Sushree Mohnaty
In a recent decision, the Supreme Court has stated that any act of sale or mortgage of a property by a foreign resident will be considered unlawful if it is preceded without acquiring prior consent from the Reserve Bank of India (RBI).
The Court stated that the current rule is inscribed under the Section 31 of the 1973 Act which talks about acquiring a “prior” general or special consent from the Reserve Bank of India for any action taken for removal or transfer of an immovable property located in India, either by mortgage or any sale.
The Court additionally said that the rule pertains to the foreign residents and imposes a mandate on such individuals.
The bench headed by Justice A.M. Khanvilkar stated that any such action initiated without prior permission will not be realized or be given effect as it will be deemed as an unlawful transfer.
Additionally, he stated that such action will attract punishment under Section 50 of the Act along with several other penalty sections enumerated in the 1973 Act.
“Subsequently, the Trial Court, as well as the High Court, has committed an error by entertaining and dismissing the suit recorded by the petitioner in regard of a property admeasuring 12,306 square feet and for remedies alluded to in that,” it stated.
“We infer that the judgement of the concerned High Courts rendering that Section 31 of the 1973 Act is not compulsory and the transfer in repudiation thereof is not void or unenforceable, is certifiably not a good law,” the Court observed.
The bench further stated that the cases which have already been decided and have reached its conclusion, including the judgement passed by any competent authority, will not be scheduled for rehearing of the dispute due to the current verdict.