Krishnan Narayanav.State of Andhra Pradesh & Ors

Interim Custody of Seized Property: Possession and Beneficial Interest Trump Registration Certificates

Case Snapshot

Case Name: Krishnan Narayana v. State of Andhra Pradesh & Ors.

Citation: 2026 INSC 748 (Non-Reportable)

Bench: Justice Sanjay Karol and Justice Augustine George Masih

Date of Judgment: July 27, 2026

Area of Law: Criminal Law, Criminal Procedure, Property Law, Interim Custody of Seized Property

Judgment in Brief

The Supreme Court dismissed the appeal filed by the appellant challenging the High Court's order granting interim custody of seized vehicles (including excavators, a tipper, and a pick-up) to the respondent company rather than to the appellant. The vehicles were seized during the investigation of criminal cases involving allegations of misappropriation of company funds and criminal trespass.

The appellant claimed ownership based solely on registration certificates standing in the name of his company. The respondent company, however, demonstrated that it had been in continuous possession of the vehicles, had paid the EMI instalments for the loans secured against them, and had a written undertaking from the appellant permitting the company to retain and operate the vehicles until settlement of accounts.

The Court held that the power under Sections 451 and 457 of the Code of Criminal Procedure, 1973, is discretionary and requires the Court to determine who is best entitled to possession of the property pending trial. The registration certificate is a relevant factor but is not conclusive and cannot override other compelling circumstances such as admitted possession, undertaking, payment of instalments, and continued beneficial use.

Relevant Facts

The Parties:

• The appellant, Krishnan Narayana, was a director of M/s Pure Minerals (involved in granite quarrying) and also a director of the respondent company, M/s Earth Stein Private Limited, with 80% shareholding.

• The respondent company was a corporate entity.

The Vehicles: The subject vehicles (one Bolero City Pick-up, three Excavators, and one Ashok Leyland Tipper) were purchased in the name of M/s Pure Minerals between 2014 and 2022. The hypothecation instalments payable to Shriram Finance Ltd. for the loans availed for these vehicles were discharged from the account of the respondent company.

The Dispute:

• Appellant's Version: On May 31, 2023, the appellant visited the house of one S.R. Kumar. The respondents intimidated him and got his signatures on blank papers, which were used to forge his resignation from the respondent company on June 16, 2023. On August 31, 2023, the respondents committed criminal trespass into the granite factory and forcefully took away the vehicles. FIR No. 353/2023 was lodged.

• Respondent's Version: The appellant misappropriated ₹1,73,11,894 from the respondent company and used the amounts to purchase the vehicles in the name of his company. Counter-FIR No. 354/2023 was lodged under Section 406 IPC (criminal breach of trust).

Resignation and Undertaking: On June 16, 2023, the appellant submitted his resignation from the respondent company, which was accepted by the Board of Directors. Form DIR-12 was filed with the Registrar of Companies. The appellant also executed an undertaking agreeing to allow the company to continue the operation of the subject vehicles until the settlement of accounts.

Seizure and Custody Applications:

• Police seized the vehicles during investigation.

• The appellant filed Criminal Miscellaneous Petition No. 218/2025 seeking interim custody, which was dismissed by the Trial Court on March 26, 2025.

• The respondent company filed Criminal Miscellaneous Petition No. 384/2025 seeking return of properties, which was dismissed on May 16, 2025.

• The appellant filed Criminal Petition No. 3712/2025 before the High Court challenging the dismissal.

• The respondent company filed Criminal Petition No. 7896/2025 before the High Court challenging the dismissal of its application.

High Court's Decision: By common impugned order dated September 18, 2025, the High Court dismissed the appellant's petition and allowed the respondent company's petition, granting interim custody of the vehicles to the respondent company pending the resolution of the criminal cases.

Issues Before the Court

1. Who, between the parties, is entitled to interim custody of the subject vehicles at this stage, in terms of Sections 451 and 457 of the CrPC?

