Satish Chandra, J.
1. This petition under Article 226 of the Constitution prays that the order passed by the Reserve Bank of India on 6th December,1971, be quashed and the State Bank of India, Allahabad, be directed to pay the amounts and securities in question to the petitioner.
2. Mr. George Justin O'Brian, a British national resident in India, made a will on 26th December, 1926, of his properties in India. Under this will his properties were made the subject of a trust with directions for its appropriation by the executors and trustees. The income from the funds end the properties were to go to the two sisters of the testator for their life, and thereafter to his brother and after his death to his brother's wife. It was arranged in this document that after the death of the aforesaid four persons the property will be divided between the children of his brothers, William and Henry, in stated proportions. One of the daughters of William, Miss Elfeeda O'Brian, later on married and became Mrs. E. A. Clarke. She was a permanent resident of Brisbane, Australia.
3. In 1965 Mrs. Clarke addressed a letter to the Agent of the State Bank of India, Allahabad, to deliver the assets of the estate of George Justin O'Brian in possession of the Bank to her after complying with the Exchange Control Regulations. The State Bank addressed a query to the Reserve Bank of India asking its advice in the matter. It appears that the Reserve Bank wanted proof that all the other children of William and Henry had died with the result that Mrs. Clarke had become the sole beneficiary. Mrs. Clarke, however, did not furnish the requisite proof, but on 17th June, 1969, addressed a letter to the Agent, State Bank of India, Allahabad, directing him to pay the amount of the estate to Sri G. E. King, 4 Queen's Road, Allahabad, as her agent to receive the money. On this the State Bank appears to have referred the matter again to the Reserve Bank of India.
4. Meanwhile on 7th August, 1969, Mrs. Clarke executp1 ed a deed of gift giving to Sri George Elwin King, the present petitioner, all the estate of George Justin O'Brian, of which she claimed to be the sole beneficiary. Sri King lodged the deed of gift with the State Bank of India and asked for the money and securities being paid to him.
5. It appears that the State Bank was reluctant even to let Sri King inspect the papers of the estate in the possession of the Bank, with the result that Sri King had to file a suit in the civil courts at Allahabad praying that the defendant Bank be directed by an injunction to open the sealed envelope No. 26/52 in the safe custody of the Bank and to allow inspection of the same to the plaintiff. In the plaint it was stated that Mrs. Clarke had on 7th August, 1969, executed a gift deedunder which she had gifted the entire estate to the petitioner. The State Bank filed a written statement but did not dispute these statements of fact. Its plea was that it was not prepared to take any risk in the matter, and it would have no objection to allowing inspection provided the court passed an order to that effect. On 4th January, 1971, the learned Munsif decreed the suit. In this judgment it was stated that all trustees and beneficiaries excepting Miss. E. O'Brian are dead. Miss E. O'Brian married and changed her name. She is now a citizen of Australia and is now known by the name of Mrs. E. A. Clarke. She made a gift deed in respect of her assets in favour of the plaintiff.
6. When the petitioner made a claim on the basis of the gift, the State Bank again referred the matter to the Reserve Bank of India. The Reserve Bank in its reply dated 24th November, 1971, indicated that it had not been established that Mrs. E. A. Clarke was the only legatee entitled to the estate of late George Justin O'Brian, that there was nothing to indicate that the other legatees did not inherit or that they were not alive, and that it was, therefore, not possible to recognise the claim of Mrs. Clarke to be the exclusive beneficiary of the estate. It was also stated that in view of Section 5(1)(c) of the Foreign Exchange Regulation Act, 1947, payment to Sri King pursuant to the direction of Mrs. Clarke would amount to making payment by order or on behalf of any person resident outside India, and would, therefore, require the prior approval of the Reserve Bank. It was further stated that the assets in question should not hence be transferred in the name of Sri King on the strength of the gift deed executed by Mrs. Clarke. In view of this direction of the Reserve Bank, the State Bank refused to honour the request made by the petitioner for transferring the assets of the estate in his favour.
7. The State Bank of India has not contested the writ petition. It has filed no counter-affidavit. So far as the State Bank is concerned, the allegations made in the writ petition may be taken as having been admitted. Between the petitioner and the State Bank the position is that Mrs. Clarke claimed that she was the sole legatee and beneficiary of the estate which was in possession of the State Bank of India, Allahabad, and that she had gifted her interest in it in favour of Sri King, the petitioner. Sri King claims to be handed over the estate, namely, the moneys and the securities etc. on the strength of the gift. The question is whether the Reserve Bank has any locus standi in this transaction.
8. Section 5 (1) of the Foreign Exchange Regulation Act, 1947, provides-
'5. Restrictions on payments: (1) Save as may be provided in and in accordance with any general or special exemption from the provisions of this subsection which may be granted conditionally or unconditionally by the Reserve Bank, no person in, or resident in, India shall-
(c) make any payment to or for the credit of any person by order or on behalf of any person resident outside India.'
9. When question of making payment 'by order or on behalf of' any foreigner arises, such payment cannot be made without the approval of the Reserve Bank. The question of obtaining the approval of the Reserve Bank would arise only when payment has to be made 'by order' of a foreigner, or 'on behalf of' any foreigner. Here Sri King wants payment on the strength of a deed of gift. When Mrs. Clarke executed the deed of gift its immediate effect was the divesting of her title and interest in the estate and the vesting of that title and interest in Sri King as the donee. When Sri King made a demand for payment to the State Bank of India, he was already the owner of the estate. He was not making any demand for payment 'by order or on behalf of' Mrs. Clarke. He was not asking for payment on behalf of Mrs. Clarke but on his own behalf as the owner of the property. Thus so far as the demand of Sri King based upon the gift deed is concerned, Section 5 (1) (c) is not at all attracted.
10. The learned Advocate-General appearing for the Reserve Bank of India submitted that such transactions of gifts by foreigners in favour of resident Indians often involve compensatory arrangement, where under the resident Indian will somehow compensate the foreigner later on, and this arrangement involves the flowing out of foreign exchange.
11. There is not an iota of evidence-- direct or indirect-- to suggest, much less establish, the existence of any such compensatory arrangement between Sri King and Mrs. Clarke. It is trite that no such extra-legal arrangement can be presumed to exist. Since the existence of such en arrangement, which may indirectly involve the outflow of foreign exchange from this country, has not been established at all, Section 5 (1) (c) cannot come into play merely because the Reserve Bank of India may have a suspicion that such an arrangement may exist.
12. This is a simple case of the owner of property making a demand fromthe Bank for payment. The payment is to be made to a resident Indian. The payment is not 'by order or on behalf of' any foreigner. The State Bank of India does not dispute the validity or genuineness of the deed of gift. Under the circumstances the State Bank was in error in seeking the advice of the Reserve Bank and in refusing the request of the petitioner, Sri King, for payment on the basis of the directive issued by the Reserve Bank. The directive of the Reserve Bank was without jurisdiction insofar as the demand of Sri King based upon the deed of gift was concerned.
13. In the result the petition succeeds and is allowed. The State Bp1 ank of India, Allahabad, respondent No. 2, is directed to deliver the properties of the estate of the late George Justin O'Brian to the petitioner forthwith. The petitioner will execute and deliver to the State Bank of India, Allahabad, a personal indemnity bond indemnifying the Bank against any future possible claim by any one to the property which the Bank will deliver to the petitioner. We make no order as to costs.