Karnataka High Court
Manappuram Finance Ltd vs State Of Karnataka on 20 February, 2026
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NC: 2026:KHC:11263
WP No. 2574 of 2025
HC-KAR
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 20TH DAY OF FEBRUARY, 2026
BEFORE
THE HON'BLE MR. JUSTICE SACHIN SHANKAR MAGADUM
WRIT PETITION NO. 2574 OF 2025 (GM-RES)
BETWEEN:
1. MANAPPURAM FINANCE LTD
A COMPANY INCORPORATED UNDER
THE COMPANIES ACT 1956
HAVING ITS REGISTERED OFFICE AT
MANAPURAM HOUSE
A O VALAPAD, TRISSUR DISTRICT
KERALA - 680 567
HAVING ITS BRANCH OFFICE AT
DR RAJKUMAR ROAD
2ND BLOCK RAJAJINAGAR - 560010
DULY REPRESENTED BY
ITS AUTHORIZED REPRESENTATIVE/MANAGER
MR. SELVAM .C
...PETITIONER
Digitally signed (BY SRI. ANISH JOSE ANTONY, ADVOCATE)
by CHAITHRA A
Location: HIGH
COURT OF
KARNATAKA
AND:
1. STATE OF KARNATAKA
BY STATION HOUSE OFFICER
CHENNAMMANAKERE ACHU KATTU P S
REPRESENTED BY SPP
HIGH COURT OF KARNATAKA
BENGALURU - 560 001.
2. MR. MANJULA
W/O LATE VASU
AGED ABOUT 55 YEARS
NO. 31, 2ND MAIN, KATRIGUPPE EAST
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NC: 2026:KHC:11263
WP No. 2574 of 2025
HC-KAR
BSK 3RD STAGE
BENGALURU - 560085.
...RESPONDENTS
(BY SRI. RAHUL RAI, HCGP FOR R1;
R-2 SERVED AND UNREPRESENTED)
THIS WRIT PETITION IS FILED UNDER ARTICLES 226
AND 227 OF THE CONSTITUTION OF INDIA, PRAYING TO SET
ASIDE THE ORDER DATED 19/09/2020 PASSED BY THE 2ND
ADDL. CHIEF METRPOLITAN MAGISTRATE, BANGALORE IN CC
NO. 27983/2019 TO AN EXTENT OF MAKING THE INTERIM
CUSTODY OF ARTICLES SEIZED IN PF NO. 25/2019 DATED
08/03/2019 GRANTED TO THE 2ND RESPONDENT MAKING
ABSOLUTE AND FOR FURTHER DIRECT 2ND ADDL. CHIEF
METROPOLITAN MAGISTRATE, BANGALORE TO PASS ORDERS
UNDER SECTION 452 OF CRPC IN CC NO. 27983/2019 WITH
REGARD TO THE ARTICLES SEIZED IN PF NO. 25/2019 DE
NOVO AFTER HEARING THE PETITIONERS WITHIN A PERIOD
OF ONE MONTH AND GRANT SUCH OTHER AND FURTHER
RELIEFS.
THIS WRIT PETITION COMING ON FOR FURTHER
HEARING, THIS DAY ORDER WAS MADE THEREIN, AS UNDER:
CORAM: HON'BLE MR. JUSTICE SACHIN SHANKAR MAGADUM
ORAL ORDER
The captioned petition challenges the order dated 19.09.2020 passed in C.C.No.27983/2019, whereby the learned Magistrate, after recording the settlement in the Lok-Adalat, made the interim custody of certain gold -3- NC: 2026:KHC:11263 WP No. 2574 of 2025 HC-KAR articles (seized in P.F.No.25/2019) absolute in favour of respondent No.2.
2. The petitioner, a Non-Banking Financial Company (NBFC) which advanced loans against pledged gold seeks that the said portion of the order (making interim custody absolute) be set aside and that the matter be remitted to the learned Magistrate to hold an enquiry under Section 452 of Criminal Procedure Code, 1973 ('Cr.P.C.' for short) and to pass appropriate orders after giving notice to all persons claiming interest.
