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2025 DIGILAW 855 (KAR)

Muthoot Money Limited v. State of Karnataka

2025-07-08

M.NAGAPRASANNA

body2025
ORDER : 1. The petitioner/Muthoot Money Limited, a company registered under the provisions of the Companies Act, 1956 - a non-banking financial company (hereinafter referred to as ‘the Company’ for short) is at the doors of this Court seeking a declaration that interference by the respondents/Police in the business of the petitioner and forcibly seizing gold articles pledged by its customers is arbitrary. A consequential relief is sought that the gold articles seized in Crime No.108 of 2024 be returned to the petitioner. 2. Heard Sri Anish Jose Antony, learned counsel appearing for the petitioner and Sri B.N.Jagadeesha, learned Additional State Public Prosecutor for the respondents. 3. Facts, in brief, germane are as follows: - The business of the petitioner in terms of the averment in the petition is advancement of loan/money to its customers by accepting gold ornaments and getting them pledged in exchange of certain money and it is a non-banking financial company. The issue in the lis revolves around a crime being registered on 06.06.2024 by the 2 nd respondent/Station House Officer of Vidyagiri Police Station alleging offence punishable under Section 394 of the IPC. On registration of crime, it is the averment that the 2 nd respondent comes to the branch of the petitioner on 07.01.2025 and attempts to seize gold articles pledged by the borrowers, holding a threat to arrest employees of the petitioner. All this is done through a notice issued under Section 91 of the Cr.P.C. Issuance of notice and wanting to seize gold articles that are pledged in exchange of money, is what has driven the petitioner to this Court in the subject petition. 4. The learned counsel appearing for the petitioner would contend that the petitioner has got the gold pledged in exchange of money to the customers. It cannot be said to be accepting stolen gold as in a day several transactions happen and customers would come and pledge gold ornaments in exchange of money. Every pledge of gold cannot be said to be stolen article. He would contend that certain guidelines are necessary for the Police action as also the customers who would pledge the gold in registering the complaint. With reference to the case at hand, the gold weighing 100 grams worth ?3,50,000/- of different varieties were pledged. The crime then comes to be registered that four unknown persons have pledged the stolen gold ornaments with the Company. With reference to the case at hand, the gold weighing 100 grams worth ?3,50,000/- of different varieties were pledged. The crime then comes to be registered that four unknown persons have pledged the stolen gold ornaments with the Company. The learned counsel would submit that the issue is covered by plethora of judgments rendered by coordinate benches of this Court. 5. Per contra, the learned Additional State Public Prosecutor would refute the submissions in contending that earlier judgments rendered by Courts would not become applicable to the case at hand. The petitioner has in fact accepted the stolen gold and, therefore, it is bound to return to the persons who own the said gold. He would submit that under Section 17 of the Karnataka Pawnbrokers Act , 1961 the action of the petitioner becomes punishable. He would seek dismissal of the petition contending that the petitioner has to approach the concerned Court under Sections 451 and 457 of the Cr.P.C. for release of gold. The earlier judgments which were following the judgment of the Apex Court in the case of Sunderbhai Ambalal Desai v. State of Gujarat, (2002) 10 SCC 283 , would not become applicable to the facts obtaining in the case at hand. He would contend that the petitioner be left with the remedy of approaching the concerned Court by filing an application under Sections 451 and 457 of the Cr.P.C. 6. I have given my anxious consideration to the submissions made by the respective learned counsel and have perused the material on record. 7. The afore-narrated facts are not in dispute. Before embarking upon consideration of the case of the petitioner on its merits, I deem it appropriate to notice the law laid down in identical circumstances by co-ordinate benches of this Court and other constitutional Courts. A co-ordinate bench of this Court in Writ Petition No.13691 of 2024, disposed on 04.06.2024, has passed the following order: “1. In this petition, the petitioner seeks the following reliefs: “a. Declare that the seizure made as per the Annexure-D seizure is arbitrary and is in violation of fundamental rights guaranteed under Article 14 and 19(1)(g) of the Constitution of India and quash the Annexure-D seizure Mahazar (Amanathu Panchanama) dated 19.04.2024 prepared by the 2 nd Respondent. In this petition, the petitioner seeks the following reliefs: “a. Declare that the seizure made as per the Annexure-D seizure is arbitrary and is in violation of fundamental rights guaranteed under Article 14 and 19(1)(g) of the Constitution of India and quash the Annexure-D seizure Mahazar (Amanathu Panchanama) dated 19.04.2024 prepared by the 2 nd Respondent. b. To quash the notice dated 19.04.2024 addressed to, the Petitioner herein, by the Respondent No.2, furnished as Annexure-C and all subsequent actions thereafter. c. Direct the restoration of seized articles to the petitioner in similar terms as in Annexure-E order passed by this Hon’ble Court in W.P.13958/2023 date 10.07.2023 and Annexure-F order passed by this Hon’ble Court in WP No.1015/2024 dated 12.01.2024 in the interest of justice and equity. d. And grant such other relief or directions as this Hon’ble Court deems fit the facts and circumstances of the case.” 2. Heard learned counsel for the petitioner and learned AGA for the respondents and perused the material on record. 