Section 94 BNSS Production Notices Bind Pledgee-Financiers; Seizure Lies Under Section 106 (Not Section 107)

1. Introduction

The decision in IIFL FINANCE LTD. v. STATE OF KARNATAKA (Karnataka High Court, 04-02-2026; WP No.31057 of 2025) addresses an increasingly common investigative scenario: gold alleged to be stolen is traced to a gold-loan financier with whom the accused has pledged it. The petitioner (a financial institution engaged inter alia in gold loans) challenged police notices issued under Section 94 of the Bharatiya Nagarik Suraksha Sanhita, 2023 (“BNSS”) requiring production of pledge-related records and the pledged gold, in connection with Crime No.489/2025 (registered for offences under Sections 316(2), 316(5) and 318(4) of the Bharatiya Nagarik Nyaya Sanhita, 2023).

The factual backdrop, as set out in the judgment, was that gold ornaments pledged by customers with the respondent bank were allegedly replaced with spurious articles and/or found missing; the accused employee (and spouse) were then alleged to have pledged the stolen gold with the petitioner-financier. The petitioner asserted it was a “secured creditor” and feared that production would lead to seizure, depriving it of security for outstanding dues.

Key Issues

  • Whether a pledgee-financier can maintain a grievance against a Section 94 BNSS notice seeking production of records and alleged stolen gold.
  • Whether the financier can refuse/condition production on the ground of “security interest” and commercial prejudice.
  • Whether seizure requires recourse to Section 107 BNSS (attachment) or is independently permissible under Section 106 BNSS (seizure of suspected stolen property).

2. Summary of the Judgment

The Court dismissed the writ petition. It held that:

  • Section 94 BNSS empowers the investigating officer to require production of documents and “other thing” necessary/desirable for investigation, including gold alleged to be stolen.
  • The petitioner has no lawful basis to refuse/delay/condition production of the gold; a contractual “security interest” cannot obstruct investigation into alleged stolen property.
  • Seizure of suspected stolen property is governed by Section 106 BNSS; Section 107 BNSS deals with attachment/forfeiture/restoration and operates in a different field.
  • Accordingly, if the gold is found to correspond to stolen property, the police may proceed under Section 106 BNSS with the statutory safeguards (including reporting to the Magistrate).

Notably, although the petition was dismissed, the matter was directed to be re-listed on 17.02.2026 to report compliance, and the Court reiterated earlier “systemic” directions (from another writ proceeding) calling for data on gold-loan practices and theft-to-pledge linkages.

3. Analysis

3.1 Precedents Cited

(A) FEDBANK FINANCIAL SERVICES LTD. -vs- STATE OF KARNATAKA AND OTHERS (WP No.30942 of 2025, order dated 14.10.2025)

The petitioner relied on this decision to argue that seizure of “stolen articles” required recourse to the Magistrate under Section 107(1) BNSS. The present judgment treats that proposition as inapposite to the statutory scheme under BNSS as it:

  • re-anchors “seizure” in Section 106 BNSS (suspected stolen property), and
  • confines Section 107 BNSS to attachment/forfeiture/restoration (a different legal action from seizure).

In effect, this judgment clarifies (and practically limits) the “Section 107-only” seizure reading urged from Fedbank Financial Services Ltd, by holding that seizure is independently authorised by Section 106.

(B) Muthoot Finance Limited, rep by its Authorised Officer Sri. Ajumon P. George v. State of Karnataka by its Secretary and Another (2024 SCC Online Karnataka 2531)

Respondent No.2 relied on this decision to support a common judicial approach in pledge-of-stolen-gold disputes: the financier must cooperate, permit inspection, and if the gold is required, the investigating officer may take receipt and deposit it before the court seized of the matter; police should not retain it indefinitely.

The present judgment is consistent with the principle that criminal process has priority for recovery/verification and that custody is subject to statutory safeguards and judicial oversight. While this case proceeds under BNSS provisions, the Court’s reasoning aligns with the earlier “cooperate + court-supervised custody” paradigm.

(C) Muthoot Money Limited, Rep by its Authorised Officer and Assistant Manager in Charge Mr. Hanamantha Yallappa Girijannavar v. State of Karnataka, By its Secretary, Home Department (2025 SCC Online Kar 10077)

This decision (and the extracts reproduced within it) emphasised:

  • the investigating officer’s need to verify ownership during investigation;
  • the true owner should not be deprived of use merely because the gold is pledged; and
  • the financier can assert claims before the competent court when applications for release/interim custody are considered.

The present judgment adopts the same hierarchy: investigation and true-owner restitution objectives prevail over a financier’s contractual claims, with the latter being capable of being raised before the competent court at the appropriate stage.

(D) MUTHOOT FINCORP LIMITED v. INSPECTOR OF POLICE (Madras High Court) (as reproduced)

The reproduced paragraphs recognise the duty to produce records/jewels for investigation; and that if parties claim rights over property, they must approach the concerned court. The present judgment parallels this: the Section 94 mechanism is a lawful investigative tool, and resistance at the production stage is impermissible.

(E) MUTHOOT FINANCE LIMIED v. STATE OF KARNATAKA (as reproduced)

The extracted portion contains two ideas that materially inform the present judgment:

  • Ownership and return are for the court seized of the matter; the financier may place claims there.
  • A strong admonition that gold finance companies have a duty to exercise proper due diligence before accepting gold as pledge.

The present judgment, while deciding a narrow writ challenge to summons/production/seizure powers, reinforces the systemic concern about gold-loan practices and ties it to compliance expectations.

