FINO PAYMENTS BANK LIMITED vs STATE OF KARNATAKA

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Reserved on : 11.08.2026
Pronounced on : 04.11.2026



IN THE HIGH COURT OF KARNATAKA AT BENGALURU

TH
DATED THIS THE 04 DAY OF NOVEMBER, 2026


BEFORE

THE HON'BLE MR. JUSTICE M.NAGAPRASANNA

CRIMINAL PETITION NO. 8051 OF 2026

BETWEEN:

FINO PAYMENTS BANK LIMITED
A PUBLIC LIMITED COMPANY
INCORPORATED UNDER
THE PROVISIONS OF THE COMPANIES ACT
HAVING ITS REGISTERED OFFICE AT
MINDSPACE JUINAGAR, PLOT NO. GEN 2/1/F,
TH
TOWER-1, 8 FLOOR, TTC INDUSTRIAL AREA,
MIDC SHIRAWANE, JUINAGAR,
NAVI MUMBAI – 400 706,
REPRESENTED BY ITS
AUTHORISED SIGNATORY
MR. SANKET KOKIL,
…PETITIONER










Digitally signed
by PADMAVATHI
B K
Location: High
Court of
Karnataka

(BY SRI SANDESH J.CHOUTA, SR.ADVOCATE A/W
SRI RAGHAVENDRA S., ADVOCATE)

AND:

STATE OF KARNATAKA
BY WILSON GARDEN POLICE STATION/CID POLICE
REPRESENTED BY

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THE SPECIAL PUBLIC PROSECUTOR,
HIGH COURT BUILDING,
BENGALURU – 01.
…RESPONDENT
(BY SRI H.V.PRAVEEN GOWDA, SPL.PP)
THIS CRL.P IS FILED U/S 482 CR.P.C., (FILED U/S 528 BNSS)
READ WITH ARTICLES 226 AND 227 OF THE CONTITUTION OF
INDIA PRAYING TO A. SET ASIDE THE ORDER DATED 04.03.2026
PASSED IN CRIME NO.243/2023 BY THE LEARNED XXIII ADDL.
CITY CIVIL AND SESSIONS JUDGE AND SPECIAL JUDGE (P.C. ACT),
BENGALURU, INSOFAR AS IT REJECTS THE PETITIONER’S
APPLICATION FOR REMOVAL OF LIEN/UNFREEZING OF THE
PETITIONER’S BANK ACCOUNT AMOUNT; B. ALLOW THE
PETITIONER’S APPLICATION AND DIRECT RESPONDENT AND ALL
CONCERNED BANKS/AUTHORITIES TO FORTHWITH
REMOVE/UNMARK THE LIEN MARKED ON THE SUM OF
RS.11,92,00,000/- IN THE PETITIONER’S ACCOUNT MAINTAINED
WITH PUNJAB NATIONAL BANK, NERUL BRANCH, MUMBAI, AND
PERMIT THE PETITIONER TO OPERATE AND UTILIZE THE SAID
AMOUNT WITHOUT RESTRICTION; C. IN THE ALTERNATIVE,
DIRECT RELEASE/UNFREEZING OF THE SAID AMOUNT SUBJECT TO
SUCH CONDITIONS, UNDERTAKINGS, REPORTING REQUIREMENTS
OR SECURITY.
THIS CRIMINAL PETITION HAVING BEEN HEARD AND
RESERVED FOR ORDERS ON 11.08.2026, COMING ON FOR
PRONOUNCEMENT THIS DAY, THE COURT MADE THE FOLLOWING:-

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CORAM: HON'BLE MR. JUSTICE M.NAGAPRASANNA

CAV ORDER
Petitioner – FINO Payments Bank Limited (hereinafter
referred to as ‘the bank’ for short) is before the Court calling in
question an order dated 04.03.2026, passed by the learned XXIII
Additional City Civil and Sessions Judge and Special Judge
(P.C.Act), Bengaluru, whereby, an application filed by the petitioner
under Sections 451 read with 457 of the Cr.P.C., seeking a direction
to demark the lien in the respective bank accounts of the petitioner,
in Crime No.243/2023, comes to be rejected.
2. Heard Sri Sandesh J. Chouta, learned senior counsel along
with Sri Raghavendra S., learned counsel for the petitioner and
Sri H.V.Praveen Gowda, learned Special Public Prosecutor for the
respondent.
3. Facts, in brief, germane are as follows:
A crime in Crime No.243/2023 comes to be registered on an
allegation of misappropriation of funds of a company –
M/s.D. Devaraj Urs Truck Terminal Limited against several persons.
Investigation is conducted by the jurisdictional police and during the

