Seized silver and cash lost in state custody after seizure; compensation ordered for negligent safeguarding, limited to 23.44 kg shortfall.

The dominant issue was whether a writ claim for compensation/return was maintainable where seized property was lost while in State custody. Holding that seizure was an exercise of sovereign power but loss occurred due to negligence after seizure, the HC applied constitutional tort principles, finding the negligent failure to safeguard seized silver/cash infringed the petitioner's Art. 19(1)(g) right to carry on business; compensation/restoration was therefore warranted, and relief was granted. On quantification, the HC refused to adjudicate alleged impurity of returned silver for lack of material, and limited relief to the undisputed shortfall between 105 kg seized and 81.567 kg returned, directing return of 23.44 kg pure silver valued at current rates with adjustment of the excess cash returned. Petition allowed.

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ISSUES PRESENTED AND CONSIDERED

1. Whether the State can be directed in writ jurisdiction to compensate for seized property (silver and cash) lost from police custody due to theft/negligence, notwithstanding the plea of sovereign function/immunity.

2. What is the quantification and mode of compensation payable for the shortfall in seized silver and the treatment/adjustment of cash already returned, given that the Court declined to determine purity disputes on the available material.

ISSUE-WISE DETAILED ANALYSIS

Issue 1: Maintainability and entitlement to compensation for loss of seized property from police custody

Legal framework: The Court examined State liability where loss occurs during police custody of seized property and addressed the objection based on "sovereign power" immunity, while also relying on the Court's approach recognising compensation in public law (constitutional tort) and the impact on constitutional rights.

Interpretation and reasoning: The Court found that the loss of silver and cash occurred because the property was stolen from the police station itself, making the loss attributable to negligence of State officials in protecting seized property. The Court rejected the respondents' reliance on sovereign-function immunity as a bar to compensation in the circumstances, and held that such a loss "absolutely" impinges upon the petitioner's right under Article 19(1)(g) to carry on trade or business. On that basis, the Court held the petitioner entitled to compensation for loss caused by "sheer negligence" in safeguarding seized property.

Conclusion: The Court conclusively held that compensation/delivery of equivalent value is payable for the loss/shortfall of seized silver from police custody attributable to negligence, and granted relief in writ jurisdiction.

Issue 2: Quantification of shortfall and directions on adjustment/value and mode of restitution

Legal framework: The Court proceeded on undisputed facts as to quantity seized and quantity returned, and fashioned restitution/compensation directions based on the market value of silver "as on date," with a time-linked valuation rule for delay.

Interpretation and reasoning: Although the petitioner alleged that part of the returned silver was of reduced purity, the Court held it could not adjudicate purity because there was no material to ascertain impurity and it was not feasible to decide that issue in the writ petition. Therefore, the Court limited relief to the objectively verifiable shortfall between the seized quantity (105 kg) and the quantity actually returned (81.567 kg), computing a shortfall of 23.433 kg (rounded in the operative directions to 23.44 kg). As to cash, since more cash (Rs. 10 lakhs) had been returned than what was seized (Rs. 2,05,000), the Court treated the excess (Rs. 7,95,000) as available for adjustment against the value of the shortfall in silver, using the value of pure silver "as on today." The Court directed that the remaining balance after such adjustment must be made good either by delivering pure silver or paying cash equivalent, again pegged to the value of pure silver as on the applicable date. The Court further fixed a three-week period: if restitution occurs within three weeks, "today's" value applies; if delayed, the value on the date of return governs.

Conclusion: The Court ordered restitution for 23.44 kg of pure silver, directed valuation at the prevailing market value with a delay-sensitive valuation rule, mandated adjustment of Rs. 7,95,000 (excess cash returned) against the payable value, and required the respondents to satisfy any remaining amount by delivery of pure silver or cash equivalent. The Court left open the petitioner's liberty to establish the separate purity-based claim regarding the returned silver in appropriate proceedings.

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