Wholly owned subsidiary under EHTP scheme is not a joint venture where no third-party pooling of resources exists.

Approval for a wholly owned Indian subsidiary under the EHTP Scheme was held not to breach an earlier restraint against the foreign company entering into a joint venture or distributorship arrangement with a third party. The court reasoned that a 100 per cent subsidiary created and owned by the same foreign company did not involve pooling of resources between separate entities and therefore was not a joint venture. The earlier restraint was directed at third-party joint venture activity, not at establishing a subsidiary for permitted EHTP operations. The veil-piercing principle did not alter this position. The approval was therefore found not to infringe the restraint order, and writ relief was refused.

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Issues: Whether the Government's approval for setting up a wholly owned Indian subsidiary under the EHTP Scheme violated the earlier restraint order against the foreign company entering into a joint venture or distributorship arrangement with a third party.

Analysis: The approval related to a unit to be owned entirely by the foreign company through a 100 per cent. owned subsidiary under the EHTP Scheme. A wholly owned subsidiary, on the facts, did not constitute a joint venture, because no pooling of resources by two separate entities was involved. The restraint order was directed against entering into a joint venture with another party, and not against establishing a subsidiary for conducting the permitted EHTP business. The earlier corporate-law principle that the veil may be lifted in appropriate cases did not assist the petitioners, because the subsidiary here was being created by the same foreign company in accordance with the scheme and could not be treated as a prohibited third party arrangement.

Conclusion: The approval dated 25 November 1992 did not infringe the earlier interim restraint order, and the petitioners were not entitled to the writ relief.

Ratio Decidendi: A wholly owned subsidiary set up unilaterally by a foreign company under a lawful scheme is not, by itself, a joint venture with a third party, and a restraint against joint ventures does not prohibit such approval unless the subsidiary arrangement itself contravenes the order.

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