Karnataka High Court Issues Comprehensive Guidelines Refund of Trap Money to Complainants

"To compel the complainant to wait for years together for restoration of his property, merely because he assisted the State, would amount to converting his public spiritedness into an unintended penalty." Karnataka High Court, in a significant ruling, held that complainants who provide "trap money" to assist anti-corruption agencies are entitled to an expedited refund of an equivalent amount from the State exchequer, asserting that their public spiritedness should not be met with financial hardship.

A bench of Justice M. Nagaprasanna underscored that the ownership of such money remains with the complainant and directed the framing of comprehensive guidelines for the management and release of all seized property in criminal cases.

The petitioner, G. Eshwaraiah, a contractor, had filed a complaint with the Anti-Corruption Bureau alleging that K. Madhusudhana, Superintendent of Central Goods and Service Tax, demanded a bribe of ₹80,000 for the closure of his GST liability. A trap was successfully laid, and the accused was caught red-handed while accepting the bribe. The ₹80,000, which belonged to the petitioner, was seized as material evidence and the matter is currently under trial in Special C.C. No. 2749 of 2022. The petitioner approached the High Court seeking a direction for the release of his seized trap money along with interest and also sought general guidelines for the release of such funds in similar cases.

The primary question before the court was whether the seized trap money, unequivocally belonging to the de-facto complainant, can be released during the pendency of a criminal trial. The court was also called upon to determine if general guidelines were necessary to regulate the release of such funds to prevent complainants from suffering prolonged financial deprivation.

Undisputed Ownership of Trap Money

The High Court observed that it was an admitted position that the sum of ₹80,000 employed in the trap belonged to the petitioner. The prosecuting agency merely used this money as an "instrumentality to expose criminality," and ownership never migrated from the complainant to the State. The court emphasised that the complainant remains the rightful owner and lawful custodian of the trap money.

Ownership Cannot Be a Barren Declaration

The bench noted that the recognition of ownership, if divorced from possession, becomes "but a barren declaration." A person may hold legal title, but prolonged denial of enjoyment without legal necessity renders such title illusory. The law cannot merely acknowledge ownership while permitting its prolonged deprivation.

Balancing Evidentiary Integrity and Proprietary Rights

The court acknowledged that seized articles must be preserved for criminal proceedings. However, it clarified that seized property need not invariably remain in judicial custody until trial culmination. The Bharatiya Nagarik Suraksha Sanhita, 2023 (BNSS) and erstwhile CrPC recognise situations where property can be restored to its owner during pendency. While trap cases are peculiar due to the physical identity of currency notes being evidentiary, their importance cannot eclipse the complainant's proprietary rights.

The court articulated that "the law is not expected to choose one legitimate interest by sacrificing another equally legitimate one. It must endeavour to harmonise both." It noted that preserving unimpeachable evidence must be balanced with the obligation to ensure that a citizen, who voluntarily aids the State in unearthing corruption, is not compelled to bear an additional financial burden.

No Penalty for Public-Spiritedness

The High Court forcefully stated that "every successful trap is founded upon the courage of an honest citizen who chooses the path of legality over silent submission." Such a citizen should emerge with satisfaction, not financial impoverishment from prolonged retention of their money. To compel a complainant to wait for years amounts to "converting his public spiritedness into an unintended penalty."

Solution: State Exchequer Refund

The court proposed a harmonious solution: while the original currency notes should remain in judicial custody to maintain evidentiary integrity, there is no legal impediment for the prosecuting agency to restore an "equivalent amount from the State exchequer immediately after the trap proceedings attain finality for investigative purposes." This approach preserves evidence while protecting proprietary rights, fosters public confidence, and encourages citizens to report corruption.

Apex Court Emphasizes Prompt Disposal of Seized Property

The High Court referred to the Supreme Court's judgment in Sunderbhai Ambalal Desai v. State of Gujarat, which delineated principles for custody and release of seized articles under Sections 451 and 457 of the CrPC. The Apex Court had emphasized that these powers should be exercised "expeditiously and judiciously" to prevent owners from suffering and to avoid police or court having to keep articles for unduly long periods. It underscored that property "ought not to be retained in the custody of the court or of the police for any time longer than what is absolutely necessary."

