TaxTMI 
TaxTMI 
2021 (4) TMI 82
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....Jindal Steel & Power Limited filed a writ petition in this Hon'ble Court seeking the following reliefs:- "A. Issue a writ, order or direction including a writ in the nature of Mandamus, directing Respondent to permit Petitioner to make additional commitments and payments of USD 300 Million to its wholly owned subsidiary namely Jindal Steel and Power (Mauritius) Limited by way of equity subscription or loan or corporate guarantee or bank guarantee or through other permitted mode from Indian Bank for meeting its debt obligations; B. Pass any other Order(s) as this Hon'ble Court may deem fit in the given facts and circumstances of the present case." 3. The Respondent is said to be a company with business interest in steel manufacturing, power generation, mining of iron ore, lime stone and coal. To optimise the cost of raw material required for manufacturing and also to have a linkage to raw material like coking coal, the respondent set up various overseas subsidiaries including (i) Jindal Steel & Power (Mauritius) Ltd. (herein after called JSPML), a company incorporated under the laws of Mauritius; (ii) Skyhigh Overseas Ltd. (also called SOL), a ....
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....cation of the respondent on account of objections raised by ED. b) A conjoint reading of Regulation 6 and 9 would show that where an Indian Party is under any investigation by any investigation/enforcement agency or regulatory body, the Indian party can apply under Regulation 9 for making any direct investment in a joint venture or wholly owned subsidiary outside India. c) The learned Single Judge further held that it is clear from the reading of Regulations 6 and 9 that mere existence of an investigation by an investigation/enforcement agency or regulatory body ipso facto does not debar an Indian Party from direct investment in Joint Venture or wholly owned subsidiary outside India. 8. The learned Single Judge also held that the impugned order dated 30.12.19 is bad as:- i) No reasons have been given for rejection. ii) The reasons given in the order communicated vide Email dated 30.12.2019 at 3:29 PM is also passed contrary to Regulation 9. 9. The learned Single Judge has relied upon Mahender Singh Gill Vs. Chief Election Commissioner, (1978) 1 SCC 405 that "8. when a statutory functionary makes an order based on certain grounds, i....
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.... require no reasons to be given even then the appellant in order to ensure principles of natural justice, equity and fair-play communicated the reasons vide email dated 30.12.2019 sent at 3:29 PM giving the reasons as under:- "From: Semwal, Mayank <mayanksemwal@rbi,org.!n> Date: Man, Dec 30,2019 at 3:29 PM Subject: RE: RBI Letter To:[email protected]<[email protected] m> Dear Shri Sogani, With respect to the attached letter to your trailing e-mail, addressed to our CGM, Shri R.K Moolchandani, you may recall that during a meeting held in November, 2019 in CGM's cabin, your Company's representatives were advised that with a view to expedite decision on your request, we had already written to DoE for their views in the matter. As Shri Hemant Kumar has already discussed with the CGM through telecon today, in view of the reservations expressed by DoE/ongoing investigations, it shall not be possible for us to give approval Thanks and Regards, MayankSemwal Manager Foreign Exchange Dept. Reserve Bank of India Mumbai In support of the above contentions the learned Sr. Counsel for....
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.... following factors while considering the application made under sub-regulation (2):- a. Prima facie viability of the Joint Venture/Wholly Owned Subsidiary outside India; b. Contribution to external trade and other benefits which will accrue to India through such investment; c. Financial position and business track record of the Indian Party and the foreign entity; d. Expertise and experience of the Indian Party in the same or related line of activity of the Joint Venture or Wholly Owned Subsidiary outside India." Mr. Bhushan placed reliance on the words "inter alia" appearing in Regulation 9(3) to urge that the grounds mentioned in Regulation 9(3) are indicative and not exhaustive. He further argued that the appellant has to be satisfied and only then it is to grant approval. The satisfaction is "subjective satisfaction" of the appellant. The appellant before granting approval sought inputs from the DOE and based upon their inputs, the approval was not be granted. The learned Sr. Counsel for the appellant argued that DOE being an expert body its opinion was sought and after seeking their opinion which was contained in the letter....
