Leave-and-licence security deposit without foreign remittance did not establish contravention under foreign exchange restrictions.

A temporary caretaker or leave-and-licence arrangement for immovable property, coupled with an interest-free security deposit received in India from an Indian branch office and without any remittance outside India, did not by itself establish contravention of Sections 9(1)(b) or 9(1)(d) of the Foreign Exchange Regulation Act, 1973. The record did not show the requisite nexus for treating the receipt or payment as prohibited, and the transaction was treated as falling within the limited caretaker arrangement contemplated by the proviso to Section 31(1). On those facts, RBI permission was not required on the respondent's case.

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Issues: Whether receipt of an interest-free security deposit in connection with a caretaker or leave-and-licence arrangement for immovable property attracted contravention of Sections 9(1)(b) and 9(1)(d) of the Foreign Exchange Regulation Act, 1973.

Analysis: The arrangement was treated as a temporary caretaker or leave-and-licence transaction for a period within the limit contemplated by the proviso to Section 31(1) of the Foreign Exchange Regulation Act, 1973. The deposit was received in India from an Indian branch office, there was no remittance outside India, and the record did not establish any nexus showing that the appellant had received the amount in the manner alleged so as to constitute the prohibited receipt or payment under Section 9(1)(b) or Section 9(1)(d). On the facts, the transaction did not require the RBI permission suggested by the respondent, and the appellant was entitled to the benefit of doubt.

Conclusion: The alleged contravention was not made out against the appellant, and the penalty order could not be sustained as against him.

Final Conclusion: The appeal succeeded and the impugned adjudication was set aside insofar as it related to the appellant.

Ratio Decidendi: A temporary leave-and-licence or caretaker arrangement for immovable property, accompanied by an interest-free security deposit received in India without any transfer of funds outside India, does not by itself establish contravention of Sections 9(1)(b) and 9(1)(d) of the Foreign Exchange Regulation Act, 1973.

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