The Karnataka High Court final week held {that a} finance firm has no authorized proper to object to the seizure of the gold pledged with it by the police if the gold is alleged to be stolen property.
Justice Suraj Govindaraj within the order dated February 4 mentioned, “A pledgee or financier holding alleged stolen property cannot object to seizure on the idea of contractual safety curiosity, business hardship, or apprehended monetary loss. Stolen property doesn’t purchase immunity from seizure by being routed via business transactions.”
Additional, the court docket declared that an investigating officer isn’t solely empowered however, the place circumstances warrant, duty-bound below Part 106 of the Bharatiya Nagarik Suraksha Sanhita (BNSS), 2023, to seize gold articles alleged or suspected to be stolen. Such seizure is proportionate, mandatory, and topic to ample statutory and judicial safeguards.
Moreover, the court docket famous within the order that manufacturing of property pursuant to statutory discover issued by the police to the finance firm, doesn’t infringe the suitable to commerce, nor violates the suitable to life or private liberty below Article 19 (1) (g) and Article 21. Justice Govindaraj mentioned, “Quite the opposite, refusal to comply would quantity to obstruction of justice, which enjoys no constitutional safety.”
The court docket held thus whereas dismissing a petition filed by IIFL Finance Ltd, searching for to quash the discover issued by the Kengeri police, below Part 94 of the Bharatiya Nagarik Suraksha Sanhita (BNSS), calling upon the corporate to produce varied data and the gold articles pledged by a pair, Ashwini and Ravi Naik, that are alleged to have been stolen from Karur Vysya Financial institution.
Background of the case
A grievance was lodged by Karur Vysya Financial institution, Kengeri department, towards its worker Ashwini, who had been working there since 2022, for offences punishable below Sections 316(2) (Legal Breach of Belief), 316(5) and 318(4) (Dishonest) of the Bharatiya Nyaya Sanhita (BNS).
The financial institution’s grievance acknowledged that in shock reappraisals performed on October 6 and October 7, 2025, critical irregularities had been detected in gold mortgage accounts managed by Ashwini.
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It was allegedly discovered that she had indulged in acts amounting to theft and felony breach of belief, by clandestinely eradicating real gold ornaments pledged by prospects with the financial institution and had changed them with spurious articles. It was additionally alleged that the mentioned gold was then pledged with IIFL Finance Ltd to safe gold loans.
Petitioner’s arguments
Petitioner IIFL Finance Ltd, on receiving the discover by the financial institution, approached the court docket. It was argued that it’s a secured creditor and has superior loans aggregating to Rs 73,01,222 to the accused, towards which gold ornaments had been pledged as safety.
It was mentioned that if the pledged gold articles are seized by the police, the corporate can be divested of its safety and rendered treatment much less, thereby irritating its proper to get well the mortgage quantity from Ashwini and her husband.
The corporate additionally identified that it had accepted the pledged gold in good religion and disbursed the mortgage quantities solely after conducting due scrutiny and verification. Thus the continuance of the discover issued by the police below Part 94 of the BNSS would quantity to a gross abuse of the method of regulation.
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Lastly, the corporate mentioned if the seizure of gold pledged with it was permitted it could violate its basic proper to carry on commerce and enterprise below Article 19(1)(g), the suitable to life and livelihood below Article 21, and the constitutional safety of property below Article 300A of the Structure of India.
Financial institution’s arguments
The counsel for the financial institution, which lodged the grievance, contended that the gold articles pledged represent stolen property, belonging to its prospects, and the financial institution is below a authorized obligation to restore the gold to its prospects.
Additional, the finance firm, having obtained stolen items and superior loans based mostly on such stolen property, isn’t entitled to any safety.
The police additionally supported the complainant financial institution by submitting that the petitioner cannot declare any exemption from the investigative course of. If, upon investigation, the gold articles are discovered to be stolen property, they’re liable to be restored to the rightful proprietor. Since Ashwini and her husband didn’t have a lawful title over the gold, they might not have pledged it with the petitioner firm.
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The police will be unable to set up the factum of theft with out the petitioner producing the gold articles earlier than it, and thus, the investigation can be rendered incomplete.
Lack of gold causes steady struggling
Justice Govindaraj emphasised that within the Indian social context, gold ornaments aren’t mere business commodities however they symbolize matrimonial safety, household heirlooms, emergency financial savings, and belongings pledged in instances of acute monetary misery.
The court docket within the order mentioned, “The continued deprivation of such gold causes actual and persevering with struggling to the true homeowners, each financial and emotional. The felony justice system, whereas safeguarding procedural equity, cannot lose sight of the truth that investigations into such offences are in the end directed in direction of the restoration of property to its rightful homeowners and the vindication of their rights. If the gold articles alleged to be stolen aren’t produced earlier than the investigating officer, the investigation can be rendered sterile.”
Following which, the court docket opined, “The identification of the gold, its correspondence with the stolen articles, and the chain of custody cannot be established via paperwork alone. With out such verification, the struggling of the true homeowners can be extended, and the potential for restitution successfully foreclosed.”
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Pledge created by accused cannot defeat unique proprietor’s rights
The court docket in its order underscored {that a} pledge created by an accused one who had no lawful title to the gold cannot defeat the rights of the unique proprietor, nor can it impede a lawful felony investigation.
Justice Govindaraj mentioned, “The investigative necessity to confirm the identification, origin, and possession of alleged stolen property, and to allow eventual restitution to the true homeowners, prevails over contractual or monetary pursuits of the particular person in possession.”
The court docket famous within the order, “Legal regulation doesn’t recognise contractual standing as a protect towards investigation. The second property in possession is alleged to be stolen, the character of the possession ceases to be purely civil or business and turns into topic to felony scrutiny.”
Safety for restoration of mortgage granted
The court docket refused to settle for the petitioner firm’s competition that the pledged gold constituted safety for the restoration of its mortgage dues. The bench mentioned, “A pledge created by an individual who had no lawful title to the property is void towards the true proprietor. A pledgee cannot purchase a greater proper than that possessed by the pledger.”
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Additional, the court docket recorded “The petitioner’s apprehension that manufacturing of the gold would lead to lack of safety or business prejudice is legally irrelevant on the stage of investigation. Legal process isn’t subordinated to business comfort.”
The bench in its order identified that if the corporate was allowed not produce the gold articles pledged with it, then it could ‘set a harmful precedent’.
Justice Govindaraj mentioned, “If stolen property may very well be immunised from investigation merely by being routed via monetary establishments, such an final result would strike the very root of felony justice administration and cannot be countenanced by this court docket.”
Accordingly, the court docket directed the petitioner to produce the gold articles earlier than the investigating officer and for the investigating officer to study whether or not the gold articles produced are mentioned to have been stolen, in compliance with the necessities of Part 106 of the BNSS for attachment.
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