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course of investigation, the details of the four bank account holders
in the petitioner - bank are secured by the investigating agency.
Later, it transpires that the bank account of the petitioner held in
Punjab National Bank is frozen and a lien is marked on an amount
of ₹11.92 crores in the bank account of the petitioner. It is the
contention in the petition that the petitioner is not concerned with
the crime or has anything to do with the alleged misappropriation of
funds. It is the case of the prosecution against the accused
indicated in Crime No.243/2023, alleged to have created fake
invoices, bills, issuing work orders without any approval, several
unauthorized transactions and siphoning of the funds. As observed
hereinabove, the petitioner - bank is not named as an accused nor
any specific act is attributed to the petitioner - bank. In the light of
freezing of the bank account of the petitioner and the marking of
the lien, the petitioner prefers an application under Sections 451
r/w. 457 of the Cr.P.C., before the concerned Court seeking a
direction to demark the lien on the amount of ₹11.92 crores in the
bank account of the petition. This comes to be rejected by the
concerned Court in terms of the order dated 04.03.2026, which is

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impugned in the petition. Therefore, the petitioner is before this
Court in the subject petition.
4. Sri Sandesh J. Chouta, learned senior counsel appearing
for the petitioner would contend that the concerned Court has not
appreciated the fact that the petitioner is not even named as an
accused in Crime No.243/2023 and there is not even a whisper of
any allegation against the petitioner. The petitioner is only
regulated as a payments bank, which provides CMS and EMD
platform services, in the ordinary course of business. Learned
senior counsel would submit that there is absolutely no finding
recorded in the impugned order concerning any nexus between the
amount of ₹11.92 crores lying in the petitioner's bank account held
in Punjab National Bank and the alleged proceeds of crime. The
learned senior counsel submits that the petitioner had disclosed the
modus
entire of the CMS mechanism and demonstrated that all
CMS transactions can be executed only if equivalent funds are
already available in the merchant's earnest money deposit
accounts. Despite complete cooperation, the police have proceeded
to freeze the accounts of the petitioner and mark lien on the

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petitioner's own amounts in Punjab National Bank without any
finding or wrongdoing against / by the petitioner. He would submit
that this Court must set aside the impugned order and direct the
defreement of the account or demark the lien as the case would be.
Per contra
5. , Sri H.V.Praveen Gowda, the learned Special
Public Prosecutor appearing for the respondent – State vehemently
contend that all the monies are routed through the petitioner’s
bank. The trial is yet to get concluded. Therefore, the amount of
₹11.92 crores in the bank account should not be demarked till the
conclusion of the investigation. He would submit that the alleged
misappropriation of the funds of the company – D. Devaraj Urs
Truck Terminal is operated through the bank account of the
petitioner held in Punjab National Bank and therefore, seeks
dismissal of the petition.
6. I have given my anxious consideration to the submissions
made by the respective learned counsel for the parties and have
perused the material on record.
7. The afore-narrated facts and link in the chain of events are
all a matter of record. The issue is with regard to the consideration

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of the application filed under Sections 451 read with 457 of the
Cr.P.C., before the concerned Court:
“11. It is respectfully submitted that the blocked amount
referred herein above solely belongs to the Applicant Bank and
it is not at all connected to the case under the investigation by
the respondent police in any manner. It may not be out of
place to mention before this Hon'ble Court that the said
blocked amount is used as a capital of the Applicant Bank and
required for smooth functioning of day to day functioning of
the Applicant Bank and due to the unilateral act of marking
lien on the blocked amount has largely affected the day to day
transactions of the Applicant Bank. It is further submitted that
the Applicant Bank is a public limited company listed on the
stock exchanges viz, Bombay Stock Exchange (BSE) and
National Stock Exchange (NSE) wherein the shareholders
have invested their hard earned money. It is further submitted
that the Applicant Bank also borrows money from other
institutions to fulfil its capital requirement to ensure smooth
functioning of its business however due to the unilateral act of
the respondent police the Applicant Bank is unable to use its
own capital however paying interest for the same and hence
the Applicant Bank badly requires the blocked amount for
smooth functioning of its day to day business and avoid losses.
It is submitted that the blocked amount lying in the custody of
Police will not serve any purpose. However, it will definitely
cause great loss to the Applicant Bank. It is further submitted
that if the lien continuous and the Applicant Bank is unable to
use the said blocked amount it will make serious impact on the
financials of the Applicant Bank.

