Supreme Court Seeks Central Government and RBI's Response in Plea Seeking FEMA Exemption for OCIs Domiciled in India

Supreme Court Seeks Central Government and RBI's Response in Plea Seeking FEMA Exemption for OCIs Domiciled in India

The Supreme Court by its division bench comprising of Justices KM Joseph and BV Nagarathna issued notices to Central Government and Reserve Bank of India in a writ petition seeking to exempt resident Overseas Citizens of India from the purview of the Foreign Exchange Management Act regulations.

The writ petition was filed by the petitioners- Association of Resident Overseas Citizens of India and Families (AROCIF) and another against the Union of India and others.

During hearing, the bench asked, "Your prayer is that OCI citizens domiciled in India should be given the same benefits in relation to educational institutions?"

"That has been dealt with in a recent judgement delivered by Justice AS Bopanna on 3rd February. To that extent, my relief is granted," the counsel informed.

According to that judgment the Supreme Court had observed that the Centre's 2021 notification - which took away the rights of Overseas Citizens of India (OCI) category students to apply for general seats and confined their right only to Non-Resident Indians (NRI) category seats- will apply prospectively to those who register as OCIs after 4th March, 2021.

After the introduction of the OCI Scheme by the Government of India, the Resident OCIs, who were highly successful in their professional careers and personal lives in foreign countries, relocated back to India for serving their motherland, with an intention to take permanent domicile in India, the plea states.

The Counsel further intimated the bench that his challenge was specifically with regard to the Foreign Exchange Management (Acquisition and Transfer of Immovable Property in India) Regulations, 2018.

The Advocate contended, "The definition for OCIs is only with regard to the those who are residing outside. The parity which was drawn, the basis of the judgement of February 3rd is taken away by this definition…. All OCIs will necessarily be considered as per the definition in 2(d) of the (2018 FEMA) regulations. The class to which I actually belong, because I have stayed here for the last 20 years, is negated. Therefore, I have claimed parity between resident citizens and OCI domiciled citizens."

To this the bench asked, "OCIs not domiciled in India, how are they treated?"

"As NRI's", the Counsel answered.

The Court questioned, "You want to be treated more like citizens, that's going to be the ultimate argument? How is that possible?"

The Advocate responded with the reason that it has followed the promissory estoppel created by the government in terms of the policy.

According to the petitioner's case even though technically holding a foreign citizenship, the Resident OCIs constitute a distinct class in themselves, who not have any substantial foreign connection. The Resident OCIs live, work, and earn in India, in Indian currency, are permanently domiciled in India and residing in this country for more than a decade in most cases. Many such Resident OCIs do not even maintain any accommodation abroad and have adopted India as their domicile permanently.

The Resident OCIs who live permanently in India pay income taxes to the Government of India not only on their income in India but also on their world-wide income. Additionally, they also pay education cess and such other cess etc., which materially contribute to the country's development of this country. However, non-resident OCIs who reside abroad do not pay any taxes to the Government of India on their world-wide income.

The petitioners also argued that regulation 2 (d) makes FEMA applicable to resident OCIs, thereby depriving them of enjoying the guarantees on the depriving them of enjoying the guarantees on the basis of which they took up domicile in India.

According to Regulation 2(d) of the 2018 FEMA Regulations defines OCIs as 'a person resident outside India who is registered as an Overseas Citizen of India Cardholder under Section 7A of the Citizenship Act, 1955.'

"Thereby, the Impugned Regulation clubbed the Resident OCIs and other non-resident OCIs in the same bracket, seriously jeopardizing the life and prospects of the Resident OCIs, who had been permanently domiciled in India since the introduction of the OCI Scheme," stated in the petition.

The bench further queried, "What about the rights of the citizens under the Constitution and the Citizenship Act?"

The Counsel termed the plea as a 'holistic challenge.'

Thereby, the bench proceeded to issue notices to sought the response from the Reserve Bank of India and the Central Government.