Ajay Narain v. Reserve Bank of India & Ors.

1. Allowed, subject to all just exceptions.

2. Applications stand disposed of. W.P.(C) 10832/2025 & CM APPL. 44785/2025

3. This writ petition is filed on behalf of the Petitioner under Article 226 of the Constitution of India seeking the following reliefs:- “(a) Issue an appropriate writ, order or direction, in the nature of mandamus, under Article 226 of the Constitution of India, 1950, or any other appropriate writ, order or direction inter alia quashing and setting aside the Letter bearing No. EC.CO.FID(III)/954/10.03.03./W-165/98-99 dated 14.12.1998 issued by the Respondent No. 1; (b) Issue an appropriate writ, order, or direction, declaring that no reliance be placed on documents that create an interest of Respondent No.2 in the First Floor of the property at 110, Jor Bagh, New Delhi, which have been executed without any permission having been sought from Respondent No.1 under the FERA regime;

(c) Issue an appropriate writ, order or direction under Article 226 of the

(d) Pass any other or further order/s as this Hon’ble Court may deem fit and proper.”

4. Case of the Petitioner, as set out in the writ petition is that Respondent No.2/Shri Kanwar Raj Singh relinquished Indian citizenship and became a US citizen in 1993. Between 1996 to 1998, Petitioner took loans of approximately Rs.50 to 60 lakhs from Respondent No.2 and his wife and as security he offered 1st and 2nd floors of property bearing no. 110, Jor Bagh, New Delhi (‘Jor Bagh property’) with an understanding between the parties that the property will not be sold to recover the loan amount and was only to underwrite the loan taken by the Petitioner. On 30.03.1998, Petitioner signed a fresh set of documents including Agreement to Sell (‘ATS’) and Power of Attorneys (‘POAs’) in respect of 2nd floor of the Jor Bagh property. On 30.04.1998, Petitioner returned a sum of Rs.45 lakhs as part repayment of the loans taken and since an amount of Rs.15 lakh was outstanding, Respondent No.2 withheld the original ATS, GPAs and SPAs and promised to return the documents upon repayment of the pending loan amount.

5. It is stated in the petition that on 23.06.1998, Petitioner revoked the GPAs and SPAs and after cancelling the documents informed Land & Development Office that all documents pertaining to the loan agreement stood cancelled, in light of the revocation deeds. On 09.07.1998, Petitioner filed a suit for declaration and permanent injunction being CS(OS) NO. 1336/1998 before this Court. On 13.07.1998, Court issued summons and granted injunction restraining Respondents No.2 and 3 from dealing with, alienating or parting with the 1st and 2nd floors of the Jor Bagh property. On 18.08.1998, Respondent No.2 sent a letter to Respondent No.1 claiming to have purchased 2nd floor of the subject property and submitted the ATS and GPA, both dated 30.03.1998 along with Form IPI-7 in compliance with reporting obligation under Foreign Exchange Regulation Act, 1973 (‘FERA’), after a delay of 51 days.

6. It is stated that Respondent No.1/Reserve Bank of India (‘RBI’) decided on 14.12.1998 to accept the Form IPI-7, without condoning the delay in declaring the purchase of the property and without conducting a preliminary enquiry into the validity of the documents given in support of the claim that the property was purchased. In 2000, Respondent No.2 filed a cross suit being CS (OS) No. 2273/2000 inter alia seeking specific performance of ATS dated 30.03.1998. On 15.09.2011, Court framed an additional issue in CS (OS) No. 2273/2000 “whether the transaction in favour of plaintiff No.2 is hit by Section 31 of the Foreign Exchange Regulation Act, 1973? OPP”. Both the suits were decided by common judgment dated 02.12.2024. CS (OS) No. 2273/2000 was decreed in favour of Respondent No.2 directing specific performance of ATS dated 30.03.1998 in respect of 2nd floor of Jor Bagh property with a further direction to execute the Sale Deed within 60 days while the suit filed by the Petitioner i.e., CS (OS) No. 1336/1998 was dismissed. Petitioner filed two appeals against the judgment and decree being RFA (OS) 13/2025 and RFA (OS) 14/2025, which were pending when this writ petition was filed in July,

2025.

7. In the present writ petition, Petitioner seeks quashing of letter dated 14.12.1998 issued by RBI as also a declaration that no reliance be placed on documents that create an interest of Respondent No.2 in the 1st floor of the Jor Bagh property, which were executed without any permission from RBI under the FERA regime.

