Digital Gold and Commodity-Backed Transactions Qualify as Deposits Under the BUDS Act, 2019.

The Petitioners (a Director and the Company, Jar Gold Retail Pvt. Ltd.) challenged the registration of FIR No. 25/2026 under Sections 21(1) and 21(2) of the Banning of Unregulated Deposit Schemes (BUDS) Act, 2019.

Petitioner No. 2 operates a digital platform "JAR," allowing customers to purchase physical gold starting from ₹10, which is purportedly stored in third-party vaults (Brinks India).

Following alerts from the RBI and SEBI regarding the unregulated nature of "digital gold" and potential 30-40% referral bonuses, the Koramangala Police registered a suo motu complaint.

The State alleged that the scheme functions as an unregulated deposit, receiving money from nearly 3.3 crore users without regulatory oversight.

The Petitioners sought quashing, arguing their business involves the sale of movable property, not "deposits."

The Court applied Section 2(4) of the BUDS Act, 2019, which defines "deposit" expansively as money received in any form with a promise to return in cash, kind, or service.

It relied on Sections 21 and 22 of the BUDS Act for punishment regarding unregulated schemes.

Regarding the scope of interference, the Court cited Kaptan Singh v. State of Uttar Pradesh (2021), establishing that Courts must not appreciate evidence or disputed facts at the quashing stage.

It further applied the principle from Neeharika Infrastructure (P) Ltd. v. State of Maharashtra (2021), holding that an FIR is not an encyclopedia and the police must be permitted to complete investigations in cognizable offences.

The Court rejected the Petitioners' narrow interpretation of "deposit," noting that the BUDS Act is remedial legislation designed to prevent financial stratagems that circumvent regulatory vigilance.

It observed that although the Petitioners claimed the gold was backed by physical bullion stored with "Brinks," there were serious allegations and customer complaints that physical gold could not be traced or delivered upon demand.

The Court emphasized that in the landscape of cyber-enabled financial fraud, the "economic substance" of a transaction outweighs its "cosmetic garb."

Given that the Company’s turnover grew from zero to ₹4,000 crores in five years without oversight from RBI or SEBI, the Court found that the allegations of "structural opacity" and manipulative referral bonuses required a thorough probe.

It held that whether the specific transactions constitute a legal sale or an illegal deposit is a triable issue of fact that cannot be determined in a writ petition.

It held that the definition of "deposit" under the BUDS Act is broad enough to potentially include digital gold schemes, and a purposive interpretation is necessary to protect unsuspecting investors.

The Court directed that the investigation must proceed, clarifying that an FIR is merely a trigger for investigation and not a final determination of all applicable offences.

All interim observations were confined to the section 528 BNSS consideration and do not bind future proceedings.