New Delhi: Any sale or mortgage of a property by a foreigner without prior permission of the RBI would be illegal, the Supreme Court has ruled.
The Apex Court has held that the condition predicated in Section 31 of the 1973 Act of obtaining “previous” general or special permission of the RBI for transfer or disposal of immovable property situated in India by sale or mortgage by a person, who is not a citizen of India, is mandatory.
“Until such permission is accorded, in law, the transfer cannot be given effect to; and for contravening with that requirement, the concerned person may be visited with penalty under Section 50 and other consequences provided for in the 1973 Act”, said an order of the Supreme Court by a bench presided by Justice A.M. Khanvilkar.
“Hence, the Trial Court, as well as the High Court, committed manifest error in dismissing the suit filed by the plaintiff for a declaration in respect of suit property admeasuring 12,306 square feet and for consequential reliefs referred to therein,” it added.
“A priori, we conclude that the decisions of concerned High Courts taking the view that Section 31 of the 1973 Act is not mandatory and the transaction in contravention thereof is not void or unenforceable, is not a good law,” Supreme Court said.
However, transactions that have already become final including by virtue of the decision of the court of competent jurisdiction, need not be reopened or disturbed in any manner because of this pronouncement, the order said.
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