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Articles
Dishonour of Cheque - Law & Practice
1. Dishonour of Cheque - Law & Practice
WOMEN'S LEGAL RIGHT 2018
1. A general perspective on Women's Legal Right
2. Domestic Violence and Dowry
3. MARRIAGE, SEPARATION, DIVORCE, CHILD CUSTODY
4. Rights of women in ancestral property
5. Senior Citizens
REAL ESTATE SUMMIT 2017
1. Real Estate Act, 2016 & its impact on industry
2. RERA-IMPACT ON REAL ESTATE
3. GST-TAXATION
4. FINANCE or LOAN DOCUMENTS
5. Leave & Licence, Lease and Power of Atorney
REAL ESTATE SUMMIT 2016
1. Acquisition of Property through Purchase, Will, Inheritance, Nomination, Gift and Bank Auctions
2. Leave & License Lease and Power of Attorney
3. Lis Pendens
4. Property Fraud
5. Real Estate (Regulation and Development) Act, 2016
6. Taxation on Sale and Purchase of Property
7. Concept of Huf Property and Women's Legal Right to
Ancestral Property
LONDON SERIES OF PRESENTATION
ON REAL ESTATE LAWS AND INVESTMENT BY NRI HELD AT OLYMPIA, KENSINGTON ON 23-04-2016 & 24-04-2016
1. Real Estate (Regulation and Development) Act, 2016, highlights
2. FDI in Construction and Development Sector in India
3. Important Legal Property Documents
4. Drafting Legal Documents
5. Property Title Due Diligence
6. Taxation on Sale and Purchase of Property - 2016
7. Investment in Property by NRI / PIO
8. Advantages of Investment in Real Estate in Gujarat
9. NRE / NRO Accounts
▼ SUPREME COURT HOLDS THAT CHEQUE DISHONOUR PROSECUTION CAN BE HELD ONLY AT THE COURT IN WHOSE JURISDICTION THE CHEQUE WAS ISSUED OR WHERE DRAWEE BANK IS LOCATED
A three judge bench of the Supreme Court in Dashrath Rupsingh Rathod v. State of Maharashtra (criminal Appeal No. 2287 of 2009) has laid the controversy pertaining to jurisdiction of the courts in cheque bouncing cases under Section 138 at rest conclusively.
The court has laid down that the place of the issuance or delivery of the statutory notice or where the complainant chooses to present the cheque for encashment by his bank are not relevant for purposes of territorial jurisdiction of the complaints. The court noted that the liberal approach preferred in Bhaskaran was being misused by issuance of notice from a situs which had no connection with the accused or with any facet of the transaction to confer territorial jurisdiction on courts which had none.
The court upheld the validity of the three judge bench in Ishar alloy steels v Jayaswals Neco 2001 3 SCC 609 which stated that the word ‘bank’ used in Section 138 (a) refers to the drawee bank and not the drawer/collecting bank. The Supreme Court relied on Ishar Alloy which had categorically stated that for criminal liability to be attracted the subject cheque has to be presented to the bank on which it is drawn (drawee bank) within the prescribed period. (para 5)
The court also noted that the verdict in Bhaskaran diluted by Harman Electronics v National Panasonic India 2009 1 SCC 720 as the latter judgment has given primacy to the service of a notice on the accused instead of its mere issuance by the complainant.
6. The Supreme Court also relied upon Premchand Vijay Kumar v Yashpal Singh 2005 4 SCC 417 to hold that the commission of the crime was distinguished from its prosecution. The court stated that the offence comes into existence as soon as subject cheque is dishonoured by the drawee bank. (para 6)
The court then held that "We ingeminate that it is the drawee bank and not the complainants bank which is postulated in the so called second constituent of Section 138 of the NI Act…
In our consider view the offence in the contemplation of Section 138 of the Ni Act is the dishonour of the cheque alone and it is the concatenation of the five concomitants of that Section that enable the prosecution of the offence in contradistinction to the completion of the offence." (para 8)
The Court overruled Shamshad Begum v B Mohammed 2008 13 SCC 77 as being not reconcilable with the later decision in Harman and held Mosaraf Hossain Khan v Bhageeratha Engg 2006 3 SCC 658 per incuriam on the ground that the doctrine of Forum non conveniens has no role to play under Section 138 of the NI Act.
The Court relied upon Om Hemrajani v State of UP 2005 1 SCC 617 to support its conclusion that jurisdiction is on the place where the alleged offence was committed.
Nishant Aggarwal v Kailash Kumar Sharam decided on 1.7.2013 did not follow Ishar Alloy which said presentation of the cheque refers to the drawee bank and not holders banks and therefore, even implicity doubted the validity of this decision as well.
It is axiomatic that when a court interprets any statutory provision, its opinion must apply to and be determinate in all factual and legal permutations and situations.
