Seized FDRs as “Court Property” and the Limits of DRT Orders: Commentary on Axis Bank Ltd. v. State of Rajasthan, 2025 RJ‑JP 49452

1. Introduction

The decision of the Rajasthan High Court (Jaipur Bench) in Axis Bank Ltd. v. State of Rajasthan, Citation Code 2025 RJ‑JP 49452, delivered on 09 December 2025 by Justice Anoop Kumar Dhand, is an important ruling at the intersection of:

the criminal court’s control over seized property under the Code of Criminal Procedure (CrPC), and
the powers of specialised tribunals such as the Debt Recovery Tribunal (DRT) under the Recovery of Debts Due to Banks and Financial Institutions Act (RDDBFI Act / RDB Act).

The judgment squarely addresses whether a bank, armed with an order of the DRT permitting appropriation of funds, can ignore or bypass prior binding directions of a criminal court regarding monies lying in a Fixed Deposit Receipt (FDR) created pursuant to an order under Section 457 CrPC. The Court answers this in the negative and uses the occasion to reaffirm a core constitutional value: no one, however high, is above the rule of law or the authority of court orders.

The case arises out of a large-scale alleged fraud perpetrated on hundreds of farmers in Kota district, where agricultural produce entrusted to traders was allegedly misused as security for substantial bank loans. The agricultural stock was seized in criminal proceedings, auctioned under orders of the Magistrate, and the sale proceeds were directed to be kept in FDRs “in the name of the Court” with Axis Bank. Years later, Axis Bank appropriated most of this FDR amount relying on a DRT order obtained in its recovery proceedings against the borrowers. The Magistrate ordered the Bank to redeposit the appropriated amount, prompting Axis Bank to invoke the High Court’s inherent jurisdiction.

The ruling establishes a clear doctrinal proposition: monies deposited pursuant to a criminal court’s order under Section 457 CrPC are “court property” and cannot be appropriated or dealt with by a custodian bank—even on the strength of a DRT order—without prior permission of the criminal court. A tribunal’s order passed in ignorance of binding criminal court directions cannot be used as a shield to justify disobedience of those directions.

2. Factual Background and Procedural History

2.1 Alleged fraud on farmers and the role of Axis Bank

The genesis of the case lies in a complaint dated 06.05.2011 made by one Naval Kishore and supported by 33 agriculturists to the SHO, Police Station Bapawar Kalan, District Kota (Rural). The complaint alleged that:

Certain traders—Purshottam Mittal, Sumit Mittal, Vimal Mittal, Dinesh Mittal and Hukam Chand Mittal @ “Naya Baniya”—operating in the Krishi Mandi, Bapawar, used their position and apparent reliability to persuade farmers to entrust agricultural produce (grains and other products) to them for storage in godowns.
The produce was given on credit, with only “kacchi parchis” (informal receipts) issued and an assurance that it would be sold later at favourable prices and farmers would then be paid.
Subsequently, these traders allegedly absconded and failed to pay the farmers.

On investigation, a much larger alleged fraud came to light:

About 418 farmers initially, and later 623 farmers, claimed to have entrusted produce worth around ₹9 crore to the accused persons, to be stored in four godowns at Bapawar Kalan (three owned by the accused and one on rent).
The accused allegedly transferred this produce on paper to firms run in their family names—particularly M/s Mohanlal & Sons and M/s Seth M.L. Goyal & Sons.
On the basis of forged or manipulated purchase and sale documents relating to this produce, the accused, in alleged conspiracy with Mahendra Goyal, Dheeraj Goyal and Neeraj Goyal, obtained loans of about ₹9 crore from Axis Bank Ltd.
The agricultural stock was pledged/mortgaged to Axis Bank as security.

The core allegation is that the accused dishonestly converted the farmers’ property—entrusted to them on trust—into collateral for bank loans, thereby committing offences under Sections 406 (criminal breach of trust), 420 (cheating) and 120‑B (criminal conspiracy) IPC.

