TaxTMI 
TaxTMI 
2026 (6) TMI 1371
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....r the Act is covered by Section 13 of the Foreign Exchange Management Act, 1999 as per which the adjudicating authority alone is empowered to determine the same? ii) Whether the Courts below are justified in concluding the 24.10.2005 sale deed to be illegal and invalid for contravention of the Foreign Exchange Management Regulation dated 03.05.2000, especially when the Foreign Exchange Management Act, 1999 or the regulation do not declare such a transaction to be void?" 3. I have heard Mr. H. Lakshmi Shankar, learned counsel for the appellants / defendants, Mr. T. Balakumaran, learned Counsel for the first respondent / plaintiff and Mrs. M.P. Kavia, learned Counsel for the second respondent / 1st defendant. 4. The facts that are necessary for adjudicating the second appeal on the substantial questions of law are as follows: 4.1. The first respondent filed a suit in O.S.No.258 of 2011, seeking to declare the sale deed executed by the first defendant in favour of the third defendant in Document No.192 of 2005, as null and void, in terms of the provisions of the Foreign Exchange Management Act, 1999 [in short 'FEMA'] and for consequential relief of partition ....
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....;A' Schedule properties were already sold by the father Narayanasamy Naicker along with the first defendant. However, it is the contention of the plaintiff that the third defendant is a non-resident Indian and any purchase of agricultural lands is not permitted under the FEMA. Though the plaintiff caused a pre-suit notice, except the third defendant, other defendants did not send any reply. The third defendant sent a reply stating that he was entitled to purchase the property and also claimed that the plaintiff has orally relinquished her right in the 'A' schedule property. In view of the unsustainable stand taken in the reply notice, plaintiff proceeded to file the suit for declaration and for consequential relief of partition. 4.5. The second defendant supported the case of the plaintiff. However, the fourth defendant filed a written statement stating that the plaintiff is not entitled to any share in 'A' Schedule property and in respect of 'B' Schedule property, the Director of Enforcement has already imposed a penalty under the provisions of FEMA, on the third defendant and the third defendant has also preferred an appeal against the same. Th....
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....A, specific adjudicating authority has been named and various provisions including power of review has been vested with the authorities and therefore, the relief which can be obtained under FEMA cannot be obtained by filing a civil suit. In this regard, he relies on the applicability of Section 9 of the Code of Civil Procedure as well and contends that a suit for declaration that the sale deed in favour of the third defendant is null and void cannot be maintained before the regular Civil Court. 8. It is his further submission that when the authorities have imposed fine for the purchase of the agricultural lands and the same has also been confirmed in appeal, the same issue cannot be gone into by the Civil Court to declare the sale deed as null and void, when the authorities under FEMA have not chosen to confiscate the property or annul the transaction itself. 9. Mr. H. Lakshmi Shankar, learned Counsel for the appellants, would rely on the following decisions in support of his contentions: i) Vijay Karia and others Vs. Prysmian Cavi E Sistemi Srl and others, reported in AIR 2020 SC 1897. ii) Raj Kumar Shivhare Vs. Assistant Director, Directorate of Enforcemen....
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.... the Hon'ble Supreme Court in Asha John Divianathan Vs. Vikram Malhotra and others, reported in 2021 SCC Online SC 147. It is therefore, contended by the learned Counsel for the respondents that when the purchase by the third defendant was not permitted under the provisions of the FEMA, the transaction was hit by Section 23 of the Indian Contract Act r/w. Section 6(h) of the Transfer of Property Act and therefore, there is no infirmity in the findings by the Courts below, granting the relief of declaration. They would also state that once the sale in favour of the third defendant is set aside, consequently the plaintiff is entitled to the relief of partition and there is no bar of a suit for partition, being filed under the provisions of FEMA and it is therefore, their submission that the Second Appeal deserves to be dismissed and the substantial questions of law are to be answered against the appellants. 13. Insofar as the settlement made by the third defendant in favour of the fourth defendant, it is the contention of the learned Counsel for the respondents that the settlement deed was pending suit and it was clearly effected by the doctrine of lis pendens and therefore, n....