3. In addition to reiterating the various contentions urged in the memorandum of petition and referring to the material on record, learned counsel for the petitioner submits that the issue in controversy involved in the present petition is directly and squarely covered by the judgment of a Co- ordinate Bench of this Court at Annexures-E and F and the present petition may be disposed of in the above terms. 4. As rightly contended by the learned counsel for the petitioner, the issue in controversy in the present petition is covered by the judgment of this Court in the case of M/s. Muthoot Finance Ltd. Kanakapura Branch Vs. State of Karnataka and another, W.P. No. 13958/2023 dated 10.07.2023 (Annexure-E) wherein it is held as under: “4. Having heard the learned counsel for the parties and having perused the petition papers, this Court is inclined to grant conditional indulgence in the matter to the effect that seized articles be restored to the petitioner after taking videograph and photographs of the same provided that petitioner furnishes an undertaking to produce the same if and when needed by the police or court in the enquiry, investigation or in the trial of the proceedings. The said articles shall not be converted, pledged or sold or otherwise disposed off till after and subject to outcome of the criminal case concerned. This would do justice to both the sides. The said articles shall not be converted, pledged or sold or otherwise disposed off till after and subject to outcome of the criminal case concerned. This would do justice to both the sides. With the above observations, this writ petition is disposed off directing the police to restore the seized articles to the petitioner forthwith; if other articles are needed, then also the same procedure shall be followed. If the articles are already produced before the jurisdictional Court, the learned Magistrate is requested to release the same in favour of the petitioner subject to the terms hereinabove mentioned and such other usual terms. Costs made easy.” 5. The aforesaid judgment is followed by this Court in the case of M/s. Muthoot Finance Ltd. V.V. Puram Branch Vs. State of Karnataka and another, W.P. No. 1015/2024 dated 12.01.2024 (Annexure-F), wherein this Court has held as under: “4. In the light of the issue standing covered by judgment rendered by the Co-ordinate Bench supra, the petition stands disposed of on the same terms.” 6. In view of the above, the writ petition is disposed of in terms of the orders passed in the cases of M/s. Muthoot Finance Ltd. Kanakapura Branch Vs. State of Karnataka and another, W.P. No. 13958/2023 dated 10.07.2023 (Annexure-E) and M/s. Muthoot Finance Ltd. V.V. Puram Branch Vs. State of Karnataka and another, W.P. No. 1015/2024 dated 12.01.2024 Further, the respondents are directed to return the seized gold articles back to the petitioner within one month from the date of receipt of a copy of this order in terms of Annexure-D. Subject to the aforesaid observations and directions, the Writ Petition stands disposed of.” This was following the judgment of the Apex Court in the case of SUNDERBHAI AMBALAL DESAI . A learned single Judge in a subsequent order passed in CRIMINAL REVISION PETITION NO. 210 OF 2024 , disposed on 04.10.2024 , while dealing with an identical circumstance has laid down certain guidelines. I deem it appropriate to notice the same. They read as follows: “…. … … 47. As such, the following directions are issued which would cover in general the disposal of the properties as is contemplated under Section 451 and 457 of Cr.P.C. and presently under the provisions of Section 497 of 30 Bharatiya Nagarik Suraksha Sanhita, 2023 (‘BNSS’ for short). They read as follows: “…. … … 47. As such, the following directions are issued which would cover in general the disposal of the properties as is contemplated under Section 451 and 457 of Cr.P.C. and presently under the provisions of Section 497 of 30 Bharatiya Nagarik Suraksha Sanhita, 2023 (‘BNSS’ for short). Directions/Guidelines (1) Description of the seized property shall be incorporated in the seizure mahazar so as to distinctly identify the seized property at all stages in the criminal trial. (2) Mahazar shall include, serial numbers, make of the seized property, manufacturers name, if any, distinctive marks, if any, hall mark, if any, on the gold and silver articles with distinct numbers. (3) Mahazar shall include, approximate value of the seized property (estimation of valuation to be obtained from the registered valuers wherever necessary). It shall accompany the P.F. Memo when it is placed before the learned Trial Magistrate. (4) Trial Magistrate shall verify the contents of mahazar with aforesaid details and personally examine the seized properties and satisfy that the seized properties are tallying