2024 (7) TMI 1118 - HC - FEMA

Claim of interest on refund of Amount deposited - Penalty was Imposed under FEMA - refund of confiscated amount - Interest accrued on deposited amount by the respondents in the Nationalized Bank - legitimate right of the petitioner to receive interest on the amount that were lying with the Department for almost for 21 years - HELD THAT - As there is no justification in the stand of the respondents in denying the interest, as Section 42 of the Foreign Exchange Regulation Act, 1973, makes it clear that in all other cases, such proceeds shall be paid to such person as may appear to other cases, such proceeds shall be paid to such person as may appear to the officer or the Court, who or which made the direction under subsection (1) to be entitled thereto in such currency and in such manner as he or it deems just together with interest at the rate of six per cent. per annum from the date on which such draft, cheque (including traveller's cheque) or other instrument came into his or its custody till the date of payment. By confiscating the amount, the respondents have made no favour to the petitioner. By returning the amount belatedly pursuant to the directions of this Court, the respondents have done no favour to the petitioner. The petitioner cannot be rubbed of the interest, which the petitioner would have earned, had the petitioner invested the amount in Fixed Deposit. All that the respondents have done is to comply with the order by refunding the amount that was illegally confiscated from the petitioner. There has to be a restitution and therefore, the interest is to be paid to the petitioner. Writ Petition is disposed of by directing the respondents to pay the interest to the petitioner on the confiscated amount from the date of confiscation up to the date of refund at the prevailing bank interest within a period of 3 months from the date of receipt of a copy of this order. No costs.

Summary

Issues:
1. Petitioner seeking interest accrued on deposited amount.
2. Imposition of penalty and confiscation of seized amount.
3. Interpretation of relevant sections and rules.
4. Applicability of interest payment under different statutes.
5. Comparison with relevant case law.
6. Discretion of the Appellate Tribunal in directing interest payment.
7. Legal provisions regarding payment of interest post judgment.

Analysis:
The Writ Petition was filed to obtain a Writ of Mandamus instructing the respondents to pay interest on the petitioner's deposited amount and penalty sum, as per specific sections and rules. The petitioner, aged 65 at the time of filing, had Rs. 9,00,000 seized under the Foreign Exchange Regulation Act, leading to a penalty of Rs. 10,00,000 and confiscation order. An appeal to the Appellate Tribunal resulted in the refund order of the seized and penalty amounts, but no mention of interest payment was made.

The petitioner argued for interest under Rule 8 of the Foreign Exchange Management Rules, 2000, citing the right to interest if no contravention is found or if the seized currency is irrelevant to adjudication. Additionally, Section 42(3) of the Foreign Exchange Regulation Act, 1973, mandates interest payment on confiscated amounts. The petitioner claimed the right to interest due to the prolonged period the amount was held by the Department.

Contrary to the petitioner's stance, the respondents contended that interest payment requires a specific directive from the Appellate Tribunal, as per Section 53 of the Foreign Exchange Regulation Act, 1973. They relied on Section 34 of the Civil Procedure Code, stating that a decree silent on interest payment implies refusal, necessitating a separate suit for interest recovery.

The Court opined that interest payment was justified under Section 42 of the Act, emphasizing the obligation to pay interest on confiscated amounts. It noted that the respondents' actions did not merit favor, as they merely complied with refund orders. Thus, the Court ruled in favor of the petitioner, directing the respondents to pay interest on the confiscated amount from the date of confiscation to the refund date at prevailing bank interest rates within three months.

In conclusion, the judgment resolved the issue of interest payment on the confiscated amount in favor of the petitioner, highlighting the legal basis for such payment and the obligation of the respondents to fulfill it within the specified timeline.