Banks have no right over stolen gold if it is deposited in a bank, says State High Court

Bengaluru, Feb. 17: The High Court has ruled that any person or entity in possession of stolen property has no legal right to delay or refuse to hand it over when asked by the police.

Also, in the case of stolen property, even if it is a gold loan company, possession of stolen property does not become a shield. It has also ruled that it is not allowed to keep stolen items with itself on the grounds of interest and security.

A single-member bench headed by Justice Suraj Govindaraj passed this order while hearing a petition filed by IIFL Finance Company challenging the action taken by the Kengeri police to hand over stolen gold ornaments on the charge that a staff member of a bank branch in Kengeri had sanctioned a loan by depositing stolen gold ornaments.

Further, the accused cannot object to the recovery of stolen jewellery by the investigating officers on the grounds that he will suffer financial loss if he returns it. If he accepts the argument that he will face financial hardship if he is sanctioned a loan by pledging the stolen jewellery, it will be tantamount to giving a dangerous advance directive. Such arguments will hinder the investigation. It will embolden economic criminals and undermine faith in the criminal justice system, the bench said.

Further, there are no compelling reasons to grant the petition sought by the petitioner. Therefore, the stolen jewellery should be handed over to the investigating officers.

The investigating officers should ascertain that the jewellery was stolen from the Kengeri bank branch and if it is proved, legal action should be taken, the bench said.

Further, the finance company cannot interfere with the superior rights of the real owner of the stolen property or obstruct the investigation, even if it is valid under any security interest agreement. The court held that gold items fall under the ambit of “other matter” under Section 94(1) of the Indian Civil Protection Act, 2023. It also ruled that the investigating officers have the power to issue notices to any person believed to be in possession of such items to surrender them.

A woman employee was working as an assistant manager in the Kengeri branch of a bank since 2022. During an unexpected revaluation in October 2025, serious irregularities were found in the gold loan accounts maintained by the assistant manager and about two kg of gold was missing.

During the verification, it was found that she was involved in acts amounting to theft and criminal breach of trust by secretly removing genuine gold ornaments deposited by the customers and replacing them with fake ones. The accused had allegedly taken loans by pawning the stolen items at various places, including IIFL Finance Company. The bank had filed a complaint regarding this allegation, and the police had issued a notice to the finance company. The company had challenged this in the High Court.

During the hearing, the counsel for IIFL Finance Company said that the gold was received in good faith. The loans were disbursed after following the proper procedures. According to the terms of the agreement, the pawned gold cannot be given. It was also stated that it is possible to cooperate with the investigation without seizing the gold.

The counsel for the bank, who objected to this, argued that it was its legal duty to return the stolen gold to its customers. The counsel for the government argued that the investigation had found that the accused officer had stolen the gold pawned at IIFL Company and the investigation should continue.

• Kovarkolli Indresh

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