3. The petitioner is an established NBFC with nationwide presence. The petitioner advanced loan to Sri. Dage Chetan on 01.02.2019 against pledges of gold ornaments. A complaint came to be registered in Crime No.57/2019 alleging offences under Sections 420 r/w 34 of IPC. The Investigating Officer issued notice under Section 91 Cr.P.C. and seized the gold articles (recorded as P.F.No.25/2019). Interim custody of the seized articles -4- NC: 2026:KHC:11263 WP No. 2574 of 2025 HC-KAR was given during investigation and, following settlement before the Lok-Adalat, the trial Court made the interim custody absolute in favour of respondent No.2, without hearing the petitioner. The petitioner contends it is a bona fide pledgee and has a civil right/claim to possession which was not adjudicated.
4. The petitioner's counsel reiterating the grounds has placed reliance on the following judgments:
1) Nevada Properties (P) Ltd. vs. State of Maharashtra, (2019) 20 SCC 119;
2) N.Madhavan vs. State of Kerala - (1979) 4 SCC 1;
3) Hiralal Babulal Soni vs. State of Maharashtra - 2025 SCC Online SC 437;
4) Yes Bank vs. State of UP and Others - Criminal Appeal No.207/2023;
5) Muthoot Fincorp Ltd. vs. The SHO and Others -
Criminal Appeal No.1026/2024;
6) Shimoga District Central Co-operative Bank Limited, Shimoga vs. Karnataka Food and Civil Supplies Corporation, Bangalore - 2003 SCC Online Kar 831; -5-
NC: 2026:KHC:11263 WP No. 2574 of 2025 HC-KAR
7) Kasturi Lal Ralia Ram Jain vs. State of UP - 1964 SCC Online SC 38;
8) Union Territory of Ladakh vs. Jammu & Kashmir National Conference - 2023 SCC Online SC 1140;
9) Shabna Abdulla vs. Union of India - 2024 SCC Online SC 2057;
10) Union of India vs. Dayanand - (2008) 10 SCC 1.
5. Learned counsel appearing for the respondent/State has also countered by producing the following judgments:
1) Muthoot Fincorp Limited Rep. by its Branch Manager, Udumalpet vs. Inspector of Police and Another - 2020 SCC Online Mad 4664;
2) Muthoot Fincorp Ltd. vs. Station House Officer - 2022 SCC Online Ker 1539;
3) Manappuram General Finance & Leasing Limited vs. State of Telangana - 2024 SCC Online TS 1423;
4) Muthoot Finance Ltd., vs. State of Karnataka - 2024 SCC Online Kar 2531.-6-
NC: 2026:KHC:11263 WP No. 2574 of 2025 HC-KAR
6. Heard the learned counsel appearing for the petitioner and learned counsel appearing for the respondents. The following point would arise for consideration:
"Whether the learned Magistrate was justified in making the interim custody of the seized gold articles absolute in favour of respondent No.2, without notice to the petitioner and without holding an enquiry under Section 452 Cr.P.C. and whether the settlement before the Lok Adalat could supplant the statutory process for disposal of seized property where third-party rights are claimed?"
Finding on the Point for consideration:
7. In the present case on hand, petitioner/company asserts that it has advanced loan to Sri. Dage Chetan on 01.02.2019 by accepting gold through pledging by following the due process of law. The petitioner's primary grievance is that pursuant to complaint lodged which culminated in registration of crime -7- NC: 2026:KHC:11263 WP No. 2574 of 2025 HC-KAR at the instance of respondent No.2 in Crime No.57/2019, the Investigating Officer based on statement given by the accused seized the gold articles from the petitioner/company in Crime No.57/2019 and the seized property was assigned with Property Finding No.25/2019. Petitioner/company therefore contends that gold mentioned in the seized mahazar, since it was seized from petitioner's branch, the interim custody given to the complainant of the seized gold and consequent order by the local authority making it absolute according to the finance company is arbitrary and prejudicial to petitioner's claim over the seized golden articles.
