HONOURABLE SRI JUSTICE P.NAVEEN RAO WRIT PETITION NO.4473 of 2014 Date: 16.12.2014 Between :
The Gurajala Field Association of Telugu Baptist Churches, Gurazala, Guntur District (registered society bearing No.374/2010), rep.by its Authorized person Kotapalli Shankar Rao, s/o. Pedda Sambaiah, Aged 29 years, Pastor, r/o.Gundlapalli Village, Nakarikallu Mandal, Guntur District.
... Petitioner And The Union of India, Ministry of Finance, North Block, New Delhi, Rep.by its under Secretary and others.
….. Respondents This Court made the following:-
HONOURABLE SRI JUSTICE P.NAVEEN RAO WRIT PETITION NO.4473 OF 2014 ORDER:
Petitioner is the Association of Telugu Baptist Churches of Gurazala in Guntur District. Petitioner assails in this writ petition the two deeds of conveyance dated 12.04.2010 and 01.05.2013 executed by the 20th respondent.
2. The case of the petitioner is, petitioner is affiliated to Samavesam of Telugu Baptist Churches (STBC), which is also a registered society, which is affiliated to “The Property Association of Baptist Churches Private Limited” (PABC). The main object of PABC is to aid further the religious and charitable work of the Baptist and other Churches in India and in particular the Baptist Churches affiliated to the STBC and to the Christian Service Society of Bengal, Orissa, Bihar Baptist Convention and for the purpose to do and carry out all such matters and things for promoting such objects etc. The 20th respondent is American Baptist Foreign Mission Society (ABFMS). This Society has purchased several properties in various part of the country including the erstwhile State of Andhra Pradesh. It is further case of petitioner that the ABFMS was amalgamated with PABC. As a consequence of such amalgamation, the properties which earlier purchased by ABFMS, now become the properties of PABC. As PABC was providing financial assistance to the various missionaries including the petitioner herein, on account of illegal sale of properties belonging to the erstwhile ABFMS, grave prejudice is caused to the petitioner in particular and the entire Christian community in general. It is further contended that the sale deeds disclose the receiving of consideration at far low price than the prevailing market rate. As against market price of Rs.3,61,95,000/-, two extents of properties was sold for meager amount of Rs.14,00,000/- vide sale deed dated 12.04.2010 and similarly as against market price of Rs.1,85,86,000/-, Ac.1.92 cents was sold for meager amount of Rs.18,00,000/- vide sale deed dated 01.05.2013. Alleging that such illegal transactions would cause immense loss to the entire community and praying to annul the said sale transactions, this writ petition is instituted.
3. Heard learned counsel for the petitioner Sri N.Vijay and Sri Vedula Srinivas for respondent No.20 and learned Government Pleader for Revenue.
4. With the consent of learned counsels this writ petition is disposed of by this Order.
5. Learned counsel for the petitioner contended that ABFMS was amalgamated with PABC by virtue of order of Madras High Court in Company Petition Nos.109/1973 and 110/1973. As per the scheme of amalgamation, the properties of ABFMS are to b e utilized for the benefit of STBC insofar as the properties located in State of Andhra Pradesh is concerned. As a consequence to such amalgamation, the properties have vested in PABC and, therefore, the ABFMS is no more competent to undertake such sale transactions.
6. It is further contended that ABFMS was a registered society in United States of America. No Foreign person can undertake sale of property without prior approval by the Reserve Bank of India. In accordance with the Regulation 8 of Foreign Exchange Management (Acquisition and Transfer of Immovable Property outside India) Regulations, 2000 (for short, ‘the Regulations, 2000’), such prior permission is mandatory. These regulations are made in exercise of power vested by Section 6(3) read with Section 47(2) of the Foreign Exchange Management Act, 1999 (for short, ‘FEMA’). Learned counsel further contended that in the instant case, Section 22-A(1)(a) of the Indian Registration Act, 1908 is also attracted. Section 22-A(1)(a) prohibits registration of any document, which is prohibited by any provision of law. As a Foreign Society is not entitled to undertake sale of retail properties without prior consent of Reserve Bank of India, the sale transactions undertaken by the 20th respondent on 12.04.2010 and 01.05.2013 were hit by the provision of Section 22-A(1)(a) and, therefore, such sale transactions are void transactions.