The court further noted that the judgment in Bhaskaran was diluted by FIL Industries v Imtiyax Ahmed Bhat wherein it was decided that the place from where the statutory notice had emanated would not of its own have the consequence of vesting jurisdiction upon that place.
At paragraph 11, the court observed that Bhaskaran allows multiple venues to the complainant which runs counter to this court’s preference for simplifying the law.
Relying on Section 178 of the Criminal Procedure Code, the court stated that the said section admits of no debate that in criminal prosecution, the concept of cause of action, being the bundle of facts required to be proved in a suit and accordingly also being relevant for the place of suing, is not pertinent or germane for determining territorial jurisdiction of criminal trials. The employment of the phrase ‘cause of action’ in Section 142 of the NI Act is apposite for taking cognizance, but inappropriate and irrelevant for determining the commission of a crime, the prosecution of which is dependent on extraneous contingencies.
The court then drew an analogy with the situation wherein sanction is required for the prosecution of a crime and said that even if the sanction is not granted, it does not mean that the offence has vanished. Equally, if the sanction is granted from a place other than the place of commission of the offence, it is the latter which will remain the place for its prosecution.
At paragraph 15, the court held that Section 138 unequivocally states that the offence is committed no sooner the drawee banks returns the cheque unpaid and observed (at para 16) that Section 142 correctly employs the term cause of action as compliance with the three factors contained in the proviso to Section 138 are essential for the cognizance of the offence, even though they are not part of the action constituting the crime.The Court held that the five constituents in bhaskaran are essential for the successful initiation or launch of the prosecution though so far as offence itself, the proviso has no role to play.
The court said that an interpretation should not be imparted to section 138 which would render it as a device for harassment ie, by sending notices from aplace which has no causal connection with the transaction itself, and by presenting the cheques at any of the banks where the payee may have an account. (para 17).
The Court finally held (at para 19) that "the interpretation of section 138 of the NI Act which commends itself to us is that the offence contemplated therein stands committed on the dishonour of the cheque and accordingly the JMFC at the place where this occurs is ordinarily where the complaint must be filed, entertained and tried. We clarify that the place of the issuance or delivery of the statutory notice or where the complainant chooses to present the cheque for encashment by his bank are not relevant for purposes of territorial jurisdiction of the complaints even through non-compliance thereof will inexorably lead to the dismissal of the complaint".
As regards the operation of the judgment and its applicability, the Supreme Court held as follows:
"20. we are quite alive to the magnitude of the impact that the present decision shall have to possibly lakhs of cases pending in various courts spanning across the country. Consequent on considerable consideration we think it expedient to direct that only those cases where post the summoning and appearance of the alleged accused, the recording of evidence has commenced as envisaged in Section 145(2) of the NI Act, 1881 will proceeding continue at that place. To obviate and eradicate any legal complications, the category of complaint cases where proceedings have gone to the stage of Section 145(2) or beyond shall be deemed to have been transferred by us from the court ordinarily possessing jurisdiction, as now clarified, to the court where it is presently pending."
▼ SHORT SYNOPSIS ON DEPOSITS FROM NRI/PIO
1. Provisions with regards to acceptance of deposits are contained in Schedule 6 of Foreign Exchange Management (Deposit) Regulations, 2000.
2. The accounts can be maintained with 'authorised bank' in India.
3. Deposit under the said account includes deposit of money with a bank, company, proprietary concern, partnership firm, corporate body, trust or any other person.
4. A company incorporated in India [including a non-banking finance company (NBFC) and Residuary Non-banking company (RNBC) registered with the Reserve Bank may accept deposits from NRIs, on non-repatriation basis from their NRO account only.
5. Amount deposited should not represent inward remittances or transfer from NRE/FCNR (B) Accounts into NRO Account.
6. Authorised Dealers can accept deposits from NRI both on repatriation and non-repatriation basis as the same is permissible under RBI circular No. 89 dated 24-4-2004.
7. Acceptance of deposits on repatriation basis was permitted upto 24-4-2004. If such deposits were accepted, the same can be renewed under Regulation 7(2) of Foreign Exchange Management (Deposit) Regulations, 2000.
8. A proprietorship concern or a firm in India, may accept deposits on non-repatriation basis from NRIs, and a company incorporated in India (including a non-banking finance company registered with Reserve Bank) may accept deposits on non-repatriation basis from NRIs.
9. The acceptance of deposits is subject to the following conditions:
• In the case of a company, the deposits may be accepted either under private arrangement or under a public deposit scheme.
• If the deposit accepting company is a non-banking finance company, it should be registered with the Reserve Bank and should have obtained the required credit rating as stipulated under the guidelines issued by Reserve Bank for such companies.
• The maturity period of deposit shall not exceed 3 years.
• The amount of deposits accepted shall not be allowed to be repatriated outside India.
