The Supreme Court on Wednesday held that a foreigner can not sell or mortgage a property without the prior permission of the Reserve Bank of India.
Holding it as illegal, a Bench headed by Justice A M Khanwilkar said the condition predicated in Section 31 of the 1973 Act of obtaining "previous" general or special permission of the RBI for transfer or disposal of an immovable property situated in India by sale or mortgage by a person, who is not a citizen of India, is mandatory.
It, however, said the transactions that have already become final including by virtue of the decision of the court of competent jurisdiction, need not be reopened or disturbed in any manner because of this pronouncement.
“Until such permission is accorded, in law, the transfer cannot be given effect to; and for contravening with that requirement, the concerned person may be visited with penalty under Section 50 and other consequences provided for in the 1973 Act”, the Court held.
The court said: "The Trial Court, as well as the High Court, committed manifest error in dismissing the suit filed by the plaintiff for a declaration in respect of suit property admeasuring 12,306 square feet and for consequential reliefs referred to therein."
"A priori, we conclude that the decisions of concerned High Courts taking the view that Section 31 of the 1973 Act is not mandatory and the transaction in contravention thereof is not void or unenforceable, is not a good law,” Supreme Court said.