7. Learned counsel also placed reliance on statement made by the 19th respondent, who is the deponent on behalf of the 20th respondent herein in T.S.No.595-I.94 on the file of Court of Civil Judge (Junior Division), Balasore, State of Orissa. It was deposed that “Moreover, American Baptist Mission owned the property along with others and they transferred the same to The Property Association of Baptist Churches (P) Ltd., on the basis of an order of amalgamation under the Companies Act passed by the Madras High Court”. Learned counsel, therefore, contended that as was categorically admitted of transfer of properties to PABC, the ABFMS ought not to have undertaken the sale of very same properties.
8. Learned counsel Sri Vedula Srinivas for respondent No.20 submitted that petitioner is no way concerned with the affairs of ABFMS and, therefore, petitioner cannot challenge the sale transactions undertaken by the ABFMS. He further contended that no right of the petitioner is affected by the said sale transactions necessitating institution of this writ petition.
9. The amalgamation of ABFMS with PABC has not become final and as on today, both Societies independently exist and ABFMS continue to manage the properties originally belonging to ABFMS. Learned counsel further submitted that in Company Petition Nos.109 and 110 of 1973, Company Application No.287 of 1973 was filed praying; (i) for an order of sanction to the scheme of amalgamation attached herewith so as to be binding on all the members of the company and on the said company; (ii) for sanction to dissolve the company without being wound up; and (iii) for such further or other order as may deem fit to the Court. When the matters were taken up for consideration on 05.07.1974, prayer two in the petition was not pressed i.e., for sanction to dissolve the company without being wound up. He, therefore, contended that the company is not dissolved nor it is wound up. Thus, the affairs of the company are continued to be independently regulated and company continues to deal with the properties owned by the company. Even according to the petitioner, he is remotely connected to PABC, but he is no way connected to ABFMS and, therefore, petitioner has no locus standi to challenge the dealing of the properties by the ABFMS. He, therefore, submitted that the petitioner is not the person aggrieved and, therefore, the writ petition is liable to be dismissed on this ground alone.
10. In support of the said contention, learned counsel placed reliance on the decision of the Supreme Court in Ayaaubkhan
[1]
Noorkhan Pathan v. State of Maharashtra . Supreme Court held that a stranger cannot be permitted to meddle in any proceedings. Only a person who has suffered legal injury can challenge the act/actions/order etc., in a Court of law. Petitioner is not seeking to enforcing a statutory or legal right, or breach of statutory duty on the part of the 20th respondent. The legal right that can be enforced must ordinarily be the right of the petitioner himself, who complains of infraction of such right and approaches the Court for relief as regard the same. (paras 9 to 17).
11. Learned counsel further contended that petitioner is making conflicting allegations, which are opposite to each other. On the one hand, petitioner contended that as amalgamation has taken place, the ABFMS can no more deal with the properties. On the contrary, he contends that ABFMS being a Foreign Society, the sale transactions under challenge were in violation of provision of FEMA and Regulations made thereunder. If amalgamation is completed FEMA is not violated. If amalgamation is not completed, petitioner is no way concerned. Since the petitioner is no way concerned, he cannot make allegations of violations of provisions of FEMA and the registrations made. Petitioner has not taken a definite stand.
12. Learned counsel relied on the Order passed by the Madras High Court in the case of American Baptist Foreign Mission Socieity vs.
[2]
D.Jayaraju and others . Madras High Court observed that “ In the light of the materials placed in the form of affidavit and in the absence of contra evidence by way of counter affidavit, it is clear that the scheme of amalgamation has not been approved, hence, the applicant has vital interest in the properties and several litigation, considering its objects referred to in the earlier part of our order”. It is further observed th a t “ Though by the order dated 03.05.1974, the scheme of amalgamation as proposed was sanctioned, notice to the Official Liquidator was ordered returnable by 27.06.1974, however, it is seen that by a subsequent order dated 05.07.1974 of this Court, the prayer for dissolution of a Transferor Company was not pressed. Therefore, it follows that the amalgamation has not become complete and does not have the legal force as put forth by the first defendant”. He, therefore, contended that the amalgamation has not become final and the company continued to exist independently.