10. Indian company can accept deposits by issue of Commercial Paper to a Non-Resident Indian or FII (Foreign Institutional Investor). Issue should be as per RBI directions. Payment should be received in foreign exchange by inward remittance. The CP is not transferable. The amount invested in Commercial Paper shall not be eligible for repatriation outside India. The Commercial Paper shall not be transferable [regula-tion 8(2) of FEM (Deposit) Regulations, 2000]
▼ INVESTMENT SCHEMES FOR NRI
1. Various schemes are available for NRI investment in India. Non-Resident Indian (NRI) means a person resident outside India who is a citizen of India or is a person of Indian origin.
FDI BY NRI
2. As far as Foreign Direct Investment (FDI) is concerned, there is not much difference between policy in respect of NRI and other foreign investors.
3. For all sectors excluding those falling under Government Approval, NRIs (which also includes PIOs) are eligible to bring investment (FDI) through the Automatic Route of RBI. All other proposals which do not fulfill any or all of the criteria for automatic Approval are considered by the Government through the FIPB.
4. NRIs are allowed to hold up to 100 percent equity in civil aviation sector in which otherwise foreign equity only up to 40 per cent is permitted.
PORTFOLIO INVESTMENT SCHEME FOR NRI
5. Purchase/sale of shares and/or convertible debentures by an NRI on a Stock Exchange in India on repatriation and/or non-repatriation basis under Portfolio Investment Scheme (PIS) is permissible. Statutory provisions are contained in Foreign Exchange Management (Transfer or issue of Security by a Person Resident outside India) Regulations, 2000, particularly in schedule 3 and 4.
6. A Non-resident Indian (NRI) may purchase/sell shares and/or convertible deben¬tures of an Indian company, through a registered broker on a recognized stock exchange, subject to the following conditions as laid down under para 1 of Schedule 3 of Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000].
7. The NRI can purchase and sell shares/convertible debentures through a designated branch of an authorised dealer approved by RBI. Thus, he need not restrict his transactions to only one branch - amendment dated 18-6-2003.
8. The paid-up value of shares of an Indian company, purchased by each NRI both on repatriation and on non-repatriation basis, does not exceed 5 percent of the paid-up value of shares issued by the company concerned.
9. The NRI investor takes delivery of the shares purchased and gives delivery of shares sold (i.e. speculative purchases are not permitted).
10. Payment for purchase of shares and/or debentures is made by inward remittance in foreign exchange through normal banking channels or out of funds held in NRE/FCNR account maintained in India if the shares are purchased on repatriation basis and by inward remittance or out of funds held in NRE/FCNR/NRO account of the NRI concerned maintained in India where the shares/debentures are purchased on non-repatriation basis.
11. Shares purchased can be sold on stock exchange. Sale by private placement or by way of gift will require RBI approval.
12. NRIs can invest in Exchange Traded Derivative Contracts approved by SEBI.
REMITTANCE/CREDIT OF SALE/MATURITY PROCEEDS OF SHARES AND/OR DEBENTURES
13. The net sale/maturity proceeds (after payment of taxes) of shares and/or debentures of an Indian company purchased by NRI under the PIS Scheme, can be credited only in designated branch of an authorised dealer under para 3 Schedule 3 of Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000]-
• In NRO account, where the shares and/or debentures were purchased on non-repatriation basis, or
• It can be remitted abroad or credited to his/its NRE/FCNR/NRO account, where shares and/or debentures were purchased on repatriation basis.
14. Dividend can be credited in NRE account. - RBI circular No. 5 dated 15-7-2002.
PURCHASE AND SALE OF SHARES/CONVERTIBLE DEBENTURES BY NRI ON NON-REPATRIATION BASIS
15. NRI can purchase, without any limit, on non-repatriation basis, shares or convertible debentures of an Indian company issued whether by public issue or private place¬ment or right issue. The statutory provisions are contained in Schedule 4 of Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000. Provisions are summarized in Part I Section IV of RBI Master Circular No. 15/2013-H dated 1-7-2013.
16. Investment by NRI for development of township, construction of residential/commercial premises, roads, bridges, etc. is permissible.
17. However, no purchase of shares or convertible debentures of an Indian company shall be made under this Scheme if the company concerned is a Chit Fund or a Nidhi company or is engaged in agricultural/plantation activities or real estate business or construction of farm houses or dealing in Transfer of Development Rights.
18. Dividend can be credited in NRE account under RBI circular No. 5 dated 15-7-2002.
PURCHASE BY NRI OF OTHER SECURITIES ON REPATRIATION/NON-REPATRIATION BASIS
19. Investment on repatriation basis - A Non-resident Indian can purchase without any limit, on repatriation basis, (i) Government dated securities (other than bearer securities) or treasury bills or units of domestic mutual funds; (ii) bonds issued by a public sector undertaking (PSU) in India; (iii) shares in Public Sector Enterprises being dis-invested by the Government of India, provided the purchase is in accor¬dance with the terms and conditions stipulated in the notice inviting bids. The payment shall be made either by inward remittance through normal banking channels or out of funds held in his/its NRE/FCNR account.