with the description made in the mahazar and P.F. Memo. (5) Unless a specific grounds/reasons are made out by the Investigating Agency, seized property shall not be allowed to be retained by the Investigating Agency. (6) Even if the request for retention is allowed, the learned Trial Magistrate instead of passing a mechanical order by initialing on the readymade seal with words ‘permitted to retain’ pass a suitable speaking order in the order sheet of the case, directing the Investigating Agency that they would be retaining the property as a ‘Bailee’ and ensure that proper care is taken to preserve the seized property. (7) Learned Trial Magistrate shall ensure that proper infrastructure is available with the police for preservation of the seized material objects and must report to the Court as to its status when the charge sheet is filed. (8) If the seized property is sent to the Forensic Science Laboratory, Investigating Agency shall ensure that the property is sent in a proper sealed condition and seals are intact, at all levels. (9) Whenever the property is ordered to be retained by the Investigating Agency, and if an application seeking release is rejected, after the investigation, and if the need of retaining property is not imperative, the Court may pass suitable orders with regard to the interim disposal of the property. (9) Whenever the property is ordered to be retained by the Investigating Agency, and if an application seeking release is rejected, after the investigation, and if the need of retaining property is not imperative, the Court may pass suitable orders with regard to the interim disposal of the property. (10) Learned Trial Magistrates/leaned Sessions Judges are hereby directed to ensure the disposal of the property in respect of Narcotic drugs and psychotropic substances as per the directions of the Hon’ble Supreme Court in the case of Union of India vs. Mohanlal and another, (2016) 3 SCC 379 . In case of seizure of the vehicles, the standard operating procedure and the amendment to the Rule 232G of Karnataka Motor Vehicles (Amendment) Rules, 2018 shall be borne in mind by the learned Trial Magistrate while disposing the application filed under Section 451 and 457 Cr.P.C., or under Section 497 of BNSS. (12) In respect of the electronic and digital material objects, the learned Trial Magistrate shall ensure that the same to be retained by the police under retention order to ensure that the same are not exposed to the atmospheric moisture, resulting in damage to the seized electronic equipment or data stored therein. (13) Necessary directions in this regard shall be made in the order while P.F. Memo is filed into the Court seeking retention of the seized electronic items, Compact Disc, Pendrives and such other storage media when produced and ordered to be retained shall be properly preserved by taking necessary precautions so as to avoid the damage to the data stored therein which may have a direct bearing on the merits of the trial. (14) Precious items like Gold, Silver shall not be ordinarily to be retained with the Investigating Agency unless the same is required for investigation purpose like identity, finger print examination etc., and wherever it is necessary, photographs/videographs of the seized material objects can ordered to be returned to the applicant after deciding the rival claim, if any. (15) In respect of the explosives, inflammable substances, like adulterated petroleum products, gas cylinders etc, the learned Trial Magistrate shall ensure the safety of the seized material objects, not only the safety of seized material objects and possible accident in the place where it is stored and pass suitable orders. (15) In respect of the explosives, inflammable substances, like adulterated petroleum products, gas cylinders etc, the learned Trial Magistrate shall ensure the safety of the seized material objects, not only the safety of seized material objects and possible accident in the place where it is stored and pass suitable orders. (16) In respect of perishable items, the learned Trial Magistrate without loss of time, shall consider the application and pass suitable orders like auctioning the perishable items and directing the auction money to be kept in ‘escrow account’ subject to the final result of the criminal proceedings. (17) In respect of the seized material objects under the special enactments like Essential Commodities Act etc., learned Trial Magistrate, shall strictly adhere to the rules and regulations under the special enactment and pass appropriate orders as early as possible. (18) In respect of seized cash, photograph/videograph of the currency notes to be taken and serial numbers of the seized currency notes shall be written in a mahazar. Immediate steps are to be taken to deposit the currency notes to Reserve Bank of India and value of the currency notes thereof shall be ordered to be returned to the successful party at the end of the trial.” (Emphasis supplied) At guideline No.14 supra, the coordinate bench holds that precious items like gold and silver shall not be ordinarily retained with the Investigating Agency unless the same is required for investigation purpose like identity, finger print examination etc., and whenever it is necessary photographs/videographs of the seized material objects can be ordered to be returned to the applicant after deciding the rival claim, if any. 8. The High Court of Madras in Muthoot Fincorp Limited v. Inspector of Police , 2020 SCC OnLine Mad 4664 has held as follows: “…. …. …. 