Independent RBI discretion under foreign exchange regulations cannot be replaced by a non-speaking refusal based only on enforcement objections.

Under the Foreign Exchange Management (Transfer or Issue of any Foreign Security) Regulations, 2004, Reserve Bank approval for outward remittance must be based on an independent assessment of relevant material and cannot be mechanically declined on the basis of Enforcement Directorate objections alone. A non-speaking refusal without reasons was treated as unsustainable, particularly where earlier permissions had been granted despite ongoing investigations and no clear change in circumstances was shown. The permission sought for remittance was therefore allowed with conditions.

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Issues: Whether the Reserve Bank of India was justified in refusing permission for outward remittance under the Foreign Exchange Management (Transfer or Issue of any Foreign Security) Regulations, 2004, and whether the refusal could rest only on the objections of the Enforcement Directorate without an independent exercise of discretion.

Analysis: Regulation 6 of the 2004 regulations prohibits direct investment by an Indian party under investigation by an investigating, enforcement, or regulatory agency, while Regulation 9 permits an eligible party that does not satisfy Regulation 6 to seek the Reserve Bank's approval. The impugned refusal gave no reasons and was based on a cryptic objection from the Enforcement Directorate. Prior permissions had earlier been granted for the petitioner's overseas commitments even while investigations existed, and the record did not show any clear change in circumstances justifying a different stand. The Reserve Bank was required to exercise its own discretion on relevant material and could not mechanically adopt the Enforcement Directorate's objections.

Conclusion: The refusal was not sustained; the petitioner was entitled to permission for the remittance sought, and the application was allowed with conditions.

Ratio Decidendi: Where the governing regulation leaves the matter to the Reserve Bank's approval, the discretion must be exercised independently on relevant material and cannot be abdicated to another agency's objection, especially when the refusal order is non-speaking.

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