20. Investment on non-repatriation basis - A Non-resident Indian may, without limit, purchase on non-repatriation basis, dated
Government securities (other than bearer securities), treasury bills, units of domestic mutual funds, units of Money Market Mutual Funds in India, or National Plan/Savings Certificates. The payment shall be made either by inward remittance through normal banking channels or out of funds held in his/its NRE/FCNR/NRO account.
21. Sale of securities and remittance of proceeds - A person resident outside India who has purchased securities in accordance with above schemes may (a) sell such securities through a registered stock broker on a recognised stock exchange or (b) tender units of mutual funds to the issuer for repurchase or for payment of maturity proceeds or (c) tender Government securities/treasury bills to the Reserve Bank for payment of maturity proceeds.
22. NRI cannot open PF account or post office account but can continue earlier account till maturity
A Non-resident Indian cannot open Public Provident Fund (PPF) account, but can continue and subscribe to the account till maturity, if he had opened the account when he was resident. NRI cannot open a post office savings bank account. However, if he had an account when he was resident, he can continue it till maturity on non-repatriation basis.
23. Derivative contracts by NRI
FII, NRI or person resident outside India having FDI in India can enter into a foreign currency-rupee option contract with an authorised dealer in India, under same terms and conditions applicable to forward contracts.
24. NRIs can trade in derivative contracts out of rupee funds. The investment will not be eligible for repatriation benefits. They can also trade in exchange traded derivative contracts from funds held in India on non-repatriation basis.
▼ NON RESIDENT INDIANS/PERSONS OF INDIAN ORIGIN….DID YOU KNOW ??
1. Non Resident Indian (NRI) means a person resident outside India who is a citizen of India or a person of Indian origin if he or any of his parents/grand parents etc. were citizens of India except persons residing in Bangladesh or Pakistan.
2. Person of Indian Origin (PIO) means citizen of any country other than Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran or Nepal, if (a) He at any time held Indian Passport, (b) he/his parents/his grandparents were citizen of India where any in case of accusation of immovable property.
3. NRI and PIO are given special facilities for investment in India such as Bank Accounts and deposits which includes NRE account, FCNR (B) account, NRO account; along with Repatriation upto USD 1 million per year from NRO account.
4. NRI/PIO can acquire immovable property other than agricultural property or a farm house only by remittance of funds from outside India or from non-resident account in India.
5. That the sale proceeds to the extent of repatriable funds used in acquiring immovable property can be repatriated with out any lock-in period upto two residential properties.
6. NRI/PIO can avail the facility of obtaining housing loans for purchase of property in India.
7. NRI/PIO may continue to hold, own transfer or invest in foreign currency, foreign security or immovable property situated outside India if the same was held or owned when resident outside India.
8. Overseas Corporate Bodies (OCB) includes any overseas company, partnership firm, society and other corporate body owned directly or indirectly to the extent of 60% by NRIs. However, this definition is deleted and OCBs are prohibited from any kind of investment in India by RBI circular dated 12/05/2006.
9. For NRI/PIO, income neither received nor deemed to be received in India is not taxable. Further dividend, interest, capital gains are not taxable if the same are not received in India.
10. For NRI/PIO, the amount (principal + interest) is freely repartiable. Also transfer from/to FCNR(B) account is freely permitted.
11. NRO Account means Non-resident ordinary rupee account. Nomination is permitted in this account. This account is opened by any person resident outside India. Interest is subject to TDS @ 20% at present. Interest income is investment income under section 115(C) of IT Act.
12. NRE account means Non-resident (External) rupee account. The amount in this account is freely repatriable. Income by way of interest is exempt from Income Tax.
13. Resident Foreign Currency Account also known as RFCA account can be opened and maintained by residents, NRI and PIO who have returned to India after working abroad. Interest is taxable.
14. FCNR account means Foreign Currency (Non-resident) Account. Only term deposits are permitted. Nomination is permitted. Loan and overdrafts are permissible. Both principal and interest are repatriable. The account can be maintained in any currency which is freely convertible. Interest is exempt from Income Tax.
▼ SYNOPSIS ON INHERITANCE LAWS IN INDIA
• Introduction.
1. The Constitution of India provides freedom of following a religion of your choice as a fundamental right. Family law has always been a part of religious law which in itself holds prime importance in India. Since laws of marriage and succession are the most intricate amongst the religious laws, inheritance issues in India are very complicated.
2. Different religious groups in India subscribe to different laws. Hindus have their own codified law (Hindu Succession Act) as well as a part uncodified law, Muslims have their own textual law of inheritance (Islamic Law on Succession), Parsees come under the Indian Succession Act, as do Christians.
3. Similarly, when it comes to the laws and rights of inheritance, the applicable law of inheritance depends on the personal law of the deceased. This law may be the textual law of the deceased’s religion, or the codified law of the nation to which the deceased belonged to at the time of death.
4. If a foreign citizen inherits from a deceased Indian citizen, then the law prescribed for the appropriate Indian religious group applies.
