Court affirms investigative necessity over pledgee’s commercial interests in landmark ruling on stolen property.
In a significant judgment dated February 4, 2026, the Karnataka High Court, presided over by Justice Suraj Govindaraj, dismissed the writ petition filed by IIFL Finance Ltd. challenging the police summons under Section 94 of the Bharatiya Nagarik Suraksha Sanhita, 2023. The summons required the production of gold articles allegedly stolen and pledged with the petitioner by the accused, Smt. Ashwini, an employee of Karur Vysya Bank.
The court held that the summons under Section 94 merely facilitates investigation and does not equate to seizure, attachment, or adjudication of proprietary rights. The investigative necessity to verify the identity, origin, and ownership of the alleged stolen property prevails over the contractual or financial interests of the pledgee or financier.
The case emerged from a complaint alleging serious irregularities in gold loan accounts handled by Smt. Ashwini at Karur Vysya Bank. It was found that genuine gold ornaments pledged by customers were replaced with spurious articles, leading to loans worth Rs. 1.73 crores being disbursed based on approximately 3.398 kilograms of fake gold. Furthermore, 17 jewel loan packets, containing approximately 1.557 kilograms of gold, were reported missing, linked to loans totaling Rs. 89.01 lakhs.
IIFL Finance Ltd., a leading financial services institution, contested the police summons, arguing that the pledged gold articles serve as security for outstanding loans aggregating Rs. 73,01,222/-. They asserted that the seizure of these articles would leave them without security to recover the loan amounts. The petitioner's counsel emphasized their role as a bona fide lender and the potential violation of constitutional rights under Articles 19(1)(g), 21, and 300A.
The Karnataka High Court, however, underscored that the true victims are the customers of Karur Vysya Bank, whose gold ornaments represent matrimonial security, family heirlooms, or emergency savings. Justice Govindaraj highlighted that in the Indian context, gold is not merely a commercial commodity but often holds significant sentimental and financial value.
The court affirmed that the petitioner's security interest, even if assumed to exist contractually, cannot override the superior claim of the true owner of stolen property. The pledge created by an accused person who had no lawful title to the gold cannot defeat the rights of the original owner nor impede a lawful criminal investigation.
The judgment also clarified the distinction between seizure under Section 106 and attachment under Section 107 of the BNSS. Seizure is investigative and preservatory, while attachment is consequential and adjudicatory. The court emphasized that the power of seizure under Section 106 is integral to effective investigation, preservation of evidence, and restitution to true owners.
This ruling serves as a pivotal affirmation of investigative authority in cases involving stolen property, reinforcing the importance of criminal justice processes over commercial interests.
Bottom Line:
Summons under Section 94 of the Bharatiya Nagarik Suraksha Sanhita, 2023 (BNSS) requiring production of alleged stolen property is lawful and indispensable for effective investigation. The rights of true owners of stolen property prevail over the interests of pledgee or financier institutions.
Statutory provision(s): Bharatiya Nagarik Suraksha Sanhita, 2023 Sections 94, 106, 107
IIFL Finance Ltd. v. State Of Karnataka, (Karnataka) : Law Finder Doc id # 2852107
