Citibank, N.A. vs Union Of India & Another
2009 Latest Caselaw 132 Del

           THE HIGH COURT OF DELHI AT NEW DELHI

%                                  Judgment delivered on: 16.01.2009

+            RP 213/2007 in WP (C) 1211/2005

CITIBANK, N.A.                                              ... Petitioner


                                  - versus -

UNION OF INDIA & ANOTHER                                    ... Respondents

Advocates who appeared in this case:

For the Petitioner : Mr A.N. Haksar, Sr Advocate with Ms Rashmi Virmani and Ms Mihira Sood For the Respondents : Ms Monika Garg

CORAM:-

HON'BLE MR JUSTICE BADAR DURREZ AHMED

1. Whether Reporters of local papers may be allowed to see the judgment ?

2. To be referred to the Reporter or not ?

3. Whether the judgment should be reported in Digest ?

BADAR DURREZ AHMED, J (ORAL)

1. The Union of India has filed this review application seeking

review of the order dated 19.04.2007. By virtue of an earlier order

dated 23.03.2007, this court had directed the Union of India to take

specific instructions as to whether, prior to 31.07.1995, foreign

currency deposits could be made by individuals other than the NRI

account holders in respect of the NRE accounts of such NRIs. The

order dated 19.04.2007, which is sought to be reviewed, indicates that

the learned counsel for the respondent (Union of India) had taken

instructions and she had stated that prior to 31.07.1995, foreign

currency deposits could be made by individuals other than the NRE

account holders in the NRE accounts of such NRIs. It is on the basis of

this statement that this court directed that all proceedings pursuant to

the show cause notice dated 25.02.2002 as also the show cause notice

stood set aside. The show cause notice pertains to a period prior to

31.07.1995. Consequently, the writ petition was disposed of.

2. Now, this application has been filed in which the respondent

(Union of India) is claiming that due to a communication gap, proper

instructions had not been conveyed to the counsel and that the position

was otherwise. A reference is sought to be made to the Exchange

Control Manual, 1987, the Exchange Control Manual, 1993 and the

Circular No.7 dated 31.07.1995 issued by the Reserve Bank of India. It

is apparent from a reading of the Circular dated 31.07.1995 that

authorized dealers have been advised to scrupulously follow the

instructions given therein while permitting credits representing

proceeds of foreign currency, bank notes and travellers cheques to NRE

accounts and operations on these accounts by resident power of

attorney holders. Inter alia, the instructions provide that the account

should be opened by the non-resident account holder himself and not

by the holder of power of attorney in India on behalf of a non-resident.

It is also provided that credits representing proceeds of foreign

currency travellers cheques / foreign currency / bank notes may be

allowed provided these are tendered to the authorized dealer

maintaining the NRE account in person by the account holder himself.

In addition, it was stipulated that in the case of travellers cheques, the

same should be discharged by the account holder in the presence of the

officials of the bank with whom the account is maintained. It is

obvious that on and from the date of this circular, i.e., from 31.07.1995,

no NRE account of an NRI could be credited with the proceeds of

foreign currency travellers cheques / foreign currency / bank notes

unless and until the same was tendered in person by the account holder

himself. There is no dispute that on and after 31.07.1995, this was the

position in law. It was the contention of the learned counsel for the

petitioner that prior to this, there has been no circular or requirement

clearly pointing out that deposits in the NRE accounts could be made

by persons other than the NRE account holders themselves.

3. The learned counsel for the respondent referred to the

Exchange Control Manual, 1987 and in particular to paragraph 29A.7

thereof which indicated that authorized dealers may allow operations

on NRE accounts by residents in terms of power of attorney or other

authority granted in the resident's favour by the non-resident account

holder provided they are restricted to withdrawals for local payments.

The learned counsel for the Union of India submitted that this indicated

that the only operations that were permissible to persons other than the

account holder himself were in respect of withdrawals for local

payments, subject to the conditions stipulated therein. A similar

provision is found in the Exchange Control Manual of 1993 in

paragraph 13B.7. In the light of the aforesaid paragraphs appearing in

the Exchange Control Manual, 1987 and the Exchange Control Manual,

1993, the learned counsel for the Union of India submitted that the

instructions given to her were incorrect and contrary to the position as

indicated in the said paragraphs.

4. On the other hand, Mr Haksar, the learned senior counsel

who appears for the writ petitioner and the non-applicant in this

application, submitted that prior to 31.07.1995, there was no clear-cut

stipulation that deposits / credits could not be made in the NRE

accounts of NRI account holders in the absence of the account holders

themselves. He submitted that the stipulations contained in the

Exchange Control Manual, 1987 and the Exchange Control Manual,

1993 relate to operations pertaining to withdrawals and do not cover

deposits. He submitted that it is for the first time that the deposits were

expressly provided for by the circular of 31.07.1995. He also pointed

out that paragraph 2 of the circular dated 31.07.1995 itself draws a

distinction between credits and other operations on these accounts by

resident power of attorney holders. This is apparent from the

expressions used in paragraph 2 of the said circular itself. He further

submitted that the instructions with regard to permitting credits were

stipulated for the first time in the circular dated 31.07.1995.

5. I agree with the submissions made by Mr Haksar and am of

the view that the instructions given to the learned counsel at the time

when the order dated 19.04.2007 was passed were correct and were in

accord with what the circular dated 31.07.1995 as well as the

paragraphs of the Exchange Control Manual, 1987 and the Exchange

Control Manual, 1993 provided. In view of this, there is no basis

whatsoever for seeking recall of the order dated 19.04.2007.

The application is dismissed.

BADAR DURREZ AHMED ( JUDGE ) January 16, 2009 dutt