13. On the objection of violation of Section 22-A(1)(a) of the Registration Act, learned counsel contended that there is no prohibition by FEMA of undertaking transactions and, therefore, the above provision is not attracted. Leaned counsel contended that the power is vested in Reserve Bank of India under Section 6(3) of FEMA to regulate, prohibit, restrict by framing regulations, acquisition or transfer of immovable property in India, by a person resident outside India. In exercise of the power vested in Section 6(3) read with Section 47(2), Regulations 2000 were framed. Though Regulation 8 prescribe prior approval by the Reserve Bank of India for such sale transaction, the transactions do not automatically become void as the provisions of the Act also enable for compounding of offence as and when an allegation is made. A detailed procedure is provided in the Act for taking action if the Reserve Bank of India is of the opinion that the Regulations 2000 were violated and, therefore, warrants penal action. As on today, as no penal action is initiated against 20th respondent and no adverse order is passed under the Act, the transactions cannot be held illegal and, therefore, the provision of Section 22-A(1)(a) of the Registration Act is not attracted. He further contended that FEMA is a self-contained statute, prescribes elaborate procedure for taking action. Action can be initiated under FEMA by the competent authority on his own or o n bringing to the notice of the competent authority by any person. Even if an adverse decision is taken under FEMA, in accordance with the provision contained in Section 15, the 20th respondent can compound the offence.
14. Learned counsel further contended that on the allegation of violations of FEMA, writ petition is not maintainable. The Act is a self contained Code. An elaborate procedure and mechanism is provided by the Act on taking decisions and internal redressal mechanism. On exhausting internal redressal provisions, further appeal would lie to the High Court. These provisions are not invoked by the petitioner and he cannot raise such violations in this writ petition.
15. Learned counsel further contended that concerning the same properties, the PABC has instituted O.S.No.261 of 2010 on the file of IV Additional District Judge, Nellore. PABC prayed to grant permanent injunction restraining the defendants and their men, agents, assignees etc., from interfering with the peaceful possession and enjoyment of the plaintiff’s company, its affairs and administration and also restraining the first defendant (ABFMS) from alienating the property of the plaintiff’s company and to cancel the register sale deeds. As disclosed from the plaint schedule properties, item no.2 is concerning the property sold vide document dated 12.04.2010 and item no.4 is concerning the property subject matter of sale by document dated 01.05.2013, the two sales assailed in this writ petition. The plaintiff and first defendant have arrived at amicable settlement on the subject matter of the suit. Accordingly, the suit was dismissed as not pressed.
16. Learned counsel further submitted that the issue has become final and, therefore, it is no more open to a stranger to contest once again. It is nothing but harassment.
17. In reply, learned counsel Sri Vijay submitted that petitioner is a member of STBC which is affiliate of PABC and, therefore, he is competent to contest the sale transactions. Learned counsel further contended that Regulation 8 of Regulations, 2000 is a mandatory provision, it prohibits to undertake any sale transaction by Foreigner in India without prior approval by the Reserve Bank of India and admittedly, as no such approval was obtained, it is illegal to undertake sale transactions and, therefore, provision of Section 22-A(1)(a) of the Registration Act is attracted. Therefore, it becomes prohibited document and is void document. He further submitted that Section 23 of the Contract Act also prohibits such transactions and such transactions become a nullity. He further contended that the dismissal of O.S.No.261 of 2010 is not binding on the petitioner and, therefore, the writ petition is maintainable.
18. Petitioner is an associate of STBC. The primary object of STBC is to provide aid to the Churches of Samavesams, to the spiritual, moral and social growth of Church members, to conserve the Baptist heritage, to promote Christian programme and formulate board policies etc. As per the objectives of PABC, it intend to aid further the religious and charitable work of the Baptist and other Churches in India, particularly the Baptist Churches affiliated to the STBC. The petitioner is the beneficiary of above policies of STBC and PABC. The major source of contributions come from the landed properties. Thus, on account of sale of immovable properties by ABFMS, their would be drain in contributions and not only the petitioner but all other associates of STBC would adversely suffer and, therefore, the petitioner challenges the two sale transactions above mentioned undertaken by ABFMS.
