Introduction:

The Karnataka High Court has clarified the scope of police powers to secure property during a criminal investigation, holding that an investigating officer can freeze a bank account by issuing a prohibitory or debit-freeze direction under Section 106 of the Bharatiya Nagarik Suraksha Sanhita, 2023 (BNSS). The Court ruled that the police are not required to invariably invoke Section 107 of the BNSS, which provides for attachment of property, merely because the property sought to be secured is a bank account. The judgment was delivered by Justice M. Nagaprasanna in State of Karnataka v. JAR Gold Retail Private Limited & Connected Matters, reported as 2026 LiveLaw (Kar) 286.

The ruling arose from criminal petitions filed by the State of Karnataka challenging orders passed by the jurisdictional court directing the defreezing of bank accounts belonging to JAR Gold Retail Private Limited. The accounts had been frozen during an investigation conducted by the Koramangala Police into alleged violations of the Banning of Unregulated Deposit Schemes Act, 2019 (BUDS Act).

The prosecution alleged that the digital platform operated by JAR Gold, ostensibly facilitating the purchase and sale of gold, was in substance functioning as an unregulated deposit-taking scheme. On the basis of these allegations, an investigation was initiated and the police issued prohibitory directions to various banks, preventing transactions from the company’s accounts.

JAR Gold challenged the freezing of its accounts before the jurisdictional court. It invoked Section 15(3) of the BUDS Act read with Sections 497 and 503 of the BNSS and sought release of the bank accounts. The jurisdictional court, by an order dated April 4, 2026, directed the accounts to be defrozen. The court took the view that the criminal case appeared to have been registered merely on suspicion and that the continued freezing of the accounts could not be justified on that basis.

The State of Karnataka challenged the order before the High Court. The principal legal question was whether an investigating officer, while exercising the power of seizure under Section 106 of the BNSS, could secure a bank account through a prohibitory or debit-freeze direction, or whether the police were required to approach the Court under Section 107 and obtain an order of attachment before restricting operation of the account.

The issue assumed importance because Sections 106 and 107 of the BNSS deal with different mechanisms concerning property connected with criminal proceedings. Section 106 substantially carries forward the power that was earlier contained in Section 102 of the Code of Criminal Procedure, 1973, enabling police officers to seize certain property suspected to be connected with an offence. Section 107, on the other hand, deals with the attachment, forfeiture or restoration of property derived from criminal activity through a judicial process.

The respondent relied upon an interpretation under which bank accounts could not be frozen merely by invoking the police power of seizure and that the attachment mechanism under Section 107 was the proper and exclusive route. The State disputed this interpretation and argued that such a construction would substantially undermine the investigative power expressly conferred upon police officers under Section 106.

The High Court noted that different High Courts had taken differing approaches to the question. The Court specifically considered decisions, including the Kerala High Court’s judgment in Headstar Global Pvt. Ltd. v. State of Kerala, which had taken a restrictive view of the power to secure bank accounts and treated attachment under Section 107 as the appropriate mechanism.

An important submission was also made by Advocate Angad Kamath, who assisted the Court as Amicus Curiae. He submitted that Section 106 of the BNSS substantially reenacts Section 102 of the Cr.P.C., under which the police had consistently been recognised as having the power to seize or freeze bank accounts during investigation when the statutory conditions were satisfied.

After examining the statutory scheme, legislative intent and existing legal principles, Justice Nagaprasanna accepted the State’s position. The Court held that Sections 106 and 107 operate in distinct fields and that there was no basis for treating Section 107 as the sole mechanism through which a bank account could be secured during investigation.

The High Court consequently set aside the orders directing the defreezing of JAR Gold’s accounts. At the same time, the Court preserved an interim arrangement permitting operation of the accounts for payment of Goods and Services Tax (GST), recognising that payment of statutory tax obligations could not simply be prevented.

The judgment thus provides an important clarification on the investigative powers of police under the new criminal procedure framework introduced by the BNSS. It also emphasises that two statutory provisions dealing with different stages or purposes cannot be interpreted in a manner that renders either of them practically ineffective.

Arguments of the Parties:

The State of Karnataka challenged the jurisdictional court’s order primarily on the ground that the court had adopted an unduly restrictive interpretation of the investigative powers available under Section 106 of the BNSS. According to the State, the police were investigating serious allegations under the BUDS Act and were entitled to take immediate steps to preserve property or funds that could potentially have a connection with the alleged offence.

The State contended that Section 106 expressly empowers an investigating officer to seize property suspected to be connected with the commission of an offence. A bank account, according to the State, could fall within the scope of this power where the funds contained in the account were suspected to be connected with criminal activity. A prohibitory direction issued to the bank, preventing withdrawal or transfer of the funds, was therefore argued to be a means of effectuating the statutory power of seizure.

The State further argued that the mere fact that the property was in the form of money maintained in a bank account could not take it outside the scope of Section 106. The purpose of a seizure provision is to preserve property relevant to an investigation so that it is not dissipated, transferred or otherwise placed beyond the reach of the investigating agency.