Orissa High Court Reiterates Need for Release of Seized Cash, Citing Economic Utility

The court also cited the Orissa High Court's decision in Lakshman Srinivasan v. Republic of India (2025), which dealt with similar circumstances. The Orissa High Court, relying on Sunderbhai Ambalal Desai and the Delhi High Court's Manjit Singh v. State (NCT of Delhi), highlighted that "the release of money ensures that the seized currency remains in circulation, thereby aiding the national economy." It noted that keeping money stagnant serves no practical purpose and hinders economic activity. The Lakshman Srinivasan case outlined specific safeguards for the release of seized currency, including detailed panchnamas, high-resolution photographs, security bonds, and undertakings.

Comprehensive Guidelines for Management of All Seized Property

Taking into consideration the precedents, the Karnataka High Court found it expedient to adopt comprehensive principles, largely mirroring those from the Lakshman Srinivasan judgment, for the disposal of various types of seized articles. These guidelines, though "not exhaustive but to some extent inclusive," aim for efficient, legally sound, and timely management of seized property.

The guidelines cover several categories:

• General principles: Emphasizing prompt release or disposal of property unless required for ongoing investigation or trial, adhering to BNSS provisions, and preventing unnecessary storage or waste.
• Handling of seized cash: Mandating high-resolution colour photographs, detailed panchnamas, and appropriate security bonds. If immediate release isn't feasible, cash must be deposited in a nationalised bank.
• Releasing bank deposits/fixed deposits: Permitting release against property securities or bank guarantees, except when attachment/confiscation proceedings are underway.
• Disposal of seized vehicles: Ensuring early release to rightful owners with security bonds, or auction/disposal if untraceable or linked to serious crime after preserving records.
• Management of precious articles: Storing them in lockers, releasing to clear owners after photographic evidence and bonds, or preserving under strict security if crucial evidence.
• Disposal of seized liquor and narcotic substances: Collecting samples for analysis and promptly destroying the remaining quantity with court approval.
• Perishable goods and agricultural products: Prioritizing immediate release to owners or auction/distribution, retaining only small samples for proceedings.
• Firearms, explosives, and dangerous weapons: Storing in designated armouries, returning lawfully owned weapons after verification, or ordering destruction/forfeiture for criminal activities.
• Electronic devices and digital evidence: Creating forensic copies before returning, maintaining a chain of custody, and following strict storage protocols if crucial evidence.
• Disposal of miscellaneous seized property: Returning to identifiable owners or auctioning if no claimant comes forward within a reasonable time, with time-bound review mechanisms.
• Role of courts and investigating authorities: Proactive measures by Magistrates, regular reporting by investigating officers, and periodic review systems to prevent backlogs.

The High Court directed its Registry to transmit copies of this judgment to all District Courts, Special Courts, and other subordinate courts, as well as to law enforcement agencies, for guidance and implementation.

Special Court Directed To Expedite Release Applications

Consequently, the court granted liberty to the petitioner to approach the learned Special Court in Special C.C. No. 2749 of 2022 by preferring an application under Sections 497 and 503 of the BNSS, seeking release of an equivalent amount of the trap money. The Special Court was directed to consider and dispose of this application expeditiously, within a period of four weeks from the date of its presentation, bearing in mind that the complainant's proprietary rights should not be rendered illusory by prolonged trial.

The Karnataka High Court's judgment marks a pivotal development in anti-corruption jurisprudence, ensuring that citizens assisting the State in combating corruption are not financially penalised for their public service. By establishing a clear mechanism for the expedited refund of trap money and promulgating comprehensive guidelines for the management of all seized property, the court has harmonized the imperative of preserving evidentiary integrity with the fundamental proprietary rights of individuals and the broader public interest in fostering economic utility and trust in the justice system.

Date of Decision: 10 August 2026