In a significant ruling, the Supreme Court has revived criminal proceedings against officials of a bank in Bihar who are accused of failing to return gold ornaments pledged by a customer as loan security, despite full repayment of the loan.

A bench of Justices Sanjay Karol and Manoj Misra set aside a Patna High Court order that had quashed the FIR against the bank officials. The High Court had allowed the officials' petition in November 2024, effectively closing the case based on findings that the borrower acted with dishonest intent.

The top court, however, took a different view. “It is true that the appellant repaid the amount, albeit with delay. But once the loan is settled, it is difficult to understand why the pledged gold was revalued and subsequently auctioned,” the bench observed.

Criticising the High Court’s reasoning, the Supreme Court said, “We are at a loss to understand how such a conclusion—regarding the complainant’s dishonest intention—was arrived at, especially when intention must be determined based on evidence.”

The complainant, a businessman, had taken a loan of ₹7.70 lakh in July 2020 by pledging 254 grams of 22-carat gold ornaments. After clearing the loan and interest by March 2023, he requested the return of the pledged gold. Instead, the bank conducted a fresh valuation, deducted ₹1,500 as fees, and allegedly did not return the ornaments.

The bank claimed that a new valuer found the ornaments to be counterfeit—gold-plated over other metals—and argued this justified their refusal to return them. The complainant, having no access to the ornaments post-loan approval, contended that the gold was in the bank’s exclusive custody throughout.

Following these events, an FIR was lodged against the complainant in May 2023. Subsequently, he filed a complaint before a magistrate in Muzaffarpur, leading to an FIR against the bank officials. The High Court later quashed this FIR, a decision now overturned by the Supreme Court.

The bench noted that whether fraud occurred at the time of initial valuation or later was a matter that could only be determined after a full trial based on evidence. It held that the High Court had “improperly quashed” the proceedings and restored the case to the trial court.

“The proceedings arising from the subject FIR are revived and restored to the file of the concerned court,” the Supreme Court concluded, allowing the complainant’s appeal.