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SECTION 406 IPC - Indian Penal Code - Punishment for criminal breach of trust


Last Updated: 01 Jun, 2024
By Advocate Chikirsha Mohanty


Whoever commits criminal breach of trust shall be punished with imprisonment of either description for a term which may extend to three years, or with fine, or with both.



IPC 406 in Simple Words

IPC Section 406 deals with the punishment of criminal breach of trust. A criminal breach of trust is defined under IPC Section 405 pertaining to a criminal breach of trust by persons, including public servants, bankers, merchants, or agents who are entrusted with property or assets due to their roles, but they dishonestly misappropriate or misuse them. In essence, it involves situations where someone entrusted with property or assets acts dishonestly by misappropriating or using them in a manner contrary to the trust placed in them. This offence carries a punishment of imprisonment for a term which may extend to three years, or a fine, or both.

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Offence : Criminal breach of trust


Punishment : 3 Years or Fine or Both


Cognizance : Cognizable


Bail : Non-Bailable


Triable : Magistrate First Class



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DESCRIPTION OF SECTION 406, IPC.

Section 406, Indian Penal Code (“IPC”) prescribes punishment for the offence of ‘criminal breach of trust’. The offence of criminal breach of trust is defined under Section 405, IPC.

In order to understand Section 406, IPC it is important that we first look at Section 405, IPC.

Section 405: Criminal breach of trust

Whoever, being in any manner entrusted with property, or with any dominion over property, dishonestly misappropriates or converts to his own use that property, or dishonestly uses or disposes of that property in violation of any direction of law prescribing the mode in which such trust is to be discharged, or of any legal contract, express or implied, which he has made touching the discharge of such trust, or wilfully suffers any other person so to do, commits “criminal breach of trust”.

Explanation 1 — A person, being an employer of an establishment whether exempted under section 17 of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (19 of 1952) or not who deducts the employee’s contribution from the wages payable to the employee for credit to a Provident Fund or Family Pension Fund established by any law for the time being in force, shall be deemed to have been entrusted with the amount of the contribution so deducted by him and if he makes default in the payment of such contribution to the said Fund in violation of the said law, shall be deemed to have dishonestly used the amount of the said contribution in violation of a direction of law as aforesaid.

Explanation 2 — A person, being an employer, who deducts the employees’ contribution from the wages payable to the employee for credit to the Employees’ State Insurance Fund held and administered by the Employees’ State Insurance Corporation established under the Employees’ State Insurance Act, 1948 (34 of 1948), shall be deemed to have been entrusted with the amount of the contribution so deducted by him and if he makes default in the payment of such contribution to the said Fund in violation of the said Act, shall be deemed to have dishonestly used the amount of the said contribution in violation of a direction of law as aforesaid.

Section 406: Punishment for criminal breach of trust

Whoever commits criminal breach of trust shall be punished with imprisonment of either description for a term which may extend to three years, or with fine, or with both.

The crux of Section 406, IPC lies in our understanding of what constitutes ‘criminal breach of trust’ under Section 405, IPC.

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Recently, the Hon'ble Supreme Court in the case of Rajukrishna Shedbalkar vs. The State of Karnataka and Anr., while analysing Sections 405 and 406 of the IPC observed that no punishment under Section 406 of the Act can be given unless all essentials of Section 405 of the Act are fulfilled.

WHAT IS ‘CRIMINAL BREACH OF TRUST’ UNDER SECTION 405, IPC?

The offence of ‘criminal breach of trust’ is defined under Section 405, IPC.

In order to constitute the offence of criminal breach of trust, it must be established by the prosecution that the accused i.e., the person who is alleged to have committed the offence was entrusted with the property or with dominion/ power over the property of another and that he dishonestly misappropriated it or converted it to his own use or dishonestly disposed it off, in violation of a legal direction or contract. It is important to note that such misappropriation, or conversion or disposal must have been carried out by the accused with a dishonest intention.

The essential ingredients that go into the making of an offence under Section 405, IPC are:

1. That the accused must have been entrusted with property or dominion over property of another;

2. That the accused must have:

  • Dishonestly misappropriated or converted to his own use that property,

  • Dishonestly used or disposed of that property or wilfully suffered/allowed/permitted any other person to do so, in violation of –
    -any directions of law prescribing the mode in which such trust is to be discharged, or
    -any legal contract made touching upon the discharge of such trust.

