Devendra N. Desai Vs Assistant Director (Appellate Tribunal Under SAFEMA Delhi)
FEMA Tribunal Lifts Seizure of Indian Property After Repatriation of Foreign Asset Value – Section 37A Not Meant for Perpetual Seizure
The Appellate Tribunal under SAFEMA allowed the appeal of Devendra N. Desai and set aside the seizure of his Mumbai flat that had been attached under Section 37A of FEMA on account of an apartment held in Dubai. The Tribunal held that once the foreign asset was no longer held abroad and the equivalent value had been brought back to India, the very purpose of Section 37A stood achieved and continued seizure was unwarranted.
The Enforcement Directorate had seized the appellant’s Indian property equivalent to AED 9.14 lakh (purchase cost plus rental income from a Dubai apartment) alleging contravention of Section 4 of FEMA. The appellant contended that the Dubai property had been acquired in 2012, prior to the introduction of Section 37A, and therefore the provision could not be applied retrospectively. The Tribunal rejected this argument, observing that the relevant consideration is not when the foreign property was acquired but whether it was being held by a resident Indian on the date of seizure. Since the Dubai property continued to stand in the appellant’s name when Section 37A was invoked in 2020, the seizure was initially valid.
However, the Tribunal noted that before the impugned order was passed, the Dubai property had already been transferred out of the appellant’s name and foreign exchange equivalent to the value of the property had been remitted to India. The Tribunal found that the explanation regarding remittance through the appellant’s daughter was plausible and had not been disproved by the Directorate. It also observed that there was no allegation that the funds remitted to India were unlawful.
Interpreting the proviso to Section 37A(4) of FEMA, the Tribunal held that where the aggrieved person discloses the foreign asset and brings back the equivalent value to India, the authority has power to set aside the seizure. Since the foreign property was no longer held abroad and the equivalent foreign exchange had been repatriated, the objective of Section 37A had been fulfilled. Accordingly, the seizure of the Indian property was quashed.
Section 37A is a protective mechanism to secure foreign assets held abroad in violation of FEMA. Once the foreign asset ceases to be held abroad and its value is repatriated to India, continued seizure of Indian assets may not be justified, though FEMA adjudication for the alleged past contravention can still continue
FULL TEXT OF THE JUDGMENT APPELLATE TRIBUNAL UNDER SAFEMA AT NEW DELHI
This Order disposes of the Appeal No. FPA-FE-45/MUM/2020 filed by Shri Devendra N. Desai against the Order No. 01/MUM-CUSM/FEMA/2020-21 dated 09.06.2020 (Impugned Order) passed by the Competent Authority, Commissioner of Customs (Appeals), Mumbai-I. The Competent Authority has upheld the Seizure Order No. 01/2020 dated 02.03.2020 whereby the immovable property in India of the Appellant Shri Devendra N. Desai, to the extent of Rs. 1,77,63,590/- equivalent to AED 914,000 of Foreign Exchange held outside India, was seized under Section 37A (1) of the Foreign Exchange Management Act, 1999 (FEMA).
