Joaquim Mascarenhas Fiuza v. Jaime Rebello And Another

1. The petitioner is a foreign national and not a citizen of India. He challenges the judgment dated 28th January, 1986, passed by the learned District Judge, South Goa, confirming the order dated 21st December, 1984, made by the Civil Judge, Junior Division, Margao, dismissing the application for injunction filed by him.

2. The petitioner filed a suit seeking mandatory and perpetual injunctions against the respondents herein on the grounds that he is the co-owner in possession of the property known as “Govuncatem” and that the first respondent started laying foundation for a construction in the said property without any right therefor. The suit so filed was resisted by the respondents on several grounds, namely, on the ground that the plaintiff is not a citizen of India and as such, he cannot hold or acquire any immovable property in India unless he had obtained or is deemed to have obtained permission from the Reserve Bank of India to hold or acquire such property. Therefore, according to the respondents, the plaintiff/petitioner could not legally hold any property in India unless he had been permitted by the Reserve Bank under the provisions of Section 31 of the Foreign Exchange Regulation Act, 1973 (for short “the Act”). It is further the case of the respondents that the petitioner was not in actual possession of the suit property at least since the time of the Liberation of Goa. Along with the plaint, the petitioner filed an application seeking a temporary injunction restraining the respondents from carrying on any further construction work in the said property or from interfering in any manner with it during the pendency of the suit. The sought injunction was granted ex parte by the order dated 5th October, 1984, but the same injunction was vacated by the learned Civil Judge, Junior Division, Margao, by his order dated 21st December, 1984, on the grounds that admittedly the petitioner is a foreign national and he has not complied with the provisions of Section 31 of the Act and, therefore, he was not entitled or he should not be deemed to be holding any immovable property in this Territory, as well as on the ground that the petitioner was not in actual possession of the property. Being aggrieved, the petitioner approached the District Court, South Goa, with an appeal which was dismissed by the impugned judgment dated 28th January, 1986. The petitioner challenges the aforesaid judgment of the District Judge on several grounds, but his main thrust against the said judgment is that the lower Appellate Court had committed an error in exercise of jurisdiction by heavily relying on the provision of Section 31 of the Act to reach a finding that the petitioner is not the owner and/or is not in possession of the suit property since he failed to make a declaration or to comply with the provision of sub-section (4) of Section 31 of the Act. Secondly, it is the case of the petitioner that Section 31 of the Act does not come in any manner in his way, for he was already holding the suit property and, under the Act, those rights are not taken away.

3. Elaborating the above gounds, Shri Dessai, the learned counsel appearing for the petitioner, contended that as can be seen from the preamble to the Act, the same was enacted to consolidate and amend the law regulating certain payments, dealings in foreign exchange and securities, transactions indirectly affecting foreign exchange and the import and export of currency and bullion, for the conservation of the foreign exchange resources of the country and the proper utilisation thereof in the interests of the economic development of the country. This being the scope and purpose of the Act, it is manifest that the provisions of the Act are not meant to deprive a person from his rights and from his property. Now, according to the learned counsel, Section 31 of the Act imposes some restrictions on acquisition, holding, etc., of immovable property in India by a foreigner. Sub-section (1) is manifestly prospective in nature and lays down that a foreigner shall not acquire or hold or transfer or dispose of by sale, mortgage, lease, gift, settlement or otherwise any immovable property situate in India unless with the previous general or special permission of the Reserve Bank. The petitioner was holding the suit property much before the coming into force of the Act and, therefore, the provision of sub-section (1) of Section 31 is not attracted to his case. Sub-section (4), however, provides that every person and company referred to in sub-section (1) holding at the commencement of the Act any immovable property situate in India shall, before the expiry of a period of ninety days from such commencement or such further period as the Reserve Bank may allow, make a declaration in such form as may be specified by the Reserve Bank regarding the immovable property or properties held by such person or company. This provision of law applies to the case of the petitioner and the non-compliance with it has only the consequence of a penalty being imposed on the defaulter under Section 50 of the Act. Nowhere in the Act, it is postulated that the non-compliance with the aforesaid provision of law will have the effect of depriving a foreigner from enjoying a property he was holding at the time of the commencement of the Act. Thus, according to the learned counsel, the Courts below were entirely in error when they recorded a finding that the petitioner could not be said to hold a property, namely, the suit property in India, for he admittedly is a foreign national and has not made the declaration as required by sub-section (4) of Section 31 of the Act. That apart, the learned counsel further contended that the Courts below had also erred in holding that possession in the case at hand was relevant. In fact, both the Courts below failed to appreciate that the petitioner was entitled to obtain a perpetual injunction in view of the provision of Section 38(1) and (3) of the Specific Relief Act and, therefore, he was also entitled, on the same ground, to a temporary injunction in order to prevent an invasion of his property. The learned counsel finally contended that, in the circumstances, therefore, the Courts below ought to have granted the injunction as prayed for.

