FEMA seizure under Section 37A depends on holding of the foreign asset at seizure and can be lifted after repatriation.

Section 37A(1) of FEMA was held to depend on whether a foreign asset was being held by a resident in suspected contravention of Section 4 on the date of seizure, not on when it was acquired, so the retrospective challenge failed. However, where the foreign property had been disclosed, transferred out of the resident's and family members' names, and the equivalent foreign exchange was remitted into India with supporting documents, the purpose of Section 37A was treated as achieved. In that situation, the proviso to Section 37A(4) empowered the authority to set aside seizure of the equivalent asset in India, and the seizure was annulled.

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Issues: (i) whether the seizure under Section 37A(1) of the Foreign Exchange Management Act, 1999 could be sustained on a plea that the provision was applied retrospectively to a foreign property acquired before its introduction; and (ii) whether the seizure of the equivalent asset in India was liable to be set aside under the proviso to Section 37A(4) after disclosure of the foreign asset and repatriation of the equivalent value into India.

Issue (i): Whether the seizure under Section 37A(1) of the Foreign Exchange Management Act, 1999 could be sustained on a plea that the provision was applied retrospectively to a foreign property acquired before its introduction.

Analysis: The decisive factor for invoking Section 37A(1) was not the date of acquisition of the foreign immovable property, but whether the property was being held by a resident in India on the date of seizure in suspected contravention of Section 4. The foreign property stood in the name of the appellant and his family members on the date of seizure, and the challenge based on retrospective application was therefore not accepted.

Conclusion: The objection that Section 37A(1) was applied retrospectively was rejected.

Issue (ii): Whether the seizure of the equivalent asset in India was liable to be set aside under the proviso to Section 37A(4) after disclosure of the foreign asset and repatriation of the equivalent value into India.

Analysis: The record showed that the foreign immovable property had been transferred out of the appellant's and his family's names and that the equivalent foreign exchange had been remitted into India. The explanations regarding the remittance were supported by contemporaneous documents and were not disproved by the respondent. In these circumstances, the purpose of Section 37A stood achieved, and the proviso to Section 37A(4) permitted the competent authority to set aside the seizure.

Conclusion: The seizure of the equivalent asset in India was set aside under the proviso to Section 37A(4).

Final Conclusion: The appeal succeeded, the impugned seizure was annulled, and the respondent was left at liberty to proceed separately on any alleged contravention under FEMA, 1999.

Ratio Decidendi: For Section 37A(1) of FEMA, the relevant inquiry is whether the foreign asset is being held in contravention of Section 4 on the date of seizure, and once the foreign asset is disclosed and the equivalent value is brought back into India, the proviso to Section 37A(4) empowers the authority to set aside the seizure.

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