2. Whether the registration certificate standing in the name of the appellant's company is conclusive and determinative of the right to interim custody, or whether other circumstances (possession, undertaking, payment of instalments, etc.) must also be considered?

Legal Framework

• Section 451 of the Code of Criminal Procedure, 1973 (CrPC): "Order for custody and disposal of property pending trial in certain cases." When any property is produced before any Criminal Court during any inquiry or trial, the Court may make such order as it thinks fit for the proper custody of such property pending the conclusion of the inquiry or trial. The object is to ensure the property does not suffer waste, misuse, or deterioration.

• Section 457 of the CrPC: "Procedure by police upon seizure of property." When seizure of property is reported to a Magistrate, and the property is not produced before a Criminal Court during an inquiry or trial, the Magistrate may make such order as he thinks fit respecting the disposal of such property or the delivery thereof to the person entitled to possession thereof.

• Nature of Power: The power under Sections 451 and 457 is discretionary. The Court does not adjudicate title but merely undertakes the exercise of granting interim possession with the object of preventing decay and diminution in the value of the property.

• Registration Certificate: While a registration certificate is a relevant factor, it is not conclusive. The Court must consider all attending circumstances to determine who is best entitled to possession.

Important Precedents Relied Upon

1. N. Madhavan v. State of Kerala (1979) 4 SCC 1

The Court referred to this precedent to explain the purport of Sections 451 and 457 of the CrPC. The provisions vest the Court with the discretion to determine who is best entitled to possession of the property. The Court does not adjudicate title but merely undertakes the exercise of granting interim possession with the object of preventing decay and diminution in the value of the subject property.

2. Sunder Bhai Ambalal v. State of Gujarat (2002) 10 SCC 283

This is the most significant precedent relied upon. In this case, the Supreme Court held that the powers under Section 451 CrPC should be exercised expeditiously and judiciously. The Court identified the purposes served by such exercise:

1. The owner of the article would not suffer because of its remaining unused or by its misappropriation.

2. The Court or police would not be required to keep the article in safe custody.

3. If proper panchnama is prepared, it can be used in evidence instead of production during trial.

4. The jurisdiction should be exercised promptly so that there may not be further chance of tampering with the articles.

The Court's Distinction: The appellant relied on Sunder Bhai to contend that the vehicles must be released in favour of the owner as per the registration certificate. The Court held that this reliance was misconceived. Sunder Bhai does not lay down an inflexible rule that custody must invariably follow the registration certificate irrespective of all other attending circumstances. It requires the Court to act expeditiously and judiciously, having regard to the object of preventing misuse and deterioration of property.

Court's Reasoning and Analysis

I. The Discretionary Nature of Sections 451 and 457 CrPC

The Court began by examining the language of Sections 451 and 457 CrPC:

"The language used in these provisions makes it clear that the Court is vested with the power to grant custody to whomsoever it deems fit i.e. the Court has the discretion to determine who is best entitled to possession of the property. The use of the words 'possession' and 'custody' emphasize that the Court does not adjudicate title but merely undertakes the exercise of granting interim possession, with the object of preventing decay and diminution in the value of the subject property."

Key Principle: The Court does not adjudicate title in proceedings under Sections 451 and 457. The exercise is only for interim possession to prevent waste, misuse, or deterioration of the property.

II. Registration Certificate is Not Conclusive

The Court addressed the appellant's primary contention that the vehicles must be released in his favour because the registration certificates stood in the name of his company.

The Court's Finding: The registration certificate is a relevant factor but is not conclusive and cannot override other compelling circumstances.

The Court's Reasoning:

• The registration certificate merely records the name in which the vehicle is registered.

• It does not, by itself, establish the absolute right to possession, especially where there are allegations of misappropriation of funds and where the registration was allegedly obtained using company funds.

• The decision on interim custody must be based on a cumulative assessment of all attending circumstances, including possession, undertaking, payment of instalments, and continued beneficial use.

