Court clarifies FERA provisions on NRE Account deposits by power of attorney holders

The Court interpreted provisions of the Foreign Exchange Regulation Act, 1973 regarding deposits in NRE Accounts by power of attorney holders of Non-Resident Indians. The show-cause notices alleging FERA violations by petitioner banks were challenged and disposed of based on the interpretation of relevant provisions. The Division Bench clarified requirements for deposits in NRE accounts pre-31-7-1995. A review petition and subsequent appeal were decided in favor of the petitioner banks, citing the Division Bench's judgment in the Citi Bank case. The Court rejected the argument for alternative remedies and allowed the writ petitions, setting aside show-cause notices and adjudication orders.

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Issues:
1. Interpretation of provisions of the Foreign Exchange Regulation Act, 1973 regarding deposits in foreign currency by power of attorney holders of Non-Resident Indians in Non-Resident External (NRE) Accounts.
2. Alleged violation of section 6(4) and section 6(5) of FERA by petitioner banks.
3. Consideration of circular dated 31-7-1995 and Exchange Control Manual provisions by Division Bench in Citi Bank case.
4. Review petition by Union of India regarding communication gap and subsequent appeal.
5. Argument on alternative remedy of filing appeals under section 19 of Foreign Exchange Amendment Act, 1999.

1. Interpretation of FERA provisions:
The key issue in these writ petitions was the interpretation of provisions of the Foreign Exchange Regulation Act, 1973 regarding deposits in foreign currency by power of attorney holders of Non-Resident Indians in Non-Resident External (NRE) Accounts. The main question was whether, even before 31-7-1995, such deposits in foreign currency needed to be made by the Non-Resident Indian account holder personally. The show-cause notices issued against the petitioner banks alleged violations of FERA provisions.

2. Alleged FERA violations by petitioner banks:
The Enforcement Directorate issued show-cause notices against the petitioner banks alleging violations of section 6(4) and section 6(5) of FERA. These writ petitions were filed to challenge these notices, and the matter was disposed of based on the interpretation of the relevant provisions regarding deposits in NRE Accounts.

3. Consideration of circular and Exchange Control Manual provisions:
The Division Bench in the Citi Bank case examined the circular dated 31-7-1995 and provisions of the Exchange Control Manual, both before and after the amendment. The Division Bench clarified that prior to 31-7-1995, there was no clear requirement that deposits in NRE accounts could only be made by the account holders themselves. The Division Bench's decision provided clarity on the issue based on the circular and manual provisions.

4. Review petition and subsequent appeal:
After a review petition was filed by the Union of India regarding a communication gap, an appeal was preferred, which was decided by a Division Bench upholding the Single Judge's decision. The Division Bench's judgment in the Citi Bank case was cited to argue that the matters in these writ petitions were covered by that decision.

5. Argument on alternative remedy:
The argument regarding the alternative remedy of filing appeals under section 19 of the Foreign Exchange Amendment Act, 1999 was raised. However, the Court found that the issue was adequately addressed by the Division Bench in the Citi Bank case and that pursuing an appeal would not be an equally efficacious remedy. As a result, the writ petitions were allowed, and the show-cause notices and adjudication orders were set aside without costs.

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