Karnataka High Court: While considering the instant petition revolving around allegedly stolen gold articles that were pledged with the petitioner (Muthoot Finance); the bench of Suraj Govindraj, J*., noted that innumerable matters are coming up before the Court where stolen gold had been pledged with a gold finance company. The Court opined that this aspect must be examined by the concerned authorities and proper guidelines must be formulated in relation to issues such as pledging of gold, ascertainment of ownership, identity of the person pledging the gold, implication of pledging stolen gold, manner of dealing with such gold when criminal proceedings are taken up etc.
Therefore, the Court urged the Law Commission, Karnataka to investigate this matter and formulate necessary guidelines/rules or the like as deemed fit.
In the instant case, the petitioner knocked on the doors of the Court pleading that seizure of the gold pledged by its customers by the State Police, on the account that it was stolen, was arbitrary and violates fundamental rights guaranteed under Articles 14 and 19(1)(g) of the Constitution. Counsel for the petitioner submitted that there is a right vested on account of the pledge of the said gold as a security and that security cannot be taken away on the ground that the gold was stolen; the ownership of the gold would have to be established by the person claiming it by way of an appropriately instituted civil suit.
Considering the petitioner’s prayer and submissions, the Court opined that the petitioner being only a pledgee/ pawnee would have only the right that the pledgee/pawnee has in the said gold and the petitioner cannot claim any right more than that.
The Court stated that the true owner of the gold cannot be deprived of the use of the gold, merely because the same is pledged with a gold finance company after being stolen from such true owner. The Gold Finance Company is vested with a duty to carry out proper due diligence before accepting the gold as a pledge for a loan disbursed.
Taking note of the innumerable matters of similar nature coming before the Court, the Bench opined that there is a requirement of proper guidelines to address the concerned issues; hence the Court urged the State Law Commission to do the needful in this regard.
[Muthoot Finance Ltd. v. State of Karnataka, WRIT PETITION NO. 36201 OF 2024, decided on 31-12-2024]
*Order by Justice Suraj Govindraj
Advocates who appeared in this case:
Petitioner: SRI. ANISH JOSE ANTONY., ADVOCATE
Respondent: SRI. MOHAMMED JAFFAR SHAH., AGA
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