Legal Issues of Non-Resident Indians (NRIs) and People of Indian Origin (PIOs): Challenges and Possible Solutions, Vigyan Bhavan, New Delhi, Thursday, 7 January 2010
It is indeed pleasure to participate in this seminar – a seminar which hopes to work for a solution to property issues of NRIs/PIOs. Till now, the Indian state has been successful in attracting the cooperation and assistance from over 25 million NRIs in form of investment, technology, ideas, cultural, political, social influence, etc. Now the time has come where government at union and state level shall, in the parlance of negotiation, give back to the NRIs dues for their support to India. Unless and until we will follow in letter and spirit, Give and Take policy, the relations between India and NRIs will remain one-way love affair; hence, our relations will remain vulnerable to sustainability, stability and predictability.
Having spent nearly 20 years in the Netherlands and someone who closely watched and at times felt problems of NRIs and PIOs, I firmly believe that legal and administrative mechanisms are long due in the area of property. Incidentally, it was Dr Kalam our former President on 16 November 2004 put a general question related to succession of and matrimonial property of an NRI to me. Six years before I did not have the answer, nor six years after because calls to enact necessary legal provisions which are made by the highest judicial offices of the country, NRI associations, scholars, practitioners are yet to find careful listening and actionable plans by the Union and State machineries. This is not a criticism but this is one of the saddest areas of conflict of laws in our country and I am sure Ministers Ravi, Kaur and Ravichandran, judiciary and of course international law practitioners will sympathize with me. Therefore to be a part of a seminar which has forward looking and solution-oriented purpose is an honour and matter of service to the nation.
My presentation will focus on three main areas – matrimonial property, succession of property and tenancy/ownership of property issues of NRIs/PIOs. I would highlight the main issues and possible feasible practical legal measures to address those issues.
Matrimonial property is widely prevalent in civil law countries such as continental Europe and Latin American nations. This concept has not yet received its due importance in India and issues relating to this concept have not been agitated vehemently before Indian courts so far. However, with the globalization, privatization and liberalization and large scale immigrations that are taking place, in these countries too, legal issues concerning the properties that may have been acquired or purchased or raised in India or in such jurisdictions during the subsistence of marriage are becoming more and more important.
The current challenge is that if one of the spouses settled in civil law and / or common law countries, how to address their problems. India has large scale NRI population in the USA and the UK, not least to mention in African and Middle-East Regions. In the USA, 41 states follow the Community Property System while other follows Separate Property System. Under the CPS, predetermined assets of husband and wife either by law or contract are treated as a single mass and on the termination of marriage, either by death or divorce is shared equally. – advantage is that the danger of completely disinheriting a widow is checked by imposing restriction on testation. Whereas, under the SPS – wife is the owner of her property, distinct from her husband as she had been before her marriage as the husband is, of his. Each spouse has independent powers of disposition over his or her property without the need for consent of the other spouse. The sharing of assets of husband and wife is not institutionalized. CPS is governed by contract or in the absence of contract by the law of state of dominant interest. The state of dominant interest by and large will depend upon the nature of property.
The problem is not related to immovable property because the law relating to immovable property is governed by the lex situs (location of property). Since no community of property right attaches at the time of marriage to the existing assets the chances of conflict regarding such are reduced to minimum. After marriage while the governing law remains the same lex situs, but tracing rule also becomes important, i.e. marital rights in assets used to purchase land will be recognized in the land after purchase – marital interest which attaches to movable assets acquired by the spouses according to the law of their domicile at the time of acquisition is recognized and traceable into real property located in another state in which those assets are invested – rationale – one’s title to money or other assets, is not lost by moving it across a state line and turning it into some other form of property. Income from immovable property on receipt whether to be characterized as separate or community property would depend upon the marital domicile at the time that income is acquired.
As far as movable property is concerned, no state provides for an immediate marital interest in the movable assets of the other spouse at the time of marriage – the law of domicile of the party who has acquired the property will be applicable and law of common domicile will be applicable for such properties after marriage.
In the United Kingdom, governing law depends upon the selection of party the law for matrimonial property, in absence of such selection; law of matrimonial domicile will be effective. It is important to note, however, that husband’s domicile is largely taken into consideration as it is believed that such a rule provides a simple and certain means of identifying controlling of law. This has serious disadvantage for disserted NRI wives in the UK.
Looking at home, marriage does not have the legal effect of creating community property, India has adopted SPS which prevails in England and whatever its pros and cons have been inherited and applied by our legal and judicial system. Because of this our personal laws suffer from a serious disadvantage of the Separate Property System namely, the unrestricted power of testation that empowers one to disinherit one’s spouse, ignoring moral and social obligation. India has followed the English rules of conflict that in absence of a settlement or a contract between the parties to a marriage involving a foreign element, the parties to such marriage shall continue to enjoy properties separately and the marriage will not bring any change in their separate rights of ownership in the property with their individual and exclusive right to own and dispose of the properties whether acquired before or during the marriage. Lot of Indians find legal issues relating to their rights in such properties calling for solutions as any other person from other jurisdictions. Therefore there is a need for a uniform set of rules providing for solutions to such conflict of law situations and cannot be avoided.
