Karnataka High Court Seeks State's Response On Digital Gold Platform's Plea Against 'Blanket' Account Freeze Affecting Customer Redemptions

The Karnataka High Court on Thursday (July 23) sought the State's response on a plea by digital gold platform Jar Gold Retail Private Limited and its parent company Changejar Technologies Private Limited, challenging the CID's 'blanket' debit-freeze of their bank accounts, contending that it has affected customers seeking redemption of their digital gold holdings.

While the single judge bench of Justice Suraj Govindaraj did not grant immediate interim relief, it recorded the petitioners' willingness to furnish customer-wise details and transaction records to facilitate the investigation and directed the State to obtain instructions on the information required from the platform.

The petitioners submitted that customers regularly seek redemption of the digital gold purchased through the platform, but the complete freezing of the bank accounts had prevented the company from honouring those redemption requests and processing fresh purchases.

“…The learned counsel for the petitioners submits that the customers of the petitioner are dealing with gold on the platform of the petitioner. Many of the customers on a regular basis seek redemption; when the petitioner would have to make payments for due amounts, due to bank accounts being frozen, they are unable to pay money to those bona fide persons who have sought redemption. Even as regards the fresh purchases being made, the petitioner is unable to do so since the bank account is frozen....”, the court initially noted in the order.

Counsel for the petitioners argued that the impugned notice was "virtually in the nature of attachment" without any quantification. He further submitted that the blanket freeze was a "death knell" to the business, affecting 250 employees and the company's ability to honour customer redemptions for the gold they own.

During the hearing, the Court also questioned whether the investigation required freezing the entire bank accounts or whether a lien for the amount under investigation would suffice.

“…The learned AGA was called upon to enquire as to whether there are any complaints and the extent of complaints, so that lien could be marked rather than the entire account being debit-frozen. At present, the AGA submits that he is not in a position to make any submission in relation thereto. The petitioner submits that he is ready to furnish any and all information that the respondent requires to be furnished, including the details of the customer, the KYC requirement, extent of transaction, quantum and nature of transaction both for the purchase and sale of gold. The learned AGA is required to secure instructions and make submissions as to what all information is required….”

The matter has been posted for further hearing on July 31.

The petitions, filed through Adv. Shesha Karthik M Reddy, sought to quash notices dated July 20, 2026 issued by the Deposit Fraud Investigation Department (DFID) of the CID, directing Axis Bank to freeze accounts held at its Silk Board Branch in Bengaluru.

The accounts in question, belonging to Changejar Technologies (the parent company of Jar Gold) and Jar Gold Retail, have allegedly been rendered inoperable, preventing the companies from processing customer redemption requests and digital gold purchases.

The petitioners informed the Court that this was the second time such notices had been issued, with an earlier round of freezing orders having been stayed by the High Court. The fresh notices on other accounts, however, have once again brought business operations to a standstill, contended the counsel appearing for both companies.

The single judge bench questioned the CID on the legal basis for the freezing, noting that the notices did not specify the amount sought to be secured.

The petitioner also told the court that the major issue was the lack of power for the police to debit-freeze an entire bank account under Section 106 of the Bharatiya Nagarik Suraksha Sanhita (BNSS), 2023, which deals with seizure of property for evidentiary purposes, or whether such action could only be taken under Section 107, which requires a Magistrate's order for attachment of proceeds of crime.

The Court noted the distinction between two sections: “Attachment of bank account vis-à-vis marking the lien, there is a difference. The attachment of the entire account, they can't do. This is your submission.”

The Additional Government Advocate (AGA) appearing for the State submitted that the matter involves aspects of Karnataka Protection of Interest of Depositors (KPID) Act. He opposed any interim relief, pointing out that the petitioners had already challenged the ambit of Section 106 and 107 BNSS in another matter (before Justice M Naga Prasanna) which was reserved for orders, and likely to be delivered in the coming week.

“...Till that is decided, no interim order be granted”, the AGA urged the court

He further submitted that the investigation was still ongoing with numerous transactions being examined, and that the exact disputed amounts could not be ascertained at this stage.

Subsequently, the petitioners explained their business model in detail. According to them, the platform enables customers to purchase physical gold, starting from small amounts, through a mobile application. The company purchases gold in bulk from MMTC, stores the physical gold in secure vaults, and issues digital certificates of ownership to customers, who may later redeem or surrender the gold.

The petitioners submitted that they currently hold 1,521 kilograms of physical gold in vaults, backed by an insurance policy to protect customer interests.

The petitioners went on to inform the Court that in an earlier round of litigation; they had approached the designated Court for release of accounts. On May 27, 2026, an order was passed in their favour, which was challenged by the prosecution, and is now pending before the High Court [before Justice M. Nagaprasanna], with orders reserved.

In those proceedings, the investigating officer had filed a report confirming that 1521 kilograms of gold were in the vault, and the Court had permitted statutory GST payments to continue, the petitioner said further.

“…On a daily basis, redemptions are happening on the app. The average daily payout to customers comes to around Rs 20.4 crores”, counsel submitted adding that the company would be unable to process the redemption requests unless the blanket freeze on the said accounts are lifted.

The petitioners also submitted that there were no allegations of money laundering and that although the FIR alleged an "attempt to cheat" customers, no customer had come forward alleging any cheating despite public notices issued across 17 newspaper editions nationwide.

Recognising the concern regarding customers awaiting redemption of their digital gold, the Court orally indicated that individual redemption requests could be considered, subject to appropriate safeguards and KYC verification.

“…You place all the applications for redemption; we will pass orders on each application. The person who redeems also must be subjected to terms… If KYC is done, you [state] can always trace it out.”

When Jar Gold's counsel responded that individual customers purchasing small quantities of gold would not realistically approach the Court for each redemption, the Court directed the State to obtain instructions on the information required from the platform.

The matter will be heard again on July 31.

Case Title: Jar Gold Retail Pvt ltd v. State of Karnataka & Ors and Connected Matter

Case No: WP 22584/2026