4. Shri M.S Usgaonkar, the learned counsel appearing for the respondents, has however joined issue with Shri Dessai, for he contended that the meaning given to sub-section (4) of Section 31 of the Act by the Courts below is correct and as such, should not be interfered with. He submitted that Section 31 of the Act has to be read as a whole and, therefore, sub-section (4) cannot be interpreted in isolation. It flows clearly from the said Section that the intention of the Legislature was to regulate the holding of properties by a foreigner in this country in order to prosecute and further the needs of conservation of the foreign exchange resources. Therefore, it has been provided in sub-section (1) that a foreigner shall not, except with the previous general or special permission of the Reserve Bank, acquire or hold or transfer or dispose of by sale, mortgage, lease, gift, settlement or otherwise any immovable property situate in India. This provision is completed by what is laid down in sub-section (4) which provides that in case a foreigner or a company referred to in sub-section (1) was already holding any immovable property at the commencement of the Act, such person or company should make a declaration within a period of ninety days or within the extended period as allowed by the Reserve Bank. In other words, reading the two provisions of sub-sections (1) and (4) together, it becomes clear that a foreigner can hold immovable property in India only if he obtains prior sanction of the Reserve Bank or makes a declaration that he was already holding such property at the time of the commencement of the Act. The word “hold” includes a two-fold idea of the actual possession of a thing and also of being invested with a legal title, as observed by the Supreme Court in Handique v. Agrl. I.T Board, assam (AIR 1966 S.C 1191). It is a common fact that the petitioner is a foreign national and it is not denied that he has not made any declaration as required by sub-section (4). Therefore, he cannot be deemed to be holding any property in India at the present, particularly the suit property. This being the case, the Courts below had correctly approached the problem and also correctly recorded a finding in that respect. Insofar as the possession, the learned counsel contended that though the petitioner has approached the Court with a case that he is the co-owner in possession of the suit property, the fact is that in the course of the proceedings, he admitted that he is not in actual possession of the said property and that it is the Sociedade dos Gauncares de Cuncolim and Veroda that is in possession thereof. The suit is for mandatory and perpetual injunctions and not for restoration of possession and this being so, the relief of temporary injunction was not available to him irrespective of the provision of Section 38 of the Specific Relief Act. That apart, the learned counsel further submitted that the construction in question has been already completed and, therefore, this revision has become infructuous.

5. As rightly pointed out by Shri Dessai, the Courts below dismissed the application for temporary injunction basically on two grounds, being (a) that the petitioner being a foreign national has not complied with the provisions of Section 31 of the Act and, therefore, could not be said to be holding any immovable property in this country; and (b) that he was not in actual possession of the suit property. I will, therefore, address myself to these two questions.

6. Section 31 of the Act lays down some restrictions on acquisition, holding, transfer or disposal of any immovable property by foreigners. Sub-section (1) provides that no person who is not a citizen of India and no company (other than a banking company) which is not incorporated under any law in force in India or in which the non-resident interest is more than forty per cent, shall, except with the previous general or special permission of the Reserve Bank, acquire or hold or transfer or dispose of by sale, mortgage, lease, gift, settlement or otherwise any immovable property situate in India, provided that nothing in the sub-section shall apply to the acquisition or transfer of any such immovable property by way of lease for a period not exceeding five years. Sub-section (2) lays down that any person or company referred to in sub-section (1) and requiring a special permission under that sub-section for acquiring, or holding, or transferring, or disposing of, by sale, mortgage, lease, gift, settlement or otherwise any immovable property situate in India may make an application to the Reserve Bank in the manner provided therein. Sub-section (3) postulates that on receipt of such application, the Reserve Bank may, after making an inquiry, either grant or refuse the permission, provided that no permission shall be refused without giving a reasonable opportunity to the applicant for making a representation in the matter and provided further that if no communication is made by the Reserve Bank after the expiry of ninety days, the permission is presumed to have been granted. Finally, sub-section (4) provides that every person and company referred to in sub-section (1) holding at the commencement of the Act any immovable property situate in India shall, before the expiry of a period of ninety days from such commencement or such further period as the Reserve Bank may allow in that behalf, make a declaration in such form as may be specified by the Reserve Bank regarding the immovable property or properties held by such person or company. It would appear from the above provisions of law, particularly from the provisions of sub-sections (1) and (4) that a foreigner or a company which is not incorporated under any law in force in our country or in which the non-resident interest is more than forty per cent will be entitled to acquire or hold or transfer or dispose of by sale, mortgage, lease, gift, settlement or otherwise any immovable property situate in India unless a previous permission is granted by the Reserve Bank of India or a declaration of the holding of such property at the time of the commencement of the Act is made within a period of ninety days or within such period as allowed by the same Bank. Sub-section (4) of the Act does not take away any rights which had accrued to a foreigner or to a company coming under the purview of Section 31 as regards any immovable property situate in India. It, however, makes the enjoyment of such right subject to a declaration made within the period of time specified therein. In other words, the right of the foreigner or such company is to say so kept in a stage of suspension. Sub-section (4), as rightly pointed out by Shri Usgaonkar, cannot be read in isolation and it forms part of Section 31. The principle laid down in the said Section is, inter alia, that a foreigner shall not hold any immovable property situate in India unless with the previous general or special permission of the Reserve Bank or after making a declaration of the holding as required in sub-section (4). The dictionary meaning of the word “hold” as given in The Shorter Oxford English Dictionary is “to have or keep as one's own; to own, as property; to be in possession or enjoyment of”. In other words, the word “hold” embraces both the title and possession. This was otherwise the view taken by the Supreme Court in Handique's case (supra). In fact, it was observed in the said case that the expression “holds” appearing in the assam Agricultural Income-tax Act includes a two-fold idea of the actual possession of a thing and also of being invested with a legal title. Though this observation was made in connection with the said Act, the fact remains that the view taken is harmonious with the dictionary meaning of the said word. The wording of sub-sections (1) and (4) of the Act does not justify or warrant the giving of a different meaning to the word “hold” or “holding” occurring therein and as such, the said word is to be construed as meaning having the title or possession of any immovable property.

