JUDGMENT B.S. Chauhan, J.
1. This writ petition has been filed for quashing the order dated 2.1.2005, passed by respondent No. 2 and for a direction to the respondents to pay interest on the amount received by the respondents towards the sale of goods after confiscation of the same under provisions of Section 6A of The Essential Commodities Act, 1955, (hereinafter called 'the Act 1955').
2. The facts and circumstances giving rise to this case are that the petitioner No. 1 is a proprietary firm engaged in the business of purchase, sale and storage of goods/grains having a licence under the provisions of U. P. Food Grains Dealers (Licensing and Restriction on Hoarding) Order, 1976. The petitioners had purchased huge quantity of grains, i.e., fine rice in 1985. However, 120 bags of the said consignment had been confiscated by the authorities under Section 6A(1) of the Act, 1955. The said rice had been sold for an amount of Rs. 17,600 on 5.1.1986 and the amount was retained by the respondents. Petitioner No. 2 stood acquitted in the trial vide judgment and order dated 19.4.1988. He had been pursuing the authorities for refund of the said amount with interest but in vain, hence, being aggrieved, they filed Writ Petition No. 39995 of 1992 wherein this Court directed the authorities to decide the representation of the petitioners, vide order dated 15.10.1996. In pursuance thereof, the amount was refunded only on 10.1.2005. The interest has been denied on the ground that the amount fetched by sale of the rice did not secure any interest. An application for awarding interest has been rejected vide 2.1.2005 (Annexure-9). Hence the present petition.
3. We have considered the submissions made by Shri Rajeev Mishra, learned counsel for the petitioners and Sri C. K. Rai, learned standing counsel for the respondents and perused the record.
4. Interest is compensatory in character and can be recovered for withholding the payment of any amount when it is due and payable. It is different from penalty and tantamounts to compensation as the person entitled for recovery has been deprived of the right to use the said amount.
5. In Associated Cement Co. Ltd. v. Commercial Tax Officer, Kota and Ors., , the Hon'ble Apex Court held as under :
"Interest is ordinarily claimed from an assessee who has withheld payment of any tax payable by him and it is always calculated at the prescribed rate on the basis of the actual amount of tax withheld and the extent of delay in paying it. It may not be wrong to say that such interest is compensatory in character and not penal."
6. A similar view has been reiterated in Pratibha Processors and Ors. v. Union of India and Ors., .
7. In Abati Bezbaruah v. Deputy Director General, Geological Survey of India and Anr., , the Hon'ble Apex Court held that interest is a compensation for forbearance from detention of money and that interest being awarded to a party only for being kept out of the money which ought to have been paid to him.
8. Interest means, inter alia, a compensation paid by the borrower to the lender for deprivation of the use of his money as held by Hon'ble Apex Court in Consolidated Coffee Ltd. v. Agricultural Income-tax Officer, Madikeri and Ors., (2001) 1 SCC 278 and Central Bank of India v. Ravindra and Ors., AIR 2002 SC 3095.
9. In Secretary, Irrigation Department, Government of Orissa and Ors. v. G.C. Roy, , the Constitution Bench of the Hon'ble Apex Court observed that a person deprived of use of money to which he is legitimately entitled as of right, to be compensated for the deprivation, call it by any name. It may be called interest, compensation or damages.
10. The payment of interest can be awarded by application of the statutory provisions as held by the Supreme Court in Mafatlal Industries Ltd. v. Union of India and Ors., ; Kuil Fireworks Industries v. Collector of Central Excise and Anr., and G.T.C. Industries Ltd. v. Union of India and Ors., .
11. Interest may also be awarded on equitable grounds. (Vide Bengal Nagpur Railway Co. Ltd. v. Ruttanji Ramji and Ors., AIR 1938 PC 67 ; Satinder Singh v. Umrao Singh and Anr., ; Laxmichand v. Indore Improvement Trust, ; United India Insurance v. Ajmer Singh Cotton and General Mills and Ors., and Sovintorg (India) Ltd. v. State Bank of India, .
12. In J.K. Synthetics Ltd. v. Commercial Taxes Officer, , the Constitution Bench of the Hon'ble Apex Court overruled its earlier judgment in Associated Cement Ltd. (supra) on certain points but observed as under :
"Therefore, any provision made in a Statute for charging or levying interest on delayed payment of tax must be construed as a substantive law and not adjectival law."
13. In Union of India and Ors. v. Upper Ganges Sugar Industries Ltd., , after considering various aspects of interest, the Court held that the interest can be granted on the grounds of equity or in view of the statutory requirement but where the amount has not been withheld without any justification, the equity would not apply. The Court held that in absence of any provision in the contract or any statutory provision and not justifying on equity, the interest should not be awarded.
14. Thus, the law can be summarised that the interest, being compensatory in nature, should be awarded if it is provided in the contract/agreement or the statutory provisions provide for it. It may also be awarded on equitable grounds provided the facts and circumstances of the case justify it and the law does not prohibit it.
15. The instant case requires to be considered in the light of the aforesaid settled legal propositions.
16. The provisions of Section 6C of the Act, 1955, provides for grant of interest at the reasonable rate in the case as in hand. The relevant provisions read as under :
"6C. Appeal--(1) ....
....
(2) Where an order under Section 6A is modified or annulled by State Government or where is a prosecution instituted for the contravention of the order in respect of which an order of confiscation has been made under Section 6A, the person concerned is acquitted, and in either case it is not possible for any reason to return the essential commodities seized such person shall except as provided by Sub-section (3) of Section 6A be paid the price therefore, as if the essential commodity had been sold to the Government with reasonable interest calculated from the day of the seizure of the essential commodity and such price shall be determined....,"
17. Thus, in view of the above, the petitioners are entitled for interest on the amount which remained deposited with the respondents during the trial of the petitioner No. 2 under the provisions of the Act, 1955. The amount fetched by sale of the commodity confiscated under Section 6A of the Act, 1955, should have been refunded with interest. In the instant case, interest has not been paid to the petitioners. Therefore, the petition deserves to be allowed and the respondents should be directed to make payment of interest from the date of sale of the property till the date of payment of the amount of sale of the said property.
18. The question, therefore, which arises for consideration is as to what would be the reasonable interest payable in the facts and circumstances of the present case. The transaction under consideration cannot be termed to be a pure business or commercial deal. The goods were confiscated under statutory authority in exercise of powers in good faith. However, the trial court acquitted the petitioner No. 2 of the charges under the Act, 1955. In such a situation, the award of reasonable interest would be at an average rate keeping in view the prevalent schedule bank rates.
19. Accordingly this Court is of the opinion that in the peculiar facts of the present case, the interest should be awarded @ of 8 per cent simple interest per annum.
20. In view of the above, petition succeeds and is allowed. The order dated 2.1.2005, passed by respondent No. 2 is quashed. The respondents are directed to make payment of interest at the rate of 8 per cent per annum from the date of sale of the property till the date of payment on the amount of sale of the goods. The said amount is to be paid within a period of three months from the date of filing a certified copy of this order before the authority concerned.