Criminal breach of trust needs entrustment and dishonest misappropriation; a civil employment dispute alone does not sustain prosecution.

Criminal breach of trust under Sections 405, 406 and 408 of the IPC requires entrustment of property and dishonest misappropriation, conversion, or use in violation of that trust. The Karnataka HC noted that the allegations only suggested a possible breach of employment terms and a commercial dispute, with no material showing that any property was entrusted to the petitioners or dishonestly dealt with. The software-related accusation was also unsupported by material establishing ownership or entrustment in favour of the complainant company. On that basis, the prosecution could not be sustained and the proceedings were liable to be quashed.

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Issues: Whether the allegations in the charge-sheet disclosed the ingredients of criminal breach of trust under Sections 405, 406 and 408 of the Indian Penal Code, 1860 so as to sustain the prosecution and whether the proceedings were liable to be quashed.

Analysis: The petitioners were alleged to have floated a rival company during their employment, but the record showed no material that any property was entrusted to them or that any entrusted property was dishonestly misappropriated, converted, or used in violation of a trust. The allegations, at the highest, indicated breach of the employment undertaking and a commercial dispute. The asserted software-related accusation was not supported by material showing ownership or entrustment in favour of the complainant company, and the record indicated that business operations of the rival concern commenced only after resignation. A dispute that is essentially contractual or civil in nature does not, by itself, establish the criminal ingredients required for prosecution.

Conclusion: The essential ingredients of criminal breach of trust were not made out, and the prosecution could not be sustained.

Ratio Decidendi: For an offence of criminal breach of trust, entrustment of property and dishonest misappropriation or conversion of that property must be shown; a mere breach of employment terms or a predominantly civil dispute does not attract Sections 405, 406 or 408 of the Indian Penal Code, 1860.

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