• Reservation of Inheritance.
Except for the Muslim laws of inheritance, which require at least 2/3 of the deceased’s property to be inherited by the line of succession and allow up to 1/3 to be settled by testamentary succession, India’s other inheritance laws do not have any reserved portion, i.e. the entire property may be subject to testamentary succession or intestate succession if there is no will.
• Testamentary Inheritance.
The Laws, Procedures and Rules regarding the administration of testamentary succession are stipulated in The Indian Succession Act. Procedures are laid down for administering the testamentary succession of all religious groups, except Muslims. Muslims can make a testamentary succession under their own religious law but, a Muslim cannot transfer more than 1/3 of their property by testamentary succession.
• Will & Probate.
1. A will is a normal and commonly used course of succession. The Indian Succession Act provides for every person of sound mind, not being a minor, to dispose of his/her property by will. It is mandatory that the testator possesses the capacity to make such a will.
2. A foreigner who owns immovable property in India should preferably make a will, because intestate succession can take a long time for settlement. A local will made in India can be granted probate comparatively easily. The foreign owner of immovable property in India however, is not required to make will in India. A will made outside India is also valid.
3. A will must be in writing, signed by the testator (or by someone at the discretion of and in the presence of the testator). The will must be attested by two or more witnesses.
4. A will need not be in legal language, and it is not necessary to use technical terms. At the time of interpretation of the will, regard must be taken, not only to the actual words used, but also to the evident intention of the testator. It is therefore essential that the testator makes very clear his/her intention to dispose of property in a will.
5. Probate may be granted by a District Court where a Will has been executed. Probate is essentially a certificate granted by the District Court in terms of the Will. Shortly speaking, the Probate letter certifies the genuineness of the Will which is required to be followed in law.
6. There is little restriction on the gifts of any property during the lifetime of the owner. Owners have full power of disposing of their own property in India through gifts. Such gifts however may be challenged in the court of law on certain grounds such as the disqualification of the donor due to mental instability.
• Sequence of Intestate Succession.
1. Male Hindu: If the deceased is a Hindu male (including Buddhists, Sikh, Jain, and all those who are not Christian, Muslim or Parsi), Class I heirs of a male Hindu who shall simultaneously inherit are-
• Mother being alive (1 share)
• Widow (1 share)
• Living sons (1 share each)
• Living daughters (1 share each)
• Predeceased son having the following relations (1 share)
• widow
• sons
• daughters – each to be equally divided.
In case there is none in the class I schedule, the property shall go to the class II based order. The subsequent order shall be followed only when the prior order has none left to inherit.
Order I: Father (whole in the absence of anybody in class I)
Order II: Son’s daughter’s son; son’s daughter’s daughter, Brother, Sister ( all in equal proportion)
Order IV: Brother’s son, brother’s daughter, sister’s son and sister’s daughter
Order V: Father’s father, Father’s mother (equally)
Order VI: Father’s widow, brother’s widow
Order VII: Father’s brother, Father’s sister
Order VIII: Mother’s father, mother’s mother
Order IX: Mother’s brother, mother’s sister
Female Hindu: If the deceased is a female Hindu dying intestate-
Entry A: Sons (1 share each), Daughters (1 share each), husband (1 share), son and daughter of predeceased son (equally together 1 share), son and daughter of predeceased daughter (equally together I share).
Entry B: Heirs of Husband:
Entry C: Father and Mother
Entry D: Father’s heir
Entry E: Heir’s of the mother
2. Muslim: If the deceased is a Muslim-
The share of each heir must be ascertained based on individual cases. The following are four classes of heirs and successors, with provision of exclusion:
• Sharers are those who are entitled to a prescribed share of inheritance. They are heirs by consanguinity and collaterals. Consanguineous heirs are (a) agnets, like father, true grandfather, mother, and true grandmother; (b) descendants, like daughter, son’s daughter and (c) collaterals, like full sister, consanguine sister, uterine brother and uterine sister. Collateral heirs are heirs by affinity, like husband and wife.
• Residuaries are those who are not entitled to a prescribed share, but are entitled to take the residue after the sharers take their prescribed shares. Children of the deceased or of the son of the deceased and the father of the deceased are residuaries.
• Distant kindred are all blood relations not being sharers or residuaries. If there are no sharers or residuaries other than husband or wife the balance shall be given to distant kindred.
• Unrelated successors are those who are acknowledged kinsman, universal legatee and government by escheat. In the absence of relations, the acknowledged kinsman shall succeed.
3. Christian: If the deceased is a Christian or married under the Special Marriage Act (for inter-religious marriage)-
Where lineal descendant is present:
• Widow / widower – 1/3 of the property
• Lineal descendants – equally to share 2/3.
• In the absence of lineal descendant, to all grand children, - equally
• In the absence of grandchildren, to great grant children – equally
• Lineal descendant of a predeceased child or lineal descendant of a predeceased child of a predeceased child if present - division is based on equal shares, taking the predeceased child to be alive, and a downward distribution amongst the lineal descendants.
