Finance firms must produce stolen, pledged gold before police: Karnataka High Court

Bengaluru: The Karnataka High Court has observed that a person or institution has no legal right to refuse or delay production of gold, allegedly stolen and pledged, when lawfully required by the investigating officer under Section 94 of the Bharatiya Nagarik Suraksha Sanhita (BNSS).

“The BNSS does not recognise “financial exposure” or “loan recovery difficulty” as valid grounds to withhold stolen property from investigation,” Justice Suraj Govindaraj said, rejecting the petition filed by IIFL Finance Ltd, an institution involved in gold loans and other financial services.

The petitioner challenged the notice issued by the Kengeri police under BNSS Section 94 in a case for offences under BNS sections 316 (2), 316 (5) and 318 (4).

The complaint was filed by Karur Vysya Bank alleging breach of trust, cheating, and misappropriation.

The complainant stated that one of its employees, an assistant manager as well as jewellery loan officer, had replaced gold articles worth Rs 4.54 crore pledged by customers with spurious articles and pledged the same with IIFL Finance Ltd to raise loans.

The petitioner company claimed to have produced a statement to the police indicating the amounts disbursed as loans. However, the statement did not contain particulars such as the dates of the pledge, quantity and description of gold pledged, verification made at the time of each pledge, and identifying features of the gold articles. The petitioner said production of the gold would result in loss of its security interest.

After perusing the provisions, Justice Govindaraj noted that Section 94 contemplates a limited but essential investigative power, that is, requisition for production. Any subsequent step, such as seizure under Section 107, would necessarily have to be taken strictly in accordance with law and subject to judicial oversight, the court said.

"More importantly, the petitioner’s asserted security interest, even if assumed to exist contractually, cannot override the superior claim of the true owner of the stolen property. A pledge created by an accused person who had no lawful title to the gold cannot defeat the rights of the original owner, nor can it impede a lawful criminal investigation,” Justice Govindaraj said.

The court said that an investigating officer is statutorily empowered to issue a notice requiring production of such gold and connected records from the person in whose possession the same is believed to be.

“...investigation into such offences is ultimately directed towards restoration of property to its rightful owners and vindication of their rights. If the gold articles alleged to be stolen are not produced before the investigating officer, the investigation would be rendered sterile,” the court said.