So as to understand Section 405, IPC better, let us imagine the following –

  • A, being executor to the will of a deceased person, dishonestly disobeys the law which directs him to divide the effects according to the will, and appropriates them to his own use. A has committed criminal breach of trust.

  • A is a warehouse-keeper. Z going on a journey, entrusts his furniture to A, under a contract that it shall be returned on payment of a stipulated sum for warehouse room. A dishonestly sells the goods. A has committed criminal breach of trust.

  • A, residing in Calcutta, is agent for Z, residing at Delhi. There is an express or implied contract between A and Z, that all sums remitted by Z to A shall be invested by A, according to Z's direction. Z remits a lakh of rupees to A, with directions to A to invest the same in Company's paper. A dishonestly disobeys the directions and employs the money in his own business. A has committed criminal breach of trust. But if A, not dishonestly but in good faith, believing that it will be more for Z's advantage to hold shares in the Bank of Bengal, disobeys Z's directions, and buys shares in the Bank of Bengal, for Z, instead of buying Company’s paper, here, thought Z should suffer loss, and should be entitled to bring a civil action against A, on account of that loss, yet A, not having acted dishonestly, has not committed criminal breach of trust.

  • A, a revenue-officer, is entrusted with public money and is either directed by law, or bound by a contract, express or implied, with the Government, to pay into a certain treasury all the public money which he holds. A dishonestly appropriates the money. A has committed criminal breach of trust.

  • A, a carrier, is entrusted by Z with property to be carried by land or by water. A dishonestly misappropriates the property. A has committed criminal breach of trust.

Entrustment

‘Entrustment’ means that the beneficial interest in the property (subject matter of the offence) was vested in some person other than the accused, and that the accused held that property on behalf of that person in capacity of a trustee.

In other words, a relationship should exist between the transferor-victim and the transferee-accused, either by way of a legal contract or a legal direction, under which the transferor remains the legal owner of the entrusted property and the transferee has only the custody of that property for the benefit of the transferor himself or someone else.

At best, the transferee-accused only gets to receive a limited right to the property entrusted to them, which covers the cost of safekeeping, but never gets to acquire the right to dispose of that property against the terms of the trust.

Misappropriation or conversion to one’s own use

According to Section 405 of the IPC, a person is guilty if they dishonestly use or change someone else’s property for their own benefit or for someone else’s benefit, without the owner’s permission. ‘Misappropriation’ is when a person dishonestly uses someone else's property to benefit themselves.

The word ‘appropriate’ means to set apart or assign the property to oneself or to another to the exclusion of the owner.

A recent development in Sections 405 and 406 of the Act was observed by the Kerala High Court in the case of K.O. Antony vs. The State of Kerala. It was held that the term "in any manner entrusted with property" used in Section 405 of the Indian Penal Code (IPC) encompasses a wide range of scenarios, including entrustments to clerks, servants, business partners, or any other individuals holding a position of trust. It's important to highlight that the key term in Section 405 IPC is 'dishonestly', indicating the necessity of mens rea, or a guilty mind. In simpler terms, mere possession of property entrusted to someone without any misappropriation does not constitute a criminal breach of trust. For the offence to occur, there must be actual improper use of the property by the accused, in violation of law or contract, and this must be accompanied by a dishonest intention.

Consult: Top Criminal Lawyers in India

Dishonest Intention

As per Section 24, IPC, dishonest intention means doing an act with the intention of causing wrongful gain to one person or wrongful loss to another person.

Under Section 405, IPC the accused must have entertained a dishonest intention while committing the offence of criminal breach of trust i.e., the accused must have intended to cause wrongful loss to the person who entrusted him with the property.

Such an act should have been done deliberately, intentionally and not by accident or inadvertence.

WHAT IS ‘PUNISHMENT FOR CRIMINAL BREACH OF TRUST’ UNDER SECTION 406?

Section 406, IPC is the penal provision for the offence of ‘criminal breach of trust’ that has been defined under Section 405, IPC.