With no lineal descendant:
• Widow /widower – 1/3
• Father – balance entire
• If Father is dead, to mother, sisters and brothers- equally.
4. Parsi: If the deceased is a Parsi-
• Widow / Widower
• Children (equally)
• Living parents-each to get a share equal to half of a child
• Wife and children of a predeceased son to share the share of the child as if the son died after the death of the deceased. If the child predeceased is a daughter, her share would be equally distributed to her children.
• Succession and Marriage.
According to the Indian Succession Act, the wife acquires the domicile of her husband, but no person, by marriage, acquires an interest in the property of his/her spouse. If a person whose domicile is not in India marries in India a person domiciled in India, neither party acquires by marriage any rights in respect of the property of the other spouse, other than those agreed in a pre-marital settlement. Therefore, unless the law to which the deceased subscribed to at the time of his/her death disinherits anyone on grounds of religious conversion, or marrying in a different religion, then there is no discrimination. In Hindu law, the husband’s property also belongs to the wife but not vice versa.
▼ SYNOPSIS ON FOREIGN DIRECT INVESTMENT
1. Foreign investment in India for purpose of computation includes all types of foreign investment e.g. FDI, investment by FIIs (holding as on March 31), investment by NRI, ADR/GRD, FCCB, fully, compulsorily and mandatorily convertible preference shares and fully, compulsorily and mandatorily convertible debentures, regardless of whether the said investments have been made under Schedule 1,2,3 and 6 of FEM (Transfer or Issue of Security of Persons Resident Outside India) Regulations, 2001 - Para 4.1.2 of Consolidated FDI Policy Circular No. 1 of 2013 dated 5-4-2013 issued by DIPP of MC&I.
2. Foreign direct investment (FDI) is a direct investment into production or business in a country by an individual or company in another country, either by buying a company in the target country or by expanding operations of an existing business in that country. Foreign direct investment is in contrast to portfolio investment which is a passive investment in the securities of another country such as stocks and bonds.
3. Broadly, foreign direct investment includes "mergers and acquisitions, building new facilities, reinvesting profits earned from overseas operations and intra company loans". In a narrow sense, foreign direct investment refers just to building new facilities.
4. FDI is the sum of equity capital, other long-term capital, and short-term capital as shown the balance of payments. FDI usually involves participation in management, joint-venture, transfer of technology and expertise. There are two types of FDI: inward and outward, resulting in a net FDI inflow (positive or negative) and "stock of foreign direct investment", which is the cumulative number for a given period. Direct investment excludes investment through purchase of shares. FDI is one example of international factor movements.
MODES OF FOREIGN INVESTMENT IN INDIA
5. Foreign investment in India can be broadly categorized as follows:
• Foreign Direct Investment comprising of equity in India, ADR/GDR/FCCB, an automatic route or Government Route (approval route) for foreign investors as well as NRI.
• FDI in LLP (introduced w.e.f. 20-5-2011).
• Foreign Portfolio Investment by NRI/PIO and FII
• Foreign Venture Capital Investment by SEBI registered FVCI
• Investments in G-Sec (Government securities), NCD etc. by FII, NRI, PIO, Foreign Central Bank.
• Investment on non-repatriation basis by NRI and PIO.
POLICY OF FDI
6. Government has taken various policy decisions to encourage direct foreign investment in India.
Statutory provisions - Statutory provisions are contained in Schedule I of Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000.
7. FDI Policy of Government of India- Policy in respect to foreign investment in India is regulated by Department of Industrial Policy and Promotion (DIPP) (FC section). DIPP has decided that a consolidated circular would be issued every year in April, In update the FDI policy.
8. Foreign Investment Implementation Authority- Government has set up Foreign Investment Implementation Authority (FIIA) in Ministry of Commerce and Industry FIIA will facilitate quick translation of FDI approvals and provide pro-active one stop after care service to foreign investors.
9. No restrictions on foreign brand name- Foreign brand names/trade marks are; allowed to be used on goods for sale within India without any restriction - of course with permission of brand name holder abroad and as per provisions of Trade Mark Act.
10. A non-resident entity can invest in India, subject to the FDI Policy. A company is 'controlled' by resident Indian citizens if they have power to appoint majority of directors in that company - Para 2.1.7 of Consolidated FDI Policy Circular No. 1 of 2013 dated 5-4-2013 issued by DIPP of MC&I.
11. If investing Indian company does not satisfy above criteria, entire investment by investing company in Indian company will be considered as indirect foreign investment.
12. Downstream investment by Indian companies owned and controlled by nonresident entities.
13. Downstream investment means indirect foreign investment, by one Indian company, into another Indian company, by way of subscription or acquisition.
14. Downstream investment by companies owned or controlled by non-resident entities would have to follow same norms as direct foreign investment.
