Karnataka High Court Reserves Judgment in Digital Gold Startup's Legal Battle
The Karnataka High Court has posted for judgment a writ petition filed by Jar Gold Retail, a Bengaluru-based digital gold savings startup, challenging a First Information Report (FIR) registered by the Bengaluru City Police. The FIR was filed under the Banning of Unregulated Deposit Schemes Act, 2019, and the case is currently being probed by the Criminal Investigation Department (CID).
Regulatory Concerns and Investigation Details
According to sources within the CID, the Reserve Bank of India's Market Intelligence Unit had written to the police, highlighting significant loopholes in Jar Gold Retail's business model. The letter stated that the offers made by the firm to investors might not be fulfilled and that its "Refer and Earn" methods appeared dubious. Investigating officers revealed that Jar Gold Retail has been operating in the city since 2021 without obtaining necessary permissions from regulatory bodies such as the RBI or the Securities and Exchange Board of India (SEBI).
The deposit fraud investigation division of the CID is examining the FIR on grounds that the startup operated without a licence from banking or stock market regulators. Officials are investigating alleged offences under Section 21(1) and 21(2) of the Banning of Unregulated Deposit Schemes Act, 2019. An investigating officer noted that the firm holds 1,521 kilograms of gold and 2,541 kilograms of silver in investments, stored in lockers of a private company. However, all transactions have been halted until the investigation concludes.
Legal Proceedings and Company's Plea
Jar Gold Retail and its co-founder Nishchay AG moved the high court seeking an interim stay on all proceedings arising from the FIR, which is being handled by the principal city civil and sessions judge in Bengaluru. They also requested the quashing of the FIR dated January 16. During the hearing, Justice M Nagaprasanna heard arguments from both the petitioner and the police before posting the case for judgment on Saturday, February 21.
In their petition, the company prayed for a court direction to break open the lock or seal on their registered office and to return, release, or defreeze all seized or blocked items. This includes bank accounts, electronic devices, and precious metals. The case originated after the RBI referred complaints to the Bengaluru City Police, leading the Koramangala Police Station to register a suo moto FIR and transfer it to the CID.
Investigation Progress and Cooperation
A senior IPS officer involved in the case reported that initially, the directors and other individuals from Jar Gold Retail were not cooperating with the investigating agency. However, after receiving notices and warnings, they began to cooperate. On a recent Wednesday, all three directors appeared before the investigating team at the CID headquarters and were scheduled to appear again on Thursday.
This case underscores the increasing scrutiny on digital savings platforms and the importance of regulatory compliance in the financial sector. The judgment from the Karnataka High Court is awaited, which will determine the future course of action for Jar Gold Retail amidst these serious allegations.
