Karnataka HC overturns relief granted to Jar in digital-gold case

The Karnataka High Court has overturned three orders that had allowed venture capital-backed digital gold savings startup Jar to reclaim gold and silver seized by the police and unfreeze its bank accounts.

The latest ruling, delivered on August 10 by Justice M Nagaprasanna, followed a challenge by the Karnataka government to an April 4 Sessions Court order that had allowed the release of seized precious metals and the defreezing of Jar’s bank accounts.

The case stems from a criminal investigation into Jar’s digital-gold business. In October 2025, an RBI Market Intelligence Unit communication flagged that the entities involved in the business were not regulated by the central bank. The Karnataka authorities subsequently began investigating the company under the Banning of Unregulated Deposit Schemes Act, 2019, and the Karnataka CID conducted searches at Jar’s premises.

Jar had challenged the criminal proceedings before the Karnataka High Court, but the court rejected its plea in March 2026. The company subsequently approached the Supreme Court, which declined to entertain its challenge.

A key question before the High Court was whether police can freeze bank accounts during an investigation under Section 106 of the Bharatiya Nagarik Suraksha Sanhita (BNSS) without first obtaining approval from a Magistrate.

The court held that they can. Police can freeze an account to prevent money or other assets from being moved while an investigation is underway, but must subsequently inform the jurisdictional Magistrate.

The court distinguished this from Section 107 of the BNSS, which deals with the formal attachment, forfeiture and restoration of property. It said requiring police to obtain prior judicial approval every time they freeze an account could hamper investigations, particularly in cases involving rapidly moving funds and cybercrime.

The court also said digital-gold transactions can be examined under criminal law even though such products are not directly regulated by the Reserve Bank of India (RBI) or the Securities and Exchange Board of India (SEBI). Authorities, it said, must look at the economic substance of a transaction rather than merely its form.

Founded in 2021 by Nishchay AG and Misbah Ashraf, Jar operates a digital savings platform that allows users to invest small amounts in digital gold. The company has raised over $111 million from investors including Tiger Global, Arkam Ventures, Tribe Capital and WEH Ventures.