2009 (12) TMI 519 - HC - FEMA

Whether, even for the period prior to 31-7-1995, such deposits in foreign currency needed to be made, necessarily, by the Non-Resident Indian account holder, in person? Held that - As prior to 31-7-1995 there was no requirement that the deposits in NRE accounts could not be made by persons other than the NRE accounts holders themselves. For the subsequent period, that is after 31-7-1995, it is not in dispute that such deposits could only be made by the account holder himself, in person.no useful purpose would be served by relegating the petitioners to seek their alternative remedy of appeal under section 90 of the FEMA, particularly, because, according to us, that would not, now, be an equally efficacious remedy. In view of the foregoing discussion, these writ petitions are allowed. The show-cause notices and the consequent adjudication orders are set aside. See case of Citi Bank 2009 (7) TMI 1203 - DELHI HIGH COURT

Summary

Issues:
1. Interpretation of provisions of the Foreign Exchange Regulation Act, 1973 regarding deposits in foreign currency by power of attorney holders of Non-Resident Indians in Non-Resident External (NRE) Accounts.
2. Alleged violation of section 6(4) and section 6(5) of FERA by petitioner banks.
3. Consideration of circular dated 31-7-1995 and Exchange Control Manual provisions by Division Bench in Citi Bank case.
4. Review petition by Union of India regarding communication gap and subsequent appeal.
5. Argument on alternative remedy of filing appeals under section 19 of Foreign Exchange Amendment Act, 1999.

1. Interpretation of FERA provisions:
The key issue in these writ petitions was the interpretation of provisions of the Foreign Exchange Regulation Act, 1973 regarding deposits in foreign currency by power of attorney holders of Non-Resident Indians in Non-Resident External (NRE) Accounts. The main question was whether, even before 31-7-1995, such deposits in foreign currency needed to be made by the Non-Resident Indian account holder personally. The show-cause notices issued against the petitioner banks alleged violations of FERA provisions.

2. Alleged FERA violations by petitioner banks:
The Enforcement Directorate issued show-cause notices against the petitioner banks alleging violations of section 6(4) and section 6(5) of FERA. These writ petitions were filed to challenge these notices, and the matter was disposed of based on the interpretation of the relevant provisions regarding deposits in NRE Accounts.

3. Consideration of circular and Exchange Control Manual provisions:
The Division Bench in the Citi Bank case examined the circular dated 31-7-1995 and provisions of the Exchange Control Manual, both before and after the amendment. The Division Bench clarified that prior to 31-7-1995, there was no clear requirement that deposits in NRE accounts could only be made by the account holders themselves. The Division Bench's decision provided clarity on the issue based on the circular and manual provisions.

4. Review petition and subsequent appeal:
After a review petition was filed by the Union of India regarding a communication gap, an appeal was preferred, which was decided by a Division Bench upholding the Single Judge's decision. The Division Bench's judgment in the Citi Bank case was cited to argue that the matters in these writ petitions were covered by that decision.

5. Argument on alternative remedy:
The argument regarding the alternative remedy of filing appeals under section 19 of the Foreign Exchange Amendment Act, 1999 was raised. However, the Court found that the issue was adequately addressed by the Division Bench in the Citi Bank case and that pursuing an appeal would not be an equally efficacious remedy. As a result, the writ petitions were allowed, and the show-cause notices and adjudication orders were set aside without costs.