Director General Of Income Tax vs Diamondstar Exports Ltd.

3. The only question in this appeal is whether the High Court could have directed payment of interest on certain jewellery and ornaments belonging to the respondents which had been seized by the appellants on 12-1-2001. The seizure was challenged by the respondents before the High Court by filing a writ petition. The writ petition was allowed on 3-12-2004. The High Court was of the view that the search and seizure were invalid and illegal. Consequentially, all actions taken by the appellants on the basis of such illegal search and seizure were quashed. The appellants were directed to forthwith return the gold, diamond and jewellery and ornaments seized from the respondents with interest at the rate of 8 per cent per annum on the value of the jewellery and ornaments which the High Court quantified at Rs. 84.68 lakhs from the date of seizure till payment.

4. The grievance of the appellant was that there is no prayer by the respondent for payment of interest in their writ petition. Learned counsel appearing on behalf of the respondents on the other hand contended that the High Court was competent to award penal interest by way of compensation for the entirely unauthorised action taken by the appellant. It was also pointed out that the appellants did not comply with the High Court's order until almost one year later when the gold diamond jewellery and other ornaments were returned by the appellants to the respondents There has been no payment to wards the compensation by the appellants as directed by the High Court till today.

5. Without going into the question as to value of goods found by the court to have been illegally seized, we hold that the appellants are liable to compensate the respondents at least by way of costs. The loss obviously suffered by the respondents during the pendency of the proceedings before the High Court was further aggravated by the delay in complying with the High Court's decision. In the circumstances, we direct the appellants to pay a sum of Rs. 75,000 to the respondents on account of costs which the respondents will accept in full and final settlement of the claim towards the quantum of interest under the impugned order. Such payment is to be made within a period of four weeks. In the event such payment is not made, this appeal will stand dismissed with costs.

6. The appeal is disposed of.