In Asha John Divianathan Vs Vikram Malhotra & Ors., CIVIL APPEAL NO. 9546 OF 2010, a three-member bench of Supreme Court of India comprising of Justices AM Khanwilkar, Indu Malhotra, and Ajay Rastogi while dealing with Section 31 of the Foreign Exchange Regulation Act, 1973 decided upon as to whether a transaction (specified in Section 31 of the 1973 Act) entered into in contravention of that provision is void or is only voidable and it can be voided at whose instance.
As decided on 26th February 2021, a person, who is not a citizen of India, holding immovable property situated in India was obliged to make disclosure and declaration on that behalf to the RBI; and in any case, if he/she intended to dispose of such property by sale, mortgage, lease, gift, settlement or otherwise, was expected to obtain previous general or special permission from the RBI, under section 31 of 1973 act.
Only then, transfer so intended could be given effect. It is true that the consequences of failure to seek such previous permission have not been explicitly specified in the same provision or elsewhere in the Act, but then the purport of Section 31 must be understood in the context of intent with which it has been enacted, the general policy not to allow foreign investment in landed property/buildings constructed by foreigners or to allow them to enter into real estate business to eschew capital repatriation, including the purport of other provisions of the Act, such as Sections 47, 50 and 63.
