Per:- Mr. Deshpande, President Place : BANDRA JUDGMENT The Opposite Party is a banking company, having its branch office at Santacruz (West), Mumbai. The Complainant was residing at United Arab Emirates (U.A.E.) for quite a sometime and during that period he made certain investments in the joint stock etc. On returning to India, the Complainant started liquidating his stocks and repatriating proceeds to India where monies were sent by foreign remittances into savings bank account of the Complainant maintained with the Opposite Party – Bank. [2] It is the case of the Complainant that he sold one set of shares for an amount in sum of Singapore $17,750 equivalent to an amount in sum of INR 5,68,000/- and remitted the same to the Opposite Party – Bank; on 13/5/20009. However, instead of crediting said amount in the savings bank account of the Complainant, the Opposite Party – Bank; raised certain queries, which were answered by the Complainant. The Opposite Party - Bank; had also asked the Complainant to produce details of the remittance under which shares were purchased and asked the Complainant to produce ‘KYC’ (Know Your Customer) from the concerned bank, which was also complied with by the Complainant. The Opposite Party – Bank; then, raised certain objections based upon provisions contained in Foreign Exchange Management Act (hereinafter referred to as FEMA for the sake of brevity). The Complainant answered such objections raised by the Opposite Party – Bank; and requested the Opposite Party – Bank; to credit the amount of remittance to his savings bank account. Despite all these efforts & persuasion on the part of the Complainant, the Opposite Party – Bank; declined to credit said amount to the Complainant’s savings bank account. Ultimately, the Complainant filed present consumer complaint before this Forum, seeking direction as against the Opposite Party – Bank; to credit to his savings bank account an amount in sum of Rs.5,68,000/- together with interest thereon @ 12% p.a., and pay compensation in sum of Rs.1,00,000/-. [3] The Opposite Party – Bank; contested the complaint by filing its written version of defence and in paragraphs (01) to (14) of the written version, denied the allegations in the complaint. In paragraph (14-D) of the written version, the Opposite Party – Bank; took stand that vide a letter dtd.30/5/2009, the Opposite Party – Bank; had informed the Complainant that the Opposite Party – Bank; was guided by the Foreign Exchange Management Regulations and guidelines issued thereunder. The Opposite Party – Bank; referred to the provisions contained in the Foreign Exchange Management Rules and took stand that since the Complainant had sold foreign security, the Complainant was liable to produce permission accorded by the Reserve Bank of India. Thus, the Opposite Party – Bank; justified its stand of refusal to give credit to the Complainant of the disputed amount till assent was given by the Reserve Bank of India. [4] The Complainant filed his rejoinder to the written version of defence filed by the Opposite Party – Bank; and recapitulated all the events and annexed thereto copies of the correspondence between the parties as well as copy of declaration given by the Complainant’s wife for transfer of funds to the Company from whom the shares were purchased. [5] Parties to the complaint proceeding have filed their respective affidavits of evidence as well as copies of relevant documents. [6] We have gone through the pleadings, affidavits and documents filed by the parties. [7] We have heard the oral submissions advanced by the Learned Advocate for the Opposite Party – Bank. The Complainant, when called out, chose to remain absent and did not advance his oral submissions. [8] We take the points that arise for our consideration and record our findings there-against as below:- Sr. No. | Points for consideration | Findings | 1. | Whether the Complainant has proved that the Opposite Party – Bank; is guilty of deficiency in service on account of not crediting to his savings bank account an amount in sum of Rs.5,68,000/-, as was remitted by the Complainant? | YES | 2. | To what relief the Complainant is entitled to? | Direction to the Opposite Party – Bank; to remit to his savings bank account said amount together with interest thereon. | 3. | What order? | The complaint is partly allowed. |
REASONS FOR FINDINGS [9] There is no dispute between the parties to the complaint proceeding as regards the fact that the Complainant had remitted proceeds in share in sum of Singapore $17,750 equivalent to an amount in sum of INR5,68,000/- and the Complainant had remitted said amount to the Opposite Party – Bank; to credit the same into his savings bank account. The Complainant had stayed at U.A.E., for quite a sometime and from the joint account of the Complainant and his wife, by name – Smt. Anju Kapoor; the Complainant purchased securities from Webecome Consulting Middle East and sold the same to the said concern. The Complainant had purchased shares on 25/4/2008 and sold the same on or before 13/5/2009. On sending remittance to his savings bank account with the Opposite Party – Bank; the Complainant sent a letter dtd.27/5/2009, a copy of which is produced on the record