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.... D. As a further limb to this argument the learned Sr. Counsel for the appellant has argued that even though the learned Single Judge has held that more than a year has passed and no action has been taken by the ED, the said finding could not have been arrived at by the learned Single Judge in the absence of ED. E. The learned Sr. Counsel has argued that the findings that the RBI has rejected the application of the respondent filed under Regulation 9 at the behest of ED is flawed. The learned Sr. Counsel has argued that this is not a case where the appellant has delegated or shared its power with someone else or allowed someone else to dictate to it, but is a case where the appellant has sought ED's view and based on ED's view taken a considered decision. The learned Sr. Counsel has relied on State of Bihar v. Asis Kumar Mukherjee (Dr) (1975) 3 SCC 602 to contend that " to consult another is not to surrender but merely to seek" 13. ...To consult another is not to surrender to that other, but merely to seek assistance in the careful exercise of public power. All that we mean to emphasize is that the plain words we have already referred to, about the m....
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....d Sr. Counsel for the appellant that the appellant cannot be worse off in filing the appeal than had he not filed the appeal. J. The learned Sr. Counsel has further drawn our attention to the letter of 03.09.2020, wherein the Directorate of Enforcement, duly informed the details of pending FEMA and PMLA cases to the appellant. It was only thereafter, that the permission for corporate guarantees were granted by the appellant. Submissions of the learned Sr. Counsel for the respondent 16. On the other hand, Mr. Tripathi learned Sr. Counsel appearing on behalf of the respondent has stated that the aggregate financial commitment of the respondent in its three overseas subsidiary companies was as under:- Name of Overseas Direct Subsidiaries UIN No. Direct Investment Equity shares* Loans* Corporate Guarantees issued* Total (in USD)* JSPML NDWAZ20070042 102.84 370 864.5 1337.34 SOL NDWAZ20130244 22.35 NIL NIL 22.35 JSB SA NDWAZ20070365 148.59 NIL 0.32 148.91 TOTAL 273.78 370.0 864.82 1508.60 *All Figures in USD and are in millions 17. The respondent, its wholly owned ....
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....iew of the pendency of the previous Writ Petition and in deference to the interim orders passed by this Hon'ble Court therein granted approval on conditions set out in therein. It is submitted that the conditions imposed in the letter of 09.09.2020 are not only in line with the FEMA ODI Regulations but also in line with the order passed by this Hon'ble Court and are necessary to protect the interests of the ED pending the adjudication of the previous Writ Petition. It is submitted that in view of the aforesaid, granting unconditional permission to the transactions as proposed by the Petitioner would amount to Respondent's failure in discharge of its statutory duties." 24. The learned Sr. Counsel has further stated that it is evident from the entire correspondence, pleadings & documents on records that at best the ED has only expressed "a reservation" and expressing a reservation cannot be construed reason for rejection of permission to remit foreign exchange. 25. The learned Sr. Counsel has further stated that some investigations & inquiries have been pending against the respondent. It is in this view of the matter that each and every permission that has been granted to the r....
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....hall furnish an undertaking from the Board of Directors that if for some reason this court passes a direction to the petitioner to deposit the said remitted amount amounting to 55 million USD, the petitioner shall forthwith deposit the same in court. (ii) The petitioner shall give an undertaking that it has unencumbered assets worth 60 million USD or above and that the petitioner shall not sell, alienate or transfer or encumber these assets without prior permission of this Court." 31. The learned Sr. Counsel submits that even today they are ready to give an undertaking from the Board of Directors that if for some reason this court passes a direction to the respondent to deposit the said remitted amount amounting to 241.5 million USD, the Respondent shall forthwith deposit the same in court. As well as an undertaking that it has unencumbered assets worth 241.5 million USD or above and that the respondent shall not sell, alienate or transfer or encumber these assets without prior permission of this Court. 32. Learned Sr. Counsel for the respondent has further argued that the appellant in the past has given permissions four times for Corporate guarantee namely 33. Af....
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....d Hanuman Prasad case becomes irrelevant. Hence, we hold that even if we look at the reasons for rejection contained in the order dated 30.12.2019, the reasons are arbitrary, whimsical and do not further the scheme of Foreign Exchange Management Act. B. The reliance on word "inter alia" under Regulation 9(3) We have considered the arguments of the learned Sr. Counsel for the appellant as well as learned Sr. Counsel for the respondent. We are of the view that Regulation 9(3) the word "inter alia" of FEMA ODI Regulations must take its colour from the scheme, drift and tenor of the Act as well as Regulations. The FEMA ODI Regulations do not contemplate any role of the third party or the agency for approval or for prior approval, least of all investigating agency. The only mention of pending investigation is under Regulation 6(2) (iii) ie. If the Indian Party is under RBI caution list/lists of defaulters or under investigation by an investigation/enforcement agency or by a regulatory body. The very fact that Regulation 9(3) makes a conscious omission of pending investigations, by an investigation/ enforcement agency, further strengthens our opinion that merely an on-g....