2.2 Seizure of agricultural produce and auction under Section 457 CrPC

The police seized the agricultural produce lying in the godowns on the basis of information furnished by the accused. The seized stock included:

Mustard – 22,551 bags
Wheat – 15,764 bags
Dhania (coriander) – 458 bags
Soyabean – 173 bags

As these were perishable commodities, the Investigating Officer (IO), the Additional Superintendent of Police, Kota (Rural), moved an application under Section 457 CrPC before the Additional Chief Judicial Magistrate (ACJM), Ramganj Mandi. Section 457 CrPC empowers a Magistrate to make suitable orders regarding the disposal, custody, or delivery of property seized by the police and reported to the court.

Recognising the risk of decay of the produce during the rainy season and considering the interest of all stakeholders (farmers, bank, and accused), the ACJM, by a detailed order dated 07.07.2012:

Constituted a committee to conduct a public auction of the seized agricultural produce.
Directed that the auction proceeds be deposited in Fixed Deposit Receipts (FDRs) with Axis Bank, “in the name of the Court”.
Ordered that such amount remain so kept till the conclusion of the criminal trial.

From this point onward, the High Court consistently refers to the auction proceeds as “Court property”—a critical characterisation for the later dispute.

2.3 Challenges to the 07.07.2012 order and its finality

The order dated 07.07.2012 was challenged not by Axis Bank but by one of the accused, Neeraj Goyal, by way of S.B. Criminal Misc. Petition No. 2326/2012 before the Rajasthan High Court. Axis Bank attempted to come on record in those proceedings by filing an impleadment application, but its application was rejected on 20.09.2012.

After hearing the parties, the High Court, by order dated 10.10.2012, dismissed Neeraj Goyal’s petition, upholding the Magistrate’s 07.07.2012 order. Relevant extracts (paras 14–15) emphasised that:

The Magistrate’s order was consistent with the provisions of the CrPC and applicable Supreme Court precedents.
No interference was warranted under the High Court’s inherent powers under Section 482 CrPC.

Neeraj Goyal’s subsequent Special Leave Petition (SLP (Crl.) No. 8385/2012) before the Supreme Court was withdrawn on 09.11.2012. Thus, the order dated 07.07.2012 attained finality up to the Supreme Court.

2.4 Axis Bank’s failed attempt to obtain permission to appropriate the FDR

Despite not being a party to the challenge in 2012, Axis Bank was clearly aware of the order and its characterisation of the funds as “court property”, because:

It was the bank chosen by the Magistrate for holding the FDRs in the name of the Court; and
It had applied for impleadment in Neeraj Goyal’s 2012 petition.

On 12.04.2013, Axis Bank itself moved an application before the same Trial Court seeking permission to appropriate ₹5,56,78,363 out of the FDR amount, presumably towards the outstanding dues of the borrower. The ACJM rejected this application by a detailed order dated 03.06.2013, refusing to allow withdrawal or appropriation of the funds.

Axis Bank challenged the 03.06.2013 rejection order by filing S.B. Criminal Misc. Petition No. 3705/2013 before the High Court. However, on 17.09.2014, this petition was withdrawn by Axis Bank with liberty to initiate recovery proceedings against the defaulting borrowers.

The net result of this history is:

The 07.07.2012 order directing auction and deposit of proceeds in an FDR in the name of the Court stood final and binding.
The 03.06.2013 order refusing permission to Axis Bank to appropriate any part of that FDR amount also attained finality, as Axis Bank withdrew its challenge to that order.

2.5 DRT proceedings and the 20.04.2018 order

Having withdrawn its criminal misc. petition, Axis Bank initiated civil/statutory recovery proceedings:

It filed Original Application (OA) No. 241/2015 before the Debt Recovery Tribunal (DRT), Jaipur against its borrowers (including the Goyal entities and others).
In that OA, the Bank filed Interim Application (IA) No. 142/2018 under Section 19(25) of the RDDBFI Act (now RDB Act), seeking permission to appropriate the proceeds of the agricultural produce referenced in FIR No. 43/2011, then lying in FDR with it.

