Valuables Should Not Remain In Police Custody: Karnataka High Court Grants Interim Custody Of Seized Articles To Accused

Granting interim custody of seized items to the accused hacker in the Reward360 cyber fraud case, the Karnataka High Court has held that valuable articles cannot be kept idle in police custody for an unduly long period merely because there are 'rival claims' over their ownership.

Justice Mohammad Nawaz set aside a Magistrate Court order that had rejected applications for interim custody filed by both the accused[hacker] and the de facto complainant [Reward360].

The Court directed the release of gold weighing approximately 5.2 kg, silver weighing 27.25 kg, and cash of ₹11.13 lakhs seized from the accused, while dismissing the petition filed by the complainant company seeking custody of the very same articles.

The court also pointed to the earlier release of seized items, like motorcycles, in favour of the accused. The court felt that the refusal to release the remaining seized items without any differentiation cannot be considered just. The pendency of further investigation does not justify indefinite retention of valuables in police custody, the court added.

“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 court added that the articles were seized from the custody of the accused hacker.

The single-judge bench of Justice Mohammed Nawaz noted that the trial court has erred by attempting to reason the refusal to grant interim custody in the lines of 'disputed' title and ownership of valuables. The court, therefore, held as follows after analysing various apex court judgments, including Sunderbhai Ambalal Desai v. State of Gujarat [(2002) 10 SCC 283]:

“…learned Magistrate has noticed that there are rival claims and that neither party has, at this stage, produced conclusive documentary proof of ownership. However, the very existence of rival claims or absence of conclusive proof cannot, by itself, be a ground to reject an application for interim custody, particularly when the seized articles are identifiable and can be produced as and when required during trial”.

The connected petitions before the High Court were filed by the de facto complainant, Reward360, and the accused hacker, respectively, in connection with the order passed by Addtnl. CJM, Bengaluru in April 2025.

“…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. The Apex Court has further held that, at the stage of granting interim custody, the Court is only required to form a prima facie opinion 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 court elaborated on the legal principle.

About the claims made by Reward360, the court observed that the traceability of valuables to their assets was dependent on the allegations yet to be proved at trial.

“…the de-facto complainant has not produced any prima facie material such as bank statements, transaction records or documentary evidence to demonstrate loss of funds or to establish a direct nexus between the seized articles and the alleged offence…”, the court added.

Context

According to The Hindu, the southeast cybercrime police of Bengaluru arrested a hacker, Bodhaluru Lakshmipathi, in 2023. The police recovered ₹4.16 crore worth of valuables, which he had stolen after breaching into a rewards system and amassing digital currency.

The reward points website, Reward360, is a customer loyalty and rewards platform linked to the likes of Standard Chartered Bank, American Express, HDFC Bank, ICICI Bank, and Axis Bank. It enables customers to redeem reward points for e-commerce vouchers through its web portal, managed through an ERP software system. The vouchers, being single-use, were transmitted to customers through email along with redemption PINs.

The accused has allegedly manipulated the URL payload data and Order IDs of Reward360, thereby routing the unredeemed vouchers to a private mail address. According to the complainant company and the police, the accused has then used these vouchers to purchase gold, silver, and vehicles from various e-commerce platforms.

Arguments Raised

Since the unredeemed reward vouchers of Reward360 were allegedly utilised by the accused for the purchase of valuables, directly traceable to the digital assets he had duped out of the company, the complainant vehemently argued for the interim custody of the disputed items.

The counsel for the accused submitted that the valuables were bought from his own lawful earnings, including income from stock market trading. The articles were seized directly from the custody of the accused, argued the counsel. The accused also pointed out that the magistrate earlier granted the custody of motorcycles and documents in his favour. The recent dismissal was inconsistent with the same trial court's earlier order, added the counsel.

The state, on the other hand, argued that refusal to grant interim custody was justified in the light of the pending investigation and rival claims over seized articles.

Case Title: M/S. Reward360 Global Services Pvt. Ltd. v. State of Karnataka & Ors.

Case No: Criminal Petition No.9356 Of 2025 C/W Criminal Petition No.9844 Of 2025

Citation: 2026 LiveLaw (Kar) 113

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