III. Circumstances Weighing Against the Appellant

The Court identified several circumstances that, taken cumulatively, weighed against the appellant's claim to interim custody:

1. Criminal Proceedings Pending Against the Appellant:
Criminal proceedings remained pending against the appellant alleging misappropriation of funds from the respondent company's accounts for the very purpose of acquiring the subject vehicles in the name of his own company. This considerably weakened the appellant's claim of exclusive individual entitlement.

2. Seizure from the Respondent Company's Operational Site:
The vehicles were seized from the operational site of the respondent company, where they had remained in continued use. The vehicles were under the respondent company's use and control.

3. The Written Undertaking:
The appellant had executed a written undertaking agreeing to allow the respondent company to continue the operation of the subject vehicles until settlement of accounts. This was a significant factor weighing in favour of the respondent company.

4. Encashment of Cheque:
The appellant had encashed the cheque issued to him in connection with the transfer of his shareholding. This circumstance sat uneasily with his assertion that his resignation and the accompanying undertaking were obtained under coercion.

5. Payment of EMI Instalments:
The hypothecation instalments payable to Shriram Finance Ltd. for the loans availed for the subject vehicles had been discharged from the account of the respondent company, not by the appellant in his individual capacity. If the vehicles were, as claimed, the personal property of the appellant, there was no explanation as to why the financial burden was borne by the respondent company.

IV. The Appellant's Coercion Claim

The Court noted that the appellant had alleged that his resignation and the undertaking were forged and obtained under coercion. However, the Court found that the appellant had not offered any explanation for having encashed the cheque issued to him in connection with the transfer of his shareholding.

The Court's Finding: Whether the resignation, the board resolution, and the share transfer were validly executed or were fabricated is a matter requiring evidence and trial which cannot be resolved at this interim stage. The Court expressed no opinion on the merits of that dispute, and it shall be open to the appellant to agitate all such contentions, including the allegation of forgery, in the appropriate proceedings.

V. No Expression on Legality of Seizure

The Court declined to enter into the question of whether the reopening of investigation and the consequent seizure of the vehicles was without the sanction of law:

"We may note we do not consider it necessary to enter into the question of the reopening of investigation and the consequent seizure of the subject vehicles as being without the sanction of law in the present proceedings, as it is a matter that would fall for consideration in appropriate proceedings challenging the same and cannot by itself be determinative of the question of interim custody with which we are presently concerned."

Key Principle: The legality of seizure is a separate question that must be challenged in appropriate proceedings. It cannot, by itself, determine the question of interim custody.

VI. The Cumulatively Favourable Circumstances

The Court concluded that the circumstances favouring the respondent company—namely, the continued possession, the undisputed factum of the payment of the EMI instalments, and the undertaking on record—outweighed the circumstance of the registration standing in the appellant's name.

The Court's Conclusion: Based on a cumulative assessment, the respondent company was the party best entitled to interim possession of the vehicles.

Ratio Decidendi and Key Legal Principles

1. Power Under Sections 451 and 457 CrPC is Discretionary

The Court has the discretion to determine who is best entitled to possession of property seized during criminal proceedings. The Court does not adjudicate title but merely undertakes the exercise of granting interim possession to prevent waste, misuse, or deterioration of the property.

2. Registration Certificate is Not Conclusive

While the registration certificate is a relevant factor, it is not conclusive and cannot override other compelling circumstances such as admitted possession, undertaking, payment of instalments, and continued beneficial use.

3. Sunder Bhai Does Not Mandate Custody to Registered Owner

The judgment in Sunder Bhai Ambalal does not lay down an inflexible rule that custody must invariably follow the registration certificate irrespective of all other attending circumstances. It requires the Court to act expeditiously and judiciously, having regard to the object of preventing misuse and deterioration of property.