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.... for partition, for the daughter to claim a share, as already seen, there was no denial of the claim of the plaintiff that Schedule 'A' properties were ancestral properties and that the plaintiff was not entitled to claim a share, taking shelter under Act 1 of 1990. In fact, even in the grounds of Second Appeal, I find that the appellants have conceded to the fact that 'A' Schedule properties are ancestral properties. Ground 8 is extracted hereunder: "8. The Courts below ought to have considered that plaintiff / 1st respondent is a Co-parcener with respect to 'A' schedule properties alone, that are ancestral and only in respect of those properties she will be entitled to 1/3rd share on the ground that she is not a party to the sale deed and on the ground that the sale deed can legally convey only 2/3rd share of 'A' schedule property to the 3rd defendant." 20. In view of the above, I do not see why the plaintiff should be non-suited to a decree for partition, in respect of Schedule 'A' properties. 21. Now, coming to Schedule 'B' properties, the interesting question that begs an answer is as to whether the purchase of the....
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....and a further appeal is provided to the High Court, from the decision of the Appellate Tribunal, Mr.H.Lakshmi Sshankar contends that a separate mechanism has been set out under the provisions of FEMA and in such circumstances, Section 9 of CPC would come into play and the plaintiff cannot sustain the relief of declaration of the sale deed in favour of the third defendant as null and void, on the sole ground that it is violative of the provisions of FEMA. 25. Per contract, learned Counsel for the respondents would contend that Section 34 of FEMA cannot bar a suit for partition and in such circumstances, there is no purpose in relaying on Section 34, in the manner in which it is thought to be viewed by the learned Counsel for the appellants. 26. I am unable to the countenance the arguments of the learned Counsel for the respondents for the simple reason that, only if the sale deed is set aside or declared to be null and void, the plaintiff would become entitled to claim any right to the Schedule 'B' properties, be it by way of partition or otherwise. Therefore, the relief of partition is only consequential to the relief of declaration. Now, it is to be seen whether the ....
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....ernal trade and payments and for promoting the orderly development and maintenance of foreign exchange markets in India, the Act specifically incorporating provisions regulating purchase of agricultural lands by Non-Resident Indians and also providing for specific penalties in the event of contravention of the law, it is clear that FEMA is a complete Code by itself, touching the acquisition of properties in India by Non-Resident Indians. The Adjudicating Authority is clothed with the power of adjudicating any contravention of any of the provisions of the Act. 30. Section 14 provides for enforcement of orders of the Adjudicating Authority. As against orders of the Adjudicating Authority, an appeal is provided under Section 17 to the Special Director [Appeals] and there is a further appeal to the Appellate Tribunal under Section 19. Procedure and powers of the Appellate Tribunal as well as Special Director [Appeals] are also specifically set out in Section 28 and as against the orders of the Appellate Tribunal, an appeal is provided to the High Court under Section 35. In fact, the power to compound the contravention is also given under Section 15. It is in this light that provi....
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....e bound by the procedure laid down by the Code of Civil Procedure, 1908 (5 of 1908), but shall be guided by the principles of natural justice and, subject to the other provisions of this Act, the Appellate Tribunal and the Special Director (Appeals) shall have powers to regulate its own procedure. (2)....... ........ Section 35. Appeal to High Court.-Any person aggrieved by any decision or order of the Appellate Tribunal may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Appellate Tribunal to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. Section 23 of the Indian Contract Act, 1872: 23. What considerations and objects are lawful, and what not.-The consideration or object of an agreement is lawful, unless- it is forbidden by law; or is of such a nature that if permitted, it would defeat the provisions of any law; or ....
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.... 56 of FERA is the provision which deals with offences and prosecutions under the FERA regime that is prior to 1999, when FEMA was promulgated. 34. This decision in Vijay Karia's case was applied by this Court in GPE [India] Ltd's case, where this Court held that the contract not being void, the liabilities and obligations imposed under the contract would survive. I am also informed that the decision of this Court in GPE [India] Ltd's case was taken up by way of Special Leave Appeal before the Hon'ble Supreme Court and the Hon'ble Supreme Court by order dated 26.08.2025 dismissed the Special Leave Appeal. 35. At this juncture, it would also be relevant to refer to the Foreign Exchange Management [Acquisition and Transfer of Immovable Property in India] Regulations, 2000. The regulation 3 of the said Regulations, deal with acquisition and transfer of property in India by an Indian citizen resident outside India. Though 3(a) permits acquisition of immovable property in India, such immovable property not being agricultural properties / plantation / farm house, 3(b) does not restrict the nature of immovable property unlike 3(a), which carves out three exceptio....