13. It is seen that the accused was arrested by the 1 st respondent Police, the accused gave confession. In his confession, he disclosed about the pledging of jewels with the petitioners, which were stolen by him from the house of the 2 nd respondent. The accused gave the bill particulars of the jewels, which were pledged with the petitioners and the bill particulars. Thereafter, the 1 st respondent Police issued summons on 11.08.2015 as per law. The petitioners are duty bound to produce the book of account, records, files and documents, which are necessary for investigation. The accused gave the bill particulars of the jewels, which were pledged with the petitioners and the bill particulars. Thereafter, the 1 st respondent Police issued summons on 11.08.2015 as per law. The petitioners are duty bound to produce the book of account, records, files and documents, which are necessary for investigation. Once it is proved that the jewels are stolen, the same are to be delivered to the police, if it is required. 14. In view of the same, the petitioners cannot raise any objection for issuance of summons and production of books and jewels. If the petitioners are aggrieved and feel that they have right over the properties, they can approach the concerned Court, to safeguard and secure their rights by filing appropriate petition. If the petitioners or any other person filed a petition seeking interim custody of the jewels, the concerned Court to issue notice to them and after enquiry to pass appropriate orders. 15. With the above observation, this Criminal Original Petition is disposed of. In view of the long pendency of FIR, the 1 st respondent Police is to file a charge sheet within two months from the date of receipt of a copy of this order, before the concerned Court. The concerned Court is to conclude the trial within a period of three months from the date of filing of charge sheet. Consequently, the connected Criminal Miscellaneous Petition is closed.” (Emphasis supplied) 9. Another coordinate bench in the case of Muthoot Finance Limied v. State of Karnataka , 2024 SCC OnLine Kar 2531 , has held as follows: “…. …. …. 7. During investigation, the Investigating Officer would be required to ascertain various aspects including the ownership of the said gold and it is for the Court seized of the matter to decide as to in whose favour the gold has to be returned, if an application under Section 454 of the earlier Code of Criminal Procedure and now Section 500 of the BNSS were to be filed. Of course, at that time the petitioner can always place its rights and claims before the said Court for being decided. The true owner of the gold cannot be deprived of the use of the gold, merely because the same is pledged with a gold finance company after being stolen from such true owner. Of course, at that time the petitioner can always place its rights and claims before the said Court for being decided. The true owner of the gold cannot be deprived of the use of the gold, merely because the same is pledged with a gold finance company after being stolen from such true owner. The Gold Finance Company is vested with a duty to carry out proper due diligence before accepting the gold as a pledge for a loan disbursed. 8. There are innumerable matters coming up before this court where stolen gold is pledged with a gold finance company. I'am of the considered opinion that this aspect would have to be examined by the concerned authorities and proper guidelines have to be formulated in relation to such pledging of gold, ascertainment of ownership, identity of the person pledging the gold, implication of pledging stolen gold, manner of dealing with such gold when criminal proceedings are taken up etc.,. Therefore, I request the Law Commission, Karnataka to look into this matter and formulate necessary guidelines/rules or the like as deemed fit. 9. In that view of the matter, directing the petitioner to co-operate with the Investigating Officer and make available all the details relating to the pledge as also permit the inspection of the gold, which if required the Investigation Officer can take receipt of and deposit with the Court seized of the matter, on coming to the conclusion that the said gold is stolen, it is made clear that the police officer cannot retain the gold in his possession, but would have to deposit the same with the court seized of the matter. The court seized of the matter while considering any application for release of the gold or at the time when the court were to pass an order of release for any reason whatsoever, would have to issue notice to the Petitioner and afford an opportunity of hearing to the petitioner before ordering the release. With the above observations, the writ petition stands disposed of.” (Emphasis supplied) The coordinate bench holds that the true owner of the gold cannot be deprived of the use of gold, merely because it is pledged with the finance company. With the above observations, the writ petition stands disposed of.” (Emphasis supplied) The coordinate bench holds that the true owner of the gold cannot be deprived of the use of gold, merely because it is pledged with the finance company. The petitioner can approach the concerned trial Court seized of the matter and file an application under Sections 451 and 457 of the Cr.P.C. and place its rights and claims before the said Court. 