2026 Supreme(Online)(ATFP) 322

APPELLATE TRIBUNAL FOR FORFEITED PROPERTY
Balesh Kumar, Member, Rajesh Malhotra, Member
Union Of India – Appellant
Versus
Commissioner Of Customs – Respondent
MP-FE-65/CHN/2021 | FPA-FE-33/CHN/2021

Subscription to foreign shares confers valuable legal rights, classifying them as foreign securities under exchange control regulations. Provisions within a statute must be construed harmoniously to ensure principles of natural justice, and seizures of domestic assets to cover contraventions must be strictly limited to the value of foreign holdings.

Headnote:(A) Foreign Exchange Management Act, 1999 - Sections 4 and 37A - Foreign Exchange Management (Transfer or Issue of any Foreign Security) Regulations, 2004 - Regulation 2(e) - Foreign security - Definition and holding - Seizure of domestic assets in lieu of suspected contravention regarding foreign holdings - Statutory interpretation - Principles of harmonious construction - Appeal provisions under the Act. (Paras 22, 23, 31)

(B) Appeals - Right of appeal for regulatory departments - Statutory provisions must be read as a whole to avoid rendering parts useless - Denial of appellate remedy to one party while providing it to another would violate principles of natural justice. (Paras 23, 24)

(C) Foreign Security - Subscription rights - Subscription to the capital or Memorandum of Association of a foreign entity, despite lack of full payment, confers valuable rights and privileges - Such subscriptions are considered direct investment outside the country and constitute foreign security. (Paras 28, 29, 31)

(D) Seizure of Assets - Value equivalent - Seizure of domestic properties to secure foreign assets held in contravention of the law must be limited to the exact value equivalent - Double seizure or excessive attachment is not permitted. (Paras 34, 35)

Facts of the case:
The authorities initiated proceedings by seizing properties located within the country, alleging that these held a value equivalent to foreign securities acquired and held by several individuals in a foreign company without required approvals. The lower adjudicating authority set aside the seizures on the grounds that the shares held were not fully paid and thus possessed zero value, arguing that no violation had occurred under the relevant provisions.

Findings of Court:
The court held that subscriber interests in foreign entities constitute foreign securities regardless of the payment status, as these interests include rights, privileges, and preemptive claims. It further clarified that the statutory framework must be construed harmoniously, allowing the regulating department the standing to prefer appeals. The court finalized that, while the seizure of assets is a valid provisional measure, it must be strictly restricted to the value equivalent of the foreign assets involved.

Issues: The main issues were whether unpaid share subscriptions qualify as foreign securities under regulatory law, whether the department has the standing to appeal against an order confirming a seizure, and whether seizures must be limited to the specific value of the assets in question.

Ratio Decidendi: Subscription to share capital in a foreign entity bestows significant rights and constitutes an investment in foreign securities, bringing it within the regulatory ambit. Harmonious reading of the legislation is required to uphold the right to appeal for the regulating body, and the principle of proportionality dictates that seizures of domestic assets to remedy unauthorized foreign holdings must be precisely equivalent in value to the foreign assets held.

Result: Appeal partially allowed.