Equitable interest on wrongfully withheld refund upheld under writ jurisdiction; laches rejected and interest period limited.

The High Court of Madras held that, in proceedings under Article 226, equitable interest could be awarded on refunded money even without an express provision in the Foreign Exchange Regulation Act, 1973, because the State's continued retention became wrongful once the liability was set aside. The court also rejected laches, noting that the petitioner had repeatedly pursued refund and no third-party rights had intervened. Interest was confined to the period from 11-4-1997, when the adverse order was set aside, until 27-4-2002, when the refund was received, and was fixed at 9% per annum.

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Issues: (i) whether, in the absence of an express provision in the Foreign Exchange Regulation Act, 1973, interest could be directed on the refunded amount under Article 226 of the Constitution of India; (ii) whether the writ petition could be denied on the ground of laches; and (iii) from what date and at what rate interest was payable.

Issue (i): whether, in the absence of an express provision in the Foreign Exchange Regulation Act, 1973, interest could be directed on the refunded amount under Article 226 of the Constitution of India.

Analysis: The amount had been retained by the authorities after the petitioner's liability was set aside, and the Court treated the continued retention as wrongful once the Division Bench order had removed the basis for withholding. The absence of a statutory provision for interest did not bar relief under Article 226, because the High Court could grant equitable relief to undo injustice where the State retained money without authority and enjoyed the benefit of the retained funds. The Court distinguished authorities relied on by the respondents as cases concerned with construction of taxing statutes or special statutory codes, and applied the principle that equitable restitution may include interest where money is wrongly withheld.

Conclusion: Interest on the refund amount was payable in exercise of the Court's equitable jurisdiction, notwithstanding the absence of an express interest provision in the Act.

Issue (ii): whether the writ petition could be denied on the ground of laches.

Analysis: The petitioner had continuously pursued refund through repeated representations and an earlier writ petition, and there was no creation of third-party rights. The delay, if any, was not found to be wilful, wanton, or unexplained in a manner that would defeat relief. On the facts, the equitable bar of laches was held inapplicable.

Conclusion: The plea of laches was rejected.

Issue (iii): from what date and at what rate interest was payable.

Analysis: The Court held that the petitioner became entitled to refund only after the appellate order dated 11-4-1997 set aside the adverse orders, and therefore retention before that date was not wrongful. However, once the refund was offered by letter dated 24-4-2002 and received by the petitioner on 27-4-2002, the petitioner's refusal to return the signed refund form meant that interest could not run beyond that date. Balancing the circumstances and prevailing bank rates, the Court fixed a reasonable rate of interest at 9% per annum.

Conclusion: Interest was awarded only for the period from 11-4-1997 to 27-4-2002 at 9% per annum.

Final Conclusion: The petitioner was held entitled to equitable interest on the refundable sum for the limited period during which the authorities wrongfully retained the money, and the challenge based on delay failed.

Ratio Decidendi: In proceedings under Article 226, a High Court may award interest on money wrongfully withheld by the State as equitable relief, even without an express statutory provision, but the period of interest depends on when the retention became wrongful and may be curtailed where the claimant declines an offered refund.

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