19. The facts on record and the documents filed by both parties would show that the petitioner is no way concerned with the ABFMS. Petitioner traces his entitlement to challenge the sale transactions on the ground that ABFMS is amalgamated with PABC and, therefore, all the properties of ABFMS vests in PABC. Thus, but for the stand of the petitioner that the ABFMS stood amalgamated with PABC, petitioner is no way concerned with the activities of ABFMS. Having come to an understanding that ABFMS be amalgamated with PABC, in Company Petition Nos.109 and 110 of 1973, the scheme of amalgamation was submitted to the Madras High Court. In addition to submission of scheme of amalgamation, further prayer sought was for dissolution of ABFMS. The scheme of amalgamation was sanctioned by an order dated 03.05.1974. With reference to the prayer for dissolution of company without being wound up, notice was issued to the official liquidator. When petitions have come up further consideration, the second prayer i.e., dissolution of the company without being wound up was not pressed. Accordingly, the same was recorded by the Court in the order dated 14.09.1983. The subsequent conduct of the ABFMS and PABC would also show that both are existing independently and the amalgamation has not become final and ABFMS was not dissolved and continued to manage its own properties.
20. It is also appropriate to notice that C.S.No.124 of 1994 was instituted in Madras High Court impleading PABC and STBC as defendants 1 and 2 praying to grant various reliefs, including, 1) to remove the PABC from the trusteeship of the properties mentioned in Schedule-I and 2) to prohibit the STBC from associating with the administration of the trust. The ABFMS was not a party to the above suit, whereas the properties in issue belonged to ABFMS. ABFMS filed application in O.A.No.4740 of 2004 praying to permit the applicant to implead as a party/defendant in C.S.No.124 of 1994. The said application was rejected on 12.12.2004 by the single Judge holding that the subject matter of the suit was between the plaintiff and the defendants involving question of alienation of suit schedule properties and the applicant/3rd party cannot have a say since all the properties belonging to applicant had already vested more than 30 years ago with PABC. Aggrieved thereby, O.A.No.296 of 2004 was filed by the ABFMS. On detail consideration of the matter, the Division Bench of Madras High Court held that the scheme of amalgamation has not been approved and hence the ABFMS has valid interest in the properties. It is further held that amalgamation has not become complete and does not have the legal force. It is stated by both sides that said dispute is pending in the Madras High Court.
21. As noticed from the orders of the Madras High Court, amalgamation has not become final and ABFMS continue to hold and manage the properties originally belonging to it. The manner in which the properties are dealt with by ABFMS cannot be the concern of the petitioner. No right of the petitioner much less vested right is affected by sale transactions undertaken by the ABFMS. The writ would not lie unless the person who instituted the writ petition shows at least a semblance of legal injury. He is a stranger having no right whatsoever to the properties in issue. Therefore, as held by the Supreme Court in Ayaaubkhan Noorkhan Pathan case, the petitioner cannot be permitted to intervene in the affairs of the 20th respondent.
22. Even assuming that there exists a relationship between ABFMS and PABC, the grievance of the petitioner appears to be, as evident from the pleadings, that the property in issue is being utilized by the petitioner for the purpose of conducting meetings etc., and if the property is sold, the petitioner would be left with no place for conducting such meetings. In accordance with the objectives of STBC and PABC, the commitment of both organizations is to provide assistance of various kinds to the associate members of STBC. It does not envisage the right of any associate member of STBC to utilize the properties belonging to ABFMS. No proceedings are placed on record to show that the property is handed over to petitioner. There is no material on record as to how the sale proceeds are utilized. That being so, even assuming that petitioner is remotely concerned, petitioner has no competence or right to challenge the decision to dispose of the properties belonging to it by ABFMS.
23. The principal challenge mounted against the two sale transactions undertaken by the ABFMS is that the ABFMS being a resident outside India cannot undertake sale of immovable properties i n India without prior consent from the Reserve Bank of India as envisaged by Regulation 8 of Regulations, 2000.
24. To appreciate the said contention, it is necessary to look into the provisions of Act, 1999 and Regulations, 2000. The Act aims to consolidate and amend the law relating to foreign exchange with the primary objective of facilitating external trade and payments and for promoting the orderly development and maintenance of foreign exchange market in India. It is, thus, clear that the primary object of Act, 1999 is to monitor foreign exchange flow. Apart from various transactions which have implications on foreign exchange, the Act also seeks to regulate the transactions by persons who are not residing in India on account of sale of immovable properties in India.
