The court established the authority of the writ jurisdiction to award interest under Rule 8 of FEMA and clarified the discretionary nature of awarding interest during adjudication.

RAJIV SAHAI ENDLAW, J

1. The challenge in this Intra-Court Appeal is to the judgment dated 4th May, 2011 of the Learned Single Judge allowing W.P.(C) No. 4542/2010 preferred by the respondent and directing the appellant to pay to the respondent simple interest @ 6% per annum on the sum of `7,75,000/-from the date of seizure i.e. 3rd January, 2003 till 31st December, 2007 and @ 9% per annum from 1st January, 2008 till 1st December, 2008. Notice of this appeal was issued and the operation of the judgment of the Learned Single Judge stayed. The counsels have been heard.

2. The writ petition was filed by the respondent pleading that the appellant had on 3rd January, 2003 seized Rs. 7,75,000/-in Indian currency and foreign currency equivalent to `96,000/-from the custody of the respondent and initiated inquiry under the provisions of Foreign Exchange Management Act 1999 (FEMA); that the adjudicating authority vide order dated 28th June, 2004 forfeited the seized currency and also imposed a penalty of `5 lacs on the respondent; that the respondent filed an appeal before the Appellate Tribunal for Foreign Exchange and which appeal was allowed vide order dated 17th December, 2007 which order has attained finality but the seized currency was not returned inspite of repeated request and ultimately the Indian currency was released only on 1st December, 2008 and foreign currency on 02.02.2009. The respondent thus averred in the writ petition that his monies having been wrongfully withheld by the appellant, he was entitled to interest @ 24% per annum thereon from the date of seizure i.e. 3rd January, 2003 till return on 1st December, 2008 and 02.02.2009 respectively. It was also the contention of the respondent that in fact under Rule 8 of the Foreign Exchange Management (Encashment of Draft, Cheque, Instrument and Payment of Interest) Rules, 2000 the return/refund should have been accompanied with interest @6% per annum.

3. It is apposite to at this stage set out Rule 8 which is as under:-

“8. ‘Payment of interest on the seized Indian currency:-(i) Where it is found after completion of the investigation that the Indian currency seized under section 37 of the Act is not involved in the contravention and is to be returned, the same shall be returned to such persons together with interest at the rate of 6% per annum from the date of seizure till the date of payment. (ii) Where it has been found during the course of adjudication that the seized Indian currency is not relevant for such adjudication, the Adjudicating Authority may pass such order returning such Indian currency together with interest at the rate of 6% per annum to such person.”

4. The appellant contested the writ petition contending that under Rule 8 (supra) it was only the adjudicating authority which could have awarded interest @ 6% per annum and the adjudicating authority having not awarded such interest, no direction even under Rule 8 could be issued in writ jurisdiction.

5. The Learned Single Judge in the judgment impugned before us has held the respondent entitled to interest under Rule 8 and accordingly allowed the writ petition on aforesaid terms. Interest @ 6% on seized amount was allowed till 31.12.2007 to give time of about fifteen days after order dated 17.12.2007 for payment and @9% thereafter.

6. The appellant has challenged the order before us on two grounds. Firstly, it is contended that Rule 8 (supra) applies to seizure of Indian currency under Section 37 of the Act and was not attracted to the present case where the seizure was by the Police and the seized monies handed over to the appellant subsequently on the directions of the Court. Secondly, it is reiterated that interest under Rule 8 could be awarded by the adjudicating or the Appellate Authority only and the said authorities having not awarded any interest the same cannot be claimed by way of writ petition. Reliance is placed on Suganmal Vs. State of Madhya Pradesh AIR 1965 SC 1740 and on UOI Vs. M/