Muthoot Finance Limited Vs the State of Karnataka

OPP. SARITHA THEATRE COMPLEX BANERJEE ROAD, KOCHI-682 018. HAVING ONE OF ITS BRANCH AT BUILDING NO. 26/1 VSANTAPUR MAIN ROAD NEAR ASTRA HOSPITAL, KS LAYOUT, BENGALURU-560 078. REP. BY ITS AUTHORIZED OFFICER/ CHIEF MANAGER SRI. AJUMON P. GEORGE

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...PETITIONER

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Digitally signed by AL BHAGYA Location: HIGH COURT OF KARNATAKA

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(BY SRI. ANISH JOSE ANTONY, ADVOCATE)

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AND:

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1 . THE STATE OF KARNATAKA BY ITS SECRETARY, HOME DEPARTMENT VIDHANA SOUDHA, BENGALURU- 560 001.

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2 . THE STATION HOUSE OFFICER/ INVESTIGATION OFFICER KUMARSWAMYLAYOUT POLICE STATION KUMARSWAMYLAYOUT BENGALURU, KARNATAKA REPRESENTED BY HCPP

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NC: 2026:KHC:11261 WP No. 5071 of 2025

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HC-KAR

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HIGH COURT OF KARNATAKA BANGALORE-560 001.

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3 . SMT. SUDHA W/O APPAJIGOWDA AGED ABOUT 52 YEARS R/AT NO. 31, 4^TH CROSS OM SAKTHI TEMPLE ROAD YELACHENAHALLI, BNAGALORE-560 078.

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…RESPONDENTS

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(BY SRI. RAHUL RAI, HCGP FOR R1 AND R2; R3 SERVED AND UNREPRESENTED)

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THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA, PRAYING TO CALL FOR THE RECORDS OF THE ANNEXURE-L ORDER PASSED BY THE HONBLE XXX ADDL. CHIEF JUDICIAL MAGISTRATE AT BENGALURU ON 06.02.2025 IN PCR NO. 15367/2024 OF KUMARASWAMY LAYOUT POLICE STATION AND QUASH THE ORDER DATED 06.02.2025 AND REMAND BACK TO THE JURISDICTIONAL COURT FOR FRESH CONSIDERATION OF THE APPLICATION AFTER HEARING THE PETITIONER.

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THIS WRIT PETITION COMING ON FOR FURTHER HEARING, THIS DAY ORDER WAS MADE THEREIN, AS UNDER:

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CORAM: HON’BLE MR. JUSTICE SACHIN SHANKAR MAGADUM

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ORAL ORDER

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The captioned petition is filed challenging the order

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dated 06.02.2025 passed in PCR.No.15367/2024 by the XXX Additional Chief Judicial Magistrate, Bengaluru vide Annexure-L and consequently, remand back to the

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HC-KAR

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jurisdictional court for fresh consideration of the

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application after hearing the petitioner.

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Facts leading to the case are as under:

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The petitioner, a Non-Banking Financial Company has

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approached this Court assailing the action of the Investigating Officer and the consequential order by which interim custody of gold ornaments seized from the petitioner has been handed over to respondent No.2 (complainant) without issuing notice to or hearing the petitioner, who asserts a lawful lien based on pledge.

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The petitioner is engaged in the business of advancing loans to its customers against pledge of gold ornaments. One Sri. Anjumon P.George, working as Chief Manager was authorized on behalf of the petitioner/company. The petitioner advanced loan to Sri. Thimmegowda on 18.08.2022 and 20.10.2022 against pledges of gold ornaments. Subsequently, a complaint came to be registered by one Smt. Sudha on 19.12.2024, culminating in Crime No.1/2025 for the offences

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HC-KAR

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punishable under Sections 3(5), 303(1), 316(2), 318(4), 351(2), 352 of the Bharatiya Nyaya Sanhita. During the course of investigation, the police issued notice to the petitioner on 29.01.2025 and seized 188.7 grams gold ornaments, which were assigned P.F.No.12/2025.

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It is not in dispute that the seized gold was in

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the lawful custody of the petitioner as a pledgee at the time of seizure. However, the Investigating Officer / trial Court has proceeded to grant interim custody of the said gold ornaments to respondent No.2 – the complainant, without affording any opportunity of hearing to the petitioner.

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The short question that arises for consideration is:

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Whether interim custody of seized gold ornaments can be granted to the complainant without notice to and hearing the petitioner-NBFC, which claims a lawful possessory right by way of pledge?

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HC-KAR

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The law governing custody of seized property is

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well settled. Sections 451 and 457 of the Code of Criminal Procedure (and the corresponding scheme under the Bharatiya Nagarik Suraksha Sanhita) mandate that:

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(i) Custody of seized property is a judicial determination, not an administrative act;

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(ii) The Court must consider who is entitled to possession pending trial;

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(iii) All persons claiming an interest in the property must be heard before passing an order of custody.

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7. In Sunderbhai Ambalal Desai v. State of

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Gujarat¹ , the Hon’ble Supreme Court held that the Magistrate must exercise judicious discretion while granting custody of seized property and that such orders cannot be passed mechanically or arbitrarily, particularly where competing claims exist.

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1 (2002) 10 SCC 283

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HC-KAR

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8. In Multani HanifbhaiKalubhai v. State of

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Gujarat² , the Hon'ble Supreme Court categorically ruled

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that:

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“When rival claims are made over seized property, the Magistrate must afford an opportunity of hearing to all claimants before passing orders under Sections 451 or 457 Cr.P.C.”

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The Hon'ble Supreme Court has further clarified in General Insurance Council v. State of A.P.³ , that seizure by police does not extinguish civil or contractual rights, and that custody orders must protect such rights until adjudicated in accordance with law.

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A pledgee, in law, has a special property and possessory right in the pledged goods. This right cannot be defeated or ignored by a unilateral order of interim custody, particularly when the pledgee is not even heard.

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2 (2013) 3 SCC 240

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3 (2007) 12 SCC 354

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HC-KAR

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The criminal court, at the stage of interim

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custody, does not decide title but only determines who should retain possession pending proceedings, and such determination must follow principles of natural justice.

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In the present case, it is an admitted position that:

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(i) The gold ornaments were seized from the petitioner-NBFC, not from the complainant;

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(ii) The petitioner asserts a lawful lien and possessory right arising out of pledge;

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(iii) Interim custody has been handed over to respondent No.2 without notice to or hearing the petitioner.

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Such a course of action is ex facie illegal and contrary to the settled law laid down by the Hon’ble Supreme Court. The Investigating Officer or the Magistrate could not have unilaterally granted interim custody to the complainant ignoring the petitioner’s claim.

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HC-KAR

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The impugned order, therefore, suffers from violation of principles of natural justice, non-application of mind, and jurisdictional error, warranting interference by this Court under Article 226 of the Constitution of India.

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In view of the above, the following order is passed:

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ORDER

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(i) The writ petition is allowed;

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(ii) The impugned order dated 06.02.2025 passed in PCR.No.15367/2024 by the XXX Additional Chief Judicial Magistrate at Bengaluru vide Annexure-L, granting interim custody of the gold ornaments seized in P.F.No.12/2025 to respondent No.2 is hereby set aside;

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(iii) The matter is remitted to the learned jurisdictional Magistrate to reconsider the question of interim custody afresh, after issuing notice to the petitioner and all other interested parties, and to pass appropriate orders in accordance with law under Sections

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