TYPES OF FDIs
Horizontal FDI
15. It arises when a firm duplicates its home country-based activities at the same value chain stage in a host country through FDI.
Platform FDI
16. Arises from a source country into a destination country for the purpose of exporting to a third country.
Vertical FDI
17. Takes place when a firm through FDI moves upstream or downstream in different value chains i.e., when firms perform value-adding activities stage by stage in a vertical fashion in a host country.
METHODS
18. The foreign direct investor may acquire voting power of an enterprise in an economy through any of the following methods:
• by incorporating a wholly owned subsidiary or company anywhere
• by acquiring shares in an associated enterprise
• through a merger or an acquisition of an unrelated enterprise
• participating in an equity joint venture with another investor or enterprise.
FORMS OF FDI INCENTIVES
19. Foreign direct investment incentives may take the following forms:
• low corporate tax and individual income tax rates
• tax holidays
• other types of tax concessions
• preferential tariffs
• special economic zones
• EPZ – Export Processing Zones
• Bonded Warehouses
• Maquiladoras
• investment financial subsidies
• soft loan or loan guarantees
• free land or land subsidies
• relocation & expatriation
• infrastructure subsidies
• R&D support
• derogation from regulations (usually for very large projects)
• Governmental Investment Promotion Agencies (IPAs) use various marketing strategies inspired by the private sector to try and attract inward FDI.
20. An increase in FDI may be associated with improved economic growth due to the influx of capital and increased tax revenues for the host country. Host countries often try to channel FDI investment into new infrastructure and other projects to boost development. Greater competition from new companies can lead to productivity gains and greater efficiency in the host country and it has been suggested that the application of a foreign entity’s policies to a domestic subsidiary may improve corporate governance standards.
21. Foreign investment can result in the transfer of soft skills through training and job creation, the availability of more advanced technology for the domestic market and access to research and development resources. The local population may be able to benefit from the employment opportunities created by new businesses.
22. Foreign investment was introduced in 1991 under Foreign Exchange Management Act (FEMA), driven by then finance minister Manmohan Singh. Starting from a baseline of less than $1 billion in 1990, a 2012 UNCTAD survey projected India as the second most important FDI destination (after China) for transnational corporations during 2010–2012. The sectors that attracted higher inflows were services, telecommunication, construction activities and computer software and hardware.
▼ PERSONS OF INDIAN ORIGIN (PIO) CARD:
Persons of Indian Origin Card (PIO Card) is a form of identification issued to a Person of Indian Origin who holds a passport in another country other than Afghanistan, Bangladesh, Bhutan, China, Nepal, Pakistan, Sri Lanka.
Conditions:
The conditions for issuing a PIO card to a person are that:
1. The person ever held an Indian passport; or
2. The person's parents or grandparents or great grandparents were born in and permanent residents of India and never moved to (i.e. were never nationals of) Bangladesh and Pakistan, or
3. The person is the spouse of a citizen of India or of a PIO and has been so for two years or more; or
4. The person and his/her parents, grandparents or great grandparents must not have been a national of Bangladesh or Pakistan at any point of time.
The PIO Card Program came into effect on 15 September 2002.
Benefits:
The various benefits available to a PIO cardholders are:
• No visa required for visiting India during the period of validity of PIO Card.
• Exemption from the requirement of registration if stay in India does not exceed 6 months. Should the continuous stay exceed six months, registration will be required within 30 days of the expiry of six months with the concerned Foreigners Registration Officer.
• Parity with non-resident Indians in respect of facilities available to the latter in economic, financial and educational fields.
• All facilities in the matter of acquisition, holding, transfer and disposal of immovable properties in India except in matters relating to the acquisition of agricultural/plantation properties.
• Facilities available to children of Non Resident Indians for getting admission to educational institutions in India including medical colleges, engineering colleges, Institutes of Technology, Institutes of Management etc. under the general categories.
• Facilities available under the various housing schemes of LIC, State Governments and other Government agencies.
Persons with a PIO are not:
• allowed to vote
• eligible for an inner line permit. They have to apply for a Protected area permit.
Registration/Residential Permit
PIO card holders need to register with the appropriate FRRO (Foreigner Regional Registration Office) if they are planning to stay in India for more than 180 days. This requirement is not applicable for minors. The FRRO will issue a "Residential Permit For PIO" which is typically valid till the expiry of the PIO card holder's passport.
▼ "ACQUISITION AND TRANSFER OF IMMOVABLE PROPERTY IN INDIA BY NRIS AND PIOS"
1. Government of India has provided some special privileges to Non-resident Indians (NRIs) in areas of foreign exchange, investments including in financial sector, investment in real estate etc. These privileges are over and above the rules applicable to non-residents foreigners.
2. Persons of Indian Origin (PIO) and Overseas Citizens of India (OCI) have been given same privileges in economic field as NRIs except for investment in agricultural lands.
