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TMI Blog2010 (5) TMI 381X X X X Extracts X X X X X X X X Extracts X X X X ..... for the sum of Rs. 5,21,490 belonging to petitioner No. 2 under section 37 of the Foreign Exchange Regulation Act, 1973 ("FERA" for short). A show-cause notice dated 9-11-1999, inter alia; alleging contravention of section 9(1)(b) and section 9(1)(d) of FERA, by the petitioners were issued and proceedings thereunder were initiated against them. Finally, after a detailed hearing of the matter, an order of adjudication dated 28-2-2001 was passed by the Special Director of Enforcement, exonerating the representative of the petitioners under FERA holding that the aforesaid amounts were in no way involved in the contravention of any provisions of the FERA. However, no specific order directing refund with interest was passed by the Special Director while passing adjudication order dated 28-2-2001; wherein the show-cause notices issued to the petitioners were discharged. 4. The petitioners, after receipt of aforesaid order dated 28-2-2001, requested the officer of the Enforcement Directorate for return of seized amount. After repeated follow up, an amount of Rs. 5,21,490 was returned by bankers cheque dated 5-6-2002 and amount of Rs. 85,00,000 was returned on 23-5-2002 by bankers cheque ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... justification whatsoever. 8. Mr. Andhyarujina further submits that permitting the respondents to retain the said amount of interest would cause unjust enrichment in favour of revenue at the cost and prejudice of the petitioners. Thus, in his submission, the retention of the amount of interest accrued, by the revenue is totally arbitrary, illegal and without authority of law and violative of the fundamental rights of the petitioners guaranteed under articles 14 and 19(1)(g) of the Constitution of India. He submits that under the provisions of section 42(3) of the FERA, the respondents are bound to return to the petitioners the interest on the seized amounts of cheque and currency notes from the date of seizure till the date of return. He also relied upon the provision of rule 8 of the Foreign Exchange Management (Encashment of Draft, Cheque, Instrument and Payment of Interest) Rules, 2000, read with section 37 of the Foreign Exchange Management Act, 1999. Per Contra 9. Mr. Pakale and Mr. Mishra, learned counsel appearing for the revenue, relying upon counter-affidavit filed in the nature of reply on behalf of the revenue, submits that there is no provision under FERA to pay the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d amounts were deposited in fixed deposits with the Bank and it earned interest. 13. In order to answer the issue involved, firstly, it is advisable to consider briefly the nature of doctrine of accretion. Accretion is, however, a doctrine of the common law and is, therefore, capable of adjustment and expansion by use of analogy as held in Southern Theosophy v. South Australia [1982] 1 All ER 283. Before applying it to the case in hand, let us turn to the leading judgment of the Apex Court which is copious and in its result clear. 14. The Apex Court had an occasion to consider doctrine of accretion in the case of Standard Chartered Bank v. Custodian [2000] 25 SCL 221 while considering issue arising out of the provisions of the Special Court (Trial of Offences Relating to Transaction in Securities) Act, 1992; wherein the Custodian appointed under the said Act had called upon Standard Chartered Bank ('the Bank') to either hand over the shares and securities to the Custodian or the Bank should obtain an appropriate direction from the Court in case the Bank was claiming any title to the said shares held by them by way of security. 15. The aforesaid notice was subject-matter of adjud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Contract Act, observed as under : "The section not only gives the pawnee the right to retain the goods pledged as collateral security but also entitled the pawnee to sell the pledged goods after giving the pawner reasonable notice of the same. If the proceeds of the sale are less than the amount due, the pawner continues liable to pay the balance. On the other hand, if the proceeds realized on the sale being made are greater than the amount due the pawnee is under an obligation to pay over the surplus to the pawner." The Apex Court also referred leading book on the subject, Story on Law of Bailment (para 292); wherein the observations were made reading as under : "By the pledge of a thing, not only the thing itself is pledged, but also, accessory, the natural increase thereof. As if a flock of sheep are pledged, the young, afterwards born, are also pledged." [Emphasis supplied] This passage has been relied upon by Chitty on Contract, 28th Edn. at p. 162 where it is noted that : "If during the pledge there is an increase in the value of the thing pledged, the pledgee is entitled to the increase as part of his security." [Emphasis supplied] 20. The Apex Court finally held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll have to be exercised looking to all the circumstances of the case. 24. In the present case, the amounts involved were large, viz., Rs. 85,00,000 and Rs. 5,21,490. It is an accepted position that these amounts were seized and retained without authority of law. The lone redeeming feature in the present case is that the respondents have refunded these amounts without the petitioners being required to come to Court for that purpose. As against this, the petitioners were deprived of the use of these amounts for a period of three and half years. 25. The submissions made by Mr. Pakale, learned counsel appearing for the revenue that there is no provision under FERA for payment of interest in the facts and circumstances of the case is misplaced. The present petition, however, is under article 226 of the Constitution for the purpose of securing compensation for retention of the amount without the autho-rity of law. The order-in-original to the extent it denies interest to the petitioners is under challenge. 26. Mr. Andhyarujina, learned counsel appearing for the petitioners, on the other hand, has rightly pressed into service the Foreign Exchange Management (Encashment of Draft, Cheque ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tioners, the petitioners would be entitled to interest at the rate of 6 per cent per annum for the period for which they were deprived of the said amount of accrued interest on the seized amounts. Hence, the following order : Order The petition is allowed with costs quantified in the sum of Rs. 10,000. The petitioner No. 2 shall be entitled to the accrued interest on the seized amount of Rs. 5,21,490 invested by the respondents in fixed deposits quantified and admitted by the revenue in the sum of Rs. 2,50,398 with further interest thereon at the rate of 6 per cent per annum from 5-4-2002 till repayment in full and final. The petitioner No. 1 shall be entitled to the accrued interest on the seized amount of Rs. 85,00,000 invested by the respondents in fixed deposits quantified and admitted by the revenue itself in the sum of Rs. 43,00,932 with further interest thereon at the rate of 6 per cent per annum from 23-5-2002 till repayment in full and final. The respondents shall pay the amounts quantified hereinabove with interest thereon within a period of three months from today, failing which, the said amounts shall carry interest at the rate of 12 per cent per annum instead of 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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