The Bank’s stand in the IA was essentially:

The stock had been pledged to it; the produce was sold with its consent, and sale proceeds were lying in FDR with it.
The Tribunal had exclusive jurisdiction to adjudicate the rights of the bank and the borrower with respect to this pledged property.
Its rights were traceable to Section 178 of the Indian Contract Act, 1872 (pledge by mercantile agent).
It undertook to refund the amount if any adverse order in the OA was eventually passed against it.

The borrowers resisted, contending that:

Appropriation at the interim stage would cause irreparable loss.
They had a valid defence in the OA including on jurisdiction.
There was no “urgency” or necessity for interim appropriation.

The DRT, by order dated 20.04.2018, allowed IA No. 142/2018, holding inter alia:

The sale proceeds were already under deposit with the applicant Bank as per the directions in FIR No. 43/2011.
There was no rival claim to the sale proceeds.
Appropriation would even be beneficial to the defendants, as it would reduce their interest burden.
Temporary appropriation was therefore permitted, subject to the final result of the OA and on the Bank’s undertaking to reimburse in case of an adverse final order.

Crucially, as the High Court later emphasises, Axis Bank did not disclose to the DRT:

the ACJM’s order dated 07.07.2012 directing that the auction proceeds be placed in FDRs in the name of the Court and retained till the conclusion of trial;
the rejection of the accused’s challenge to that order by the High Court (10.10.2012) and the withdrawal of SLP (09.11.2012);
the ACJM’s order dated 03.06.2013 rejecting the Bank’s own request for appropriation; and
the withdrawal of the Bank’s criminal misc. petition (3705/2013) challenging that rejection.

The High Court therefore characterises the DRT’s order as having been passed in “complete ignorance” of these material facts and prior binding criminal court orders.

2.6 Axis Bank’s appropriation of the FDR and the 16.10.2025 Magistrate’s order

On the strength of the DRT’s 20.04.2018 order, Axis Bank proceeded to:

Appropriate ₹8,20,47,000 from the FDR amount, and
Leave and remit only ₹1,84,31,806 to the Court by demand draft (DD No. 047682).

This appropriation was done:

Without any fresh permission from the Trial Court; and
In direct contradiction to the earlier ACJM order dated 03.06.2013 refusing such appropriation and holding that the funds would remain as court property until conclusion of trial.

Upon this coming to light, the Trial Court (now ACJM No. 7, Kota, in Criminal Case No. 12377/2023 arising out of FIR No. 43/2011) passed the impugned order dated 16.10.2025. The Magistrate:

Held that Axis Bank’s unilateral appropriation was undertaken in utter violation of law and of the court’s previous orders.
Directed that the Bank refund/redeposit the appropriated amount with interest within 7 days.
Directed issuance of notice to the Managing Director/CEO of Axis Bank and the concerned Branch Manager, warning that appropriate action would be taken against them in case of non-compliance.

2.7 The present criminal miscellaneous petition before the High Court

Axis Bank filed the present S.B. Criminal Misc. (Petition) No. 7763/2025 before the Rajasthan High Court (bench at Jaipur), challenging the 16.10.2025 order of the ACJM.

The Bank’s central contentions were:

The DRT’s 20.04.2018 order permitted it to temporarily appropriate the OA amount; this order was later upheld by the DRAT.
The Magistrate’s direction to redeposit the amount was therefore in contravention of the DRT’s order and constituted an impermissible interference with the DRT’s jurisdiction.
As a matter of principle, decisions of civil courts (and civil tribunals) are binding on criminal courts, but not vice versa, and therefore the Magistrate could not override the DRT’s direction.
No prejudice was caused to respondents (borrower entities) by the appropriation; indeed, it was allegedly in their best interest as it reduced their interest burden.
The Bank relied on a Division Bench judgment of the same High Court in M/s Mohan Lal & Anr. v. State of Rajasthan & Ors. (D.B. Special Appeal (Writ) No. 448/2014, decided 20.11.2018), contending that this precedent supported its right to appropriate sale proceeds of pledged goods.

