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Gold Rush in Cyber Fraud: Karnataka HC Hands Seized Treasures Back to Accused Hacker
In a ruling emphasizing that precious metals shouldn't gather dust in police lockers, the has overturned a magistrate's order denying of seized gold, silver, and cash to the accused in a high-profile cyber fraud case. Justice Mohammad Nawaz, in a single-bench decision on , dismissed the petition by while allowing the accused B. Lakshmipathi's plea. The court mandated release of approximately 5.27 kg gold, 27.25 kg silver, and ₹11.13 lakh cash—valued at over ₹4 crore per police recovery reports—subject to strict conditions.
Anatomy of a Digital Voucher Heist
The saga began in when Reward360, a loyalty platform tied to banks like ICICI, HDFC, and Axis, discovered unauthorized redemptions of its e-commerce gift vouchers. These single-use vouchers, emailed to customers with PINs for reward point exchanges, were allegedly hijacked by accused Lakshmipathi. Using a compromised email (udithebheemanaik@yahoo.com) and software tricks to manipulate URL payloads and order IDs, he rerouted unredeemed vouchers worth lakhs to himself. He then cashed them in on e-commerce sites for gold, silver, two-wheelers, and more, causing losses to the company and its clients.
registered FIR No. 1141/2023 under , plus . Post-investigation , police seized items via Property Forms 43-46/2023 directly from Lakshmipathi's possession—even intercepting deliveries while he was in custody. A magistrate rejected both parties' applications for on , citing unresolved ownership rivalries, prompting these cross-petitions under .
Complainant vs. Accused: Battle for the Bounty
Reward360 argued the seized haul was "directly traceable" to its pilfered vouchers, backed by details like the accused's confessional statement admitting system exploits, transaction logs, e-commerce records, and an internal audit pegging losses far higher. They highlighted the IO's tentative support for their custody claim and stressed no prejudice to trial if released with safeguards, citing precedents like Sunderbhai Ambalal Desai v. State of Gujarat (2002) 10 SCC 283.
Lakshmipathi countered that the items were bought from legitimate stock trading earnings, with documents submitted, and lamented the magistrate's flip-flop—having already released vehicles and documents to him under the same Sunderbhai logic. His counsel urged that favors the possessor (himself) without mini-trials on title, decrying indefinite police storage as unsafe.
The State pushed back, insisting the items were crime proceeds needing preservation amid ongoing probes into additional transactions, warning release could tamper evidence.
Decoding the Judgment: No Rival Claims Bar to Release
Justice Nawaz meticulously dissected the magistrate's error: while applications aren't for title adjudication, the lower court wrongly stonewalled custody altogether due to "serious rival claims" and absent bills—contrary to Sunderbhai , which prioritizes preventing property decay over endless storage. The HC clarified: mere disputes or further probes don't justify "indefinite retention," especially for perishables like valuables; entitlement plus safeguards suffice.
Drawing from Sunderbhai (expeditious release post- /photos/bonds), General Insurance Council v. State of A.P. (2010) 6 SCC 768 (no purpose in retaining valuables), and coordinate bench guidelines in Muthoot Money Ltd. v. State of Karnataka (2023) (gold/silver not for routine police hold; use photos/videographs), the court favored the accused as items came from his custody. Reward360's nexus rested on unproven allegations, lacking docs like bank proofs.
Notably, the magistrate's prior vehicle release underscored inconsistency, and police custody risks loss/misuse.
Key Observations from the Bench
"Continued retention of valuable articles such as gold and silver in police custody serves no useful purpose and may, in fact, result in misuse or loss, which the law seeks to prevent."
"The very existence of rival claims or absence of conclusive proof cannot, by itself, be a ground to reject an application for, particularly when the seized articles are identifiable and can be produced as and when required during trial."
"At the stage of granting, the Court is only required to form aopinion as to who would be the proper person to hold custody, subject to appropriate safeguards, and that a detailed enquiry into ownership is neither contemplated nor desirable."
"The object of Sections 451 and 457 Cr.P.C. is to ensure that seized property is not allowed to remain idle in police custody for an unduly long period."
Victory for the Accused, Liberty Reserved for Complainant
Crl.P. No.9844/2025 (accused) allowed: set aside rejection; police to release PF 43/45/46 items post-valuation, indemnity bond, detailed inventory/photos/videographs, no alienation, produce on demand. Purely interim—no title call.
Reward360's petition dismissed, free to re-agitate post-trial. This reinforces prompt releases, nudging trial courts toward Sunderbhai compliance, potentially easing police vaults nationwide while safeguarding probes via tech (photos, bonds). For cyber victims like Reward360, it underscores bolstering evidence early; for accused, possession presumption holds sway sans ironclad complainant proofs.