25. Section 6 of the Act deals with capital account transactions. Section 6(3)(i) of the Act, empowers the Reserve Bank of India to prohibit, restrict or regulate various items mentioned thereunder and for that purpose empowers the Reserve Bank of India to formulate the regulations. One of the items provided therein is acquisition or transfer of immovable property in India. In exercise of such power the Regulations, 2000 were formulated. Regulation 8 states that “ ……. no person resident outside India shall transfer any immovable property in India”. However, first proviso appended to the said regulation empowers the Reserve Bank of India to permit the transfer subject to such conditions as may be considered necessary by the Reserve Bank of India. Placing reliance on the above provision, it is contended that as there was no prior approval from the Reserve Bank of India to the sale transactions undertaken by the ABFMS in the year 2010 and 2013 respectively, they are void and nonest in the eye of low.
26. As noticed above, the Act, 1999 is primarily intend to facilitate external trade and payments and promoting orderly development and maintenance of foreign exchange market in India. The taking of foreign exchange from India is not prohibited per se, but the Reserve Bank of India keeps tab on the amount of foreign exchange moving out of India. Various provisions of the Act prescribed restriction on foreign exchange. Chapter-4 of the Act deals with contravention and penalties. If it comes to the notice of the competent authority that a person contravened the provisions of the Act, such person is liable to penalty - it would be three times the sum involved in such contravention if amount is quantifiable or up to Rs.2,00,000/- if the amount is not quantified. Penalty can be enhanced if such contravention continues. In addition to imposing of penalty, the property also can be confiscated. According to Section 15, on finding contravention in accordance with Section 13, the person concerned is entitled to file an application to compound. If such prayer for compounding is accepted, no further proceedings would lie. On a bare reading of Sections 13 and 15, it is fair to assume that if person contravenes mandatory provisions of the Act and regulations made there under, appropriate penalty can be imposed and in extreme cases even the confiscation can be made, however, after adjudication process is completed and person is found guilty of violation of provisions of the Act, if the person intend to compound, the same can be considered and if compounding is agreed, no further proceedings would lie.
27. Admittedly no complaint is filed before the competent authority against the above sale transactions nor the competent authority has initiated any proceedings against ABFMS alleging violation of provisions of the Act and regulations made there under in selling the property without consent of the Reserve Bank of India. In the absence of taking action against the ABFMS under the Act and without adjudication process culminating in holding the person guilty as per section 13, it cannot be said that the two sale transactions undertaken by the ABFMS can be declared as void transactions. More so, as per the provisions of the Act, even if a person is found to be guilty, Act makes a provision for compounding of such offence and thus even in the event of ABFMS is found guilty, ABFMS did have an option of saving the transactions by paying penalty and/or compounding.
Therefore, at this stage, the declaration as sought by the petitioner cannot be granted, even assuming that, the petitioner is a person aggrieved and entitled to challenge such transactions.
28. The further contention of the petitioner that prior approval is mandatory does not appear to be valid from the reading of Regulation 8. In regulations 6 and 7 consciously the words ‘without prior permission’ are specifically provided for, whereas in regulation 8, no such words are incorporated. Thus, it is permissible to contend that post transaction also, Reserve Bank of India can grant approval, subject of course to such conditions as deemed necessary by the Reserve Bank of India. Therefore, the challenge to the sale transactions on this count also fails.
29. Furthermore, assailing sale transactions undertaken by ABFMS, PABC filed O.S.No.261 of 2010 in the Court of IV Additional District Judge, Nellore. As per the schedule filed in the suit, item Nos.2 and 4 are the two properties which are the subject matter of this writ petition. Both parties have compromised and accordingly, the suit was dismissed. Thus, insofar as the entitlement of ABFMS to sell the properties is concerned, inter parties the issue has become final and therefore, third party, who is only remotely connected to PABC and has no relation to ABFMS cannot challenge such sale transactions in a writ petition, more particularly when the decision in O.S.No.261 of 2014 has become final. It is also significant to notice that petitioner is not arrayed PABC as respondent in this writ petition.
30. For all the aforesaid reasons, the writ petition fails. It is accordingly dismissed. There shall be no order as to costs. Miscellaneous petitions if any pending in this writ petition shall stand closed.
JUSTICE P.NAVEEN RAO Date: 16.12.2014 Kkm HONOURABLE SRI JUSTICE P.NAVEEN RAO WRIT PETITION NO.4473 OF 2014 Date: 16.12.2014 Kkm
[1] (2013) 4 SCC 465
[2] 2005 (3) CTC 243