ASHA JOHN DIVIANATHAN versus VIKRAM MALHOTRA & ORS.

Citation: [2021] 1 S.C.R. 953 · Decided: 26-02-2021 · Supreme Court of India · Bench: A.M. KHANWILKAR · Disposal: Appeal(s) allowed

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Judgment (excerpt)

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   [2021] 1 S.C.R. 953
953
ASHA JOHN DIVIANATHAN
v.
VIKRAM MALHOTRA & ORS.
(Civil Appeal No. 9546 of 2010)
FEBRUARY 26, 2021
  [A. M. KHANWILKAR, INDU MALHOTRA
AND AJAY RASTOGI, JJ.]
Foreign Exchange Regulation Act, 1973 – ss.31, 47, 50, 63 –
A foreigner who was the owner of property in question, executed
an agreement of sale in favour of predecessor of the appellant and
respondent no.4 after previous permission of the RBI – However,
around the same time she gifted portion of the property to respondent
no.1 though without any previous permission of the RBI – Suit filed
by appellant and respondent no.4’s predecessor against the
respondent no.1 inter alia for declaring the gift deeds in his favour
as null and void and not binding – Dismissed by Trial Court – First
appeal filed by the appellant and respondent no.4, dismissed by
High Court – On appeal, held:The condition predicated in
s.31ofobtaining previous general or special permission of the RBI
for transfer/disposal of immovable property situated in India by a
personwho is not a citizen of India is mandatory– Resultantly, any
sale or gift of property situated in India by a foreigner in
contravention thereof would be unenforceable in law– Gift deeds
in favour of respondent no.1being unenforceable in law, he had no
clear title to further transfer the same – Impugned judgment and
decree of the Trial Court as confirmed by the High Court, set aside
– Suit filed by predecessor of the appellant and respondent no.4
decreed in toto – Appellant being the legal representative of the
plaintiff is entitled for possession of the suit property being the
owner thereof and also for mesne profits for the relevant period –
Interpretation of Statutes –Contract Act, 1872 – s.23 – Code of
Civil Procedure, 1908 – Or.20, r.12 – Constitution of India – Article
142.
Foreign Exchange Regulation Act, 1973:
Object and purpose of – s.31 – Discussed.
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SUPREME COURT REPORTS
[2021] 1 S.C.R.
s.47 – Application of – Held: s.47 applies to all the contracts
or agreements covered under the 1973 Act, which require previous
permission of the RBI.
Proviso to s.31 – Exception under – Discussed.
ss.29, 31 – Held: There is no possibility of ex post facto
permission being granted by the RBI u/s.31 unlike in the
case of s.29.
ss.31, 63 – “property” in s.63 – Held: Expression “property”
in s.63 takes within its sweep immovable property referred to in
s.31.
Interpretation of Statutes – Prohibition; negative words – Held:
A contract is void if prohibited by a statute under a penalty, even
without express declaration that the contract is void, because such
a penalty impliesa prohibition – Prohibition and negative words
can rarely be directory – Foreign Exchange Regulation Act, 1973 –
ss.31, 47, 50, 63.
Words & Phrases – void, voidable – Purport of – Discussed.
Allowing the appeal, the Court
HELD: 1.1 The object and purpose for which the Foreign
Exchange Regulation Act, 1973 was brought into force was to
consolidate and amend the law relating to certain payments,
dealings in foreign exchange and securities, transactions indirectly
affecting foreign exchange and the import and export of currency,
for the conservation of the foreign exchange resources of the
country and the proper utilisation thereof in the interests of the
economic development of the country. The avowed object of
Section 31 of the 1973 Act was to minimise the drainage of foreign
exchange by way of repatriation of income from immovable
property and sale proceeds in case of disposal of property by a
person, who is not a citizen of India. As is noticed from the title of
Section 31, it is to put restriction on acquisition, holding and
disposal of immovable property in India by foreigners-non citizens.
On a bare reading of sub-Section (1), it is crystal clear that a
person, who is not a citizen of India, is not competent to dispose
of by sale or gift, as in this case, any immovable property situated
in India without previous general or special permission of the
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RBI. The only exception provided in the proviso is that of
acquisition or transfer of immovable property by way of lease for
a period not exceeding five years. This provision applies to
foreign citizens and foreign and FERA companies only. A non--
resident Indian citizen is not covered thereunder. Sub-Section
(2) mandated such person, who is not a citizen of India, to make
an application to the RBI in the prescribed form making necessary
di

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