Ex post facto foreign exchange permission upheld, with shareholder requisition and regulatory action found valid.

Section 29(1)(b) of the Foreign Exchange Regulation Act was interpreted to permit ex post facto and conditional approval, because the statute used "permission" without limiting it to prior consent; the later press release, circular and permission were therefore treated as valid clarifications of the portfolio investment scheme. On the challenge of mala fides, the Reserve Bank, the Union Government and the Life Insurance Corporation were found not to have acted arbitrarily or without application of mind, and the shareholder requisition for an extraordinary general meeting was upheld as part of the company law framework. The matter was remitted to the Reserve Bank for fresh inquiry into the purchases and the conduct of the designated bank.

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Issues: (i) Whether permission under section 29(1)(b) of the Foreign Exchange Regulation Act, 1973 could be granted after the purchase of shares and whether the impugned press release, circular and permission were valid; (ii) Whether the Reserve Bank of India, the Union of India and the Life Insurance Corporation of India were actuated by mala fides or non-application of mind, and whether the requisition for an extraordinary general meeting was liable to be struck down.

Issue (i): Whether permission under section 29(1)(b) of the Foreign Exchange Regulation Act, 1973 could be granted after the purchase of shares and whether the impugned press release, circular and permission were valid.

Analysis: The expression "permission" in section 29(1)(b) was held not to be confined to prior permission. The statutory text deliberately omitted the word "previous", unlike other provisions of the same Act where that expression was expressly used. The Act was construed as a regulatory measure enacted in national economic interest, so a flexible reading that permitted ex post facto and conditional permission best advanced its object. The later press release, circular and permission were treated as a valid clarification and modification of the portfolio investment scheme, and the court held that a transfer not yet registered could not be denied once permission had been granted, whether before or after the purchase, unless the statutory authority itself declined or withdrew permission on proper grounds.

Conclusion: Ex post facto and conditional permission under section 29(1)(b) was permissible, and the impugned press release, circular and permission were valid.

Issue (ii): Whether the Reserve Bank of India, the Union of India and the Life Insurance Corporation of India were actuated by mala fides or non-application of mind, and whether the requisition for an extraordinary general meeting was liable to be struck down.

Analysis: The Reserve Bank was found not to have acted mala fide or without application of mind, though its reliance on the designated bank was later found to have been misplaced because the bank had failed in its monitoring duties. The Union of India was also held not to have acted with mala fides. The Life Insurance Corporation, as a shareholder, was entitled to seek a change in the board through the corporate democratic process, and its requisition was not shown to be arbitrary, mala fide, or contrary to law. The court emphasised that a shareholder's right to call a meeting and move resolutions is part of the company law framework, and that the reasons for such a corporate decision are not ordinarily subject to judicial review.

Conclusion: No mala fides or legal arbitrariness was established against the Reserve Bank of India, the Union of India, or the Life Insurance Corporation of India, and the requisition notice was upheld.

Final Conclusion: The appeals by the Union of India, the Reserve Bank of India and the Life Insurance Corporation of India were allowed, the challenge to the validity of the RBI's permission and the LIC requisition failed, and the matter was remitted to the Reserve Bank for fresh enquiry into the purchases and the conduct of the designated bank.

Ratio Decidendi: Under section 29(1)(b) of the Foreign Exchange Regulation Act, 1973, "permission" is not necessarily confined to prior permission; where the statute so permits, ex post facto and conditional permission may validly be granted in furtherance of the Act's regulatory purpose, and once such permission is granted the transaction cannot be collaterally impeached by the company or its shareholders.

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