Criminal Breach of Trust Under BNS Section 316: Protecting Business Assets

Section 316 BNS: The New Law on Breach of Trust

Section 316 of the Bharatiya Nyaya Sanhita (BNS), 2023 replaces Section 406 of the Indian Penal Code dealing with criminal breach of trust. This provision is critically important for businesses, as it addresses situations where a person entrusted with property or dominion over property dishonestly misappropriates or converts it to their own use, or dishonestly uses or disposes of it in violation of the terms of the trust.

Essential Ingredients

For a prosecution under Section 316 BNS, the following elements must be established: the accused was entrusted with property or with dominion over property, the entrustment was in a fiduciary capacity (as a trustee, agent, employee, partner, etc.), the accused dishonestly misappropriated or converted the property to their own use, or disposed of it in violation of the terms of the trust.

The distinction between civil breach of contract and criminal breach of trust is important. Not every failure to return property or repay money constitutes a criminal offence — there must be an element of dishonesty or criminal intent, and the relationship must involve entrustment in a fiduciary capacity.

Common Business Scenarios

Criminal breach of trust commonly arises in business contexts involving employee misappropriation of company funds or assets, partner’s misuse of partnership property, director’s unauthorized transactions using company resources, agent’s failure to remit collected payments, and trustee’s violation of trust terms in financial arrangements.

Enhanced Penalties Under BNS

Section 316 BNS provides for imprisonment up to five years and fine for simple criminal breach of trust. Where the breach involves a carrier, warehouse keeper, or other person in the business of transporting or storing goods, the punishment can extend to seven years. For breaches by public servants, bankers, merchants, or agents, the enhanced punishment of up to ten years and fine applies.

Prevention and Legal Strategy

Businesses can protect themselves by implementing robust internal controls, regular audits, clear documentation of entrustment terms, and segregation of duties for financial transactions. When breach of trust occurs, prompt legal action combining criminal prosecution under Section 316 BNS with civil recovery proceedings provides the most effective remedial strategy.