The State and the contesting respondents (M/s Seth M.L. Goyal & Sons and M/s Mohanlal & Sons) countered that:

The auction proceeds were expressly declared by the Magistrate’s 07.07.2012 order to be court property, to be held in FDRs in the name of the Court till conclusion of trial.
Axis Bank’s unilateral encashment of the FDR and appropriation of funds, without permission, amounted to disobedience of the court’s orders.
The DRT order was obtained without disclosing the prior criminal court orders and the High Court’s and Supreme Court’s refusal to interfere, and was therefore passed in ignorance of those orders.
Given this context, the Magistrate was correct in directing refund and in issuing notices to the Bank’s top management.

3. Issues Before the High Court

The High Court’s reasoning can be organised around the following core legal issues:

Nature of the FDR Amount: Whether the amount lying in the FDR with Axis Bank, created pursuant to the 07.07.2012 order, constituted “court property” under the control of the criminal court, such that the Bank could not deal with it unilaterally.
Effect of Prior Binding Orders: Whether the Magistrate’s 07.07.2012 order (auction + FDR in court’s name) and 03.06.2013 order (refusing appropriation), having attained finality up to the Supreme Court (so far as the 07.07.2012 order is concerned), precluded Axis Bank from relying on a later DRT order to appropriate those funds without leave of the criminal court.
Interplay Between DRT and Criminal Courts: Whether the DRT’s order dated 20.04.2018 could override, dilute, or otherwise justify disregard of existing criminal court directions relating to seized property, particularly when the DRT order itself was passed without knowledge of such directions.
Bank’s Liability and Rule of Law: Whether Axis Bank’s conduct in appropriating the funds amounted to violation of the rule of law and disobedience of court orders, warranting judicial censure and directions to refund the amount, and whether the notices to its MD/CEO and Branch Manager were justified.

4. Summary of the Judgment

Justice Anoop Kumar Dhand, after reviewing the full factual and procedural history, dismissed Axis Bank’s petition and upheld the Magistrate’s order. The key holdings are:

The auction proceeds from the seized agricultural goods, lying in FDRs with Axis Bank pursuant to the 07.07.2012 order, constituted court property. Axis Bank held them only as a custodian of the Court.
The Magistrate’s directions in orders dated 07.07.2012 and 03.06.2013 had attained finality. Axis Bank was bound to obey them and could not unilaterally encash or appropriate any part of the FDR amount.
The DRT’s 20.04.2018 order was passed in complete ignorance of these prior criminal court orders because Axis Bank failed to disclose them to the DRT. That order therefore could not be invoked to justify or validate the Bank’s disobedience of the Magistrate’s directions.
The Magistrate was correct in directing the Bank to refund/redeposit the appropriated amount with interest and in issuing notices to the Bank’s MD/CEO and Branch Manager, given the seriousness of the violation.
Reiterating the fundamental principle that “no one is above the law”, the Court emphasised that even large financial institutions are bound to strictly comply with court orders and cannot undermine the authority of criminal courts by resorting to parallel proceedings.

The petition was therefore dismissed, and all pending applications, including the stay application, were disposed of.

5. Detailed Analysis

5.1 Status of auction proceeds as “court property” under Section 457 CrPC

Section 457 CrPC deals with “Procedure by police upon seizure of property”. Where property is seized and reported to a Magistrate, the Magistrate may:

Order its delivery to the person entitled to its possession; or
Make such order as is deemed fit for its disposal, custody, or temporary custody, particularly when the property is perishable or subject to depreciation.

In this case, the Magistrate ordered auction of the seized agricultural produce and directed that the sale proceeds be deposited in FDRs in the name of the Court. Once such an order is passed and the funds are deposited in compliance:

The legal character of the funds changes: they are not merely the borrower’s or bank’s money but are held under judicial custody.
Axis Bank, though physically holding the FDRs, becomes a mere bailee/custodian for the Court.
Any dealing with those funds must be authorised by the criminal court that directed their deposit.