3.2 Legal Reasoning

(i) Section 94 BNSS: “Production” power is broad and investigation-facing

The Court undertakes a “plain and purposive” reading of Section 94 BNSS and treats it as a foundational investigative power: whenever production is “necessary or desirable” for investigation, the officer in charge of a police station may require the person in possession to produce documents/electronic communications/“other thing”. Crucially:

  • Gold alleged to be stolen is treated as falling within “other thing”.
  • The provision is said to be “deliberately worded in broad terms” to avoid thwarting investigations by premature civil/contractual assertions.
  • The Court draws a sharp conceptual line: production ≠ seizure. A Section 94 notice does not adjudicate rights or itself confiscate property.

(ii) No “secured creditor” veto against criminal investigation

The petitioner’s central plea was that seizure would destroy its security interest. The Court rejects this at multiple levels:

  • Contractual status does not insulate a holder of alleged stolen property from criminal scrutiny.
  • “Bona fide” lending is not a basis to withhold production; cooperation is the relevant demonstrator of bona fides.
  • The Court implicitly applies the nemo dat principle: a pledger without lawful title cannot confer a better right on the pledgee than the pledger had.

The judgment also frames the inquiry through the lens of victim restitution: gold ornaments are not mere commodities; they are often matrimonial security, heirlooms, and emergency savings. Investigation cannot be “rendered sterile” by non-production.

(iii) Seizure under Section 106 BNSS is distinct from attachment under Section 107 BNSS

The Court’s most consequential statutory clarification is its separation of:

  • Section 106 BNSS: “Power of police officer to seize certain property” (including property alleged or suspected to be stolen), with mandatory reporting to superior officer and Magistrate.
  • Section 107 BNSS: “Attachment, forfeiture or restoration of property” (proceeds-of-crime adjudicatory framework involving court notice, hearing, and distribution/forfeiture).

Against the petitioner’s argument that seizure requires Section 107 route and Magistrate permission, the Court holds the contention “completely misconceived”: seizure is covered by Section 106, whereas Section 107 is about attachment/restoration and operates “at a later and more adjudicatory stage”.

(iv) Constitutional objections rejected as misconceived in the investigative context

The petitioner invoked Articles 19(1)(g), 21, and 300A. The Court concludes that lawful investigatory production/seizure under BNSS:

  • is a reasonable legal process and does not immunise commercial transactions involving alleged stolen property;
  • does not amount to deprivation “without authority of law” (Section 106 is express authority); and
  • cannot be stalled by speculative commercial prejudice.

3.3 Impact

(A) Clear operational rule for police investigations involving pledged stolen gold

The judgment supplies a workable sequence:

  1. Issue Section 94 BNSS notice for production of pledge records and the pledged gold (“other thing”).
  2. Upon production and verification, if circumstances warrant, proceed to seizure under Section 106 BNSS (with reporting safeguards).
  3. Any later questions of attachment/restoration/distribution as “proceeds of crime” lie within Section 107 BNSS framework.

(B) Reduced scope for writ challenges to investigative production notices

By characterising Section 94 as a limited, non-adjudicatory production tool (distinct from seizure), the decision makes it harder for pledgee-financiers to seek writ quashing of such notices on the premise of “security interest” or business prejudice.

(C) Strengthened victim-centric restitution emphasis

The judgment explicitly foregrounds the continuing deprivation suffered by true owners of gold and treats investigation as a necessary step toward restitution, signalling that courts may increasingly weigh victim property interests against institutional lender claims in the interim custody context.

(D) Systemic compliance pressure on gold-loan industry practices (KYC, verification, auctions)

Though not determinative of the writ dismissal, the judgment reiterates broader directions (from the Court’s earlier daily order in another writ proceeding) seeking aggregated data on gold loan transactions, KYC deviations, auction outcomes, and theft-linked pledges. This signals an emerging judicial regulatory posture toward industry compliance failures that allegedly facilitate laundering of stolen gold through pledge-and-auction channels.

4. Complex Concepts Simplified

  • Section 94 BNSS (Summons to produce): A legal demand to produce documents/devices/objects needed for investigation. It does not itself decide ownership or permanently take away property.
  • Section 106 BNSS (Seizure): Police power to seize property suspected to be stolen or linked to an offence, with statutory duties to report to superiors and the Magistrate.
  • Section 107 BNSS (Attachment/forfeiture/restoration): A court-driven process to attach and later distribute/forfeit “proceeds of crime” after notice and hearing—conceptually different from investigative seizure.
  • Pledge / “Secured creditor” claim: A financier holding goods as security for repayment. The judgment emphasises that a pledge over stolen goods does not trump investigation or the true owner’s claim.
  • Nemo dat principle (in substance): One cannot transfer a better title than one has; an accused without title cannot confer superior rights on a pledgee as against the true owner.

5. Conclusion

This decision lays down a clear BNSS-era rule for pledged-stolen-property investigations: Section 94 BNSS production notices are valid and enforceable against pledgee-financiers, and a financier’s security-interest concerns do not justify resisting production. Further, the Court draws a decisive statutory boundary: seizure is governed by Section 106 BNSS, while Section 107 BNSS concerns attachment/forfeiture/restoration at a later, more adjudicatory stage.

In broader legal context, the judgment strengthens investigative effectiveness in economic offences involving gold, limits premature writ interference, and signals heightened scrutiny of gold-loan due diligence practices—while keeping subsequent custody/rights questions within the court-supervised criminal procedure framework.