7. Sub-section (1) of Section 31, as already stated, inter alia, provides that no person who is not a citizen of India shall, except with the previous general or special permission of the Reserve Bank, acquire or hold or transfer or dispose of by sale, mortgage, lease, gift, settlement or otherwise any immovable property situate in India. Therefore, it becomes clear from the said provision of law that a foreign national cannot hold any immovable property situate in India whatever is the means by which the said property comes to him. Sub-section (4) in its turn, inter alia, provides that every person who is not a citizen of India and who was holding at the commencement of the Act any immovable property situate in India shall, within the period specified therein, make a declaration regarding the immovable property or properties held by him. Reading sub-sections (1) and (4) together and bearing in mind the word “otherwise” occurring in sub-section (1), it would appear that irrespective of the manner or the reason why an immovable property situate in India came to a foreign national, the same can hold it within the meaning of the Act only if he complied with the requirements of the Act. In other words, if the foreigner had already acquired and was having title and possession over a particular property at the commencement of the Act, he will be entitled to continue to hold it only if he makes the declaration as required by sub-section (4).

8. It is true that Shri Dessai argued that the Act is a penal statute meant only to regulate the foreign exchange and, therefore, the provisions of the Act are to be interpreted restrictively. Shri Usgaonkar, however, contended that the mere fact that some penalties are provided in the said Act does not make it a penal statute. In this connection, he placed reliance on the observations made by G.P Singh in his book “Principles of Statutory Interpretation”, page 568, to the effect that one has to see what is the overall nature of the statute before recording a finding that such statute is or not a penal statute. The Act, as the preamble itself shows, is to regulate the foreign exchange and the penalties provided in the Act are incidental and, therefore, do not make it a penal statute. I find myself entirely in agreement with Shri Usgaonkar. Though there are some penalties imposed in the Act for some violations of its provisions, it is clear that the Act was enacted with a view to consolidate and amend the law regulating payments, dealings in foreign exchange and securities, transactions indirectly affecting foreign exchange and the import and export of currency and bullion, for the conservation of the foreign exchange resources of the country and its proper utilisation. The statute is not basically a penal statute, though some offences are mentioned and penalties for such offences are provided for. That apart, the argument advanced by Shri Dessai has no merit because the above interpretation flows directly from Section 31 as a whole. It is not an extensive interpretation, but an interpretation that the wording of the said Sections clearly imposes. Thus, there is no reason, on this ground, to interfere with the impugned judgment.

9. Coming now to the question of possession, it is an admitted fact that at least after the Liberation of this Territory, the suit property is not in actual possession of the petitioner. It was taken over by the Military Government after the Liberation of Goa and handed over to the Sociedade Agricola dos Ganncares de Cuncolim and Veroda. Thereafter, it was being administered and in possession of the Custodian of Evacuee Properties and finally was handed over again to the possession of the said Sociedade. The suit was filed on the basis that the petitioner is a co-owner in possession of the property and the reliefs sought were for mandatory injunction directing to demolish the construction works done and further for a perpetual injunction restraining the respondents from ??? out any construction in the suit property or from interfering in any manner in the suit property. Section 38 of the Specific Relief Act no doubt provides that a perpetual injunction may be granted to prevent the breach of an obligation existing in favour of the plaintiff, whether expressly or by implication and also when the defendant invades or threatens to invade the plaintiff's right to a property or to the enjoyment thereof, but such kind of relief can be granted, obviously, when the plaintiff himself is in possession of the property or when having been deprived of his possession, the plaintiff seeks as one of the reliefs the restoration of the said property. In the present case, no prayer for restoration of possession was made and, therefore, the Courts below rightly held that on that ground also the petitioner was not entitled to any injunction.

10. Be that as it may, the learned counsel appearing for the petitioner, in all fairness, conceded that the construction in question is already completed and as such, it is obvious that, in any event, this revision application has become infructuous. The result is, therefore, that this revision application is dismissed with costs.

Revision Application dismissed.