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Karnataka High Court
Manappuram Finance Ltd vs State Of Karnataka on 20 February, 2026
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WP No. 2572 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. 2572 OF 2025 (GM-RES)
BETWEEN:
1. MANAPPURAM FINANCE LTD
A COMPANY INCORPORATED UNDER
THE COMPANIES ACT 1956
HAVING REGISTERED OFFICE AT
MANAPURAM HOUSE, A.O. VALAPAD
TRISSUR DISTRICT, KERALA-680567.
HAVING ITS BRANCH OFFICE AT
MALLESHWARAM
DULY REPRESENTED BY ITS
AUTHORIZED REPRESENTATIVE
MR. SELVAM .C
...PETITIONER
(BY SRI. ANISH JOSE ANTONY, ADVOCATE)
Digitally signed AND:
by CHAITHRA A
Location: HIGH
COURT OF
KARNATAKA 1. STATE OF KARNATAKA
BY STATION HOUSE OFFICER
CHENNAMMANAKERE ACHU KATTU PS
REPRESENTED BY HCPP
HIGH COURT OF KARNATAKA
BANGALORE-560001.
2. KARTHIK .M
S/O MUNIYAPPA
NO. 2, AMRUTHANILAYA
6TH MAIN, REVENUE LAYOUT
BSK 3RD STAGE
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NC: 2026:KHC:11262
WP No. 2572 of 2025
HC-KAR
BANGALORE
KARNATAKA-560085.
...RESPONDENTS
(BY SRI. RAHUL RAI, HCGP FOR R1;
SRI. B.N. ANJAN KUMAR, ADVOCATE FOR R2)
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
ADDITIONAL CHIEF METROPOLITAN MAGISTRATE, BANGALORE
IN CC NO. 28789/2019 TO AN EXTENT OF MAKING THE
INTERIM CUSTODY OF ARTICLES SEIZED IN PF NO. 26/2019
DATED 20.03.2019 AND PF NO. 27/2019 DATED 08.03.2019
GRANTED TO THE 2ND RESPONDENT MAKING ABSOLUTE AND
FOR FURTHER DIRECT 2ND ADDITIONAL CHIEF METROPOLITAN
MAGISTRATE, BANGALORE TO PASS ORDERS UNDER SECTION
452 OF CRPC IN CC NO 28789/2019 WITH REGARD TO THE
ARTICLES SEIZED IN PF NO. 26/2019 DATED 20.03.2019 AND
PF NO. 27/2019 DATED 08.03.2019 DE NOVO AFTER HEARING
THE PETITIONERS WITHIN A PERIOD OF ONE MONTH.
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.28789/2019, whereby the
learned Magistrate, after recording the settlement in the
Lok-Adalat, made the interim custody of certain gold
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articles (seized in P.F.Nos.26/2019 & 27/2019) 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 loans to Sri.
Dage Chetan, Sri. Tambe Rajesh and Tambe Sunitha in the
year 2018 and 2019 against pledges of gold ornaments. A
complaint came to be registered in Crime No.47/2019
alleging offences under Sections 379 and 420 of IPC. The
Investigating Officer issued notice under Section 91
Cr.P.C. and seized the gold articles (recorded as
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P.F.Nos.26/2019 & 27/2019). Interim custody of the
seized articles 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;
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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.
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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 loans to
Sri. Dage Chetan, Sri. Tambe Rajesh and Tambe Sunitha
in the year 2018 and 2019 by accepting gold through
pledging by following the due process of law. The
petitioner's primary grievance is that pursuant to
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complaint lodged which culminated in registration of crime
at the instance of respondent No.2 in Crime No.47/2019,
the Investigating Officer based on statement given by the
accused seized the gold articles from the
petitioner/company in Crime No.47/2019 and the seized
property was assigned with Property Finding Nos.26/2019
and 27/2019. 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
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property (by destruction, confiscation, or delivery to any
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
Criminal Appeal No.170 of 2009
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custody and remanded the matter to the trial Court to
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 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
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facilitating settlements; they have no adjudicatory
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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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, where property is found to be
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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
falls within the exclusive domain of the criminal Court
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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
remitted to the learned Magistrate to proceed in
accordance with law, in particular to:
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(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
expeditiously. The direction to pass an order under
Section 452 of Cr.P.C. is the exact remedy indicated
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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.28789/2019 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.Nos.26/2019 & 27/2019)
absolute in favour of respondent No.2;
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(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;
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(v) Liberty is reserved to the parties to
move the learned Magistrate for interim
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