8. Sections 451-452 (and 457) Cr.P.C. lay down the power of criminal courts in respect of custody and disposal of property produced or seized in connection with an inquiry or trial. Section 451 deals with custody pending trial; Section 452 authorizes the Court, at the conclusion of the inquiry/trial, to pass orders for disposal of the property (by destruction, confiscation, or delivery to any -8- NC: 2026:KHC:11263 WP No. 2574 of 2025 HC-KAR person who claims to be entitled); Section 457 empowers a Magistrate to deal with property seized by a police officer which is not produced before the Court. The scheme presumes that disposal at the conclusion of the trial is a judicial act requiring consideration of claims and, where necessary, enquiry and opportunity to be heard.
9. Custody/disposal cannot be mechanically determined by settlement without considering third-party rights. It is now well settled that, custody or final disposal of seized property is not a mere corollary of the settlement on criminal liability; the criminal Court must consider and determine, in accordance with law, which person is entitled to possession and this normally requires an enquiry under Section 452/457 Cr.P.C. where third-party claims are made. In Bharat Sanchar Nigam Limited vs. Suryanarayanan & Another1, the Hon'ble Supreme Court set aside an order which had granted interim custody and remanded the matter to the trial Court to 1 Criminal Appeal No.170 of 2009 -9- NC: 2026:KHC:11263 WP No. 2574 of 2025 HC-KAR pass orders in terms of Section 452 Cr.P.C. because no proper disposal order in terms of Section 452 Cr.P.C. was passed. The Hon'ble Apex Court emphasized that Section 452 Cr.P.C. mandates final disposal by the Court and interim custody cannot be treated as a substitute for that statutory process.
10. The Hon'ble Apex Court has held that property should not be detained longer than necessary. The Hon'ble Apex Court has repeatedly emphasised that seizure and custody by police/court is to be regulated so as not to injure legitimate third-party rights and that property should not be retained longer than necessary; disposal must be done expeditiously while safeguarding rights of claimants.
11. Lok-Adalat's play a very limited role, it cannot determine ownership/merits when third parties are excluded. Lok-Adalats are statutorily constituted fora for facilitating settlements; they have no adjudicatory
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NC: 2026:KHC:11263 WP No. 2574 of 2025 HC-KAR jurisdiction to decide questions of title/ownership or to decide the merits where such questions are unresolved or third-party rights are involved. The Hon'ble Apex Court has emphasised that where a genuine compromise is not possible or where a determination on merits is required, the Lok-Adalat cannot assume the role of a court to adjudicate such disputes and such matters should be returned to the referring court for adjudication. Thus a settlement before Lok-Adalat (or its recording) does not absolve the trial Court from the statutory obligation to determine, after notice and enquiry, the person entitled to the seized property. In the present case;
(a) There is an admitted seizure made in course of investigation and the petitioner asserts a specific civil right as pledgee in respect of the gold articles.
(b) The Lok-Adalat settlement resulted in acquittal of the accused, but there is no contemporaneous adjudication in the trial Court under Section 452 Cr.P.C. regarding who is entitled
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NC: 2026:KHC:11263 WP No. 2574 of 2025 HC-KAR to possession of the seized articles. The lok-Adalat proceeded to make interim custody absolute in favour of respondent No.2 without hearing the petitioner and without passing an order for disposal after enquiry in terms of Section 452 Cr.P.C. Such a course is contrary to the scheme of Sections 451/452/457 of Cr.P.C. and the authorities cited above.
(c) Under Section 452 of Cr.P.C., the Court is empowered to deliver the property to any person claiming to be entitled to its possession. The court has therefore jurisdiction to decide the question of possession. The section therefore empowers the court to return articles, whether involved in crime or not, to the person claiming to be entitled to possession. Therefore, it is the responsibility of the court to ensure and ascertain as to who is the person best entitled for the possession of the golden articles which were seized from the custody of the petitioner/finance company.
(d) Sections 452 and 453 of Cr.P.C.
contemplates cases where the order with regard to property is passed on the conclusion of the trial under Section 453 of Cr.P.C., where property is
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NC: 2026:KHC:11263 WP No. 2574 of 2025 HC-KAR found to be stolen property. The person entitled to possession of the same in such case is the person from whom it was originally stolen. However, in the peculiar facts and circumstances of the case, the petitioner/finance company is asserting that the golden articles were pledged in accordance with law and therefore, the Lok Adalat had no power to make the interim custody absolute detrimental to the rights of the petitioner/company.
