Simultaneous convictions for cheating and criminal breach of trust are unsustainable; accountants fall under Section 408 IPC.

The Appellant was appointed as an accountant in 2008 for Aeon RKB Motors Pvt. Ltd. and Aeon Medical Pvt. Ltd.

Following an audit for the financial years 2015-17, an embezzlement of approximately ₹1.1 Crore was detected.

Investigation revealed that the Appellant misappropriated his authority to operate company accounts, transferring ₹1.5 Crores into his personal accounts and subsequently investing the funds in securities and his wife’s accounts.

The Trial Court (Additional Sessions Judge, Dhar) convicted the Appellant under Sections 409 and 420 of the IPC, sentencing him to seven years of rigorous imprisonment (R.I.) and a fine of ₹1 Crore.

The Appellant contended that the company's CEO operated his accounts for tax evasion purposes.

1. Whether the Trial Court erred in rejecting the defense that the Appellant’s bank accounts were actually operated by the company’s CEO?

2. Whether an accountant's misappropriation of funds falls under Section 409 (Criminal breach of trust by public servant/agent) or Section 408 (Criminal breach of trust by clerk/servant) of the IPC?

3. Whether simultaneous convictions under Section 420 (Cheating) and Section 408/409 (Criminal breach of trust) are maintainable for the same act?

4. Whether the sentence of seven years R.I. was proportionate to the gravity of the offense?

Section 408 of the IPC, which specifically addresses criminal breach of trust by a clerk or servant.

Section 409, which applies to public servants, bankers, or agents.

The Supreme Court precedents in Delhi Race Club (1940) Ltd. and Others v. State of U.P. (2024) and Arshad Niyaz Khan v. State of Jharkhand (2025), establishing that the offenses of criminal breach of trust and cheating cannot co-exist simultaneously for the same transaction.

The court applied the "principle of proportionality" as enunciated in Lehna v. State of Haryana (2002) and Deo Narain Mandal v. State of U.P (2004).

The High Court affirmed the Trial Court’s rejection of the Appellant’s defense, noting that bank records and testimony from the Branch Manager (DW-1) proved the Appellant was the designated regulator of the internet banking accounts, and OTPs were sent to his personal mobile number.

The court found a legal error in the application of Section 409; since the Appellant was an "accountant," he qualified as a "clerk or servant" under Section 408, not an "agent" or "banker" under Section 409.

Applying the Delhi Race Club doctrine, the court held that because the ingredients of criminal breach of trust (entrustment) and cheating (fraudulent inducement at the outset) are mutually exclusive in this context, the conviction under Section 420 could not stand alongside Section 408.

Evaluating the proportionality of the sentence, the court determined that while the fine was appropriate given the embezzlement amount, the substantive sentence required a reduction to align with the nature of the altered conviction.

The substantive sentence was reduced from seven years to five years R.I. The fine of ₹1,00,00,000 (Rupees One Crore) was maintained, to be paid as compensation to the victim companies under Section 357(3) of the Cr.P.C., but the default sentence was reduced from one year to six months R.I.