At international level, the Hague Convention on Matrimonial Property of 1978 does not provide a solution because it is partial towards the civil law countries, hence, NRI living in common law countries, USA, UK and many other commonwealth nations cannot depend upon this convention.
One solution has been proposed for a long time is the changes in our personal laws, but we cannot wait for long and ignore that large number of Indians have already migrated to Community Property System countries esp. to continental Europe
In view of the above, India needs to understand codify the matrimonial property regimes by the PIO/NRIs who aspire to settle in those jurisdictions cannot be under estimated.
Indian Succession Act 1925 recognizes pre-marriage contract/settlements for opting out of existing separate property regime entered into between the parties to a marriage, one of whom is domiciled in India and the other being domiciled outside India. This provision is intended to harmonize the Indian conflict of law on marital property and safeguard the interests of Indian who are marrying in jurisdictions where community property regimes are prevalent.
There are, if at all, no litigation before the Indian courts asserting rights by persons of Indian origin in the matrimonial properties and therefore the issues of conflict of laws in respect of PIOs could not be examined. One of the reasons may be that most of the immigrants so far have been investing their savings in India and therefore no litigation for asserting share in matrimonial property could arise, however, this does not mean that India must not prepare itself to meet the future litigation in the face of globalization.
Applicable succession laws to the estates of deceased persons:
Why we need to address the issues: There are increasing number of international succession due to foreign contracts/elements due to a. increase in the migration of workers, many choosing settling down abroad, b. increase in international marriages, more children with dual nationality, c. increase in number of transnational investments in real estate, shares and other areas, and d. growth and expansion of MNCs, resulting in the creation of employment opportunity across boundaries, e. increasing number of refugees, stateless people, etc.
Which are the issues: when a person has his/her habitual residence/domicile in countries other than that of his/her nationality, or his/her property is left in another country or in several countries and he dies without making a will, what happens to succession issues and which are applicable laws, will there be single law – the law of his nationality, domicile or law of the country in which property is situated applicable to the exclusion of the law of other foreign jurisdictions
Succession to property testamentary and interstate – domestic law applicable (internal law), great divergence between civil and common law on the basic concepts of the classification and succession law.
Problem arises if property is situated is in one country and owner is habitually resident in another countries and dies testate or intestate.
Law regulating succession to deceased persons’ immovable and movable property – succession to the immovable property in India of a deceased person shall be regulated by the law of India, wherever such person may have had his domicile at the time of his death; succession to a movable property shall be regulated by the law of the country in which such person had his domicile at the time of death
Lex situs of India apply even to a foreigner’s immovable property in India or for that matter of an Indian’s property even if he was not of Indian domicile at the death time. This lex situs principle in consonance with commonwealth countries practice.
1989 convention does not recognize the applicable law of lex situs regarding the immovable and movable property as prevalent in India brings into existence a partial convention reflecting mainly civil law countries traditions, introduces party autonomy drawing heavily on notions of contract law. In India, succession is regulated by law and not by the discretion of the testator, does not recognize the rule that law of domicile is the only basis for governing succession relating to movable property. India, section 4-19 of the 1925 Act deal elaborately with the domicile rule, no evidence in case laws that the rules contained in 1925 act has not functioned satisfactorily seen from Indian perspective, though. In India the succession is governed by their personal laws. For example, Hindus governed by the Hindu Succession Act, Muslims governed by their own personal laws. The Indian Succession Act governing certain persons.
Apparently India does not face any crisis situation on account of the lack of rules relating to conflict law situation in so far as it relates to the issue of succession, testate or intestate, movable or immovable property; most imp, the succession issues mainly arose in 1950s and 1960s, the present day NRIs retain their Indian domicile normally repatriating their foreign earnings to India.
Tenancy and Ownership of land, real estate
Whereas the above two regimes squarely fall under the family law area, the legal issues concerning tenancy and ownership of land, real estate, movable property, face uncertain future in the realm of conflict of laws in commercial laws and judiciary cooperation. Due to lack of codification, absence of legal and administrative mechanisms, absence of special dispute settlement mechanisms, various courts tend to take various approaches and apply different laws and rules in deciding the issues. Least to say, there is any repository of knowledge either at union or state level in this area of conflict of laws. Let me cite few classic examples and how our judiciary has settled the problem.
Our NRIs face a problem of evicting their property occupied by others and understood that they must remain present for filing a petition. Here, the Supreme Court has clearly laid down that a personal presence in filing petition is not required. Imagine, if NRI is required to file a petition personally, he would never succeed in getting eviction order passed.
At times we have seen cases where the illegal occupants to harass or usurp the properties of NRIs would resort to court arguing that it is not the NRI but a dependent of an NRI will be using the property, hence, he will not vacate because the property belongs to the NRI who is not going to be a direct user. Here, too, it is clear that though an NRI resides permanently in other country he could get the accommodation vacated for the need of his dependent that ordinarily lives with him.
Another instance relates to a presumption of bonafide element – A tenant argues that since the NRI has acquired foreign citizenship and does not stay but makes visit and hence his claim for eviction of his property occupied by the tenant shall be done. Imagine, thousands and thousands of NRIs in their old age are facing this problem. In some cases, they succeed in getting their properties evicted, whereas in many, this remains a dream for them.
