The High Court of Himachal Pradesh has delivered a significant ruling safeguarding the rights of financial institutions by restricting the ability of law enforcement agencies to seize assets based solely on summary notice. Justice Sandeep Sharma quashed a notice issued to Bajaj Finance Limited under Section 94 of the Bharatiya Nagarik Suraksha Sanhita (BNSS), 2023, confirming that the provision does not authorize the mandatory production of pledged gold ornaments suspected of being stolen without adherence to the specific procedures laid out for property seizure.

The controversy arose when the petitioner, a Non-Banking Financial Company (NBFC), found itself at the center of an investigation involving gold ornaments it had accepted as collateral for a loan. The borrower, having pledged the items, subsequently became the subject of a criminal investigation. Upon discovering the ornaments had been reported as stolen, the police issued an administrative notice under Section 94 of the BNSS, demanding that the company produce the pledged assets. Bajaj Finance challenged this order, asserting that it could not be compelled to surrender collateral without the benefit of a judicial process that would allow the company to demonstrate its status as a bona fide pledgee.

In its decision, the court underscored the necessity of distinguishing between the production of documents or digital communication and the seizure of physical property derived from criminal activity. While the state argued that the term "other thing" within Section 94 was broad enough to encompass physical property, the court rejected this interpretation, noting that such an approach would circumvent essential legal safeguards. Justice Sandeep Sharma clarified the scope of the legislation, observing: “The aforesaid provision of law nowhere talks about property derived or obtained, directly or indirectly, as a result of a criminal activity or from the commission of any offence, rather it only talks about production of documents, electronic communications, including communication devices.”

The court further emphasized that investigators seeking to recover property alleged to be the proceeds of crime must instead utilize the mechanisms provided under Sections 106 and 107 of the BNSS. These sections specifically govern the attachment, seizure, and potential forfeiture of property, requiring the state to approach a competent magistrate or court of law. This process ensures that the entity in possession of the property—in this case, the financial institution—is afforded a legal opportunity to participate in the proceedings, explain its position as a lender, and protect its legitimate financial interest in the pledged assets.

Procedural Requirements for Property Recovery

The ruling provides essential clarity on the operational differences between administrative information gathering and property attachment. By requiring police to seek judicial intervention, the court ensures that the interests of third-party stakeholders, such as NBFCs, are balanced against the needs of criminal investigations. The court noted that a summary notice under Section 94 is insufficient because it provides no mechanism for the affected party to contest the seizure or demonstrate that the possession of the property was lawful at the time the loan was issued.

The judgment highlights the necessity of judicial oversight in such matters to prevent the misuse of coercive police powers. As the court articulated: “This Court finds force in the submission of learned counsel for the petitioner that appropriate remedy, if any, available to the investigating agency is to approach the competent Court of law under Section 106 and Section 107 of the BNSS, but certainly the petitioner herein, which is a Non-Banking Financial Company cannot be compelled to produce pledged property in terms of notice, if any, issued under Section 94 of Bharatiya Nagarik Suraksha Sanhita.”

The decision acknowledges that financial companies operating in good faith must be treated as parties with a vested interest when the assets they hold become part of a larger criminal trial. The court’s rejection of the summary notice approach ensures that investigators cannot bypass the requirement of notice and hearing when seeking to seize physical property. This safeguard is critical, as it prevents the potential for arbitrary seizures that could destabilize the standard business practices of lending institutions that accept valuable goods as security.

Establishing Judicial Precedent

This case marks a definitive interpretation of the relatively new provisions within the BNSS, reinforcing the principle that statutory powers granted to police officers must be exercised strictly within the boundaries of the specific procedures provided. By ruling that the term "other thing" in Section 94 is essentially limited to digital evidence and items related to communication, the court has effectively narrowed the scope of police authority in administrative notices, ensuring that the seizure of property remains a judicial act rather than an administrative one.

For the state, the ruling does not signal a total inability to recover evidence or stolen goods. Rather, it redirects the investigative machinery toward the appropriate statutory paths. Under Sections 106 and 107, the police retain the power to seek the attachment of property through the judiciary, where a magistrate can review the merits of the seizure. This process allows the court to weigh the evidence and consider the interests of all stakeholders, potentially leading to orders that both support the criminal inquiry and protect the commercial interests of the financier.

The immediate consequence of this judgment is the quashing of the impugned notice that had been served to the company. However, the court has explicitly granted the investigating agency the liberty to pursue the production of the ornaments through the correct legal channels. By requiring that applications for property production be made to a competent court, the judgment ensures that the petitioner will, in the future, be notified and granted a chance to explain its standing. This procedural rectification protects the NBFC from sudden, coercive dispossession of its collateral, affirming that even during criminal inquiries, established commercial rights and due process remain protected by the judiciary. The matter now moves to the stage where the police must decide whether to invoke the formal judicial process to regain custody of the ornaments, ensuring that all subsequent steps are taken in accordance with the mandates of the law.