2009 (1) TMI 922 - HC - FEMA

Summary

Issues involved: Review application filed by Union of India regarding foreign currency deposits in NRE accounts prior to 31.07.1995.

Summary:
1. The Union of India filed a review application seeking review of an order directing that foreign currency deposits could be made by individuals other than NRI account holders in NRE accounts of NRIs prior to 31.07.1995. The court set aside proceedings based on this statement in the order dated 19.04.2007.

2. The review application claimed a communication gap led to incorrect instructions being conveyed. Reference was made to Exchange Control Manuals and a circular dated 31.07.1995, which specified that NRE accounts could only be credited with foreign currency if tendered in person by the account holder after 31.07.1995.

3. The Exchange Control Manuals of 1987 and 1993 allowed operations on NRE accounts by residents only for withdrawals for local payments, not deposits. The instructions given were deemed incorrect by the Union of India based on these Manuals.

4. The petitioner's counsel argued that prior to 31.07.1995, there was no clear stipulation against deposits in NRE accounts by individuals other than the account holders themselves. The circular of 31.07.1995 was the first to expressly allow deposits.

5. The court agreed with the petitioner's submissions, stating that the instructions given were correct based on the circular of 31.07.1995 and the Exchange Control Manuals. The review application was dismissed.