4,75,702 was not deposited. He was consequently tried for an offence under Section 409 IPC.

The trial court acquitted the appellant after finding that the prosecution evidence was vague and did not establish the exact amounts collected and deposited. It also found that the relevant registers had not been produced and that the seizure of documents from the appellant’s house had not been proved in accordance with law.

The High Court reversed the acquittal. It relied upon the documentary material and the investigating officer’s testimony to conclude that the appellant was guilty of criminal breach of trust.

Before the Supreme Court, the appellant argued that the prosecution had proved neither entrustment nor dishonest intention. He also relied upon the Telephone Department’s failure to produce the original cashbook, daily cash-handover register, stock register and audit material.

The State supported the High Court’s judgment and submitted that the documents, handwriting evidence and the appellant’s conduct established the ingredients of the offence.

Court’s Observations

Presumption Of Innocence Was Not Weakened By Acquittal

The Court referred to Chelloor Mankkal Narayan Ittiravi Nambudiri v. State of Travancore-Cochin (1953) while considering the principles governing an appeal against acquittal.

The Court observed that an appellate court has the power to reassess the evidence and reverse an acquittal. It added that due weight must be given to the trial court’s assessment of witness credibility, the presumption of innocence in favour of the accused, which was not weakened by the trial-court acquittal, the accused’s right to the benefit of doubt and the trial judge’s opportunity to observe the witnesses.

The Court held that the High Court had not given due weight to the trial court’s assessment of the evidence and had relied upon insufficient material to overturn the acquittal.

Entrustment And Dishonest Intention Are Essential

The Court explained that Section 405 IPC requires proof that property was entrusted to the accused or that the accused had dominion over it. The prosecution must further prove that the accused dishonestly misappropriated or converted the property to personal use, or dishonestly used or disposed of it in violation of a direction of law prescribing the manner in which the trust must be discharged, or of a legal contract.

Referring to R. Venkatakrishnan v. Central Bureau of Investigation (2009), the Court held that a mere breach of trust does not constitute the offence unless it is accompanied by dishonest intention. Temporary misappropriation may fall within the offence, but it must have been committed dishonestly.

The Court also relied upon Chelloor Mankkal Narayan Ittiravi Nambudiri v. State of Travancore-Cochin (1953), which required proof of entrustment followed by dishonest misappropriation, conversion, use or disposal of the property.

Missing Records Prevented Proof Of Entrustment

The Court noted that the investigating officer said the cashbook, balance sheet, daily register, audit report and rough cashbook had not been produced with the complaint, and that he subsequently asked for the original cashbook, audit report and collection records.

The Court observed that these documents formed the basis on which entrustment of cash to the appellant could have been established. It held: “However, in the absence of these material documents, it would be difficult to hold that there was, in fact, entrustment of the amount of cash to the appellant, which is one of the basic ingredients for constituting breach of trust.”

The Court added that the missing records could have shown the amounts collected by the appellant and whether those amounts were withheld, deposited late or not deposited.

Adverse Inference Against Prosecution Was Justified

The Court noted that the appellant had filed applications seeking production of the daily cash-handover register and the stock register showing the receipt books supplied to him. The Telephone Department did not produce those documents.

The Court held: “In our view, the trial Court was justified in drawing an adverse inference against the prosecution for its failure to place on record the relevant material that was in the custody of the Telephone Department, the complainant.”

The Court found that the High Court had instead placed the burden on the appellant by observing that he should have produced the daily registers if he had deposited or handed over the money. It held that this approach ignored the fact that the relevant material remained in the Department’s custody.

Seizure Of Documents Was Not Proved

The prosecution relied upon the alleged seizure of 46 documentary items from the appellant’s residence. The Court noted that both seizure witnesses had failed to support the prosecution, while the investigating officer had not obtained the appellant’s signature on the seizure memorandum or provided him with a list of the seized articles.