There are cases when tenants try to harass NRIs and refuse to vacate properties on the grounds that NRIs own more than one property in the same jurisdiction, hence, he should not be required to vacate the property occupied by him. In other cases, tenants would argue before the courts that since NRI do not need to use the entire property, they would not vacate the entire property. The case-law has been clear in both types of circumstances – the tenants arguments do not stand.
In Punjab and Gujarat, there have been many instances where tenants would refuse to vacate on the grounds that the property is not exclusively owned by the NRIs. Here again, till such time the property is actually partitioned by meats and bounds, co-owner owns every part and bit of joint property along with others and can seek the eviction of tenant from whole building
In several cases, the tenants have challenged the intention of NRIs for eviction and alleged non-bonafide intention and refuse to vacate properties.
In above instances, as there is no uniformity of private laws and case-law differs from courts to courts in India, unless and until the NRI is fully aware of the best practices, can hardly succeed in other courts. Imagine how a remote court in various states of the country, facing absence of laws and not having readily available best case-laws, will handle such problems.
Concluding remarks and suggestions:
With regards to property issues on succession, there are no major legal problems as the Succession laws and jurisprudence is quite clear. However, issues arise with regards to matrimonial properties and ownership/tenancy issues. One of the most important solutions is to adopt the Hague Convention, however, the Convention itself has serious limitations and cannot provide any meaningful solution to problems currently.
Therefore, one proposal is to develop bilateral agreement along the lines of Bilateral Investment Treaties and the draft could be quite simple.
While MPBA (Matrimonial Property Bilateral Agreement) could be a medium term solution, GoI can in a short-term period, prepare a comparative detailed chart of applicable laws in each major jurisdictions where we have significant NRI population. The chart would help our missions and clients to understand the legal regime and give proper advise in these jurisdictions. Our foreign missions should circulate this information to Supreme Court and High Courts of various jurisdictions. GNLU Centre on Private International Law, first of its kind in the country would be pleased to prepare such informative, easily understandable information compendium and take care of circulating to missions and courts in various jurisdictions as well as our NRI associations. Until a bill is passed, such would be an interim but very useful and relief solution to our NRIs. A cursory remark is useful that the review of common law, civil law and US, UK, Canada and SA show that by and large the entire matrimonial regime is imbalanced in favour of men. Equality was not when bills in the US, UK were passed, we are in 2010 and must strike a balance between the rights instead of simply following any model. Idea is to draw comparative practices and based upon fairness and equity, new regime should be developed. At domestic level, GNLU can provide training and legal awareness session to judges in close cooperation with the MOIA and Ministry of Law and Justice.
With regards to tenancy and ownership issues of NRIs, the Centre can instruct the state to amend their revenue and land tenure acts along the lines of the Punjab Security of Land Tenures (Amendment) which came into effect in 1997. Under this amendment, the NRI can have possession of their land like members of armed forces, by summary procedure. They are required to file case in the court of SDM-cum-Asst Collector. This concession is available only in respect of the land acquired or held by a NRI before the commencement of this act.
Solution to other problem related to possession of urban properties from tenants can be found in the amendment of East Punjab Urban Restriction Act 1949 amended in 2001 which facilitates return of possession by filing a case before the civil court having power of rent controller in respective jurisdiction.
To materialize the above objectives, the Punjab govt has established fast track revenue courts for NRIs. The govt not only has established the courts in four districts but also require that district collector and divisional commissioner review disposal of cases every fortnight. A review is also held by the Chief Secretary of the State.
I see that our more than 25 million NRIs are eagerly waiting, especially those suffering and those who are planning that GoI and concerned states take necessary actions on a priority basis. They are our best partners in promoting the goals and objectives of Indian foreign, economic, cultural policies and we owe them quick actions.
Presence of three relevant ministries and senior officers, in my view, without too much of detailed discussions again and again draw up a plan of action, how to solves these problems. As I mentioned earlier, GNLU Centre for Private Int Law is willing and ready to contribute a role in relieving the agony of our NRIs.
We have gathered today with the purpose of deliberating and discussing concrete ways and let’s use this opportunity to promise them a concrete plan before the end of the year. India has steadily shown interest into the Hague Convention and I believe as a person who could play a useful role signing of some of these conventions such as apostle convention is already making a lot of positive impacts to Indian going abroad. I believe this spirit needs to be sustained. Unfortunately, Hague Conventions do not provide immediate or long-term relief to property related problems of NRIs, hence, we have to come up with indigenous, innovative legal provisions and mechanisms which cater to the needs and interests of our NRIs and the GoI.
I hope this seminar would be a true success if we can send a strong message to NRIs that GoI and state governments are tying the belts to solve these problems. Those NRIs who are not here, may please be assured by the state machineries that 2011 Pravasi Bhartiya Divas would have already made a difference in their plight to resolve property related issues. If I may say, 2011 Pravasi Bhartiya Divas – Protection Mechanisms of NRI/PIO Properties in Place.
Bimal N. Patel