RBI Can Permit Share Allotment Against Second-Hand Imported Capital Equipment On Non-Repatriation Basis: Calcutta High Court
Mehak Dhiman
4 Jan 2026 3:55 PM IST
The Calcutta High Court held that the RBI (Reserve Bank of India) is empowered under the FERA (Foreign Exchange Regulation Act, 1973) to permit allotment of shares to an NRI against the import of second-hand capital equipment on a non-repatriation basis.
Justices Madhuresh Prasad and Supratim Bhattacharya stated that the RBI, while allowing the permission, also relied upon the Government of India letter dated 03.01.1994 wherein the Central Government issued policy directive that in such a case, as arose for consideration herein, where the amount is directly paid by the NRI for importing second-hand capital goods, the investment was permissible only on a non-repatriable basis.
In the case at hand, the Ruby General Hospital Company Limited was incorporated in the year 1991 by two non-resident Indians Dr. Kamal Dutta and Binod Prasad Sinha, along with Sajal Dutta (appellant), the younger brother of Dr. Kamal Dutta.
Dr. Kamal imported second-hand equipment from the USA, treating it as his capital contribution and sought RBI's (Reserve Bank of India) permission for allotment of shares against such equipment under FERA (Foreign Exchange Regulation Act, 1973).
The RBI initially granted permission. The permission was withdrawn at the instance of the company, which challenged the approval granted by the Reserve Bank of India before the Calcutta High Court.
The Reserve Bank of India once again granted approval for allotment of the shares. The approval was challenged by the company again, by filing another writ petition
In compliance with the directions passed by the High Court, the Reserve Bank of India again passed an order dated 07.05.2004 granting permission to allot shares to Dr. Kamal Dutta against the supply of second-hand medical equipment imported from the USA, treating the same as his capital contribution.
Certain directions passed in the writ petition were allegedly not followed properly, and another writ petition was filed by the company, wherein the permission dated 07.05.2004 granted by the GM, RBI, was again challenged.
The writ petition was filed seeking quashing of the Speaking order dated 07.05.2004 passed by the General Manager of the Reserve Bank of India, Kolkata, (GM, RBI) in terms of section 19 (1) (d) of the Foreign Exchange Regulation Act, 1973, granting permission to the company to issue 30,55,329 shares of Rs. 10 each on non-repatriation basis in favour of Dr. Kamal Dutta.
The bench stated that there was no issue of importation of goods involving outflow of any foreign exchange. RBI has rightly relied upon the DO letter dated 03.01.1994, which governed the transaction carried on by the Company since the amount was paid directly by the NRI (Dr. Kamal) against the import of second-hand capital goods. Such investment is permissible as manifests from extract of the DO letter dated 03.01.1994, but on a non-repatriable basis.
Such investment had been permitted and issuance of shares allowed on a non-repatriable basis, and therefore, there is no infirmity whatsoever in the permission dated 07.05.2004 granted by the RBI, added the bench.
The bench opined that the permission was granted by RBI on 07.05.2004. Much prior thereto the Foreign Exchange Regulation Act was repealed and, in its place, the Foreign Exchange Management Act, 1999 came into effect on 01.06.2000. There is no dispute that under FEMA no permission was required from RBI to allot shares on importation of capital goods to non-resident Indians.
The bench held that the approval dated 07.05.2004 issued by the RBI is in accordance with the law.
In view of the above, the bench dismissed the appeal.
Case Title: Sajal Dutta v. Reserve Bank of India and Ors.
Case Number: APO 114 of 2016
Counsel for Appellant/Assessee: S. N. Mukherjee, Shounak Mitra, Samriddha Sen, Vishwarup Acharyya
Counsel for Respondent/Department: S. N. Mitra, Prantik Garai, Subhojit Roy, Ramanuj Roy Chowdhuri, Atish Majumdar