at Exhibit-A, page (05) of the compilation, calling upon the Opposite Party – Bank; to credit the amount into his account. This was followed by a reminder dtd.29/5/2009 and by that letter, a copy of which is produced on the record at Exhibit-B, page (06) of the compilation, the Complainant had furnished an undertaking to the effect that he was willing to give a declaration/indemnity in case of any issue. In the meantime, the Opposite Party – Bank; had called information from the Complainant under the KYC report of the remitter from the remitting bank before it could process the remittance. Copy of the letter dtd.30/5/2009, a copy of which is produced on the record at Exhibit-C, page (07) of the compilation, sent by the Opposite Party – Bank; to the Complainant shows that on 13/5/2009, the Opposite Party – Bank; had received ‘SWIFT’ (message) from the Standard Chartered Bank and the purpose of remittance, as given in the ‘SWIFT’ was under the field – ‘Remittance Information’ as buy back of U.A.E. shares. By the same letter, the Opposite Party – Bank; informed the Complainant that pending receipt of KYC, the transaction was kept on hold. That KYC was received by the Opposite Party – Bank; on 25/5/2009, copy of which is produced on the record by the Opposite Party – Bank; annexed to copy of the letter dtd.15/6/2009, at Exhibit-E. Attached to the KYC, there was copy of the declaration given by Smt. Anju Kapoor, wife of the Complainant, to remit an amount in sum of Singapore $17,778 and the name of the beneficiary was Webecome Consulting Middle East, from whom the shares were purchased. In this declaration, purpose of the transaction was mentioned as ‘Financial Assistance’. [10] Reverting to the stand taken by the Opposite Party – Bank; in its written version, the Opposite Party – Bank; has referred to paragraphs (03) & (04) of the Foreign Exchange Management Rules, 2000; which are reproduced here-in-below:- “Para 3 Prohibition on issue or transfer of foreign security: Save as otherwise provided in the Act or rules or regulations made or directions issued thereunder, no person resident in India shall issue or transfer any foreign security:- Provided that the Reserve Bank may, on application made to it, permit any person resident in India to issue or transfer any foreign security. Para 4 Purchase and sale of Foreign security by a person resident in India:- A person resident in India (a) May purchase a foreign security out of funds held in Resident Foreign Currency (RFC) account maintained in accordance with the Foreign Exchange Management (Foreign Currency Accounts) Regulations 2000. (b) May acquire bonus shares on the Foreign securities held in accordance with the provisions of the Act or rules or regulations made thereunder; (c) When not permanently resident in India, may purchase a Foreign security from out of his Foreign currency resources outside India (d) May sell the Foreign security purchased or acquired under clause (a), (b) or (c).” [11] Now, close reading of these provisions in the Rules, which are relied upon by the Opposite Party – Bank; as guidelines, it is seen that title of paragraph (03) reads – ‘Prohibition on use or transfer of foreign security’. It prohibits person resident in India to issue or transfer any foreign security. Proviso is appended that Reserve Bank of India may, on application made to it, permit any person resident in India to issue or transfer any foreign security. Paragraph (04) pertains to purchase & sale of foreign security by a person resident in India. Admittedly, the Complainant and his wife, during the relevant period when the security was acquired, were staying in U.A.E. and thus, the security was not acquired by a person resident in India. [12] The Opposite Party – Bank; vide its letter dtd.30/5/2009, a copy of which is produced on the record at page (07) of the compilation, had referred to these provisions and had called upon the Complainant to produce proof & explanation having complied with FEMA or produce copy of the approval of Reserve Bank of India. The Complainant replied that letter vide his reply dtd.1/6/2009, a copy of which is produced on the record at Exhibit-D, page (09) of the compilation and by that letter, the Complainant referred to Master Circular No.5/2008-09 dtd.1/7/2009 issued by the Reserve Bank of India being master circular on miscellaneous remittances from India – Facilities for residents. The Complainant has reproduced paragraph 13.4 thereof, which reads as follows:- “Resident individuals are free to acquire and hold immovable property or shares (of listed companies or otherwise) or debt instruments or any other asset outside India without prior approval of the Reserve Bank.” [13] According to the Complainant, earlier circular bearing No.64 dtd.4/2/2004, which was also issued by the Reserve Bank of India permit making of remittance up to an amount in sum of U.S. $25,000 per calendar year for any current or capital account transactions or a combination of both. The Complainant explained that under this facility, the resident individuals will be free to acquire & hold immovable property or shares or any other asset outside India without prior approval of the Reserve Bank of India. By the same letter