The High Court underscores this point by repeatedly describing the FDR amount as “Court property”. This classification is crucial because:

It shifts the reference point for any decision about the funds from commercial contracts and bank–borrower rights to judicial control under the CrPC.
Any third-party order (even from a civil court or tribunal) cannot, without more, override the criminal court’s directions on such property.

Thus, the Court’s first major doctrinal step is to confirm that the auction proceeds, once deposited as per the 07.07.2012 order, were under the exclusive control of the criminal court until further orders, and not available for unilateral appropriation by the Bank.

5.2 Finality and binding effect of earlier criminal court orders

The judgment lays significant emphasis on the procedural history to demonstrate that:

The 07.07.2012 order (auction + FDR in court’s name) was:
- Upheld by the High Court (order dated 10.10.2012 in Crl. Misc. 2326/2012), and
- Left undisturbed by the Supreme Court (SLP withdrawn 09.11.2012).
It thus became a final and binding directive governing the treatment of the auction proceeds.
The 03.06.2013 order rejecting Axis Bank’s application for appropriation was never set aside; on the contrary, the Bank withdrew its High Court challenge (Crl. Misc. 3705/2013).

Two consequences follow:

Binding obligation on Axis Bank: Having participated in these proceedings (by applying for impleadment and then by seeking and being refused permission to appropriate funds), Axis Bank was fully aware of the criminal court’s stance and was bound to obey it. The Bank could not treat the FDR as ordinary collateral after 03.06.2013.
Abuse of process concerns: The Bank’s later recourse to the DRT without disclosing the existence and finality of these orders appears, in effect, as an attempt to side-step binding judicial directions. This kind of parallel strategy undermines the integrity and coherence of the judicial process.

Justice Dhand explicitly notes that the petitioner Bank:

Was aware of all these orders, but
Failed to bring them to the notice of the DRT when seeking interim appropriation.

This finding is central to the Court’s later conclusion that the DRT order cannot legitimise the Bank’s conduct. It also implicitly invokes the principle that a litigant must approach a court or tribunal with clean hands and a full and fair disclosure of material facts.

5.3 Relationship between DRT orders and criminal court directions

One of Axis Bank’s key arguments was jurisdictional: that the DRT, as a specialised tribunal with exclusive jurisdiction under the RDB Act for bank debt recovery, had authorised appropriation, and that civil/tribunal decisions bind criminal courts. The High Court effectively rejects any simplistic hierarchy of this kind and addresses the relationship as follows:

The DRT’s power under Section 19(25) RDB Act allows it to pass appropriate orders to give effect to its decisions or prevent abuse of its process within the sphere of debt recovery.
However, the subject-matter here is not merely a bank debt; it is also property seized in connection with a criminal offence and placed under judicial custody under Section 457 CrPC.
On this subject-matter—custody and disposal of criminal case property—the criminal court has exclusive control. That control cannot be displaced by a tribunal’s interim order obtained without disclosure of the existing criminal orders.

The Court explicitly observes (para 22) that the DRT passed the 20.04.2018 order in complete ignorance of the 07.07.2012 and 03.06.2013 orders as well as the High Court’s and Supreme Court’s refusal to interfere. Had these been disclosed, the Tribunal would not have passed such an order.

Therefore:

The DRT order cannot be treated as an authoritative override of the criminal court’s directions.
At best, it regulates the inter se rights between bank and borrower, but it does not empower the Bank to disobey binding criminal court orders.

The Bank’s assertion that “decisions of civil courts are binding on criminal courts, but not vice versa” is implicitly rejected. While it is true in a limited sense that criminal courts do not adjudicate civil rights (and res judicata may operate in certain ways), this principle cannot be stretched to allow a party to flout specific criminal court directions on how to hold or deal with property under seizure.

In other words, jurisdictional “primacy” is context-dependent: on questions of custody and disposal of case property seized in a criminal matter, the criminal court’s orders govern, and any subsequent civil/tribunal order must be harmonised with, not used to subvert, those directions.

5.4 The rule of law and obedience to court orders

The judgment begins and ends with a strong normative emphasis on the rule of law:

“Whosoever he may be, howsoever high, is not above the rule of law.” “No one is above the law” underpins the whole of today’s legal system and the same is the essence of rule of law.

Justice Dhand reiterates that:

Legal orders and judgments must be universally obeyed to maintain order, justice, and accountability.
Disobedience of court orders “attacks the very foundation of the rule of law” on which democracy rests.
Every person and authority, regardless of rank—including large corporate entities like Axis Bank—is duty-bound to comply with court orders.

Specifically referring to Axis Bank’s conduct, the Court holds that:

The Bank’s act of appropriating the FDR without prior permission was “totally unwarranted” (para 23).
As a legal entity, the Bank is expected to follow the law and court orders.
Its conduct amounts to disobedience of the 07.07.2012 and 03.06.2013 orders, as upheld by the High Court and left untouched by the Supreme Court.
Appropriate proceedings could have been initiated against the erring Bank officials, but the Court adopts a lenient view while still issuing a strong cautionary message.

The Court’s insistence that large institutions cannot hide behind technicalities or parallel orders to justify violation of clear, subsisting judicial directions is a significant reinforcement of judicial authority and systemic discipline.

5.5 Petitioner’s reliance on M/s Mohan Lal & Anr. v. State of Rajasthan & Ors.

Axis Bank relied on a Division Bench judgment of the Rajasthan High Court in M/s Mohan Lal & Anr. v. State of Rajasthan & Ors. (D.B. Special Appeal (Writ) No. 448/2014, decided on 20.11.2018). While the text of that judgment is not reproduced here, it likely dealt with disputes over rights in agricultural produce or sale proceeds between traders/borrowers, farmers, and Axis Bank.

Notably:

The present Single Bench judgment mentions the reliance placed on this Division Bench decision by Axis Bank (para 4), but
Does not treat it as determinative of the issue before it.

This is logical, because:

The core question in Axis Bank Ltd. v. State of Rajasthan is not about substantive civil priority between farmers and bank over sale proceeds, but about whether the Bank could ignore a subsisting criminal court order controlling the custody of those proceeds.
Even if the Division Bench, in the Mohan Lal case, acknowledged strong rights of the Bank as pledgee or mortgagee, such rights must still be enforced within the framework of existing criminal court orders and not by unilateral acts that amount to disobedience.

Thus, the present judgment implicitly narrows the operative overlap of Mohan Lal by making clear that civil/tribunal findings on bank rights cannot be a licence to disregard binding directions on custody of property in criminal proceedings.

5.6 Suppression of material facts before the DRT

A particularly important aspect is the Court’s comment that Axis Bank did not inform the DRT about:

The 07.07.2012 and 03.06.2013 orders,
The High Court’s 10.10.2012 order, and
The withdrawal of SLP and of the Bank’s own criminal misc. petition.

This leads to the finding (para 17, 22) that:

“The DRT has passed the order dated 20.04.2018 in complete ignorance of the above earlier orders. Had all these facts and orders been brought into the notice of the DRT, the order dated 20.04.2018 would not have been passed.”

This resonates with established principles of procedural fairness:

Parties are expected to fully and frankly disclose all material facts that bear on the relief sought.
Orders obtained by suppression of material facts can be treated as having diminished normative authority and may not be relied upon to defeat other subsisting judicial orders.

While the Court does not expressly use the terms “fraud on the court” or “void order”, it practically treats the DRT’s 20.04.2018 order as incapable of justifying the Bank’s disobedience of the earlier criminal court orders. This serves as a cautionary signal to litigants and counsel:

Non-disclosure can severely limit the protective value of any order obtained.
Tribunals and courts may decline to recognise such orders as a valid defence to later allegations of contempt or disobedience.

