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of <h1>Court affirms application to non-citizen in India, reduces penalty for violations</h1> <h3>Reserve Bank of India Versus Jacqueline Chandani</h3> The court upheld the applicability of the Foreign Exchange Regulation Act, 1973 to a non-citizen residing in India under certain conditions. It deemed the ... Persons resident outside India, Restrictions on dealings in foreign exchange Issues Involved:1. Applicability of the Foreign Exchange Regulation Act, 1973 (FERA) to non-citizens residing in India.2. Validity of the Reserve Bank of India (RBI) notification under FERA.3. Definition and interpretation of 'person resident in India' under Section 2(p) of FERA.4. Validity of the penalty imposed on the petitioner under FERA.5. Consideration of alternative remedies and the quantum of penalty.Issue-wise Detailed Analysis:1. Applicability of FERA to Non-Citizens Residing in India:The primary issue was whether the provisions of the Foreign Exchange Regulation Act, 1973, apply to non-citizens residing in India. The petitioner, a U.S. citizen married to an Indian citizen, argued that the Act did not apply to her as she was not a citizen of India. The court examined Section 2(p) of the Act, which defines 'person resident in India' and includes non-citizens who come to or stay in India for various purposes, including staying with a spouse who is a person resident in India. The court concluded that the Act does apply to non-citizens residing in India under certain conditions.2. Validity of the RBI Notification under FERA:The petitioner challenged the RBI notification that deemed her to be a person of Indian origin due to her marriage to an Indian citizen. The court analyzed the notifications issued under Sections 8 and 14 of FERA, which provided exemptions for certain foreign citizens. The court held that the notifications were within the legislative competence of the RBI and the Union of India and were not ultra vires the Act. The notifications were intended to clarify and provide exemptions, not to enlarge the provisions of the Act.3. Definition and Interpretation of 'Person Resident in India' under Section 2(p) of FERA:The court examined the definition of 'person resident in India' under Section 2(p) of the Act, particularly focusing on sub-clause (iii)(c), which includes a person staying with their spouse who is a person resident in India. The court noted that the term 'stay' used in the section did not necessarily imply permanent residence and could include temporary stays. The court applied the principle of noscitur a sociis, interpreting the term in the context of other clauses in the section, and concluded that the petitioner, who had stayed in India for about 13 years with intermittent breaks, fit the definition of a person resident in India.4. Validity of the Penalty Imposed on the Petitioner under FERA:The petitioner was penalized for violations of FERA, and the court examined whether the penalty was valid. The court noted that the petitioner had been staying in India for an uncertain period, which brought her within the purview of the Act. The court rejected the argument that the petitioner was not subject to the Act's provisions when she was outside India, as the Explanation to Section 2(p) did not apply to persons falling under sub-clause (iii)(c). The court upheld the imposition of the penalty but reduced the quantum considering the circumstances.5. Consideration of Alternative Remedies and Quantum of Penalty:The court addressed the argument that the petitioner had an alternative remedy to challenge the penalty and should not have approached the court directly. The court acknowledged that the petitioner had challenged the vires of the RBI notification, which justified her approach to the court. The court also considered the liberalization of foreign exchange regulations and the petitioner's cooperation during the investigation. Consequently, the court reduced the total penalty from Rs. 26,500 to Rs. 5,000, imposing Rs. 1,000 for each of the five show-cause notices.Conclusion:The court set aside the learned single judge's order quashing the RBI notification and the penalty imposed on the petitioner. It upheld the applicability of FERA to the petitioner, confirmed the validity of the RBI notification, and sustained the penalty, albeit reducing the quantum. The court directed the parties to bear their own costs and refused to grant leave to appeal to the Supreme Court.
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