12. It would not be out of place to mention here that the flow
of funds into the merchant account is both online and cash.
This flow of funds into the merchant account is not monitored
by the Bank. The Bank on-boards only those individuals who
have the capability to put working capital. The merchant pre-
funds his EMD account held with Fino through this working
capital. The merchant is only permitted to do transactions with
the Bank only if his EMD account is pre-funded. The merchant
can transfer funds into his EMD account both electronically and

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through cash deposit. The equivalent amount of cash collected
from the CMS client is debited from the merchant's EMD
account. The physical cash collected is typically used by the
merchant to fund his EMD account again.

13. Aside to the above the details of amount received by the
said merchants vis-à-vis CMS transactions performed against
such amount are shown in the excel sheet.

14. As per prevailing practice across banking industry any one
can transfer the funds electronically to the intended
beneficiary account and such credits form part of State
Through Processing (STP) without any manual intervention as
per guidelines. In the given case the accused persons have
electronically transferred the amount into the EMD account of
the said merchants and basis the amount received in their
respective EMD account the said merchants executed CMS
transactions within the defined process of the Bank and
therefore there were no anomaly identified in the processing of
the said transactions. It is further stated that all these
merchants were working with the Bank for significant time and
they had good knowledge of the process and making use of
their knowledge the said merchants have misused the platform
of the Bank. In view thereof it is humbly submitted that the
Bank has not violated any guidelines of RBI.



*NKYC - Normal KYC and EKYC "Electronic Know Your
Customer

th
15. As per the operating guidelines dated 6 October 2016
issued by RBI for payment banks there is a limit for savings
account customer to accept a deposit not exceeding Rs.1 Lakh

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per customer. However the said limit is not applicable to the
security/EMD accounts the extract of the relevant circular is
enumerated herein below for reference:

7. Bank deposits

(1) As provided in the current RBI directions, PBs
can accept only savings and current deposits. The
aggregate limit per customer shall not exceed 100,000,
as provided in the Licensing Guidelines. However, the
RBI will have no objection to the PBs making
arrangements with any other scheduled commercial
bank /SFB, for amounts in excess of the prescribed
limits, to be swept into an account opened for the
customer at that bank. This arrangement should be
activated with the prior written consent of the
customer.

(ii) The above limit shall apply to customer
deposits and not to any security/earnest money deposit
the bank may collect from any of its service providers
in the ordinary course of business.

*vide notification/circular dated 8th April 2021 the RBI
has increased the aggregate limit per customer to Rs. 2
Lakh.

16. It is submitted that at the time of marking lien on the
blocked amount of the Applicant Bank the respondent police
has not at all considered the documents provided by the
Applicant bank. The unilateral act of the respondent police of
marking lien on the Bank Account of the Applicant Bank is
nothing but a grave misuse of powers and utter violation of the
principle of natural justice.

17. The Applicant Bank carries a good reputation amongst its
peers in the industry and has earned its position by following
all the guidelines of the Reserve Bank of India strictly and
since its inception has not been involved in any criminal
activities at any point of time. It is pertinent to mention here
that the respondent police have not even whispered the name
of the Applicant Bank in the FIR/Charge sheet. The
complainant himself has not alleged anything against the
Applicant Bank in his complaint. This it-self show that the
Applicant Bank is not involved in any way in the instant case

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and despite knowing this the respondent police have arbitrarily
arbitrarily marked a lien on the blocked amount of the
Applicant bank for the reasons best known them.

18. The Applicant Bank shall stand abide by any conditions
that may be directed by this Hon'ble Court and the Applicant
Bank is already co-operating with the respondent police by
providing the available information and documents required by
them and assures this Hon'ble Court to co-operate with the
Respondent police in future for effective and proper
investigation.

19. The Applicant Bank upon receipt of the information from
the respondent police has blocked the accounts of the
merchants of the Bank and has initiated action against them
as per the process laid down by the Bank in this regard.

20. That the Applicant Bank is absolute owner of the blocked
amount. The Applicant Bank alone is entitled for the same and
there are no rival claimants at all as against the Applicant
Bank for the blocked amount.

21. In view of the above facts and circumstances it is
submitted before this Hon'ble Court that the lien marked on
the blocked amount of the Applicant Bank deserves to be
removed to meet the ends of justice.

22. Wherefore, the Applicant Bank humbly prays to this
Hon'ble Court that

a. Appropriate directions may kindly be issued to
the respondent police to remove the lien marked on the
blocked amount of Rs. 11,92,00,000 (Rs. Eleven Crore
Ninety Two Lakhs Only) without any further restriction and
allow the Applicant Bank to use the said blocked amount
as well as the bank account without any restrictions
and/or hindrance whatsoever.

b. Any other relief as this Hon'ble Court may deem
fit.”