4. Cumulative Assessment of Circumstances

The Court must make a cumulative assessment of all attending circumstances to determine who is best entitled to possession. These include:

• Possession at the time of seizure

• Written undertakings or agreements

• Payment of financial obligations (EMIs, etc.)

• Allegations of misappropriation of funds

• Continued beneficial use and control

5. Interim Custody is Not a Determination of Title

An order granting interim custody under Sections 451 and 457 CrPC does not determine the ultimate rights of the parties. It is purely an interim arrangement to safeguard the property pending the conclusion of the inquiry or trial.

6. The Legality of Seizure is a Separate Question

The legality of seizure cannot, by itself, determine the question of interim custody. It must be challenged in appropriate proceedings.

7. Prima Facie Assessment is Sufficient

The exercise of power under Sections 451 and 457 requires only a prima facie assessment of who is best entitled to possession. The Court need not conduct a full trial or adjudicate title.

8. The Object is to Prevent Waste and Deterioration

The limited object of Sections 451 and 457 is to ensure that property seized in the course of criminal proceedings does not suffer waste, misuse, or deterioration, and that it remains available for production before the Court as and when required.

Important Court Observations

• "The language used in these provisions makes it clear that the Court is vested with the power to grant custody to whomsoever it deems fit i.e. the Court has the discretion to determine who is best entitled to possession of the property."

• "The use of the words 'possession' and 'custody' emphasize that the Court does not adjudicate title but merely undertakes the exercise of granting interim possession, with the object of preventing decay and diminution in the value of the subject property."

• "The appellant's reliance on Sunder Bhai Ambalal (supra) to contend that the subject vehicles must be released in favour of the owner as per the registration certificate is misconceived. The said judgment... does not lay down an inflexible rule that custody must invariably follow the registration certificate irrespective of all other attending circumstances."

• "The registration certificate stands considerably weakened given that criminal proceedings remain pending against the appellant alleging misappropriation of funds from the accounts of the respondent company for the very purpose of acquiring the subject vehicles in the name of his own company."

• "The appellant has not offered any explanation for having encashed the cheque issued to him in connection with the transfer of his shareholding, a circumstance that sits uneasily with his assertion that his resignation and the accompanying undertaking were obtained under coercion."

• "If the vehicles were, as claimed, the personal property of the appellant, there is no explanation forthcoming as to why the financial burden of servicing the loan secured over them was borne by the respondent company."

• "The circumstances favouring the respondent company, namely, the continued possession, the undisputed factum of the payment of the EMI instalments, and the undertaking on record, outweigh the circumstance of the registration standing in the name of the appellant."

• "It is, however, clarified that the observations made herein are confined to the question of interim custody and shall not be construed as an expression of opinion on the merits of the rival claims of ownership, misappropriation, or the validity of the resignation and share transfer."

Final Outcome

Appeal Dismissed: The Supreme Court dismissed the appeal as being devoid of merit.

Interim Custody: The respondent company, M/s Earth Stein Private Limited, was held to be the party entitled to interim possession of the subject vehicles.

Clarification: The Court clarified that the observations made in the judgment are confined to the question of interim custody and shall not be construed as an expression of opinion on the merits of the rival claims of ownership, misappropriation, or the validity of the resignation and share transfer. These shall be independently determined in the pending appropriate proceedings.

Pending Applications: Disposed of.

Practical Impact and Legal Strategy

Why the Judgment Matters

1. Clarifies that Registration is Not Conclusive

This judgment establishes that the registration certificate of a vehicle is not conclusive for determining interim custody under Sections 451 and 457 CrPC. Courts must consider all attending circumstances, not merely the registration.

2. Provides a Framework for Interim Custody Disputes

The judgment provides a clear framework for courts to follow in interim custody disputes: conduct a cumulative assessment of all circumstances, including possession, undertakings, payment of financial obligations, and allegations of misappropriation.

3. Distinguishes and Limits Sunder Bhai

The judgment clarifies that Sunder Bhai Ambalal does not mandate custody to the registered owner in all cases. It requires expeditious and judicial exercise of power, but the determination must be based on all attending circumstances.