The State resisted the contention that Section 107 provided the exclusive mechanism for freezing or securing bank accounts. It argued that Sections 106 and 107 served different purposes and operated at different stages. Treating Section 107 as the only provision capable of securing a bank account during investigation would effectively deprive Section 106 of much of its intended investigative utility.

The State also relied upon the legislative continuity between Section 106 BNSS and Section 102 Cr.P.C. It was submitted that the power of police officers to seize or freeze bank accounts during investigation had been recognised under the earlier criminal procedure regime. The BNSS, substantially reenacting that provision, could not be interpreted as silently taking away such a power unless the statutory language clearly indicated such an intention.

The State’s position was therefore that the investigating officer did not have to obtain a separate attachment order every time immediate steps were necessary to prevent suspected proceeds or property from being dealt with during an investigation. Section 106 itself supplied the necessary investigative authority, subject to the statutory requirements governing seizure.

The State also challenged the reasoning of the jurisdictional court that the criminal case had been registered merely on suspicion. At the investigation stage, it was argued, the police are necessarily in the process of collecting evidence. A court should not demand proof equivalent to that required at the stage of trial before permitting investigative measures intended to preserve potentially relevant property.

The State therefore sought restoration of the freeze and setting aside of the order directing the banks to permit unrestricted operation of the accounts.

On behalf of JAR Gold Retail Private Limited, Senior Advocate Sandesh Chouta opposed the State’s petitions. The respondent’s case was that the continued freezing of the company’s bank accounts severely affected its ability to conduct its ordinary business operations and that the police could not exercise an unrestricted power over the company’s funds merely by characterising the accounts as property connected with an alleged offence.

The respondent argued that the statutory scheme of the BNSS required a distinction between seizure and attachment. According to the company’s interpretation, where the State sought to effectively immobilise property, particularly funds maintained in bank accounts, the appropriate mechanism was the judicial attachment procedure contemplated under Section 107 rather than an indefinite police-imposed debit freeze under Section 106.

The respondent’s argument was also based upon the safeguards associated with judicial supervision. An attachment order involves consideration by a court, whereas allowing an investigating officer to freeze an account directly could, according to the respondent, result in significant interference with property and business rights without prior judicial scrutiny.

JAR Gold relied upon the divergent judicial approaches to the issue and particularly referred to the Kerala High Court’s decision in Headstar Global Pvt. Ltd. v. State of Kerala. The respondent’s position was that Section 107 should govern situations where the State seeks to secure property suspected of being derived from criminal activity, thereby preventing the police from bypassing the judicial procedure contemplated by that provision.

The company also sought practical relief in relation to the operation of its accounts. During the proceedings, Senior Advocate Sandesh Chouta submitted that the accounts should remain operational at least to the extent necessary to enable the company to pay salaries to approximately 200 employees.

The submission highlighted the practical consequences of a complete debit freeze. According to the respondent, maintaining a total prohibition on the operation of the accounts could affect employees, statutory obligations and the ordinary functioning of the company, even before the allegations against it had been finally adjudicated.

The jurisdictional court had already permitted the accounts to be defreezed, and the respondent sought continuation of that arrangement. The respondent also relied upon the absence, at that stage, of conclusive proof establishing that the company’s entire bank balances represented proceeds of crime or funds connected with an offence.

The arguments thus placed before the High Court two competing interpretations of the BNSS. The State advocated a construction that preserved the immediate investigative power under Section 106, while the respondent sought a construction that subjected the securing of bank accounts to the judicial attachment procedure under Section 107.

The Court was consequently required to determine whether the two provisions were mutually exclusive or whether they could operate simultaneously in their respective fields.

Court’s Judgment:

Justice M. Nagaprasanna allowed the State’s criminal petitions and set aside the jurisdictional court’s orders directing the defreezing of JAR Gold’s bank accounts. The High Court held that the investigating officer was competent to freeze the accounts under Section 106 of the BNSS and that Section 107 did not constitute the exclusive mechanism for securing bank accounts during investigation.

The starting point of the Court’s reasoning was the statutory distinction between Sections 106 and 107. The Court held that the two provisions address different situations and perform different legal functions. They must therefore be interpreted harmoniously rather than in a manner that allows one provision to completely displace the other.

The Court rejected the argument that every bank-account freeze necessarily amounts to attachment requiring recourse to Section 107. A prohibitory direction issued by the investigating officer under Section 106 operates as an investigative measure intended to preserve property suspected to have a connection with an offence. Attachment under Section 107 serves a different statutory purpose and is governed by its own requirements.

The Court found that treating Section 107 as the sole route for securing a bank account would have the effect of substantially disabling the investigative power contained in Section 106. Such an interpretation could not be accepted merely because the property involved happened to be money held in a bank.

