ASHA JOHN DIVIANATHAN Vs. VIKRAM MALHOTRA

JUDGEMENT

(1.) The central issue in this appeal is in reference to Section 31 of the Foreign Exchange Regulation Act, 1973[1]. To wit, transaction (specified in Section 31 of the 1973 Act) entered into in contravention of that provision is void or is only voidable and it can be voided at whose instance?

(2.) The undisputed facts are that one Mrs. F.L. Raitt, widow of late Mr. Charles Raitt, a foreigner and the owner of the property in question, gifted it to respondent No.1 (Vikram Malhotra) without obtaining previous permission of the Reserve Bank of India[2] under section 31 of the 1973 Act. Further, before executing the gift deed, she had executed an agreement of sale in favour of one Mr. R.P. David, father of appellant (Asha John Divianathan) and husband of respondent No.4 (Mrs. R.P. David, wife of Mr. R.P. David). That agreement was executed on 05.04.1976 where under the title deed of the schedule property was delivered by Mrs. F.L. Raitt to late Mr. R.P. David. However, Mrs. F.L. Raitt gifted the portion of schedule property admeasuring 12,306 square feet, vide gift deed dated 11.03.1977, in favour of respondent No.1 without seeking previous permission of the RBI under Section 31 of the 1973 Act. She then executed a supplementary gift deed in favour of respondent No.1 on 19.04.1980. Even this deed was executed by Mrs. F.L. Raitt without seeking previous permission of the RBI. The respondent claimed that a power of attorney was executed in his favour by Mrs. F.L. Raitt on 09.01.1982, which it appears, was revoked by Mrs. F.L. Raitt on 03.06.1982. Thereafter, Mrs. F.L. Raitt executed a ratificatory agreement to sell the schedule property in favour of Mr. R.P. David (predecessor of the appellant and respondent no.4) on 04.12.1982, followed by a power of attorney in favour of Mr. Peter J. Philip dated 26.01.1983. That a formal permission of RBI under Section 31 of the 1973 Act was then sought for completing the transaction in favour of Mr. R.P. David (predecessor of the appellant and respondent no.4). The RBI granted that permission on 02.04.1983, permitting transfer of the immovable property No. 12 (old No. 10A), Magrath Road, admeasuring 35,470 square feet in favour of Mr. R.P. David (predecessor of the appellant and respondent no.4). Consequent to the said permission of the RBI, a registered sale deed came to be executed by Mrs. F.L. Raitt in favour of Mr. R.P. David (predecessor of the appellant and respondent no.4) on 09.04.1983. However, Mrs. F.L. Raitt filed a suit being O.S. No. 10328 of 1983, on 30.07.1983, to declare the power of attorney dated 26.01.1983 given to Mr. Peter J. Philip as null and void and for cancellation and setting aside of the registered sale deed dated 09.04.1983 executed in favour of Mr. R.P. David (predecessor of the appellant and respondent no. 4) - pertaining to the entire property admeasuring 35,470 square feet. The said Mrs. F.L. Raitt, however, expired on 08.01.1984 and after her death, Mrs. Ingrid L. Greenwood was substituted as her legal representative in the pending suit. Mr. R.P. David (predecessor of the appellant and respondent no.4) and others then filed O.S. No. 10079 of 1984 on 10.02.1984 against respondent No. 1 (Vikram Malhotra) praying that the gift deed and the supplementary deed allegedly executed in his favour in respect of portion of the larger property to the extent of 12,306 square feet bearing No. 12 (Old No. 10A) be declared as null and void and not binding and consequentially for relief of possession, permanent injunction and mesne profits. Mr. R.P. David (predecessor of the appellant and respondent no.4) also filed O.S. No. 10155 of 1984 against Mrs. Ingrid L. Greenwood and Mr. Clive Greenwood, who were claiming to be successor in title of Mrs. F.L. Raitt, for declaration and possession of entire property No. 12 (Old No. 10) admeasuring 35,470 square feet. All the three suits were tried and decided by the City Civil and Sessions Judge, Mayo, Bangalore[3].

(3.) As regards the suit filed by Mrs. F.L. Raitt and Mrs. Ingrid L. Greenwood bearing suit No. 10328 of 1983, the Trial Court had framed as many as 11 issues, which read thus: