2025 (12) TMI 766 - HC - FEMA

Writ on property deal rejected; prior ruling on FERA compliance, RBI Form IPI-7 acceptance held conclusive, FEMA applies

HC dismissed the writ petition as not maintainable, holding that the legality of the property transaction and RBI's acceptance of Form IPI-7 stood ... Maintainability of writ petition - Jurisdiction - foreign citizen of Indian origin and claims to have acquired interest in property by way of irrevocable GPAs - failure to investigate the authenticity and enforceability of documents such as the ATS and GPA - No permission sought by from RBI, to create the interest, within the prescribed period of 90 days in Notification dated 26.05.1993 - whether this Court can adjudicate on the legality and validity of letter dated 14.12.1998 issued by RBI, whereby RBI accepted Form IPI-7 dated 18.08.1998. HELD THAT:- This issue stands decided by the Division Bench of this Court in the two appeals filed by the Petitioner, being RFA (OS) 13/2025 and RFA (OS) 14/2025, holding that the transaction entered into by Respondent No. 2 was fully compliant with statutory provisions under FERA and procedural mandates stipulated by RBI Notification and thus the same issue cannot be reagitated in this writ petition. Even otherwise, on merits, Petitioner has no case as he is attempting to seek relief under a repealed statute. Foreign Exchange Management Act, 1999 (‘FEMA’) came into effect from 01.06.2000 and period of two years provided under Section 49(3) elapsed on 31.05.2002 and no cognizance can be taken of any purported offence under FERA after the said cut-off date. It is palpably clear that the Court has decided the additional issue settled between the parties in the suit and held that the transactions executed by Respondent No. 2 fall squarely within the scope of general permission granted under RBI Notification and that Respondents have demonstrated that purchase consideration for 2nd floor, together with roof and terrace rights, was remitted through NRO and NRE accounts in accordance with procedural requirements prescribed by RBI. The Division Bench has also observed that declaration (Form IPI-7) dated 18.08.1998 was duly accepted by RBI and in consequence, the transaction is fully compliant with statutory provisions under FERA and procedural mandates of RBI Notification. Significantly, RBI maintains the stand even today that mere delay in submission of the declaration may not invalidate the acquisition if exchange control requirements are complied with as also that prevailing guidelines allow acquisition of residential immovable property by foreign citizens of Indian origin from repatriable funds i.e., NRE and FCNR accounts and in the present case, portion of purchase amount was paid through NRO account (non-repatriable funds) and thus RBI accepted the declaration with a caveat that Respondent No. 2 is eligible for repatriation of USD 18134.70 only (funds used from FCNR account). Thus, there is merit in the preliminary objection raised by the Respondents that the issues sought to be agitated by the Petitioner in the present writ petition have been duly considered and decided by the Division Bench (supra) and cannot be reopened in these proceedings. On this short ground and without entering into the merits of the case, this writ petition is dismissed, making it clear that this order will not preclude the Petitioner from taking recourse to any other appropriate remedy. 1. ISSUES PRESENTED AND CONSIDERED 1.1 Whether the Court can adjudicate the legality and validity of the Reserve Bank of India's letter dated 14.12.1998 accepting Form IPI-7 in view of the prior decision of the Division Bench on the same FERA/RBI Notification issues. 1.2 Whether, in light of the Division Bench's findings, the challenge to the compliance of the impugned property transactions with Section 31(1) of the Foreign Exchange Regulation Act, 1973 and the RBI Notification dated 26.05.1993 is maintainable in this writ petition. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1 & 2: Maintainability of the writ petition challenging RBI's letter dated 14.12.1998 and re-agitation of FERA/RBI Notification compliance Legal framework (as discussed) 2.1 The challenge in the writ petition is premised on alleged violation of Section 31(1) of the Foreign Exchange Regulation Act, 1973 and the RBI Notification dated 26.05.1993 governing acquisition of immovable property in India by foreign citizens of Indian origin and requirement of intimation through Form IPI-7 within 90 days. 2.2 In the connected civil suits, an additional issue was framed: 'Whether the transaction in favour of Plaintiff No. 2 is hit by Section 31 of the Foreign Exchange Regulation Act, 1973? OPP'. The Division Bench, in appeals arising from those suits, analysed Section 31(1) and the same RBI Notification and specifically considered the validity of the transaction and the acceptance of Form IPI-7. Interpretation and reasoning 2.3 The writ petition seeks quashing of RBI's letter dated 14.12.1998 accepting Form IPI-7 and a declaration that the transactions creating interest in the property in favour of the concerned respondent are contrary to Section 31(1) FERA and the RBI Notification due to absence of prior permission and delayed intimation. 2.4 The Court notes that the same FERA/RBI Notification compliance question, including the effect and validity of Form IPI-7 dated 18.08.1998 and its acceptance by RBI, stood directly in issue in the civil suits and the subsequent appeals. An additional issue on Section 31 FERA was expressly framed and adjudicated. 2.5 The Division Bench, after reproducing and analysing the RBI Notification issued in pursuance of Section 31(1) FERA, held that: (i) The transactions executed by the foreign citizen of Indian origin fall squarely within the scope of the 'general permission' granted under the RBI Notification. (ii) The purchase consideration for the second floor with roof and terrace rights was remitted through NRO and NRE accounts in accordance with RBI's procedural requirements. (iii) The declaration in Form IPI-7 dated 18.08.1998 was duly accepted and acknowledged by RBI by its letter dated 14.12.1998. (iv) Consequently, the transaction is fully compliant with the statutory provisions under FERA and with the procedural mandates of the RBI Notification. 2.6 The Court observes that RBI continues to maintain that mere delay in submission of the declaration does not invalidate the acquisition if exchange control requirements are satisfied, and that prevailing guidelines allow acquisition of residential immovable property by foreign citizens of Indian origin from repatriable funds (NRE/FCNR accounts). In the present case, a portion of the purchase amount being from a non-repatriable NRO account led RBI to accept the declaration with a specific caveat as to the extent of repatriation permissible. 2.7 In view of the above findings of the Division Bench, the Court holds that the questions the petitioner now seeks to re-open-whether the transactions are hit by Section 31(1) FERA, whether they fall under the general permission of the RBI Notification, and whether the acceptance of Form IPI-7 by RBI is valid-have already been 'duly considered and decided' in the earlier appellate judgment. 2.8 The Court therefore accepts the preliminary objection that the same issues cannot be reagitated in this writ petition and that the legality and validity of the RBI letter dated 14.12.1998, and the FERA/RBI Notification compliance of the impugned transactions, are not open for re-examination in these proceedings. Conclusions 2.9 The writ petition is held to be not maintainable insofar as it seeks to challenge the RBI letter dated 14.12.1998 and to re-open the question of compliance of the transactions with Section 31(1) FERA and the RBI Notification dated 26.05.1993, those issues having been finally decided by the Division Bench. 2.10 On this ground alone, and without entering into the merits, the writ petition is dismissed, with liberty to the petitioner to pursue any other appropriate remedy.