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FEMA permits purchase of land by foreigners: Ferreira

by Abdul Rauf Beig

NT ARTICLE 29TH JAN 07: PEOPLE OF the state have been raising questions over land deals between locals and foreigners. Our senior reporterAbdul Rauf Beig spoke to Mr Carlos A Ferreira, Assistant Solicitor General of India and former advocate general of the state talks about laws relating to the land acquisition by foreigners in the country in an attempt to find answers to the vexed problem.

What is the law regulating purchase of immoveable property by foreigners in

India?

The main legislation in force, governing transfer of immoveable property by or in favour of such persons is the central legislation viz. The Foreign Exchange Management Act, 1999 (FEMA) under which the Foreign Exchange Management (Acquisition & Transfer of Immoveable Property in India) Regulations, 2000 has been framed. The above named Regulations categorises persons as follows: person resident outside India who is a citizen of India (NRI); person of Indian origin (PIO); a person resident in India; a person resident in India who is a citizen of India; a person resident outside India; a person resident outside India who has established in India in accordance with the Foreign Exchange Management (Establishment in India of Branch or Office or other Place of Business) Regulations, 2000 a branch office or other place of business for carrying on in Indian any activity, excluding a liaison office; foreign embassies/diplomats/consulates; citizens of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal or Bhutan.

Is it permissible for anyone to purchase land in India?

The basic thrust of the legislation is to permit any person to purchase any land in India, through normal banking channels. The categorisation of persons makes a great difference in such person’s right to acquire or transfer immoveable property in India. However, it can be seen that the legislature has consciously prohibited transfer of agricultural/plantation land and farmhouses to persons other than Indian citizens, resident in India. It may be useful to refer to the chart for summary of the position on acquisition or transfer by each such person.

Citizens of certain countries like Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal or Bhutan have not been given similar rights and instead they can acquire or transfer land by lease for a period not exceeding five years, that too, with prior approval of RBI.

What is the role of the sub-registrars in registering the sale deeds? Often, there are allegations that sub-registrars are permitting registration of sale deeds/transfer documents, in contravention of law. Can you comment?

The sub-registrar performs functions and duties specifically as per the provisions of the Registration Act, 1908. Enquiry which can be conducted for this purpose is limited and only within the four corners of the Registration Act, 1908. He is also required to examine whether the market value declared on the transaction is in accordance with the provisions of the Stamp Act, 1899. Beyond this, the sub-registrar has absolutely no jurisdiction to embark upon any enquiry whether the person purchasing is Indian national, foreign national, PIO, etc.

Likewise, even if it was a transaction between two Indian citizens, resident in India, he cannot embark upon enquiry whether the sale is made within the four corners of the Portuguese Civil Code, 1867 including whether all co-owners are parties and/or have consented to the sale or whether the transfer is beyond the disposable quota.

If there is any contravention of law, the transaction is void or voidable (as per the relevant statutory provision). If the sub-registrar attempts to conduct such enquiry, then in my view, apart from such action being without jurisdiction or in excess of jurisdiction, would also run contrary to the provisions of FEMA.

If the sub-registrar cannot conduct such enquiry, would it not amount to permitting transfers being made in contravention of law?

Every sale to or by a foreign national is not illegal for violation of FEMA. As can be seen from above, even PIO (who is actually a foreign national), can acquire/sell land, of course subject to certain omissions/restrictions under the abovementioned regulations. Under Chapter IV of FEMA, 1999, the central government has provided a mechanism and an “adjudicating authority” to examine such cases and for imposition of penalty. Under Section 13 of FEMA, 1999, in addition to penalty confiscation of the property can be ordered. There is no delegation of power by the central government whether by statute or otherwise, to the sub-registrars for adjudicating upon alleged violations of FEMA. Under Section 49 of the Registration Act, 1908, unless a document which is compulsorily registerable is registered, it shall not have any effect.

Section 13 of FEMA will operate only once the transaction is complete and it is found that there is a violation and not before registration. Attempt to contravene FEMA, is not an offence and not punishable thereunder. Therefore, the action of the sub-registrar in conducting such enquiry and refusing to register the document, in my view, amounts to usurping jurisdiction of the “adjudicating authority” and preventing the central government from imposing penalty by which the central government would have earned from penalty imposed and/or acquired the property transferred in contravention of law, which confiscation can be ordered only when there is a transfer in contravention of FEMA and not mere attempt to transfer the immoveable property.

In such an event, would the state government and the officials not be helpless spectators with no power under the law?

Once the registration of the document is complete, if the sub-registrar has reason to believe that the document is in contravention of law, he can record his observation and make a reference to RBI/adjudicating authority for examining the transaction, of course with due intimation/approval of the state government. Once the registration is complete, if by oversight or by collusion or otherwise, the registering authority does not make such intimation, the subsequent title-holder applies to the talathi for mutation of the name in the survey record. At this level, the state government can issue directions for making report to the central government for necessary action. Similarly, when permission is sought for development, or mutation in house tax records, if any, the local body steps in and can also take action. No rights can be transferred merely on the basis of an agreement and the local bodies must refuse to take cognizance. Finally, any person can obtain copy of the document registered (as the same is a public document) and can forward the same to the adjudicating authority, with relevant petition/complaint. It should be remembered that there is no presumption in law the every transfer made by or in favour of a foreign national or non resident, is necessarily in contravention of law.

If agricultural lands cannot be sold, then how are large amount of agricultural land being sold and being held by foreigners, which are then being converted for non-agricultural purposes even by seeking change of zone in Regional Plan?

Primarily, the survey record prima facie determines the nature of the holding/land. Under Section 105 of the Goa Land Revenue Code, 1968, the entries in the survey records maintained under the enactment have presumptive value as to their correctness. Therefore, survey entries can generally be accepted as the benchmark. It may be possible for a person to demonstrate that the classification of land in the survey record is factually incorrect. In the event there is any doubt as to nature of the land there is provision and procedure for rectifying the error.

Seeking permission for conversion of land in the Regional Plan, in my view is totally unconnected with the nature of the land. The Regional Plan is actually a plan for future development of the land specifically permitting usage of land for certain purposes and conversely, prohibiting its use for another purpose. It is when change for usage of land is sought from what land use is proposed in the Regional Plan, that the conversion thereunder is sought. For e.g. land notified for settlement land may be sought to be utilised for industrial purpose. But even if land is already proposed in Regional Plan for a particular purpose, it does not lose its character of being agricultural land or non-agricultural land, merely by such incorporation in the Regional Plan.

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FEMA permits purchase of land by foreigners: Ferreira

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