Release of seized cash is premature where ownership is disputed, Supreme Court directs

A Bench of Justices Sanjay Karol and Prashant Kumar Mishra heard an appeal by an accused challenging a Gujarat High Court order that had directed release of seized currency (muddamal) of Rs.50 lakh to a private claimant during the pendency of criminal proceedings. The appeal arose from an order in which the High Court quashed trial-court and revisional orders declining to return the cash and directed release on conditions including personal bond and detailed panchnama.

The Court allowed the appeal, set aside the High Court judgment and restored the orders of the trial court and the Additional Sessions Judge. The Court held that where the ownership of seized money was itself the subject-matter of the criminal investigation and the exchange of money was in controversy, prima facie determination of rightful ownership could not be made at the interlocutory stage and releasing the muddamal would be "unjustified and premature." The Court observed that Section 451 CrPC and precedents such as Sunderbhai Ambalal Desai were distinguishable on the facts because the money in question had been recovered in an investigation where the exchange of money formed the core of the dispute. The Court, in its reasoning, observed: "The appropriate ownership of the sum of money can only be determined after consideration of all evidence and having taken into account the claims and views of all the other persons that the appellant-accused has allegedly played foul with, in business. The evidence presented by respondent no. 2 to establish his claim over the said amount will have to be considered by the Court seized of trial in the matter, and then only can a proper decision be arrived at. At this stage, therefore, releasing the muddamal would be unjustified and premature." The Court noted and reproduced earlier judicial observations, including the trial court's remark that "it does not appear to be proper and just to take any decision regarding muddamal" at the stage when objections of all witnesses had not been obtained, and the High Court's contrary view that "the currency notes seized by the police is required to be released in favour of the petitioner who is lawfully entitled to claim the amount."

Background

The dispute originated from a complaint dated 9 April 2022 alleging that the appellant ran a proprietary concern and had traded in castor seeds with several merchants, including the complainant, resulting in alleged defaults totalling over Rs.3.49 crore. The police investigation seized cash of Rs.50,00,000. A chargesheet was filed under Sections 406, 420 and 120-B IPC with 41 witnesses listed. One of the private respondents (respondent no.2) claimed the seized cash as amounts owed to his concern and sought release of the muddamal by producing bills, audit reports and ledger entries.

The Trial Court refused the release application on the ground that ownership and entitlement were matters of evidence and that objections of all witnesses were not on record. The Additional Sessions Judge affirmed, treating the amount as proceeds of crime pending trial. The High Court granted relief to the private respondent, relying on Sunderbhai Desai and directing release on furnishing personal bond, drawing detailed panchnama and permitting use of the currency notes.

The Supreme Court examined Section 451 CrPC and Sunderbhai Desai but distinguished those precedents on the facts, holding that where the very transaction and exchange of money formed the subject of criminal allegations, prima facie release would risk prejudicing other claimants and the prosecution. The Court allowed the appeal, set aside the High Court order and restored the trial court and revisional orders. The Court directed that amounts already withdrawn pursuant to the High Court's order be deposited with the Registry along with interest and be transferred to the custody of the trial court forthwith; it further directed private respondents to deposit original currency notes, if still available, before the trial court and permitted withdrawal only after cross-verification against the detailed panchnama. Pending applications stood disposed of.

Case No.: 2025 INSC 1129 Case Title: Rajput Vijaysinh Natwarsinh v. State of Gujarat & Ors. Appearances: For the Petitioner(s): [Not indicated in judgment] For the Respondent(s): [Not indicated in judgment]