This article on ‘Misappropriation of Funds under IPC’ was written by Shivani Chaudhary, an intern at Legal Upanishad.
INTRODUCTION
Misappropriation occurs when someone who has been trusted with another person’s money, property, or assets misuses them for their personal gain. Misappropriation is the wrongful utilization of another’s property for one’s own benefit without the owner’s consent. Any time an individual who does not own the company’s assets uses them for personal gain, this is considered theft.
This article attempts to analyse the concept and meaning of the term “misappropriation of funds”. It aims to study and highlight the provisions governing the misappropriation of funds under Indian Laws.
MEANING
Misappropriation is the criminally illegal use of another person’s property or funds for one’s own use or other unauthorized purposes. This is especially true when the offender is in a position of trust, such as a public official, trustee, executor, or administrator of an estate. Misappropriation may be a felony, a crime punishable by prison time, depending on the jurisdiction in question and the value of the property at issue.
TYPES OF MISAPPROPRIATION
1. MISAPPROPRIATION OF FUNDS
The term “misappropriation of funds” is used to describe the unauthorized use of another person’s money. Even though the offender had legal access to the funds, it is still theft if they utilize the money for something other than what they intended.
Theft crimes like embezzlement and misappropriation of funds share similarities. Both occur when someone in a position of trust steals money or property from someone else. A defendant may face charges of embezzlement and theft of funds in the same case.
For instance, a CEO may misuse corporate finances by paying their own credit card bills using money that was intended for business purposes. The CEO may face charges of embezzlement or theft of funds. The offender would be prosecuted for misappropriation rather than embezzlement if the stolen funds were used for unauthorized reasons other than personal gain.
2. TRADE SECRET MISAPPROPRIATION
Misappropriation of a trade secret occurs when one party gains the secret through unethical means (such as theft, bribery, or fraud) and then uses or discloses that secret to another party.
For example, if an employee takes company secrets home with them, that is a breach of confidentiality and could lead to allegations of theft.
If a company believes that its trade secrets for a good or service that is involved in interstate or foreign commerce have been misappropriated, it can bring a civil claim in state court or a federal lawsuit in federal court.
3. MISAPPROPRIATION OF ASSETS
The misuse of other assets is also possible when someone is given control over them. In cases of misappropriation of assets, inventory and company equipment frequently play central roles.
PENALTIES FOR MISAPPROPRIATION
The state level is frequently the level of jurisdiction for misappropriation charges. The federal court may hear a misappropriation case under the following conditions, however:
- Misappropriation of federal funds, the commission of a crime by electronic means, or
- The criminal activity involved the crossing of state lines.
The following elements must be proven by the prosecution whether the misappropriation case is heard in state or federal court:
- The plaintiff had possession and control over the property or funds since the owner had given it to the defendant, but the defendant did not actually own the property or funds.
- The defendant acted willfully and dishonestly in stealing the money or property.
- The defendant spent the money or took the property for themselves. There’s no requirement that the defendant actually spends the money for this requirement to be met in court. The defendant need only have diverted the money to their own account or refused to return it to its rightful owner when asked to do so.
- It depends on the state whether or not misappropriation is considered a misdemeanour or felony. Each case of misappropriation of cash or property is unique, and the value of the stolen goods and the nature of the theft may have a role in determining the gravity of the crime and the associated punishments.
Government employees or officials found guilty of embezzling a big sum of taxpayer money, for instance, could face harsher penalties than the average individual. Among the consequences of stealing money are the following:
- Misappropriation is punishable by a minimum of one year in jail and potentially ten or more years if it is considered a felony.
- Maximum fines of $1,000 for a misdemeanor and $10,000 or more for a felony.
- Payment of damages to the victim.
- There may be a probationary period of up to five years.
DEFENCE FOR MISAPPROPRIATION
If you’ve been accused of theft, you might be frightened about the legal procedure and the potential penalties. Even though you’re facing some rather serious charges (especially if they’re federal), you still have some options open to you.
The defence attorney you hire will investigate the specifics of your case to formulate a plan of action. Some frequent counterclaims to accusations of misappropriation are outlined below.
Negligent Intent: You did not set out to steal or otherwise wrongfully acquire the funds or property.
Permission- The owner of the funds or property gives you the approval to keep or use them for your own reasons.
Ownership- You had a reasonable and good faith belief that you were the legitimate owner of the funds or property.
You were falsely accused or are the victim of mistaken identity; you did not commit the crime.
Entrapment- You were pressured by law enforcement into misappropriating the funds.
You committed the theft under duress if you were threatened with physical harm, restrained, or otherwise coerced into making the unauthorized monetary transfer.
Evidence against you is inadmissible because it was gathered through an illegal search or because of some other legal technicality.
The prosecution has failed to provide sufficient evidence to prove that you stole the money or property.
Which of the Following Constitutes Embezzlement or Misappropriation of Funds?
Theft by deception, including embezzlement and other forms of misappropriation of funds, can take numerous shapes and sizes, from being a long-term, methodical scheme to a single, isolated incident.
A partner, LLC member, official, or employee has possibly stolen from or otherwise misappropriated the business. Having a manager or cashier remove cash from a drawer is one example. A bookkeeper, accountant, executive, or other employees could go to great lengths to defraud their employer by creating fake companies and issuing fraudulent invoices.
People who work for you or who hold positions of authority inside your company are a prime target for embezzlement and other forms of financial misappropriation. They can switch the payee on cheques, invoices, and other papers to get money sent to their own bank accounts.
Reference List
- “Misappropriation”, Wikipedia, available at: https://en.wikipedia.org/wiki/Misappropriation
- “Misappropriation of Funds or Embezzlement”, Watkins Firm, available at: https://watkinsfirm.com/misappropriation-of-funds-or-embezzlement/
- “The Crime of ‘Misappropriation of Funds’ – What You Need to Know”, Robert M Helfend, available at: https://www.robertmhelfend.com/federal-defense/misappropriation-of-funds/