J&K High Court Refuses to Release Rs 4 Lakh FDR Tied to MD/MS Question Paper Scam, Says Amount Carries Potential to Be Proceeds of Crime

The Srinagar bench held that a demand draft seized in the VOK investigation into illegal sale of MD/MS entrance question papers cannot be released while trial is pending, though the petitioner stands protected by accruing interest.

Justice Sanjay Dhar, sitting singly at the Srinagar bench of the High Court of Jammu & Kashmir and Ladakh, dismissed a petition filed by Bashir Mohammad Choudhary seeking release of a Fixed Deposit Receipt (FDR) created from a Rs 4,00,000 demand draft that was seized during the investigation of FIR No. 36 of 2003, registered by Police Station Vigilance Organisation Kashmir (VOK). The case relates to an alleged conspiracy to illegally sell question papers of the MD/MS Entrance Examination conducted by the Board of Professional Entrance Examinations. The court found that the demand draft — prepared by the petitioner's wife, Dr. Shagufta — bore a direct connection to the alleged crime, and that releasing the FDR amount before the conclusion of trial could prejudice confiscation if the accused are ultimately convicted.

The Dispute Before the High Court

FIR No. 36/2003 was registered at Police Station VOK after information was received about the illegal sale of question papers for the MD/MS Entrance Examination. Investigators found that candidates had paid large sums through bank drafts to accused persons in exchange for advance copies of examination question papers, promised one day before the examination.

One such draft, bearing No. 525051 dated 3 December 2003, was prepared from the account of Dr. Shagufta of Nursing Garh, Srinagar, at J&K Bank Branch Bone and Joint Hospital, Barzulla, Srinagar, for Rs. 4,00,000 in favour of Dr. Mohammad Sadiq Mughal, who is named as an accused in the charge-sheet. The investigating agency seized this draft from the premises of the accused.

Dr. Shagufta is the wife of the petitioner, Bashir Mohammad Choudhary. On 19 July 2005, the trial Court granted interim custody of the demand draft to the petitioner, with a direction to produce it as and when required and with a clear prohibition against disbursement of the amount until further orders.

In 2011, the petitioner approached the trial Court again, this time seeking conversion of the demand draft into an FDR. The learned Chief Judicial Magistrate, Srinagar, by order dated 22 December 2011, directed the Manager of J&K Bank Branch Bone and Joint Hospital, Barzullah, to convert the demand draft amount into an FDR in the name of the petitioner — but with the condition that the petitioner would not be entitled to withdraw either the principal or the interest until the conclusion of trial.

The petitioner then filed a fresh application before the trial Magistrate seeking release of the FDR amount along with accrued interest. By order dated 19 May 2023, the Chief Judicial Magistrate dismissed that application. Both the order of 22 December 2011 and the order of 19 May 2023 were challenged before the High Court.

The Petitioner's Case and the Legal Issue

Before the High Court, the petitioner contended that he is neither an accused in the case nor is the demand draft amount connected with the proceeds of any offence. It was submitted that since the demand draft was merely seized in the course of investigation, its release would have no bearing on the trial. The petitioner also placed his financial condition before the court, stating that he had taken a loan from J&K Bank and was in dire need of the money.

The legal question was whether a third party — neither an accused nor formally indicted — could seek release of seized funds during a pending criminal trial, when those funds are alleged to have been part of a payment made in furtherance of the crime being tried.

How Justice Dhar Reasoned

Justice Dhar found that the charge-sheet contained material showing that Dr. Shagufta was among the prospective candidates for the MD/MS Entrance Examination. Given that background, the demand draft prepared from her account and paid to one of the accused fit squarely within the prosecution's case that candidates had advanced money to accused persons to obtain question papers.

The court held that the amount “has the potential of being the proceeds of crime in case the offences are proved after the trial.” On that basis, if the accused are convicted, the amount would be liable to confiscation. Releasing it before the conclusion of trial would therefore render the eventual confiscation infructuous.

The court characterised the petitioner's submission — that the demand draft proceeds are unconnected to the offence — as “absolutely misconceived.” It found that the material on record, as reflected in the charge-sheet, directly linked the draft to the alleged scheme.

Justice Dhar also addressed the petitioner's concern about the prolonged freezing of the amount. The court pointed to the structure of the order dated 22 December 2011: by directing conversion of the demand draft into an FDR, the trial Magistrate had ensured that the amount earns interest throughout the period it remains locked. If the accused are ultimately acquitted or charges dismissed, the petitioner would be entitled to receive the principal along with all accrued interest.

In the court's assessment, the trial Magistrate had “properly balanced and safeguarded the interests of parties” while passing the 2011 order. The High Court saw no ground to interfere with either the 2011 order or the 2023 order dismissing the release application.

Outcome

Justice Sanjay Dhar dismissed the petition in its entirety on 22 July 2026. The two impugned orders — dated 22 December 2011 and 19 May 2023 — passed by the learned Chief Judicial Magistrate, Srinagar, were upheld. The Rs 4,00,000 FDR and the interest accrued thereon will remain frozen in J&K Bank Branch Bone and Joint Hospital, Barzullah, until the conclusion of trial in FIR No. 36/2003. The order was marked as both speaking and reportable.