Compensatory interest for wrongful retention of seized investments included further simple interest on the quantified amount.

Wrongful retention of seized Kisan Vikas Patras and Indira Vikas Patras after a final settlement direction entitled the assessee to compensatory interest for loss of earning opportunity, because the instruments should have been released once the settlement amount was deposited. The compensation was awarded on the maturity value at the prevailing rate for the period of retention from 23.12.2003 to 10.01.2005. The Court further held that, on these facts, the quantified compensatory interest itself justified simple interest at 4% per annum from 10.01.2005 until payment.

---

---

Issues: (i) Whether the assessee was entitled to compensatory interest for the period during which seized Kisan Vikas Patras and Indira Vikas Patras were wrongfully retained after the settlement amount was deposited; (ii) whether the assessee was also entitled to further simple interest on the amount of such interest.

Issue (i): Whether the assessee was entitled to compensatory interest for the period during which seized Kisan Vikas Patras and Indira Vikas Patras were wrongfully retained after the settlement amount was deposited.

Analysis: The Settlement Commission had directed release of the seized instruments once the settlement amount was deposited, and that direction had attained finality. After deposit of the settlement amount, the authorities ought to have released the instruments forthwith, but they were retained until much later. The Court treated the loss suffered by the assessee as loss of opportunity to earn interest on the instruments, and held that the Revenue was liable to compensate that loss for the period of wrongful retention, not from the date of maturity as claimed.

Conclusion: In favour of the assessee. Interest was directed on the maturity value of the Kisan Vikas Patras and Indira Vikas Patras at the prevailing rate from 23.12.2003 to 10.01.2005.

Issue (ii): Whether the assessee was also entitled to further simple interest on the amount of such interest.

Analysis: The Court distinguished the statutory interest cases relied upon by the Revenue and held that the present claim was compensatory, arising from wrongful retention without authority of law. In the peculiar facts, the Court found that further compensation by way of simple interest was justified on the interest amount determined for the period of retention.

Conclusion: In favour of the assessee. Simple interest at 4% per annum was awarded on the interest amount from 10.01.2005 until payment.

Final Conclusion: The writ petitions were partly allowed by granting compensatory interest for wrongful retention of the seized instruments and additional simple interest on the quantified interest amount.

Ratio Decidendi: Where seized financial instruments are retained beyond the date on which they ought to have been released under a final settlement direction, the assessee may be compensated for the loss of earning opportunity, and in suitable facts such compensatory interest may itself carry further simple interest.

---