When an accused commits the offence of criminal breach of trust as per Section 405, IPC, he would be liable to be punished under Section 406, IPC with imprisonment for a term which may extend to three years, or with fine, or with both.


IS CRIMINAL BREACH OF TRUST THE SAME AS EMBEZZLEMENT?

Criminal breach of trust is similar to embezzlement, which is the misappropriation of funds or assets that have been entrusted to someone for a specific purpose. However, the specific definitions and legal consequences of these offenses can vary depending on the jurisdiction.


ARE THERE OTHER VERSIONS OF THE OFFENCE OF CRIMINAL BREACH OF TRUST?

There are many penal provisions in the IPC which comprise the aggravated versions of the basic offence of ‘criminal breach of trust’ under Section 405, IPC i.e., these are offensive, penal situations which borrow their fundamental criminality from Section 405, IPC and build upon its intensity.

In other words, the base, essential crime is that of ‘criminal breach of trust’ (under Section 405, IPC) which is made further worse by the attendant circumstances that are captured under its aggravated versions, which are:


Section 407, IPC – Criminal breach of trust by carrier, etc.

Whoever, being entrusted with property as a carrier, wharfinger or warehouse-keeper, commits criminal breach of trust in respect of such property, shall be punished with imprisonment of either description for a term which may extend to seven years, and shall also be liable to fine.

Section 408, IPC – Criminal breach of trust by clerk or servant.

Whoever, being a clerk or servant or employed as a clerk or servant, and being in any manner entrusted in such capacity with property, or with any dominion over property, commits criminal breach of trust in respect of that property, shall be punished with imprisonment of either description for a term which may extend to seven years, and shall also be liable to fine.

Section 409, IPC – Criminal breach of trust by public servant, or by banker, merchant or agent.

Whoever, being in any manner entrusted with property, or with any dominion over property in his capacity of a public servant or in the way of his business as a banker, merchant, factor, broker, attorney or agent, commits criminal breach of trust in respect of that property, shall be punished with imprisonment for life, or with imprisonment of either description for a term which may extend to ten years, and shall also be liable to fine.

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WHAT IS THE PROCEDURE FOR TRIAL UNDER SECTION 406, IPC?

In India, the mechanism for criminal justice delivery assumes shape of a criminal trial which is governed by the Code of Criminal Procedure, 1973 (‘CrPC’).

The trial under Section 406, IPC takes a journey similar to the trials conducted for other criminal offences. Broadly, the procedure for a trial takes the steps - as have been enumerated below, beginning from the filing of an FIR to the final verdict by the court:

1. Investigation - FIR, Arrest, Remand and Bail

i. First Information Report (FIR) - Criminal procedure is set into motion with the filing of an FIR or First Information Report by the victim or an aggrieved person. This marks the beginning of investigation by police into the case.

ii. Arrest - FIR is soon followed by the arrest of the accused person (person who has allegedly committed the offence) by the police and his subsequent production before the Magistrate. Such production must be made within 24 hours of the arrest of the accused person.

iii. Remand/ Custody - At the time of such production if the investigating officer believes that the investigation cannot be completed within 24 hours i.e., the police need more time with the accused for the purpose of interrogation etc., the officer will file an application before the same Magistrate seeking an extension in custody of the accused. Now, depending on the discretion of the Magistrate, such detention may be authorised in police custody (lock-up) or in judicial custody (jail).

However, it is to be noted that a Magistrate cannot authorise detention of an accused in police custody for a period exceeding the initial 15 days (from the date of the production of the accused before the Magistrate).

On the other hand, a Magistrate under Section 167 (2)(a), CrPC may authorize the detention of the accused in judicial custody beyond the period of initial fifteen days, if he is satisfied that adequate grounds exist for doing so. However, no magistrate shall authorize custody for more than -

  • Ninety days, where the investigation relates to an offence punishable with death, imprisonment for life or imprisonment for a term not less than ten years;

  • Sixty days, where the investigation relates to any other offence.

iv. Bail - If upon the expiry of 60 or 90 days, as the case may be, the police is unable to complete the investigation and file a chargesheet (as corresponds to the offence) with the Magistrate, the accused is entitled to default bail i.e., such bail is compulsorily granted to the accused provided he applies for and furnishes bail.