6. Precedential Value and Impact

6.1 For banks and financial institutions

The judgment has immediate practical resonance for banks and other secured creditors:

If assets or sale proceeds are under criminal court custody by virtue of an order under Sections 451/457 CrPC, banks cannot:
- unilaterally appropriate,
- set off, or
- adjust
those funds, even if they are held in accounts or FDRs in the bank.
Any such dealing must be preceded by an application to the criminal court seeking modification, clarification, or permission.
Obtaining orders from DRTs or civil courts without placing the full criminal court record before them will not protect the bank from liability, and such orders may be given limited or no effect where they conflict with subsisting criminal directions.
Personal liability risks to senior management and branch officials are real, as the Magistrate’s issuance of notice to the MD/CEO and Branch Manager illustrates.

Strategically, this judgment encourages banks to:

Implement internal protocols ensuring that legal teams cross‑check for pending criminal proceedings and orders before acting on civil/DRT orders affecting the same assets.
Maintain systems to flag accounts and assets that are subject to court custody and require prior judicial clearance before any debit or appropriation.

6.2 For criminal courts and criminal procedure

The judgment also strengthens the hand of criminal courts in supervising case property:

It confirms that criminal courts can and should treat auction proceeds deposited pursuant to Section 457 CrPC directions as “court property” under their direct control.
They can insist that custodians—banks, authorities, or individuals—strictly comply with their orders and can direct refund or restoration in cases of unauthorised dealings.
The Court’s strong language about rule of law and disobedience supports the use of contempt or other coercive measures in appropriate future cases where compliance is lacking.

This may encourage more robust and creative use of Sections 451 and 457 CrPC in complex economic offences involving perishable goods or assets that need to be monetised but still remain under judicial supervision.

6.3 For DRTs and specialised tribunals

Though the DRT is not directly reprimanded, the judgment implicitly suggests that:

DRTs should be cautious when dealing with property whose origin is linked to criminal proceedings and particularly where seizure and auction have been court-regulated.
Tribunals should actively inquire whether:
- the subject property is under criminal court orders, and
- any such orders have attained finality.
Orders of temporary appropriation or adjustment should be framed so as to respect and not contradict such criminal court orders.

In a broader sense, the judgment underlines the need for institutional comity and coordination among different adjudicatory forums to avoid contradictory or overlapping orders that can weaken respect for the rule of law.

7. Simplifying Key Legal Concepts

7.1 Section 457 CrPC – What does it do?

Section 457 CrPC allows a Magistrate to decide what should be done with property seized by the police when it is brought to the court’s notice. The Magistrate can:

Return property to the person it appears to belong to, or
Order it to be kept in safe custody, sold, or otherwise disposed of, especially if it is perishable or difficult to store.

Here, the Magistrate chose to auction the perishable agricultural goods and convert them into cash, then secure that cash in FDRs in the name of the Court. This ensured that:

The produce did not rot or lose value, and
A secure, interest‑earning fund would be available for eventual distribution depending on the outcome of the case.

7.2 “Court property” – What does that mean?

When the Court orders that certain money or property be held in a specific way (e.g., in an FDR in its name), that property becomes “court property”. Practically, this means:

The final say on what happens to that property lies with the Court.
The party physically holding it (like a bank) is merely a custodian or bailee, not the beneficial owner.
No one—including the custodian—can change its use, encash it, or appropriate it without the Court’s permission.

7.3 DRT and Section 19(25) RDB Act

The Debt Recovery Tribunal (DRT) is a specialised forum created to expedite recovery of debts due to banks and financial institutions. Under Section 19(25) of the RDB Act, the DRT can pass interim orders and give directions necessary to:

Give effect to its orders, or
Prevent abuse of its process, or
Secure the ends of justice in debt recovery matters.

However, this power does not authorise DRTs to:

Override or nullify existing criminal court orders about seized property, especially when those orders are not disclosed to the Tribunal.