dtd.1/6/2009, the Complainant confirmed that acquisition of security was made by him through an outward remittance from his account on 25/4/2008. [14] Realizing that the Complainant had relied upon earlier RBI Circular and had taken a stand that circular dtd.1/7/2009 override the other provisions relied upon by the Opposite Party – Bank; as guidelines, the Opposite Party – Bank; shot back a letter dtd.15/7/2009, a copy of which is annexed at Exhibit-E by the Complainant to his affidavit of rejoinder. By that letter, the Opposite Party – Bank; took stand that provisions contained in Liberalized Remittance Scheme (LRS) have to be read in conjunction with Foreign Exchange Management Regulations. The Opposite Party – Bank; further tried to explain that under the LRS, the limit of an amount in sum of U.S.$2,00,000 was on an individual basis and would not be applicable to a joint account. This was in the context of remittance made by the Complainant’s wife – Smt. Anju Kapoor; on 25/4/2008 for an amount in sum Singapore $17,778. The Opposite Party – Bank; also tried to add that in the remittance statement dtd.25/4/2008, Smt. Anju Kapoor had disclosed that remittance was for ‘Financial Assistance’ and not for investment in shares. [15] We have extensively referred to the correspondence by the Opposite Party – Bank; to the Complainant and the stand taken thereunder to point out that from one stage to another progressively, the Opposite Party – Bank; continued to change its stand and improve upon the same ignoring the fact that in the written version of defence, it has merely taken stand to the effect that Foreign Exchange Management Regulations were not followed inasmuch as there was no production of approval from the Reserve Bank of India on the part of the Complainant. Contents of the communication sent by the Opposite Party – Bank; to the Complainant reveal that the Opposite Party – Bank; acquired the role of financial investigator and tried to point out alleged one flaw after another. [16] While doing so, the Opposite Party – Bank; conveniently ignored the fact that on 13/3/2009, the Complainant had sent similar remittance to his savings bank account with the Opposite Party – Bank; and without any issue, the amount was credited to the Complainant’s account. In this regard reference can be usefully had to legal notice dtd.12/8/2009, served by the Complainant’s advocate to the Opposite Party – Bank; a copy of which is produced on the record at Exhibit-E/4 annexed to the affidavit of rejoinder filed by the Complainant. Before referring to the contents of the said notice, it would be worthwhile to refer to paragraph (04) of the complaint, where the Complainant specifically referred to transaction of remittance of the amount under similar transaction on 13/3/2009 and giving credit of the same by the Opposite Party – Bank; without any demur. In the written version of defence, the Opposite Party – Bank; while dealing with the averments in paragraph (04) of the complaint, merely denied those averments ignoring the fact that in the account of the Complainant, a copy of which is annexed to the rejoinder filed by the Complainant at Exhibit-E/5, there is an entry dtd.13/3/2009 for an amount in sum of Rs.3,75,617/- against an amount in sum of U.S. $7380. In the legal notice, the Complainant referred to this transaction and stated that identical inward remittance was received and the proceeds of sale of shares of a foreign company were credited on 13/3/2009 for an amount in sum of Rs.3,75,617/- and the said transaction was processed by the Opposite Party – Bank; without any protest or objection. The Opposite Party – Bank; had sent a letter to the Complainant on 25/8/2009, which was in reply to the legal notice sent by the Complainant. In this reply, a copy of which is produced on the record at Exhibit-F, there is no reference to this remittance of an amount in sum of Rs.3,75,617/- on 13/3/2009. Silence maintained by the Opposite Party – Bank; is eloquent in the sense that this transaction has been referred to in the complaint, in his affidavit of rejoinder as well as in the legal notice issued by the Complainant. Still then, the Opposite Party – Bank; could not put forward any plausible explanation for the same. [17] Now, we are left with guidelines in paragraph (03) of the Foreign Exchange Management Rules, 2000; which have been reproduced here-in-above. The Opposite Party – Bank; is harping upon condition in paragraph (03) of the said Rules, which require a person resident in India to transfer any foreign security with the approval of the Reserve Bank of India. Be it noted that title of paragraph (03) is in the form of a prohibition on issue or transfer of foreign security. Provisions contained in paragraph (03) as well as paragraph (04) of the said Rules will have to be read together. As per the provisions contained in paragraph (4-c), a person resident in India when not permanently resident in India, may purchase a foreign security from out of his foreign security currency resources outside India and as per sub-clause (d) of paragraph (04), may sell foreign security purchased or acquired under Clauses (a), (b) or (c). Thus, a person resident in India when not permanently residing in India may purchase foreign security subject to the condition that he may acquire the same from out of his foreign currency resources outside India. Clause (4-d) permit sale of such foreign security. Provisions contained in paragraph (03) start with a saving clause which reads – ‘Save otherwise as provided in the Act or Rules or Regulations…’, which indicates that Rule No.