Karnataka High Court asks if police chief can clarify procedure for seizing ‘stolen’ gold from NBFCs

The court issued the order while hearing a petition filed by Muthoot Finance Limited seeking to quash a February 12 notice issued by the Banaswadi police station directing the company to produce gold articles pledged with it in connection with a criminal case.

The bench noted that it was passing the order as court petitions were repeatedly calling into question notices issued by the police under section 94 of the Bharatiya Nagarik Suraksha Sanhita (BNSS). The section empowers courts or police officers to issue summonses to produce documents, electronic communication, or things necessary for investigations or trials.

Advocate Anish Jose Antony, appearing for the company, submitted that police interference in the company’s business to forcibly seize gold articles pledged by its customers was arbitrary and in violation of fundamental rights guaranteed under Articles 19(1)(g) and 21 and 300A of the Constitution of India. Further, the company’s petition seeks a direction for the police to follow procedures under BNSS section 107 if they intend to seize gold articles pledged with the company.

BNSS section 107 states that when a police officer making an investigation has reason to believe that any property is derived or obtained, directly or indirectly, as a result of a criminal activity or from the commission of any offence, he may, with the approval of the superintendent of police or commissioner of police, make an application to the court or the magistrate exercising jurisdiction to take cognisance of the offence or commit for trial or try the case, for the attachment of such property.

‘No legal right to object to seizure’

A coordinate bench recently held that a finance company has no legal right to object to the seizure of the gold pledged with it by the police if the gold is alleged to be stolen property.

In the order dated February 4, Justice Suraj Govindaraj said, “A pledgee or financier holding alleged stolen property cannot object to seizure on the basis of contractual security interest, commercial hardship, or apprehended financial loss. Stolen property does not acquire immunity from seizure by being routed through commercial transactions.”

Further, the court has declared that an investigating officer is not only empowered but, where circumstances warrant, duty-bound under BNSS section 106 to seize gold articles alleged or suspected to be stolen. Such seizure is proportionate, necessary, and subject to adequate statutory and judicial safeguards.

Furthermore, the court noted that the production of property pursuant to a statutory notice issued by the police to a finance company does not infringe on the right to trade or violate the right to life or personal liberty under Article 19 (1) (g) and Article 21.

On Tuesday, the court posted the matter for further hearing on Friday.

The court has also directed the company to file an affidavit with the police furnishing details of gold articles pledged with it. If such an affidavit is filed, the police should not take any precipitative action against the company or its employees, the court added.