8. Learned counsel for the Petitioner submits that Respondent No.2 wilfully acted in breach of statutory mandate by failing to obtain prior permission from RBI within the prescribed 90 days period as required by Notification dated 26.05.1993. Furthermore, he suppressed material facts by omitting to disclose that there was a pending litigation with respect to interest in the 2nd floor of the Jor Bagh property and that he had acquired purported interest in the 1st floor under an ATS and GPAs. GPA dated 30.03.1998 executed in favour of Respondent No.3 purports to transfer interest in an immovable property from a foreign national of Indian origin i.e., Respondent No.2, without prior RBI approval, in direct contravention of Section 31(1) of FERA. Failure to obtain prior permission necessitates regulatory action by RBI and judicial declaration that consequences under Section 31 must follow.

9. It is contended that acceptance of Form IPI-7 by RBI is vitiated owing to failure to investigate the authenticity and enforceability of documents such as the ATS and GPA or the facts in the pending litigation. Under RBI Notification, any foreign citizen or Person of Indian Origin (‘PIO’) acquiring immovable property in India was required to mandatorily file Form IPI-7 with RBI within 90 days of acquisition, which is not an administrative formality but a statutory condition grounded in larger public policy of regulating and limiting foreign control over immovable assets in India. In Asha John Divianathan v. Vikram Malhotra and Others, (2021) 19 SCC 629, the Supreme Court has held that non-compliance with Section 31 renders the underlying transactions void and unenforceable. Moreover, no reason has been accorded by RBI for entertaining delayed filing of the Form IPI-7, more particularly, when there is no power to condone the delay under the Notification. Taking the Court through the facts of the case, it is urged that the alleged ATS and other documents were executed on 30.03.1998 while permission was sought on 18.08.1998, which was beyond the deadline of 90 days, which expired on 01.07.1998 and despite the delay, Form IPI-7 was accepted by RBI, which is wholly illegal.

10. Learned counsel for RBI submits that by this writ petition, Petitioner challenges the legality and validity of letter dated 14.12.1998 issued by RBI, however, this issue stands decided by the Division Bench of this Court in the two appeals filed by the Petitioner, being RFA (OS) 13/2025 and RFA (OS) 14/2025, holding that the transaction entered into by Respondent No.2 was fully compliant with statutory provisions under FERA and procedural mandates stipulated by RBI Notification and thus the same issue cannot be reagitated in this writ petition. Even otherwise, on merits, Petitioner has no case as he is attempting to seek relief under a repealed statute. Foreign Exchange Management Act, 1999 (‘FEMA’) came into effect from 01.06.2000 and period of two years provided under Section 49(3) elapsed on 31.05.2002 and no cognizance can be taken of any purported offence under FERA after the said cut-off date.

11. Counsel for Respondent No.2 also opposes the petition on the ground that the issue of alleged violation of RBI Notification or the FERA regime in the present case stands settled by the judgment of the Division Bench holding that the transactions by Respondent No.2 are totally compliant and the present writ petition is thus only a futile attempt to reagitate decided issues, which is impermissible in law. In fact, after the decision in the two appeals, this writ petition is clearly barred by constructive res judicata and deserves to be dismissed on this ground alone. Without prejudice, Respondent No.2 has duly complied with the Notification and money was paid through foreign exchange remitted from abroad through normal banking channel and Non-Resident External Account (‘NRE Account’).

12. After hearing the counsels for the respective parties and in light of the preliminary objection to the maintainability of this writ petition, the first and foremost question that needs consideration is whether this Court can adjudicate on the legality and validity of letter dated 14.12.1998 issued by RBI, whereby RBI accepted Form IPI-7 dated 18.08.1998. Challenge to the letter is predicated on violation of RBI Notification dated 26.05.1993 and Section 31(1) of FERA. As per the Petitioner, Respondent No.2 is a foreign citizen of Indian origin and claims to have acquired interest in 1st floor of the Jor Bagh property by way of irrevocable GPAs dated 06.12.1996 and 07.10.1997. However, no permission was sought by him from RBI in respect of the 1st floor prior to creating the interest, within the prescribed period of 90 days in Notification dated 26.05.1993. Heavy reliance is placed on Section 31 of FERA that no person who is not a citizen of India and no company, other than a banking company, which is not incorporated under any law in force in India, shall, except with previous general or special permission of RBI, acquire or hold or transfer or dispose by sale, mortgage, lease, gift, settlement or otherwise any immovable property situate in India. Challenge is laid to the action of RBI in accepting Form IPI-7 beyond the prescribed period, without condonation of delay and without any power to condone.