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7.1. The State files its statement of objections to the afore-
quoted application. It reads as follows:

“OBJECTION TO THE APPLICATION UNDER SECTION 451
& 457 OF THE CODE OF CRIMINAL PROCEDURE BY FINO
PAYMENTS BANK LTD

The Special Public Prosecutor most humbly submits as follows:

1. The above bank has received an amount of Rs.
11,13,00,000/-, the amount belonging to the Devaraja Urs
Truck Terminal with respect to above crime through various
channels / persons etc., who have involved in the above crime.
However, the investigation is still going on with respect to the
transaction pertaining the total amount involved in the above
crime and for time being the investigation is stayed by the
Honourable High Court of Karnataka, with respect.

2. The investigating officer requires time to investigate into
entire transaction to ascertain, who all having been involved in
the above transaction and also with respect to, if any, bank
officials having been involved. The investigating agency need
to trace to whom all the above crime proceeds having been
disbursed. Due to the grant of stay by Honourable High Court
Karnataka, the investigation has taken back seat. The
investigation agency has marked lien as they are yet to
recover huge sum of money.

3. If lien is unmarked and subsequently if found, involvement
of the above bank in the above crime, it would be difficult for
the investigating agency to recover the amount from the
above bank. Hence, this objection to dismiss the above
application.

WHEREFORE , it is prayed that this Honourable court be
pleased to dismiss the above application in the interest of
justice and equity.”

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7.2. Considering the detailed objections made by the State,
the concerned Court by rendering its reasons rejects the application
by the following order:
“ REASONS

5. Crime No.243/2023 of the Wilson Garden Police, is popularly
known as D Devaraj Urs Truck Terminal Ltd., Companies Scam
case (for short, the Company). It is a Government owned
company, having a board consisting of 10 directors including its
chairman and the managing director. Its main object is to
develop and manage the truck terminate all over the state. The
present crime is seen to have got registered by the present
Managing Director of the Company Sri. C.N Shiva Prakash at the
Wilson Garden Police Station. Offences alleged to have
committed are punishable under Section 120 (B), 409, 420, 465,
471, 486 of the Indian Penal Code and offences under the
Prevention of Corruption Act, 1988.
6. The Ex-Managing Director Sri. S Shankarappa (Predecessor
of the complainant), the Chairman of the company Sri.D.S
Veeraiah (a politician) and 7 others are alleged to have involved
in the crime as accused No.1 to 9 respectively. The following are
the main allegations in the FIR:
th
a. The 194 board meeting was held on 25.10.2021 with
the presence of accused No.1, 2 and other directors.
Totally 38 items were discussed relating to the emergency
reparation works and maintenance of the terminals.
Resolutions to that extend were passed with a decision to
place the proposal before the Government for its approval
to carry, under the piece work contract within the limit of 5
lakhs under KPTT Act, excluding the GST and other taxes.
st
Accordingly, the 1 accused was empowered to implement
the resolutions and get the work done under piece work
directly through the contractors without inviting the

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tendors. Subsequently and without getting the approval
from the Government, the Board in its subsequent
meeting, has assumed the powers of getting the piece
work upto Rs.2 Crores without any approval, the work
st
order was issued by the 1 accused to accused No.3 to 5
contractors.
b. In turn, accused No.3 to 5 have got created fake
material supply bills, through accused No.8 and 9
st
suppliers. Based on those bills, the 1 accused Managing
Director has released the amount of Rs.37.59 crores even
without getting the work of any kind from the contractors.
They in turn, have retained Rs.4.13 crores towards their
commission and paid the remaining amount of Rs.33.45
crores to the suppliers. The suppliers have retained their
part of commission to the tune of Rs.1,13,97,680/- for
having converted the digital amount into cash, with the
help of various agencies namely, Paybingo, Pinopay, Epay,
Rapipay and the domestic money transfer merchants like
st nd
the applicants herein. The 1 and 2 accused took the
entire money in cash by way of hit back, with the help of
accused No.3 to 9.
c. In the light of the above, the case of the prosecution is
that, accused No.1 to 9 have conspired together with an
intention to cheat the company and the Government. They
have created the fake bills and documents falsely focusing
to have done the work entrusted by the company. They
have misappropriated the funds of more than Rs.47 Crores
and cheated.
7. Thus, the misappropriation of more than 47 crores meant for
the development and maintenance of company is, the subject
matter of the present crime. When the investigation was on,
admittedly, the IO concerned has got lien marked
Rs.4,97,30,000/- in the bank account of the applicant at Sl.No.1
and Rs.11,92,00,000/- in the bank account of the applicant at
Sl.No.2 on the ground that, it is the part of the crime proceeds.

