Karnataka High Court Requests Law Commission To Frame Guidelines To Deal With Pledging Of Stolen Gold With Gold Finance Companies

The Karnataka High Court has requested the Law Commission, Karnataka to formulate necessary guidelines/rules in respect of stolen gold being pledged with gold finance companies, the implication of pledging such stolen gold and the procedure for dealing with it when criminal proceedings are initiated. 

Justice Suraj Govindaraj noted that there are innumerable matters coming up before this court where stolen gold is pledged with a gold finance company.

Thus it said, “I'am of the considered opinion that this aspect would have to be examined by the concerned authorities and proper guidelines have to be formulated in relation to such pledging of gold, ascertainment of ownership, identity of the person pledging the gold, implication of pledging stolen gold, manner of dealing with such gold when criminal proceedings are taken up etc., etc. Therefore, I request the Law Commission, Karnataka to look into this matter and formulate necessary guidelines/rules or the like as deemed fit.”

The court said this while disposing of a petition filed by Muthoot Finance Limited which had moved the court questioning a notice issued by Begur Police Station to make available certain gold articles stated to be in the company's custody, which were claimed to have been stolen and pledged with the petitioner.

The company argued that it would cooperate with the investigation but would have to retain the gold which had been pledged with the petitioner since the petitioner has a right over the same being a Pledgee/pawnee.

On going through the record the bench said “The petitioner being only a pledgee/ pawnee would have a only right that the pledgers/pawner has in the said gold and the petitioner cannot claim any right more than that.”

It said that during investigation, the Investigating Officer would be required to ascertain various aspects including the ownership of the gold in question and it is for the Court seized of the matter to decide as to in whose favour the gold has to be returned, if an application under Section 454 of the earlier Code of Criminal Procedure–now Section 500 of the BNSS, were to be filed.

The court observed “The true owner of the gold cannot be deprived of the use of the gold, merely because the same is pledged with a gold finance company after being stolen from such a true owner. The Gold Finance Company is vested with a duty to carry out proper due diligence before accepting the gold as a pledge for a loan disbursed.”

Accordingly it directed the petitioner to co-operate with the Investigating Officer and make available all the details relating to the pledge as also permit the inspection of the gold, which if required the Investigation Officer can take receipt of and deposit with the Court seized of the matter.

It added “On coming to the conclusion that the said gold is stolen, it is made clear that the police officer cannot retain the gold in his possession, but would have to deposit the same with the court seized of the matter. The court seized the matter while considering any application for release of the gold or at the time when the court were to pass an order of release for any reason whatsoever, would have to issue notice to the petitioner and afford an opportunity of hearing to the petitioner before ordering the release.”

Appearance: Advocate Anish Jose Antony for Petitioner.

AGA Mohammed Jaffar Shah for Respondents

Citation No: 2024 LiveLaw (Kar) 6

Case Title: Muthoot Finance Limited AND State Of Karnataka & ANR

Case No: WRIT PETITION NO. 36201 OF 2024

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