Section 31(1) of FERA did not require the foreign national to obtain permission at the time of entering into the agreement for sale per se: Calcutta High Court

The present application had been filed by the defendant before the bench of Moushumi Bhattacharya J. in a suit for specific performance of an agreement dated 2nd January, 1989 for sale of a premises situated at No.6, Chowringhee Lane, Calcutta-16. The application filed by the defendant in the matter of Jagannath Marothia v Norman William Wilson [C.S.576 of 1990], is for dismissal of the suit and rejection of the plaint under Order VII Rule 11 of The Code of Civil Procedure, 1908 (CPC) on the ground that the suit is barred by law.

Defendant no.3/applicant submits that the mother of the defendant no.1, Mrs. Helen Wilson, since deceased, was a foreign national and failed to obtain the permission from the Reserve Bank of India under Section 31(1) of The Foreign Exchange Regulation Act, 1973 (FERA) Mrs. Helen Wilson was a foreign national would appear from a letter dated 14th December, 1989, which has been referred to in the plaint and further that the fact that the Reserve Bank o India has not granted any permission to Mrs. Helen Wilson save and except permitting her to hold the property would also be evident from a letter dated 8th October, 1993. Section 31(1) of FERA to submit that transfer of immovable property of a foreign national without prior or general or special permission of the Reserve Bank of India would be unenforceable in law

The bench interpreted that Section 31(1) of FERA must be given an interpretation which is in line with the law decided on the subject. It is indisputable that a foreigner who is not a citizen of India can only acquire, hold, transfer or dispose of an immovable property situated in India by way of a sale, gift, etc. upon prior permission being granted by the Reserve Bank of India subject to the proviso to Section 31(1) concerning lease of immovable property for a period up to five years.

The court sought a purposive interpretation of Section 31. The requirement of permission to be obtained from the Reserve Bank must be at the time of entering into the agreement for sale and before the immovable property is sought to be transferred or disposed of by execution of a registered conveyance. In other words, Section 31(1) of FERA did not require the foreign national to obtain permission at the time of entering into the agreement for sale per se; the material point of time for being granted the approval is before the foreign national takes steps to alienate the property in question in favour of a third party. This construction would also be in consonance with Section 54 of The Transfer of Property Act, 1882, which provides that transfer of ownership of a tangible immovable property of or in excess of Rs.100/- can only be made by a registered document. The bench referred to the decision in Rambhau Namdeo Gajre vs. Narayan Bapuji Dhotra (Dead) through LRS.; (2004) 8 SCC 614 while applying their interpretation.

The court rendered judgment that, “The contention of the applicant in respect of Section 31(1) of FERA, subject to Section 49(3) of FEMA setting the time-limit for cognizance of any offence under FERA, would have also been acceptable had Helen Wilson attempted to set the property in motion from herself to the plaintiff without first complying with the statutory requirement as existed on the date of sale of the property. Since this is not the factual position, this Court is not persuaded to dismiss the suit or reject the plaint for contravention of any law which existed on the date when the suit was filed.”

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