Already under strain, Indo-Pak relations are set to face another test with Pakistan International Airlines (PIA), the sole carrier between the two countries, finding itself in deep legal trouble over buying immovable assets in India.
The airline faces action from the Reserve Bank of India (RBI) as well as the Enforcement Directorate (ED) over purchase of four flats in New Delhi for managing its affairs.
While the RBI and ED have not softened their stand over what they call violation of the Foreign Exchange Management Act (FEMA), the airline has now suffered a legal setback with the Delhi High Court refusing to interfere at this stage.
Justice Rajiv Shakdher, in a recent order, rejected PIA’s request to stay the notice issued to it by the RBI in November 2014. The RBI had asked the airline to sell the immovable property within six months and thereafter approach it with a request to compound the offence within one month. The banking regulator also prohibited PIA from repatriating the money received from this sale without its prior permission. Subsequently, the ED had initiated proceedings for alleged contravention of FEMA and RBI guidelines.
In his order, Justice Shakdher also turned down PIA’s plea to restrain the ED from taking any coercive steps, in terms of the summons issued, after observing that the airline’s petition did not make the ED a party.
The judge noted that the RBI had issued a notice to the airlines in November with a deadline of six months to sell the properties but the latter had showed no urgency to move the court; nor was there any immediate coercive action contemplated under the notice.
Justice Shakdher said: “According to me, apart from the fact that the petitioner has waited for a period of more than six months to move the court, which is one of the reasons why no stay can be given, the other reason is that the petitioner appears to have taken a position that, in law, it is entitled to sell the property and in this regard intimation given to the RBI in the prescribed form should suffice. The stand taken by the petitioner requires deliberations.”
It underlined that PIA relied on Regulation 5 of the FEMA to assert it is entitled to acquire immovable property and that an appropriate declaration regarding the purchase of four office spaces was made in the prescribed manner in an RBI form. The RBI notice, however, contended that prior permission is a must for buying properties.