However, during the 60- or 90-day period, as the case may be, while the accused is still under custody of the police or otherwise, he may keep pushing for the grant of regular bail under Section 437 or 439, CrPC by the Magistrate or the High Court/Court of Sessions, respectively.

2. Filing of Final Report by the Police

The police after completing the investigation have to file a final report under Section 173, CrPC. This marks the conclusion of the investigation which is aimed at collecting evidence surrounding the commission of the offence.

The final report may take one of the following forms:

i. Closure Report

ii. Charge Sheet

Closure Report

If the evidence gathered against the accused is insufficient to support prosecution before a court of law, justifying their continued detention, the police will file a closure report under Section 169 of the Criminal Procedure Code (CrPC). The accused will be released on executing a bond or signing an undertaking for appearance when required by a Magistrate. Essentially, a closure report is filed when there is little or no evidence supporting the accusation against the concerned individual.

The police officer must inform the informant (who lodged the FIR) about the submission of a final report related to the case to the Magistrate. Upon receiving the closure report, the Magistrate has four options:

  1. Accept the closure report, declining to take cognizance of the offence, leading to no further proceedings.

  2. Reject the closure report and take cognizance of the offence under Section 190 of the CrPC, allowing the case to proceed.

  3. Without rejecting the closure report, direct the investigating agency to conduct further investigation if there are gaps to be filled.

  4. If the informant challenges the closure report by filing a protest petition, the Magistrate will adjudicate upon it and decide whether to take cognizance of the offence.

If the Magistrate takes cognizance of the offence under Section 190 of the CrPC, they issue summons to the accused under Section 204, directing their appearance before the court.

Charge Sheet

If the evidence collected against the accused is sufficient to support prosecution before a court of law and justify their continued detention, the police have to file a charge sheet under Section 173 of the CrPC and, according to Section 170, send the accused under the custody of the Magistrate.

A charge sheet is a formal police document outlining various case particulars prescribed by the State. It includes the names of involved parties, the nature of accusations, witness lists, statements recorded under Section 161 of the CrPC, the determination of whether an offence was committed and by whom, arrest details, objects seized, and other documentary evidence for prosecution.

Once the Magistrate takes cognizance of the charge sheet, they issue summons or warrants to the accused, securing their attendance on a specified date. At the hearing, the Magistrate may discharge the accused and close the case or frame charges and proceed to trial.

3. Plea of Guilty or Not Guilty by the Accused

After the charges have been formally framed, they will be read over and explained to the accused by the Magistrate. Thereafter, the accused would be asked whether he pleads guilty to such charge or not.

If the accused pleads guilty, the Magistrate shall record such plea and may convict him thereupon. However, it is to be noted that the responsibility lies with the Magistrate to ensure that the plea of guilt is made voluntarily by the accused and that is why he reserves the discretion to convict the accused on such plea.

If the accused does not plead guilty i.e., if he claims trial, the Magistrate shall post the case for trial.

Consult: Top Criminal Lawyers in India

4. Evidence for Prosecution

On the day fixed for the prosecution evidence, the Court invites the prosecution to lead the evidence and prove the guilt of the accused beyond reasonable doubt. The prosecution may establish the guilt with the help of oral or documentary evidence.

The prosecution witnesses are summoned and examined or are asked to produce any document or thing in support of their version of events.

These witnesses may be subject to cross-examination if the defence counsel so desires.

5. Statement of the Accused

After the prosecution concludes its evidence, the same is put to the accused i.e., he is given an opportunity to explain the circumstances appearing in evidence against him and to say in his defence what he wants to, in his own words. This mandate is captured under Section 313, CrPC. The purpose of such statement is to establish a direct dialogue between the Court and the accused so as to enable him to give his explanation.

This statement is not taken on oath and anything recorded as part of it can be used against the accused at a later stage.

6. Evidence for Defence

After recording the statement of the accused, the Court invites the defence to present evidence, if any. However, the accused is not required to mandatorily enter upon his defence as the burden of proof lies on the prosecution to prove the charge against the accused beyond reasonable doubt.