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But, both the applicants denies their role of any kind in the crime
so also the lien marked amount in their respective accounts as
per to the crime.
8. the contention of both the applicants is that, their respective
business establishments are incorporated under the Companies
Act, 1957 and Banking Regulations Act, 1949. They claims to
have been rendering the various kinds of services including the
cash management system on commission basis. They have been
engaging the third party individuals as merchants, providing
them a plotform, to collect the cash on behalf of their empanelled
clients i.e., NBFC’s, MFI’s banks, other corporates and transfer
the equivalent amount to the respective bank accounts via cash
management system mechanism. Here admittedly, these
applicants are not the accused in the crime. Both the applicants
admits the acts of their respective merchants in accepting the
funds from the customers and convert it, into cash to earn the
commission. But, according to them, neither they nor their
merchants were aware of the crime in question and its
background. They mean to say that, they did their usual business
in accordance with the law for the commission.
9. Thus apparently, conversion of the crime proceeds into cash
by the applicants through their merchants in the course of their
business is not in dispute. Now, the question as to whether they
did it with the knowledge of the crime or not is a matter which
requires to be interrogated and decide in due course. Both the
applicants have appraised the manner in which, the arbitrary
acts of the 10 in getting lien marked their capital amount has
affected the business. They asserts to have borrowed the amount
from others and paying the interest thereon by sustaining the
huge loss. Now their grievance is that, the lien marked amount
being of their own, is required for the smooth functioning of their
day to day business.

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10. Here it is not in dispute that, the applicants are the
registered corporate business establishments. Their names are
enlisted in the Bombay Stock. Exchange and National Stock
Exchanges. The investment of money by the share holders with
the applicants may be true. Their grievance is that, they have
borrowed money from other institutions to fulfill the capital
requirements for ensuring the smooth ctioning the business
cannot be ruled out. Here. elearned SPP has opposed the
entitlement of the applicants to get remove the lien mark and
utilize the amount in question. According to him, the lien marked
amount is the part of the crime proceeds. The investigation
which was to continue to ascertain the involvement of other
persons including the applicants and to recover the crime
proceeds has taken the back seat, as a result of the stay granted
by the Hon'ble High Court against the further investigation. His
main grievance is that, if the amount is lien marked and
permitted the applicants to utilize the same, it would be very
difficult to recover it in case if their involvement in the crime and
the lien marked amount to be the part of it is found.
11. It is forth coming from the record that, the FIR against the
2nd accused came to be quashed by the order dated 29.04.2025
of the Hon'ble High Court in W.P.No.31828/2024. Admittedly, the
investigation against the 1st accused has been stayed by the
Hon'ble High Court in W.P.No.3496/2024. Under these
circumstances, the entitlement of the applicants to get remove
the lien mark and right to utilize the amount or otherwise cannot
be decided, unless the stay granted by the Hon'ble High Court
gets vacated. Therefore, without giving scope for the further
discussion, I am declined to sustain the prayer of both the
applicants for the present. In the result, I pass the following:
ORDER
Petitions under Section 451 r/w Section 457 of Cr.P.C
filed on behalf of the applicant at Sl. No.1 and 2 are
rejected.”

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8. The contention of the petitioner is with regard to the
‘Operating Guidelines for Payments Banks’ issued by the Reserve
Bank of India to all the payments banks and the directions in the
said guidelines with regard to marking of the lien or demarking of
the lien have not been considered by the concerned Court.
9. In that light, I deem it appropriate to direct the concerned
Court to reconsider the application of the petitioner in terms of the
‘Operating Guidelines for Payments Banks’ issued by the Reserve
Bank of India to petitioner – bank, which is also a payments bank.
10. For the aforesaid reasons, the following:
ORDER

a. The criminal petition is allowed in-part.

b. The matter is remitted back to the hands of the concerned
Court to reconsider the application filed under Sections
451 and 457 of the Cr.P.C.

c. In view of the matter remanded back to the concerned
Court, the order dated 04.03.2026 passed on the

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petitioner’s application, in Crime No.243/2023 stands
quashed.

d. The concerned Court shall reconsider the application of the
petitioner within eight weeks from the date of receipt of a
copy of the order, bearing in mind the observations made
in the course of the order.
Ordered accordingly.


Sd/-
(M.NAGAPRASANNA)
JUDGE






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