Fino Payments Bank Limited vs. State Of Karnataka

Held

The High Court allowed the criminal petition in part and remitted the matter back to the concerned Court. The Court held that the learned XXIII Additional City Civil and Sessions Judge and Special Judge had not considered the 'Operating Guidelines for Payments Banks' issued by the Reserve Bank of India, which are crucial for a payments bank like the petitioner. Therefore, the impugned order dated 04.03.2026 was quashed. The concerned Court was directed to reconsider the petitioner's application under Sections 451 and 457 of the Cr.P.C. within eight weeks, bearing in mind the observations made in the judgment, specifically concerning the RBI guidelines. The Court did not decide on the merits of the lien itself but remanded the matter for reconsideration based on the relevant regulatory framework.

Facts

FINO Payments Bank Limited (the petitioner) filed a criminal petition challenging an order dated 04.03.2026 passed by the XXIII Additional City Civil and Sessions Judge and Special Judge, Bengaluru. This order rejected the petitioner's application under Sections 451 and 457 of the Cr.P.C. seeking to remove a lien marked on its bank account. The lien was placed on an amount of ₹11,92,00,000/- in the petitioner's account with Punjab National Bank, Nerul Branch, Mumbai, as part of the investigation into Crime No. 243/2023 concerning alleged misappropriation of funds from M/s. D. Devaraj Urs Truck Terminal Limited. The petitioner contended it was not involved in the crime, nor was the amount in its account proceeds of crime. The State argued that all monies were routed through the petitioner's bank and the trial was ongoing.

Key Issues

1. Whether the learned XXIII Additional City Civil and Sessions Judge and Special Judge erred in rejecting the petitioner's application for removal of lien on its bank account, despite the petitioner not being an accused in Crime No. 243/2023 and no direct nexus being established between the frozen amount and the alleged proceeds of crime? 2. Whether the learned Judge failed to consider the 'Operating Guidelines for Payments Banks' issued by the Reserve Bank of India concerning the marking and demarking of liens on bank accounts of payment banks? Petitioner's arguments: The petitioner argued that it was not named as an accused, no allegations were made against it, and there was no finding connecting the ₹11.92 crores to the crime proceeds. It highlighted that it operates as a regulated payments bank providing CMS and EMD platform services, and the frozen amount is its capital, essential for daily operations. The petitioner claimed to have disclosed its CMS mechanism, demonstrating that transactions require equivalent funds in merchant EMD accounts. The impugned order allegedly failed to appreciate these facts and the RBI guidelines. Respondent's arguments: The State contended that all monies were routed through the petitioner's bank, the trial was ongoing, and the ₹11.92 crores should not be released until the investigation concluded. The State argued that the alleged misappropriation was operated through the petitioner's bank account and releasing the funds would make recovery difficult if the petitioner's involvement was later established.