NRE account credits and exchange control manuals: later circular applied prospectively, so recall challenge failed.

Before 31.07.1995, the Exchange Control Manuals did not clearly prohibit foreign currency deposits or credits into NRE accounts by persons other than the NRI account holder, including operations under a power of attorney confined to local payments. The circular dated 31.07.1995 introduced an express prospective regime for credits representing foreign currency, travellers cheques and bank notes, and required in-person tender by the account holder for such credits. The earlier order dated 19.04.2007 was maintained because the manuals and circular did not justify recall on the basis of the alleged communication gap, and the review challenge failed.

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Issues: Whether, prior to 31.07.1995, foreign currency deposits or credits could validly be made in NRE accounts by persons other than the NRI account holders, and whether the order dated 19.04.2007 was liable to be recalled on the ground of an instruction or communication gap.

Analysis: The Exchange Control Manual, 1987 and the Exchange Control Manual, 1993 were relied upon for the proposition that operations by residents under a power of attorney were confined to withdrawals for local payments. The circular dated 31.07.1995 was examined as introducing an express regime for credits representing proceeds of foreign currency, travellers cheques and bank notes, and it distinguished such credits from other account operations. On that basis, the reasoning accepted that before the circular there was no clear prohibition against the impugned credits, while from 31.07.1995 onward the circular itself made in-person tender by the account holder necessary for such credits.

Conclusion: The prior order was in holding that the circular and the manuals did not support recall, and the review application failed.

Final Conclusion: The order dated 19.04.2007 was maintained and the challenge to it was rejected.

Ratio Decidendi: Where earlier regulatory manuals did not clearly prohibit a particular banking credit and a later circular expressly regulated it prospectively, the later circular cannot be used to dislodge a prior order based on the regulatory position as it stood on the relevant date.

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