The Court observed: “There are serious infirmities in proving the seizure with both the seizure witnesses not having supported the prosecution. Further, there was infraction of the requirements of Sections 100(4) and 100(7) of the Code due to its non-compliance.”

The Court held that the seizure could not be treated as proved solely on the investigating officer’s testimony without further corroboration.

Referring to Sunder Singh v. State of Uttar Pradesh (1956) and State of Punjab v. Balbir Singh (1994), the Court clarified that non-compliance with the procedural requirements of Section 100 CrPC does not, by itself, vitiate the seizure. Such irregularity must nevertheless be considered with the remaining evidence while determining its weight and whether prejudice was caused.

The Court held that the defective seizure, considered cumulatively with the other deficiencies in the prosecution case, supported the appellant’s acquittal.

Documents Did Not Connect Appellant With Alleged Shortfall

The Court noted that the prosecution had not produced any record establishing which receipt books had been supplied to the appellant. One document relied upon to establish the alleged shortfall did not bear his signature or contain any handwriting attributed to him.

After examining the document, the Court held: “There is nothing to connect the appellant with the figures mentioned in Exhibit-9 and it could not have been relied upon by the High Court.”

The Court observed that the prosecution could have established the allegation by producing the complete chain of records showing receipt of money by the appellant, followed by short deposit or non-deposit. It held that the necessary registers and documents were not brought on record.

Appellant Was Not Heard Before Sentencing

The Court found a separate infirmity in the High Court’s judgment. After reversing the acquittal and convicting the appellant for the first time, the High Court sentenced him without giving him an opportunity to be heard on the quantum of sentence.

Relying on Mukesh Kumar Yadav v. State, Union Territory of Andaman and Nicobar Islands (2026), the Court held that an appellate court convicting an accused for the first time after reversing an acquittal must hear the accused before imposing sentence.

The Court also referred to Kumar Exports v. Sharma Carpets (2008), which held that the appellate court must itself impose an appropriate sentence instead of remanding the matter solely for sentencing, and Suryamoorthi v. Govindaswamy (1989), where the Supreme Court granted a hearing before sentencing persons convicted by it for the first time.

The Court clarified that this infirmity did not affect the result because it had independently found that the prosecution failed to establish the charge.

Prosecution’s Burden Could Not Be Shifted

The Court observed that the High Court had placed undue importance on the appellant’s alleged inability to explain the documents purportedly seized from his residence.

Referring to Rabindra Kumar Dey v. State of Orissa (1976), the Court reiterated that the prosecution must prove its case beyond reasonable doubt and cannot rely upon the weakness or falsity of the defence to establish guilt. It further held that the accused must be presumed innocent unless proved guilty and that the prosecution’s burden does not shift.

The Court concluded that the High Court had erred in shifting the burden to the appellant.

Conclusion

The Supreme Court held that the prosecution failed to prove entrustment of property, misappropriation or any dishonest intention on the appellant’s part. It found that the High Court had relied upon insufficient documentary material, an unproved seizure and the appellant’s alleged failure to explain the prosecution circumstances.

The Court allowed the appeal, set aside the Bombay High Court’s judgment and restored the trial court’s acquittal under Section 409 IPC. It cancelled the appellant’s bail bonds and disposed of the pending application.

Cause Title: Ramkrushna Prahllad Dongardive v. State of Maharashtra (Neutral Citation: 2026 INSC 1099)

Appearances

Appellant: Senior Advocates B.H. Marlapalle and Sudhanshu S. Choudhari; Advocate-on-Record Vatsalya Vigya; Advocates Ajit Wagh, Aanchal Rathore, Avinish Kumar Saurabh, Gautami Yadav, Pranjal Chapalgaonkar and Yash Singhania

Respondents: Advocates Shrirang B. Varma, Siddharth Dharmadhikari and Harshavardhan V. Ghadge; Advocates-on-Record Aaditya Aniruddha Pande and Sachin Patil

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