HC Upheld Compounding Fee Imposed on OCI Cardholder for Purchasing Agricultural Land in India Without RBI’s Permission

Case Details: Martin Jebarathna Doss Antonisamy v. Reserve Bank of India - [2024] 167 taxmann.com 353 (HC-Delhi)

Judiciary and Counsel Details

• Dharmesh Sharma, J.
• Balaji Srinivasan & Vishwaditya Sharma, Advs. for the Petitioner.
• Abhinav Sharma & Dipan Sethi, Advs. for the Respondent.

Facts of the Case

In the instant case, the petitioner was a citizen of United State of America and Overseas Citizen of India (OCI) cardholder and, evidently, he purchased vast tracks of agricultural property in Tamil Nadu, without obtaining prior permission from RBI, as required under Regulation 8 of the Foreign Exchange Management (Acquisition and Transfer of Immovable Property in India) Regulations, 2000.

Thus, there was a contravention of FEMA. The Respondent/RBI inter alia directed him to transfer the acquired property immediately to a person resident in India, who should be a citizen of India and eligible under FEMA, 1999 for the acquisition of the said property.

The petitioner was also informed that he should approach the respondent for compounding of contravention within one month from the date of transfer of immovable property under reference. In the said backdrop, compounding proceedings were initiated, and vide impugned order, a sum of Rs. 41 lakhs had been levied as a compounding fee in terms of section 13 of the FEMA read with the relevant rules.

The petitioner filed an instant petition for quashing of the compounding order on the ground that he bonafide purchased the said agricultural property and, despite complying with directions of the respondent, thereby selling proprieties to an Indian citizen, had been levied an exorbitant penalty without any basis.

It was noted that computation had been done in accordance with the prescribed Master Direction-Compounding of Contravention under FEMA, 1999. Further, there was nothing pointed out by the petitioner so as to challenge the manner in which computation had been done.

High Court Held

The High Court held that there was no denial that before passing the impugned order, an opportunity of hearing was afforded; however, it was not availed. Thus, the decision by the respondent could not be faulted on any legally sustained grounds. In view of the above, the instant writ petition was to be dismissed.