2012 (10) TMI 44 - HC - FEMA

Interest on the seized foreign currency - applicability of Rule 8 Held that - Interest at the rate of 6% per annum under Rule 8 could have been awarded to the respondent on the seized Indian currency only - writ petition in the nature of enforcement of a civil liability that is claim for interest in the nature of compensation for wrongful retention of money is not maintainable. It is not as if payment of interest under Rule 8 (ii) was mandatory (as under Rule 8(i)) and which could be enforced by way of a writ petition - judgment awarding interest under Rule 8(i) qua Indian currency also can thus not be sustained

Summary

Issues:
Challenge to judgment allowing payment of interest on seized currency under FEMA rules.

Analysis:
1. The respondent filed a writ petition seeking interest on seized currency under FEMA rules. The appellant contested, arguing that interest could only be awarded by adjudicating authority, not through writ jurisdiction.
2. The Learned Single Judge allowed interest under Rule 8 of FEMA rules. The appellant challenged this, arguing that Rule 8 applies to seizure under Section 37 of the Act, not to cases where police seize and hand over monies. They also contended that interest could only be awarded by adjudicating or appellate authorities.
3. The Court noted Rule 8 applies to seizure under Section 37 of FEMA, regardless of initial seizure by police or Directorate of Enforcement. It distinguishes between Indian and foreign currency, allowing interest only on Indian currency. The appellant's challenge on interest for foreign currency was upheld.
4. The Court held that interest under Rule 8 is not mandatory for seized foreign currency and cannot be enforced through a writ petition. Citing previous judgments, it stated that writ jurisdiction is not for awarding interest but for civil liabilities.
5. The Court found the impugned judgment unsustainable as it awarded interest on seized foreign currency under Rule 8, which was not permissible. The appeal was allowed, setting aside the Single Judge's judgment and dismissing the respondent's petition.