4. Prevents Misuse of Registration Certificates

The judgment prevents parties from using registration certificates as a trump card to claim interim custody, especially where there are allegations of misappropriation or where the registered owner has no beneficial interest.

5. Protects the Interests of Parties with Beneficial Interest

The judgment protects the interests of parties who may not have registration in their name but have beneficial interest, possession, and control over the property.

6. Maintains the Object of Sections 451 and 457

The judgment ensures that the object of Sections 451 and 457—preventing waste, misuse, and deterioration of property—is achieved by granting custody to the party best entitled to possession.

How Advocates and Litigants May Rely Upon It

For Claimants Seeking Interim Custody:

• Must demonstrate more than just registration certificate

• Should provide evidence of possession, control, and beneficial use

• Show payment of financial obligations (EMIs, taxes, maintenance)

• Produce any written agreements or undertakings

• Explain the circumstances under which the property came to be held by another

For Opponents of Interim Custody:

• Can argue that registration certificate is not conclusive

• Can rely on possession at the time of seizure

• Can rely on written undertakings or agreements

• Can rely on payment of financial obligations

• Can rely on allegations of misappropriation of funds

For Advocates:

• Cite this judgment to argue against automatic release based on registration

• Rely on the cumulative assessment framework

• Use the judgment to argue that the legality of seizure is a separate question

• Cite Sunder Bhai with the clarification provided by this judgment

Can It Be Cited Before High Courts, Tribunals, or Subordinate Courts?

Yes. While this judgment is marked as "Non-Reportable," it is still a judgment of the Supreme Court of India and can be cited before:

• The Supreme Court of India

• High Courts

• Sessions Courts and Trial Courts

• Any authority exercising criminal jurisdiction

However, as a non-reportable judgment, it has lesser precedential value than a reportable judgment. It can still be cited as a persuasive authority.

Practical Implications for Future Litigation

1. Factors to Consider in Interim Custody Applications

Courts will now consider the following factors in interim custody applications:

• Registration certificate (relevant but not conclusive)

• Possession at the time of seizure

• Written undertakings or agreements

• Payment of financial obligations (EMIs, taxes, maintenance)

• Allegations of misappropriation of funds

• Continued beneficial use and control

• The object of preventing waste and deterioration

2. Burden of Proof

The party claiming interim custody must demonstrate, on a prima facie basis, that they are best entitled to possession. Mere production of the registration certificate is insufficient.

3. Distinction Between Title and Possession

Courts will maintain the distinction between title (which requires adjudication) and possession (which is the subject of interim orders). Interim custody does not determine title.

4. The Legality of Seizure

The legality of seizure is a separate question and cannot, by itself, determine interim custody. Parties must challenge the legality of seizure in appropriate proceedings.

5. Prima Facie Assessment

Courts will make only a prima facie assessment of who is best entitled to possession. Full adjudication of title is not required at the interim stage.

6. Effect of Pending Criminal Proceedings

Where criminal proceedings are pending against a party alleging misappropriation of funds for the acquisition of property, this is a relevant factor weighing against that party's claim to interim custody.

7. Written Undertakings are Significant

Written undertakings or agreements permitting another party to retain and operate property are highly significant and weigh heavily in favour of that party's claim to interim custody.

8. Payment of Financial Obligations

Payment of financial obligations (EMIs, taxes, maintenance) by a party is a strong indicator of their beneficial interest and entitlement to interim custody.

9. Coexistence of Civil and Criminal Proceedings

Interim custody disputes under Sections 451 and 457 CrPC can coexist with civil proceedings regarding title. The criminal court's decision on interim custody does not bind the civil court's determination of title.

10. Finality of Interim Orders

Interim custody orders under Sections 451 and 457 are subject to modification at any stage. They do not attain finality and can be reviewed or revised based on fresh circumstances.