The Court expressed this principle in strong terms, observing that Sections 106 and 107 deal with different situations and that an interpretation which gives life to one provision by effectively suffocating the other was not an exercise the Court could undertake.

The Court’s approach was based on the principle that statutory provisions must, wherever possible, be given meaningful operation. Courts should avoid an interpretation under which one provision becomes redundant or practically ineffective when the legislature has separately enacted both provisions.

The High Court also considered the historical relationship between Section 106 BNSS and Section 102 Cr.P.C. Section 106 substantially reenacts the earlier provision empowering police officers to seize property suspected of being connected with an offence. Under the earlier legal framework, courts had recognised that this power could extend to bank accounts and could permit freezing of accounts during investigation in appropriate cases.

The Court found significance in this legislative continuity. If Parliament intended to completely remove the police power to secure bank accounts during investigation, it would have been expected to use clear statutory language to that effect. No such exclusion could be inferred merely from the enactment of Section 107.

The submission of Amicus Curiae Advocate Angad Kamath was particularly relevant on this point. He assisted the Court by drawing attention to the fact that Section 106 substantially reenacts Section 102 of the Cr.P.C. and that the earlier provision had long been understood as conferring investigative authority upon police to secure bank accounts connected with alleged offences.

The Court therefore accepted that a bank account can, in appropriate circumstances, constitute property capable of being secured through the seizure power under Section 106. A debit-freeze direction issued to the concerned bank can operate as the practical mechanism through which the account is secured.

The Court’s conclusion does not mean that the police have an unlimited or unreviewable power to freeze any bank account merely because an investigation has been commenced. The power remains connected to the statutory requirements governing seizure and must be exercised in the context of the investigation into an offence.

What the Court rejected was the proposition that the police must invariably abandon Section 106 and approach the Court under Section 107 whenever the property sought to be secured happens to be a bank account.

The distinction is particularly important in the investigative stage. Criminal investigations may require immediate preservation of funds suspected to be connected with an offence. If an investigating officer had to await a separate attachment proceeding in every case before preventing the transfer of potentially relevant funds, there could be a risk that such funds would be withdrawn, transferred or dissipated before judicial proceedings could be completed.

The Court’s interpretation therefore recognises the practical purpose of a seizure power: preserving potentially relevant property while the investigation is underway.

At the same time, the Court did not treat the freezing of the accounts as an adjudication of JAR Gold’s ultimate criminal liability. The issue before the Court concerned the legality of the investigative measure, not whether the company had actually committed the offences alleged against it.

This distinction is fundamental. A freeze under Section 106 is an investigative step. It does not amount to a judicial declaration that the funds constitute proceeds of crime or that the account holder is guilty of an offence. The ultimate determination of criminal liability must follow the ordinary course of criminal proceedings.

The Court also considered the divergent judicial approaches that had emerged on the issue. It noted decisions such as the Kerala High Court’s judgment in Headstar Global Pvt. Ltd. v. State of Kerala, which had adopted the view that bank accounts could be secured only through the attachment mechanism under Section 107.

The Karnataka High Court did not accept that restrictive interpretation. It found that such an approach failed to sufficiently account for the separate statutory function of Section 106. In the Court’s view, the existence of Section 107 could not be used to read down or eliminate the investigative power separately conferred under Section 106.

The Court accordingly held that the investigating officer’s power under Section 106 includes the authority to issue a prohibitory direction to a bank, thereby preventing debit transactions from an account that is relevant to the investigation.

Having reached that conclusion, the High Court set aside the jurisdictional court’s order dated April 4, 2026, which had directed the defreezing of JAR Gold’s accounts.

The High Court, however, preserved an important practical safeguard concerning statutory tax payments. It clarified that the interim arrangement under which the accounts could be operated for payment of GST would continue. The Court recognised that GST payment constituted a statutory obligation and therefore permitted the company to meet that obligation despite the continuation of the freeze.

This aspect of the order demonstrates that the Court did not approach the issue mechanically. While recognising the investigative authority of the police, it also accounted for legitimate statutory obligations that could arise during the period of the freeze.

During the proceedings, the respondent had also sought permission to operate the accounts for payment of salaries to approximately 200 employees. The submission reflected the wider consequences that a complete account freeze can have upon a functioning business. Nevertheless, the Court’s principal ruling remained that the investigating agency possessed the statutory power to secure the accounts under Section 106.

The judgment is significant because it provides clarity on the relationship between the seizure and attachment provisions of the BNSS. The Court effectively held that the two provisions should not be treated as competing alternatives where one necessarily excludes the other. Rather, their applicability depends upon the nature and purpose of the action being taken.

Section 106 concerns the investigative seizure of property suspected to be connected with an offence. Section 107 provides a separate mechanism concerning attachment and related consequences. The existence of the latter does not extinguish the former.

The judgment also reflects the broader principle of harmonious statutory interpretation. Where Parliament has enacted two provisions dealing with related subjects, courts ordinarily seek to give effect to both rather than interpret one provision in a way that makes the other redundant.

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