7.4 Pledge and Section 178 of the Contract Act

Section 178 of the Indian Contract Act deals with cases where a mercantile agent pledges goods in his possession. It protects the pledgee (the person to whom goods are pledged) if the agent was in possession of goods with the owner’s consent and acted in the ordinary course of business.

Axis Bank invoked Section 178 to argue that:

The traders and firms had pledged the agricultural goods to it as a mercantile agent might, and
Therefore the Bank had valid pledgee rights over the goods and, by extension, over the sale proceeds.

The High Court does not decide the substantive civil validity of the pledge in this petition. Instead, it focuses on the procedural point: even if the Bank has robust civil/pledgee rights, it must assert them within the framework of the criminal court’s custody orders, not contrary to them.

7.5 Rule of law – in practical terms

“Rule of law” is a broad principle, but in this context it boils down to some very practical propositions:

No individual or institution—including powerful banks—can ignore or defy court orders.
Where two forums (e.g., a DRT and a criminal court) deal with related matters, parties must disclose all relevant orders so that no conflicting directions arise.
If a party chooses to bypass or conceal such orders, it risks being found in disobedience or contempt of court.

8. Critical Reflections

The judgment is firmly grounded in the need to maintain the integrity of judicial orders. A few further reflections may be noted:

On not setting aside the DRT order:
Although the High Court finds the DRT’s 20.04.2018 order to have been passed in ignorance of earlier binding orders, it stops short of formally setting that order aside. Instead, it focuses on the Bank’s duty not to rely on that order to contravene criminal court directions. This is a restrained approach that avoids direct inter‑jurisdictional friction while still safeguarding the authority of the criminal court.
On leniency towards the Bank:
The Court notes that “appropriate proceedings could have been initiated” against the erring officials but deliberately takes a lenient view, albeit while sending a “clear message” for the future. This may be seen as giving Axis Bank an opportunity to rectify its conduct without immediate penal consequences, while building a strong precedent that will make similar conduct more risky for institutions.
On systemic coordination:
The case exposes the practical problems that arise when assets tied to a criminal case are also central to bank recovery proceedings. It suggests a need for more formal cross‑communication protocols between criminal courts and tribunals like DRTs, perhaps through mandatory disclosure requirements or inter‑court references when overlapping subject‑matter is detected.

9. Conclusion: Key Takeaways

The Rajasthan High Court’s decision in Axis Bank Ltd. v. State of Rajasthan makes several points of lasting importance:

Seized auction proceeds under Section 457 CrPC are court property.
When a criminal court orders auction of seized assets and directs that proceeds be deposited in FDRs in its name, those funds come under judicial custody. Any custodian, including a bank, holds them on behalf of the Court and cannot unilaterally appropriate them.
Prior criminal court orders bind, despite later DRT or civil orders.
Even where a DRT grants interim permission to appropriate funds, such an order cannot override or justify disobedience of earlier, final criminal court orders governing the custody and use of those funds—especially when those orders were not disclosed to the tribunal.
Non-disclosure undermines the protective value of tribunal orders.
Obtaining an order by failing to disclose relevant judicial directions is procedurally improper and can lead courts to treat such orders as ineffective in defending subsequent acts of disobedience.
Banks and corporate entities are fully subject to the rule of law.
Large institutions cannot invoke their commercial interests or tribunal orders to excuse violation of specific court directions. Senior management and branch staff may be personally answerable for such disobedience.
Reaffirmation of judicial authority and rule of law.
By upholding the Magistrate’s order and directing Axis Bank to redeposit the appropriated sum with interest, the High Court emphatically reinforces that “no one, howsoever high, is above the law” and that courts will protect their own processes and orders vigorously.

Taken together, the judgment provides a strong doctrinal and practical precedent for future cases involving overlapping claims over property caught in both criminal and civil/tribunal proceedings. It stands as a clear warning against attempts—deliberate or negligent—to circumvent criminal court orders through parallel recourse to specialised fora.

Seized FDRs as “Court Property” and the Limits of DRT Orders: Commentary on Axis Bank Ltd. v. State of Rajasthan (2025)