3. The following are the facilities granted to NRIs/PIOs:
Maintenance of bank accounts in India
Investment in securities/shares of, and deposits with Indian firms/companies
Investments in immovable properties in India
4. Foreign Exchange Management (Acquisition and Transfer of Immovable Property in India) Regulations, 2000 covers the restrictions that are imposed on non resident Indians with regards to acquisition and transfer of Immovable property in India. Further various instructions with respect to the same are consolidated in RBI Master Circular No. 4/2013-14 dated 1/7/2013. As held in the landmark judgment of Geeta Reinboth v. Mrs. J Clairs Brohier (2005) 63 SCL 411 (MP HC DB) it is a well established principle of law that restrictions on acquisition, holding, etc. of immovable property cannot be stretched so as to include prohibition to right of inheritance.
Acquisition and transfer of Immovable property in India by NRIs/PIOs
5. A person resident outside India who is a citizen of India (NRI) and a person of Indian origin (PIO) are entitled to acquire any immovable property in India other than agricultural/plantation/farm house. Purchase price shall be made out of funds received from banking channels from outside India or from non-resident accounts maintained as per the provisions of FEMA Act. It may be noted that payment by way of traveller’s cheques or by foreign currency notes is not permissible as per the provisions laid down under the Foreign Exchange Management (Acquisition and Transfer of Immovable Property in India) Regulations, 2000 and also as per para 2A of RBI Master Circular No. 4/2013-14 dated 1/7/2013.
6. Any NRI/PIO who has purchased residential/commercial property under general permission is not required to file any documents with RBI. The same is stated in Para 2B (v) of RBI Master Circular No. 4/2013-14 dated 1/7/2013 which can be termed as additional benefits given to NRIs/PIOs.
7. NRIs/PIOs can transfer any immovable property other than agricultural or plantation property or farm house to a person resident outside India who is a citizen of India or to a person of Indian origin resident outside India. Further if the said asset is sold, amount equivalent to foreign exchange brought in can be repatriated. NRIs/PIOs are entitled to acquire immovable property from a citizen of India by way of gift/inheritance.
8. An NRI can also avail loan facilities from authorized dealer or housing finance institutions in India to acquire any immovable property in India. Once the loan amount is repaid, the NRI may further sell the property if he so desires as the same is permissible by law. In such a case, if he had repaid the amount out of remittances abroad or from their NRE/FCNR account, sale proceeds to the extent of foreign exchange inward remittances can be remitted abroad. An NRI can acquire property even from rupee funds in India while PIO can acquire immovable property only from out of funds received in India by inward remittance.
Sale of immovable property by NRIs/POIs
9. An NRI/PIO is permitted to sale his immovable property in India and repatriate the sale proceeds abroad upto US $ one million per financial year. Remission is only permitted on submission of certificate of CA in form prescribed by CBDT (in respect of TDS).
10. A person resident outside India (other than NRI/PIO) referred to in section 6(5) of FEMA or his successor, will require prior permission of RBI to repatriate sale proceeds of immovable property.
Immovable Property for carrying on business by NRIs/PIOs
11. A person resident outside India who has established in India a branch or place of business in accordance with RBI regulations, can acquire any immovable property in India, which is necessary for or incidental to carrying such activity. It may be noted that all applicable laws, rules, regulations or directions for the time being in force are to be complied with regards to the said acquisition. It is also required under the provisions of law that any person acquiring property should file with the RBI a declaration in the form IPI within 90 days. Further, the form IPI is only to be filled when the immovable property is acquired in India by a person resident outside India who has established in India a branch, office or other place of business, excluding a liaison office. Transactions made by any person resident outside India who is a citizen of India or PIO are not required to be reported.
12. The property so acquired can be further transferred by way of mortgage to an authorized dealer as a security for any borrowing. If the asset is sold, sale proceeds can be repatriated only with prior permission of RBI.
Conclusion
13. It is great time for NRIs/PIOs to remit funds to India for investment. And for most NRIs/PIOs, the preferred asset class continues to be real estate. NRIs have always been opportunistic in terms of investment avenues and returns. The government regularly comes up with new schemes to attract more and more investments from abroad. Real estate is one of the sectors which always grabs the attention of non-residents.
14. The Reserve Bank of India by giving permission to all non-residents who possess Indian passports as well as people of Indian origin to put their money in the real estate sector (residential as well as commercial property) has opened the floodgates for all the NRIs/PIOs to remit funds to India for investment. The number of NRIs investing in real estate is increasing fast as the value of the rupee is depreciating and real estate offers better returns. A place in the homeland usually gives a sentimental support and sense of security, which is the other reason of investment in real estate by NRIs/PIOs.
15. The RBI along with the Foreign Exchange Management Act (FEMA) has become lenient in terms of rules and regulations for non-residents who are looking for an investment in real estate. They are not only simplifying the rules but also providing the benefit of repatriation of the capital involved. The government is planning some investment growth activities through their investment promotional council, to create an environment appropriate for non-residents to put money.
