Unauthorised auction of confiscated goods during pending appeal, without permission or notice, led to refund plus 9% interest

During pendency of an appeal concerning confiscated goods, the authorities could not auction or otherwise dispose of the goods without prior permission of the appellate forum; any auction, if permitted, also required individual notice to the affected party. The HC held that auctioning the goods in a clandestine manner without such prior permission constituted a serious legal lapse causing financial loss, attracting compensatory restitution. The HC directed the authorities to refund to the petitioner the declared value of the confiscated goods and to pay interest at 9% per annum from the date of the unauthorised auction (21-05-1998), and disposed of the writ petition accordingly.

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Issues: (i) Whether auction of confiscated goods during the pendency of the appellate proceedings without prior permission of the appellate court was lawful and (ii) Whether the petitioner is entitled to refund/compensation for goods auctioned without such permission.

Analysis: The Court examined the legal consequences of confiscation under the Customs Act and the protective effect of appellate proceedings on confiscated goods. The Court considered Section 126 (vesting of confiscated goods in the Central Government) and the distinction between disposal under Section 150 and confiscation-based cases, noting that auctioning goods which are subject to appeal without prior written permission of the appellate authority contravenes the protective regime and results in denial of effective appellate relief. The Court applied precedents addressing restitution where goods were wrongfully confiscated or disposed of, and assessed available measures to avoid unjust enrichment of the State and to restore the injured party to the position to which it is entitled.

Conclusion: The auction of the confiscated goods during the pendency of the appeal without prior permission of the appellate court was impermissible. The petitioner is entitled to refund of the declared value of the goods and interest to compensate for the unauthorized disposal; the respondents are directed to pay Rs. 26,28,904.00 with interest at nine percent per annum from the date of unauthorised auction (21-5-1998) forthwith.

Ratio Decidendi: Where confiscated goods are auctioned during the pendency of appellate proceedings without prior permission of the appellate court, the affected party is entitled to restitution of the value of the goods with interest to prevent unjust enrichment and to effectuate appellate protection.

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