2012 (1) TMI 198 - HC - FEMA

Summary

Issues Involved:
1. Maintainability of writ petition for payment of interest.
2. Entitlement to interest on the seized amount.
3. Claim for interest post-refund of the principal amount.

Summary:

1. Maintainability of Writ Petition for Payment of Interest:
The learned Single Judge dismissed the writ petition relying on precedents, stating that a writ petition claiming only payment of interest is not maintainable. However, the court noted that the Apex Court in Godavari Sugar Mills Ltd. Vs. State of Maharashtra (2011) 2 SCC 439 clarified that while normally a writ petition for enforcing a civil liability is not entertained, the High Court can order payment of money in enforcement of statutory functions. The court found the present case fit for exercising discretion under Article 226 of the Constitution of India, as the facts were undisputed and the seizure was without authority of law.

2. Entitlement to Interest on the Seized Amount:
The court held that the seizure of Rs. 4,50,000/- was without authority of law and the respondent had a duty to refund the amount along with any accretion thereon. The principle of restitution was invoked, and it was noted that the respondent had earned interest of Rs. 4,42,500/- on the seized amount. The court emphasized that allowing the respondent to retain the benefits accrued from the wrongful seizure would amount to unjust enrichment. The court directed the respondents to pay Rs. 4,42,500/- to the appellant within eight weeks, failing which the amount would incur interest at the rate of 10% per annum.

3. Claim for Interest Post-Refund of the Principal Amount:
The court differentiated the claim for interest post 1st December 2009 on the amount of Rs. 4,42,500/-. It was held that this claim could not be adjudicated in writ proceedings and required a civil suit. Rule 8 of the Foreign Exchange Management (Encashment of Draft, Cheque, Instrument and Payment of Interest) Rules, 2000, which provides for interest at 6% per annum on the principal amount, was found inapplicable to the claim for interest on the interest amount. The court upheld the learned Single Judge's dismissal of the writ petition regarding this claim, granting liberty to the appellant to institute a suit for the same.

Conclusion:
The appeal was allowed to the extent of directing the respondents to pay Rs. 4,42,500/- to the appellant within eight weeks, with a 10% per annum interest penalty for non-compliance. The claim for interest post 1st December 2009 was dismissed, with liberty to the appellant to pursue a civil suit. The court also awarded costs of Rs. 20,000/- to the appellant.