Introduction
The Karnataka High Court examined whether the CID can impose a blanket debit-freeze on the bank accounts of a digital gold platform during an investigation under the Bharatiya Nagarik Suraksha Sanhita (BNSS), or whether such action should be limited to securing the disputed amount without completely paralysing the company’s business operations.
Background
Jar Gold Retail Private Limited and its parent company, Changejar Technologies Private Limited, challenged notices issued by the CID’s Deposit Fraud Investigation Department (DFID), directing Axis Bank to freeze their bank accounts.
The companies argued that the complete freeze had prevented them from processing customer redemption requests and facilitating fresh purchases of digital gold. They submitted that thousands of customers regularly redeem their gold holdings through the platform and that the freeze had brought business operations to a standstill, affecting around 250 employees.
The petitioners explained that their platform allows customers to purchase physical gold digitally. The company purchases gold in bulk from MMTC, stores it in secure vaults, and issues digital ownership certificates. They informed the Court that they currently hold 1,521 kilograms of physical gold in insured vaults and that the average daily redemption payout is approximately ₹20.4 crore.
The petitioners further contended that this was the second instance of their accounts being frozen. An earlier freezing order had been stayed by the High Court, but fresh notices were subsequently issued in respect of other bank accounts.
They argued that the police lacked authority under Section 106 of the BNSS to freeze entire bank accounts without specifying the amount under investigation and maintained that such attachment could only be made through the procedure contemplated under Section 107 of the BNSS with appropriate judicial oversight.
The State opposed interim relief, submitting that the investigation under the Karnataka Protection of Interest of Depositors (KPID) Act was still underway and that the exact disputed amount had not yet been determined.
Court’s Observations
The High Court did not grant immediate interim relief but questioned whether freezing entire bank accounts was necessary for the investigation.
The Court observed that there is a distinction between imposing a lien over the amount under investigation and freezing an entire bank account. It sought clarification from the State on whether a limited lien could adequately protect the investigation instead of completely disabling the petitioners’ banking operations.
The Court also took note of the petitioners’ willingness to cooperate fully with the investigation by furnishing customer-wise details, KYC records, and complete transaction data relating to the purchase and redemption of digital gold.
Recognising the hardship faced by customers awaiting redemption of their digital gold, the Court orally indicated that individual redemption requests could potentially be considered with appropriate safeguards and KYC verification to ensure traceability.
The Additional Government Advocate submitted that similar legal issues concerning the scope of Sections 106 and 107 of the BNSS are already pending before another Bench of the High Court, where orders have been reserved.
Decision
The High Court directed the State to obtain instructions regarding the information required from the petitioners for the ongoing investigation and listed the matter for further hearing on 31 July 2026.
No interim order lifting the debit-freeze was granted at this stage.
Takeaways
The case raises an important question regarding the limits of police powers to freeze bank accounts during criminal investigations under the BNSS. The Karnataka High Court has indicated that a blanket freeze affecting legitimate business operations and customer transactions may require closer scrutiny, particularly where a less restrictive measure such as marking a lien over the disputed amount could adequately protect the investigation.
Case Title: Jar Gold Retail Pvt. Ltd. v. State of Karnataka & Ors.
