High Court Cannot Preempt Investigation by Ordering Release of Seized Funds: Supreme Court

The High Court exceeded its jurisdiction under Section 482 CrPC... it is not supposed to conduct a mini trial while investigation is still pending”, On May 13, 2025, the Supreme Court of India delivered a firm reminder that courts must not interfere with ongoing investigations under the guise of exercising inherent jurisdiction. The Bench of Justices Sudhanshu Dhulia and K. Vinod Chandran quashed a Delhi High Court order that directed the premature release of Rs. 15.90 lakhs — proceeds from a suspected fraudulent share transaction — held by the Bombay Stock Exchange (BSE). The Court held that the High Court’s order was “wholly unwarranted” and warned against judicial overreach while a criminal probe is ongoing.

The dispute stemmed from a criminal complaint filed by NDA Securities Ltd., a registered BSE broker. On April 1, 2013, the company received a call from an impersonator claiming to be client Brij Mohan Gagrani, ordering the purchase of one lakh shares of Ashutosh Paper Mills Ltd. The shares were bought, 72,000 of which were subsequently sold. However, the real client denied ever placing such an order. The appellant broker alleged that Ashish Agarwal, one of its employees, was in collusion with the impersonator, Amit Jain, and the selling party, respondent no. 2.

Following a complaint, an FIR was lodged under Sections 420 and 120B of the Indian Penal Code. The proceeds of the sale (Rs. 15.90 lakhs) were withheld by the BSE pending investigation. A charge sheet was filed naming Amit Jain as a key accused. It was also recorded that Jain had absconded and that respondent no. 2 — the beneficiary of the sale — was under investigation.
Applications by respondent no. 2 for release of the funds were dismissed both by the Metropolitan Magistrate and the Sessions Court. However, in a petition under Section 482 CrPC, the Delhi High Court directed the BSE to release the funds upon a furnishing of a guarantee.

The Supreme Court criticized the High Court’s decision as not only premature but also legally unsustainable. Referring to the established limitations of inherent powers under Section 482 CrPC, the Court stated: “The High Court exceeded its jurisdiction under Section 482 CrPC… it is not supposed to conduct a mini trial while investigation is still pending.”

The Court cited CBI v. Aryan Singh and Dharambeer Kumar Singh v. State of Jharkhand to reaffirm that the High Court must refrain from adjudicating disputed facts at a pre-trial stage.
It further remarked: “The High Court ought not to have made any observations regarding the absence of any role played by respondent no. 2… because investigation is yet to be completed.”

On the risk of irreparable harm, the Court highlighted: “The release of the sale value of the concerned shares in favour of respondent no. 2, may cause an irreparable loss to the appellant and vitiate the entire investigation.”
Expressing concern over the High Court’s casual dismissal of the allegations, the Court underscored: “Respondent no. 2 was the main beneficiary of the alleged fraudulent transaction… it is therefore premature to give a clear chit to respondent no. 2.”

The Supreme Court ruled that the High Court had wrongly interfered with concurrent findings of two lower courts. It stated: “The High Court has virtually acted as an Appellate Court against the concurrent findings of the two courts… which was wholly unwarranted.”

Accordingly, the Bench set aside the Delhi High Court's order dated February 25, 2025. It directed that the withheld funds of Rs. 15.90 lakhs remain with the BSE until the conclusion of the trial. The Trial Court was instructed to conduct proceedings expeditiously.

Importantly, the Court clarified: “We are not making any comments on the merits of the case and the Trial Court shall proceed with the trial uninfluenced by any observations made herein.”

The Supreme Court’s ruling in NDA Securities Ltd. v. State (NCT of Delhi) & Anr. reinforces the limits of the High Court's powers under Section 482 CrPC, particularly in matters that are fact-intensive and still under investigation. In holding that “inherent powers cannot be exercised to stifle legitimate prosecution or interfere with investigations,” the Court has affirmed a core principle of criminal jurisprudence: due process must take precedence over premature conclusions.

Date of Decision: May 13, 2025