The Supreme Court has ruled that a vehicle’s registration certificate is not conclusive for granting interim custody under the Code of Criminal Procedure, holding that courts must undertake a holistic assessment of the facts to determine who is best entitled to temporary possession.
Upholding the Andhra Pradesh High Court’s decision, the bench of Justice Sanjay Karol and Justice Augustine George Masih has observed that continued possession, financial responsibility for the assets, and surrounding circumstances may outweigh mere registration in deciding interim custody of seized property.
The appellant was a director of M/s Pure Minerals, engaged in granite quarrying, and also held an 80% shareholding in M/s Earth Stein Private Limited. The disputed vehicles were purchased between 2014 and 2022 in the name of Pure Minerals. According to the appellant, he was coerced into signing blank papers that were subsequently used to fabricate his resignation from the respondent company. He further alleged that the respondents unlawfully entered the granite factory and forcibly removed the vehicles, leading to the registration of an FIR.
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The respondent company, however, alleged that the appellant had misappropriated approximately ₹1.73 crore belonging to the company and used those funds to purchase the vehicles in the name of his own company. A counter-FIR was lodged alleging criminal breach of trust, and criminal proceedings remained pending before the trial court.
Subsequently, during further investigation, the police seized the vehicles from the respondent company’s granite factory. Both parties moved the trial court seeking interim custody, but their applications were rejected, prompting separate petitions before the Andhra Pradesh High Court. The High Court ultimately directed that interim custody be handed over to the respondent company, leading to the present appeals before the Supreme Court.
Before the Supreme Court, the appellant argued that since the registration certificates stood in the name of his company, interim custody ought to have been granted to him. Relying on the Supreme Court’s earlier decision in Sunder Bhai Ambalal Desai v. State of Gujarat, it was contended that vehicles should ordinarily be released to the registered owner pending trial.
The appellant further argued that the High Court erred in treating the earlier closure report as final because the investigation had later been reopened, resulting in a chargesheet. He also alleged that both his resignation and the undertaking permitting continued use of the vehicles by the respondent company had been obtained fraudulently and were the subject of separate proceedings.
The respondent company countered that the vehicles had been purchased using company funds, although registered in the appellant’s company name. It submitted that the appellant had voluntarily resigned, transferred his shares, accepted the sale consideration by encashing the cheque, and executed a written undertaking permitting the respondent company to continue operating the vehicles until settlement of accounts.
The respondent also emphasized that the vehicles had consistently remained in its possession and that the loan installments payable to the financing institution had been serviced entirely from the respondent company’s bank account. According to the respondent, these facts demonstrated continued beneficial ownership and operational control despite the registration certificates standing elsewhere.
The Supreme Court examined Sections 451 and 457 of the CrPC, observing that these provisions empower courts to make appropriate orders for custody of seized property pending inquiry or trial. The Court stressed that the objective is to preserve the property from deterioration while ensuring that it remains available whenever required during criminal proceedings.
The Bench reiterated that while exercising powers under these provisions, courts do not determine legal title or ownership. Instead, they only make a prima facie assessment regarding who is best entitled to interim possession based on the material available at that stage.
Rejecting the appellant’s principal argument, the Supreme Court held that registration certificates are merely evidentiary and cannot by themselves determine entitlement to interim custody.
The Court clarified that its earlier ruling in Sunder Bhai Ambalal Desai did not establish an inflexible rule requiring release of every seized vehicle to the registered owner. Rather, that decision requires courts to exercise their discretion expeditiously and judiciously while considering the broader objective of preserving the property and preventing misuse.
The Bench noted several factors that collectively weakened the appellant’s claim. Criminal proceedings alleging misappropriation of company funds for purchasing the vehicles were pending against him. More importantly, the vehicles had been seized from the respondent company’s operational premises, where they had remained in continuous use pursuant to an undertaking executed by the appellant himself.
Although the appellant alleged that the undertaking had been forged, the Court observed that he had failed to explain why he accepted and encashed the cheque issued in connection with the transfer of his shareholding if the resignation and related documents had truly been executed under coercion. The validity of those documents, the Court observed, would ultimately be decided in separate proceedings after evidence is led.
The Court also found it significant that the financing instalments payable to Shriram Finance Ltd. for the vehicles had admittedly been paid by the respondent company. If the vehicles genuinely belonged exclusively to the appellant, there was no satisfactory explanation for the respondent company bearing the financial burden. This circumstance further strengthened the respondent company’s claim to interim possession.
Affirming the High Court’s decision, the Supreme Court concluded that the respondent company’s continued possession of the vehicles, payment of loan instalments, and the appellant’s undertaking permitting their use collectively outweighed the evidentiary value of the registration certificates.
Accordingly, the Court held that M/s Earth Stein Private Limited was rightly granted interim custody of the seized vehicles and dismissed the appeals. At the same time, it clarified that its observations were confined solely to the issue of interim custody and would not influence the pending proceedings concerning ownership, alleged misappropriation, resignation, or share transfer.
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