The Karnataka High Court has overturned earlier court orders, emphasising that police can freeze accounts without magistrate approval using Section 106 of the Bhartiya Nagarik Suraksha Sanhita, marking a significant development in law enforcement powers during financial probes.
The Karnataka High Court has set aside three sessions court orders that had ordered the release of gold and silver and the unfreezing of bank accounts linked to wealthtech start-up Jar, while also drawing a wider line on police powers to freeze accounts during investigations.
In an order delivered on August 10, Justice M. Nagaprasanna said police may debit-freeze a bank account as an investigative and preservative step under Section 106 of the Bharatiya Nagarik Suraksha Sanhita without first obtaining a magistrate’s approval. The court said the police must, however, report the action forthwith to the jurisdictional magistrate. It distinguished that power from attachment under Section 107, which requires a judicial order and is tied to the treatment of alleged proceeds of crime.
The ruling is the latest in a series of decisions scrutinising how investigators can restrain bank accounts under the new criminal procedure law. The Bombay High Court has separately held that agencies cannot use Section 106 to debit-freeze or attach accounts and must instead follow the judicial route under Section 107, while the Karnataka High Court has also said banks cannot block more money than investigators have specifically sought to freeze. In a separate Karnataka case involving Mufin Green Finance, the court said freezing a sister company’s account during an inquiry was arbitrary and contrary to legal principles.
The Jar dispute began after concerns emerged over its digital gold business. According to the company’s own profile, Jar operates a savings platform with tens of millions of users, has expanded into jewellery through its Nek brand and says it has cut losses sharply while lifting revenue after shifting to a principal model. But the court also noted, as reported in earlier proceedings, that the substance of a transaction matters more than its label, and that financial wrongdoing can involve commodities, digital assets and gold-linked products rather than plain cash deposits. The high court has now allowed the limited April 27 arrangement to continue, under which Jar could use frozen accounts for essential payments such as salaries and statutory dues, while otherwise restoring the stricter freeze.
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