(3) would be applicable to such transactions, which are not governed by any of the clauses contained in paragraph (04). Since the present transaction would not be governed by clauses (c) & (d) of paragraph (04), naturally provisions contained in paragraph (03) would not be applicable and if the provisions contained in paragraphs (03) & (04) are harmoniously interpreted, would lead us to form an opinion that condition of approval of Reserve Bank of India would not be applicable, if the transaction was attracted by any of the clauses of paragraph (04). [18] Having read so, we find that the Opposite Party – Bank; was unreasonable and rather harsh in insisting upon the Complainant to produce approval from the Reserve Bank of India. It be noted that a copy of legal notice dtd.12/8/2009 was marked by the Complainant’s Advocate to the Reserve Bank of India, but we do not know as to whether it was actually served to the Reserve Bank of India or not. In any case, the conduct on the part of the Complainant shows that he does not want to conceal this transaction from the Reserve Bank of India. A copy of the declaration dtd.25/4/2008 under the signature of the Complainant’s wife must have been sent to the Reserve Bank of India. Still then, the Opposite Party – Bank; continued to insist for approval from the Reserve Bank of India. [19] As pointed out above, the Opposite Party – Bank; also overlooked the earlier transaction of similar nature under which remittance was credited to the Complainant’s account without any issue or objection. [20] In view of the above, we find that stand taken by the Opposite Party – Bank; in not crediting the amount of the remittance to the Complainant’s savings bank account was unreasonable and we find that the Opposite Party – Bank; is guilty of deficiency in service to that extent. [21] Still then, by way of an abundant caution, we propose to give two directions to the Complainant so that interests of the Opposite Party – Bank; in future should not be jeopardized in the event of any action being taken by any competent authority. First, the Complainant shall submit a report to the Reserve Bank of India and shall annex thereto a copy of declaration dtd.25/4/2008, signed by the Complainant’s wife – Smt. Anju Kapoor; and shall give all the details about this transaction, including the name of the party from whom the shares were purchased and to whom the share were sold, information received under ‘KYC’ etc. Secondly, the Complainant shall execute an indemnity bond in favour of the Opposite Party – Bank; furnishing an undertaking to the effect that should any action be taken in future about this transaction, he shall be liable to reimburse any loss or penalty being imposed upon the Opposite Party – Bank; and shall give a specific undertaking to that effect. The Complainant shall complete this exercise within a period of two weeks from the date of receipt of copy of this order. With this we proceed to pass the following order:- ORDER The complaint is partly allowed. The Opposite Party – Bank; is hereby directed to credit the Complainant’s savings bank account an amount in sum of INR 05,68,000/- together with interest thereon @ 9% p.a., as from 13/May/2009 till the date of crediting the amount to the Complainant’s savings bank account. It is hereby made clear that in view of the fact that we have awarded interest on the principal sum, we are not inclined to award any separate compensation to the Complainant. The Opposite Party – Bank; shall also pay to the Complainant, an amount in sum of Rs.10,000/- towards costs. The Opposite Party – Bank; shall comply with the foregoing order within a period of eight weeks from the date of receipt of copy of this order. Rest of the claims of the Complainant stands rejected. The Complainant is hereby directed to submit a report to the Reserve Bank of India and shall annex thereto a copy of declaration dtd.25/April/2008, signed by the Complainant’s wife – Smt. Anju Kapoor; and shall give all the details about this transaction, including the name of the party from the shares were purchased and to whom the share were sold, information received under ‘KYC’ etc. Secondly, the Complainant shall execute an indemnity bond in favour of the Opposite Party – Bank; furnishing an undertaking to the effect that should any action be taken in future about this transaction, he shall be liable to reimburse any loss or penalty being imposed upon the Opposite Party – Bank; and shall give a specific undertaking to that effect. The Complainant shall complete this exercise within a period of two weeks from the date of receipt of copy of this order. Parties shall be informed accordingly, by sending certified copies of foregoing judgment & order.
| | [HONABLE MRS. Mrs.DEEPA BIDNURKAR] Member[HONABLE MR. Mr. J. L. Deshpande] PRESIDENT[HONABLE MR. MR.V.G.JOSHI] Member | |