If the accused has any evidence (oral or documentary) it is presented before the Court at this stage. This is an opportunity for him to punch holes in the prosecution story for which it can call upon and examine witnesses.

7. Final Arguments

As per Section 314, CrPC, after the close of the evidence both parties take turns - first, the prosecution and then the defence - to make final oral arguments in front of the judge. Final arguments are presented by the Public Prosecutor and the Defence counsel.

8. Judgment

After studying the facts and circumstances of the case, analysing the evidence produced by both the parties in support of their versions and hearing the arguments advanced by each of them, the judge decides, based on strong reasons, whether to convict or acquit the accused. This is known as the judgment.

If the accused is pronounced ‘guilty’ upon trial, he is convicted of the charge and if pronounced ‘not-guilty’, he is acquitted of the charge in the judgement.

If the accused is convicted, then both sides are heard on quantum of sentence i.e., what punishment should he be given. This is usually done if the punishment prescribed is that of life imprisonment or death.

After listening to the arguments about the sentence, the court decides the punishment for the accused. They think about different ideas of punishment like the idea of changing the person (reformative theory) and the idea of scaring the person so they don’t do it again (deterrent theory). The court also thinks about the accused’s age, background, and past before deciding the punishment.

It is important to mention that the above-mentioned procedure is subject to the practice and complexity of your case, which you might find difficult to understand. Therefore, before taking any steps, talk to a lawyer and discuss your case. Get a clear idea of your case and the process involved. This will enable you to be well-prepared. You can also connect to top-ranking criminal lawyers across the country, including your city, with help of LawRato. The 10 Best Criminal Lawyers (lawrato.com)


WHAT IS THE PROCEDURE FOR APPEAL UNDER SECTION 406, IPC?

The fundamental principles of appeal under CrPC are as follows:

  • An appeal is a creature of statute.

  • No inherent right to file an appeal.

  • No appeal only against conviction.

  • No appeal in petty cases.

  • Generally, there is no appeal on conviction on a plea of guilt.

It needs to be pointed out that except for the statutory provisions laid down under the CrPC or any other law for the time being in force, an appeal cannot lie from any judgment or an order of a criminal court. Thus, there is no vested right to appeal as such as even the first appeal will be subjected to statutory limitations. The justification behind this principle is that the courts which try a case are competent enough with the presumption that the trial has been conducted fairly. However, as per the Section 372, CrPC the victim has a right to appeal against any order passed by the Court under special circumstances comprising of a judgment of acquittal, conviction for lesser offence or inadequate compensation.

Generally, same sets of rules and procedures are employed to govern the appeals in the Sessions Courts and High Courts (highest court of appeal in a state and enjoys more powers in matters where appeal is permissible). The highest court of appeal in the country is the Supreme Court and hence, it enjoys the most extensive discretionary and plenary powers in the cases of appeals. Its powers are largely governed by the provisions laid down in CrPC, Indian Constitution, and the Supreme Court (Enlargement of Criminal Appellate Jurisdiction), 1970.

The law provides a person who has been convicted of a crime to appeal to the Supreme Court or the High Court or the Sessions Court as per the circumstances.

The accused has been given the right to appeal to the Supreme Court against the judgment of the High Court if the High Court has reversed an order of his acquittal on appeal by convicting him, thereby, sentencing him to imprisonment for life or for ten years or more, or to death.

A similar right to appeal has been granted to one or all accused persons if more than one person has been convicted in a trial and such order has been passed by the court.

However, there are certain circumstances under which no appeal shall lie. These provisions have been laid down under Section 265G, Section 375 and Section 376 of the CrPC.

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CAN A POLICE-OFFICER MAKE AN ARREST UNDER SECTION 406, IPC WITHOUT WARRANT?

Yes, since the offence of ‘punishment for criminal breach of trust’ under Section 406, IPC is a cognizable offence, a police officer can arrest a person suspected to have committed such offence without warrant from the Court (a warrant is a Court-order authorising a police officer to carry out an arrest).


IS THE OFFENCE UNDER SECTION 406, IPC, BAILABLE?

No, the offence under Section 406, IPC is not bailable.


HOW TO GET BAIL IF CHARGED UNDER SECTION 406, IPC?