12. It is trite law that a Lok-Adalat derives its jurisdiction strictly from the consent of the parties and is empowered only to record a lawful settlement between them. A Lok-Adalat does not exercise adjudicatory powers and cannot decide disputed questions of fact or law, nor can it pass orders affecting substantive or proprietary rights of persons who are not parties to the settlement. In the present case, the order of the Lok-Adalat making the interim custody of the seized articles absolute travels far beyond the scope of its statutory authority. The question of final custody or disposal of seized property squarely
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NC: 2026:KHC:11263 WP No. 2574 of 2025 HC-KAR falls within the exclusive domain of the criminal Court under Sections 451 and 452 of Cr.P.C. and requires a judicial determination after affording an opportunity of hearing to all persons claiming an interest in the property. The impugned order, insofar as it makes interim custody absolute, directly and adversely affects the rights of the petitioner, who asserts a lawful lien by way of pledge, despite the petitioner not being a party to the Lok-Adalat proceedings. Such an order, therefore, suffers from inherent lack of jurisdiction and warrants interference by this Court. Accordingly, the impugned order is liable to be set aside to the limited extent it makes the interim custody absolute, leaving it open to the jurisdictional Magistrate to decide the issue of custody and disposal of the property in accordance with law.
13. In the present circumstances the impugned portion of the order (i.e., making interim custody absolute) must be set aside and the matter must be
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NC: 2026:KHC:11263 WP No. 2574 of 2025 HC-KAR remitted to the learned Magistrate to proceed in accordance with law, in particular to:
(i) issue notice to the petitioner and any other person who claims interest in the seized articles;
(ii) hold an enquiry (if necessary, of a summary nature) to determine questions of entitlement to custody / possession;
(iii) having recorded evidence and heard the parties, pass appropriate orders for disposal of the property in accordance with Section 452 of Cr.P.C. (and, where relevant, Section 457/451), giving reasons;
and
(iv) ensure interim measures (if necessary) to protect the property pending enquiry, e.g., superdari bond, custodial safeguards, photographic record and inventory, so as to preserve the property and the rights of parties. The trial Court must act
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NC: 2026:KHC:11263 WP No. 2574 of 2025 HC-KAR expeditiously. The direction to pass an order under Section 452 of Cr.P.C. is the exact remedy indicated by the Hon'ble Supreme Court in similar circumstances.
Accordingly, the point formulated above is answered in the negative.
14. For the foregoing reasons, this Court proceeds to pass the following:
ORDER
(i) The writ petition is allowed in part;
(ii) The impugned order dated 19.09.2020 passed in C.C.No.27983/2019 by the II Additional Chief Metropolitan Magistrate, Bangalore vide Annexure-H is set aside insofar as it makes the interim custody of the gold articles (seized in P.F.No.25/2019) absolute in favour of respondent No.2;
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NC: 2026:KHC:11263 WP No. 2574 of 2025 HC-KAR
(iii) The matter is remitted to the learned Magistrate, who shall, within a period of four (4) weeks from receipt of the records:
(a) issue notice to the petitioner and to any other person who claims interest in the gold articles;
(b) hold necessary enquiry/hearings under Sections 451/452/457 Cr.P.C., as may be appropriate in the facts of the case; and
(c) after considering the claims and evidence, pass an order for disposal of the seized articles in terms of Section 452 Cr.P.C., recording reasons and following principles of natural justice.
(iv) Pending the aforesaid enquiry, the learned Magistrate may, if necessary, direct suitable custodial safeguards for the gold articles (including bond or other appropriate mechanism) so as to preserve the property and the rights of the parties;
(v) Liberty is reserved to the parties to move the learned Magistrate for interim
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NC: 2026:KHC:11263 WP No. 2574 of 2025 HC-KAR directions, and thereafter to approach this Court for any exceptional relief, if need arises;
(vi) No order as to costs.
Sd/-
(SACHIN SHANKAR MAGADUM) JUDGE CA List No.: 1