Karnataka HC Quashes Sessions Court Orders To Defreeze Jar’s Accounts

The Karnataka High Court has quashed three Sessions Court orders directing the release of gold and silver and defreezing of bank accounts linked to wealthtech startup Jar. 

A bench of Justice M Nagaprasanna, in an order pronounced on August 10, set aside the April 4 orders passed by the Principal City Civil and Sessions Judge, Bengaluru, in a case involving Jar Gold Retail. 

The HC ruled that police do not require prior permission from a Magistrate to debit-freeze a bank account as an investigative and preservative measure under Section 106 of the Bharatiya Nagarik Suraksha Sanhita (BNSS). 

However, police must report the action “forthwith” to the jurisdictional Magistrate, the court said. 

The HC distinguished such a freeze from attachment of property under Section 107 of the BNSS. While Section 106 allows police to preserve property during an investigation, attachment under Section 107 involves a judicial process and may ultimately lead to the forfeiture or restoration of alleged proceeds of crime. 

The court said requiring police to secure judicial approval before every debit freeze could undermine investigations, particularly in cybercrime cases where funds can be moved between accounts within seconds. 

The development was first reported by Bar and Bench. Inc42 has reached out to Jar for comments on the development. The story will be updated on receiving a response.

Beyond the question of bank-account freezes, the court also made observations on the regulatory treatment of digital gold. It said that the absence of direct regulatory supervision by the RBI and SEBI over digital gold does not put such transactions beyond the reach of criminal law.

It stressed that the law must examine the economic substance of a transaction rather than merely the form in which it is presented. The court noted that financial fraud can increasingly involve commodities, digital assets and gold-linked products instead of conventional cash deposits.

This comes after SEBI’s November 2025 warning that digital gold products offered by online platforms are not SEBI-regulated products and may expose investors to counterparty and operational risks.

The High Court had made similar observations in its March 4 order in the Jar case, which was subsequently challenged before the Supreme Court. The apex court declined to entertain the special leave petition.

Digital Gold Under Scrutiny 

The proceedings stem from a suo motu case after concerns were raised about Jar’s digital gold business. An RBI Market Intelligence Unit communication in October 2025 noted concerns around the Jar app and said the companies involved were not regulated by the RBI. The matter was subsequently forwarded to the police.

Following this, Karnataka CID searched Jar’s premises in February this year as part of its investigation into potential violations linked to its gold business.

Jar’s directors challenged the criminal proceedings before the Karnataka HC, but the petition was dismissed on March 4. After the Supreme Court declined to entertain the challenge, Jar approached the Sessions Court seeking the release of seized gold and silver and defreezing of its bank accounts.

The Sessions Court ruled in Jar’s favour on April 4, observing that its transactions prima facie resembled completed gold-sale contracts rather than deposit-taking activities. It also noted that there were no customer complaints alleging non-delivery of gold or non-payment and that investigators had verified around 1,521 kg of gold stored with Brinks India.

The Karnataka government challenged the order before the HC, which subsequently stayed the Sessions Court’s directions.

The HC had earlier permitted Jar to use its frozen bank accounts only for essential payments, including employee salaries, GST and other statutory dues. Under its April 27 interim order, the accounts could be defrozen to that limited extent, subject to the company submitting the required details to the investigating officer.

The HC has now quashed all three April 4 orders while allowing the April 27 interim arrangement to continue.

Inside Jar’s Business Model

Founded in 2021 by Nishchay AG and Misbah Ashraf, Bengaluru-based Jar operates a digital savings platform that allows users to make small-ticket investments in digital gold. The company says its platform has more than 35 Mn users across 12,000 pin codes.

In October 2024, the startup also forayed into the ecommerce jewellery segment under the brand Nek. In FY25, it slashed its consolidated net loss by half to ₹50.5 Cr from ₹104 Cr in the previous fiscal year. Operating revenue zoomed 50X YoY to ₹2,447.8 Cr from ₹49 Cr in FY24. 

The sharp rise in the top line stemmed from its shift from a distributor model to becoming a principal in FY25, effectively owning the full value chain, which mandated the startup to record the entire value of gold sold as revenue. The startup also claimed to have achieved profitability in the first half of calendar year 2025. 

Jar has raised more than $111 Mn to date from investors including Tiger Global, Arkam Ventures, WEH Ventures, Tribe Capital, Eximius Ventures, Force Ventures, LetsVenture, Rocketship Venture Capital, Third Prime and Stonks.

In 2025, it was reported that the startup was in talks with investors, led by Prosus, to raise nearly $50 Mn in a fresh funding round. However, the deal fell through over differences in valuation. While Jar was aiming to raise money at its last valuation of $300 Mn, the potential investors pegged the startup at $200 Mn to $250 Mn.

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