The severity of the offence under Section 406, IPC is so much that it has been characterized as a non-bailable offence.

To get bail in such cases, the accused need to have strong reasons. Depending on where the case is at, the accused can apply for regular bail after being arrested or ideally apply for anticipatory bail before being arrested. The court will look at things like the accused's past, their place in society, why they did the crime, and the police report. If all these things support the accused, then bail will be given. It is important to take assistance from an experienced criminal lawyer in cases like these.


REGULAR-BAIL

1. In order to apply for regular bail when one is wrongfully accused under Section 406 IPC, the alleged accused will have to submit an application for bail in the court of Area Magistrate.

2. The court will then send the summons out to the other party and will fix a date for the hearing.

3. On the date of hearing, the court will hear arguments from both sides and would give a decision based on the facts and circumstances of the case.

ANTICIPATORY-BAIL

1. In case the accused has an apprehension of an arrest under Section 406, IPC, he or she can also file an application for anticipatory bail with the help of a criminal lawyer.

2. The lawyer will file the anticipatory bail application in the requisite court having the authority to adjudge the particular criminal matter along with a vakalatnama.

3. The court will then notify a public prosecutor about the anticipatory bail application and would ask him to file objections, if any.

4. Thereafter, the court will appoint a date of hearing and after hearing the final arguments of both the parties would give a judgment based on the facts and circumstances of the case.


IS THE OFFENCE UNDER SECTION 406, IPC, COMPOUNDABLE?

The offence under Section 406, IPC is compoundable i.e., law allows for a compromise to be recorded between the victim and the offender.

However, as per Section 320, CrPC such offence may be compounded by the victim - the owner of property in respect of which breach of trust has been committed, only with the permission of the Court before which prosecution for such offence is pending.

Consult: Top Criminal Lawyers in India


TESTIMONIALS

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- Mrs. Neeta Sharma

2. I am in the pharmaceutical business, a person placed an order for a medicine from my company, the same was delivered by me on the condition of paying half of the order before delivery and the rest after delivery. But in spite of sending regular reminders the opposite party did not pay the dues, on which I consulted a lawyer, he got the dues as well as compensation for legal services.

- Mr. Puneet Singh

3. I had given my car to a travel company to make some extra money. But they sold my car to someone else without asking me. When I found out about this, I looked for a criminal lawyer and found one on LawRato. I connected to him and discussed my situation. With his expertise I was able to filed a case against the travel company for cheating and breaking trust.

- Mr. Nischal Verma


WHY DO YOU NEED A LAWYER FOR A CASE UNDER SECTION 406, IPC?

Facing criminal charges, whether serious or minor, is a significant matter that carries potential consequences such as imprisonment, heavy fines, and social repercussions like damage to reputation. It is important to seek guidance from a qualified criminal lawyer who can advise on your rights and work towards the best possible outcome for your case.

A qualified criminal lawyer can help you understand the charges, your rights before and after arrest, available defences, potential plea bargains, and post-trial expectations. It's advisable to prepare a timeline of events to effectively brief the lawyer and collaborate in formulating a trial strategy. In situations such as those outlined in section 406 of the IPC, having legal representation is particularly valuable.
You may also refer to LawRato’s Criminal Law Guide for more information.

Section 406 of the Indian Penal Code (Indian Kanoon) Section 406 of The Indian Penal Code (406). Penalty for criminal breach.





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Frequently Asked Questions


What is Section 406 of the Code of criminal Procedure?

Only in extreme cases should the power to transfer be used under Section 406, CrPC. This Court has only allowed transfers in exceptional situations, considering that transfers could cast unnecessary doubts on the State Judiciary or the Prosecution Agency. 17 Mar 2023


Can I get bail in 406 IPC?

The bail is grenade based on the discretion of court.


What is the IPC for breach of trust?

According to Section 405, IPC, criminal breach of trust is defined as: Whoever has been entrusted in any way with property or any dominion of property dishonestly misappropriates, converts that property for his own use, or dishonestly disposes or uses that property in violation any law prescribing...


Can Section 406 and 420 be charged together?

It is not possible to combine the offences under Sections 406 or 408 with Section 420. ...