10. The learned counsel for the petitioner submits that this Court must permit gold to be in the hands of the pledgee i.e., Muthoot Finance as is ordered in every case. The said submission is not acceptable. The coordinate benches of this Court have laid down guidelines as quoted supra and have directed that the finance company should approach the concerned Court under Sections 451 and 457 of the Cr.P.C. by filing application. A division bench of the High Court of Bombay again in the case of Manappuram Finance Limited v. State Public Prosecution, Criminal Writ Petition No. 745 of 2022 decided on 28.03.2023 has held as follows: “…. ….. …. 2. The petitioner claims that some gold, which is the subject matter of criminal breach of trust has been pledged with the petitioner. Based in this the petitioner seeks a writ of mandamus commanding respondent No.2 i.e., the Police Inspector, Ponda Police Station not to take possession of the gold ornaments which the petitioner claims are legally pledged with the petitioner. This petition has been instituted in respect to an order dated 3-12-2022 issued by the IO to the petitioner requiring the petitioner to produce the gold ornaments and all the documents in terms of Section 91 and 102 of the Criminal Procedure Code (Cr.P.C.). The notice refers to the FIR dated 2-12-2022 alleging an offence under Section 406 of the IPC. 3. In our opinion, this petition is misconceived. The issues as to whether the gold ornaments which are the subject matter of the criminal breach of trust are indeed pledged with the petitioner or not, terms of such pledge, etc. cannot be gone into by us in the exercise of our extraordinary jurisdiction. This would involve disputed questions which cannot be adequately resolved in the absence of such alleged pledgors who have not even been impleaded as parties to this petition. cannot be gone into by us in the exercise of our extraordinary jurisdiction. This would involve disputed questions which cannot be adequately resolved in the absence of such alleged pledgors who have not even been impleaded as parties to this petition. In any case, we are satisfied that the petitioner has alternate and efficacious remedies available to it under the provisions of the CrPC where, all such issues can be considered threadbare. For instance, under Section 451 of the CrPC the Criminal Court during an inquiry or trial can make necessary orders for proper custody of the property produced before. Similarly, the provisions of Section 457 deal with the procedure of the Police upon seizure of property. 4. Mr. Gaonkar also places on record a decision of the Hon’ble Supreme Court in Sunderbhai Ambalal Desai v. State of Gujarat, (2002) 10 SCC 283 which is concerned with the disposal of muddemal articles, kept in policy custody, pending trial. In this decision the Hon’ble Supreme Court has held that the object and scheme of the various provisions of the Code appear to be that where the property which has been the subject matter of an offence is seized by the police it ought not to be retained in the custody of the court or of the police for any time longer than what is absolutely necessary. The procedure for disposal of valuable articles is also laid down. 5. Sunderbhai Ambalal Desai (supra) was delivered in the context of provisions of Sections 451 and 457 of the Criminal Procedure Code . Therefore, it is for the petitioner to invoke the said provisions before the appropriate J.M.F.C. in case such occasion arises. Invoking our extraordinary jurisdiction or seeking a writ of mandamus that would have tendency to interfere with the investigation, will not be appropriate remedy. 6. For all the above reasons, we decline to entertain this petition. However, we clarify that it will be open to the petitioner to take out such proceedings as are available under the law for securing its interest. 6. For all the above reasons, we decline to entertain this petition. However, we clarify that it will be open to the petitioner to take out such proceedings as are available under the law for securing its interest. Nothing in this order is intended to prejudice the rights, if any of the petitioner or other parties, in this regard.” (Emphasis supplied) The division bench holds that the judgment in the case of SUNDERBHAI AMBALAL DESAI was delivered by the Apex Court in the context of provisions of Sections 451 and 457 of the Cr.P.C. Therefore, it was for the petitioner to invoke the said provisions before the JMFC Court. 11. In the light of the law laid down by the coordinate benches and the division bench of other High Court, the unmistakable inference is non-entertainment of petition qua the prayer that is sought. It is for the petitioner at every instance to knock at the doors of the concerned Court by filing applications for release of gold. In the event of such an application is filed, the concerned Court in consonance with the principles of natural justice, shall pass necessary orders in accordance with law. Except the aforesaid observation, no other prayer of the petitioner would merit consideration. 12. With the aforesaid observation, the petition stands disposed of. Ordered accordingly.