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....ere has been no concealment of any material, fact or information which was relevant to the issue in controversy and which has not been brought to the notice of the learned Single Judge intentionally or malafidely, by the respondent. Hence, the learned Single Judge has not adverted to the preliminary objections raised in the counter affidavit. D. No finding against ED could have been given without ED being a party. We are unable to agree with this contention of the appellant as there is no finding given against the ED by the learned Single Judge. The learned Single Judge in Para 38 of the impugned order and judgment dated 04.12.2020 has observed merely that there is nothing on record of the writ court which shows that any demand appears to have been raised by the ED on the respondent. The learned Single Judge has further held that DOE has enough power under various statutory regimes to attach properties and assets of the defaulter individual. E. The appellant has rejected the application of the respondent at the behest of ED. The learned Sr. Counsel has relied on State of Bihar v. Asis Kumar Mukherjee (Dr) (1975) 3 SCC 602 to contend that....
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....l commitment amounting to USD 241.5 million and an undertaking that it had unencumbered assets worth USD 241.5 million but the same was not acceptable to the respondent. Be that as it may, it is clear that the letter of 09.09.2020 was issued by the respondent after the so-called Panama/Mauritius Leaks and there is no justification or satisfactory explanation as to why the permission was granted even as late as 09.09.2020. Moreover, the learned Sr. Counsel for the appellant had relied on the Judgment M/s. Mahabir Jute Mills LTD., Gorakhpore Vs. Shri Shibban Lal Saxena and Ors to urge that the very fact that the appellant chose not to challenge the order and in fact comply with the same cannot be held against them. The said judgment need not detain us as we are of the opinion that the order dated 30.12.2019 is itself flawed. Hence, denial of permission of 30.12.2019 by the respondent is flawed. G. No amount of unencumbered asset can be ordered as a condition for granting permission The said ground has been raised by the learned Sr. Counsel for the appellant that no amount of unencumbered assets can be ordered as a condition for granting permission ....
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..... (2012) 8 SCC 384. 42. The Hon'ble Supreme Court has stated that a necessary party is the person who ought to be joined as the party in the proceedings and in whose absence an effective decree cannot be passed by the court. 43. A proper party is a person whose presence would enable the court who completely, effectively and properly adjudicate upon all matters and issues, though he may not be the person in favour of or against whom a decree is to be made for the reasons we have elaborated in our judgment dated 26.03.2021. 44. We feel that DOE is neither a proper nor a necessary party to the present proceedings as no relief is claimed against DOE ii. The disputes in question can be effectively, completely and properly be adjudicated in the absence of applicant. 45. In addition we are also persuaded by the fact that there is no averment in the application as to why DOE chose not to file a similar application for impleadment in the original writ proceedings and has only come up for the first time in the present appeal. The application is totally silent on the said ground. In this view of the matter we find no merit in the application and the same is dismissed. ....
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....Aug-19 30 24.06.2019 20,00,000 03-Aug-19 31 25.06.2019 10,00,000 03-Aug-19 Ref No FE.CO.OID 32 25.06.2019 20,00,000 33 1546 /19.10.136/ 03-Aug-19 25.06.2019 20,00,000 03-Aug-19 2018-19 Dated 34 25.06.2019 20,00,000 03-Aug-19 14.09.2018 35 25.06.2019 10,00,000 03-Aug-19 36 25.06.2019 20,00,000 03-Aug-19 37 26.06.2019 20,00,000 03-Aug-19 38 27.06.2019 20,00,000 03-Aug-19 39 26.06.2019 10,00,000 03-Aug-19 40 27.06.2019 20,00,000 03-Aug-19 Document 2 41 27.06.2019 20,00,000 42 27.06.2019 20,00,000 03-Aug-19 03-Aug-19 43 27.06.2019 10,00,000 03-Aug-19 44 27.06.2019 10,00,000 03-Aug-19 45 27.06.2019 20,00,000 03-Aug-19 46 31.07.2019 20,00,000 02-Aug-19 47 31.07.2019 20,00,000 02-Aug-19 48 31.07.2019 10,00,000 02-Aug-19 49 02-Aug-19 20,00,000 02-Aug-19 50 02-Aug-19 20,00,000 02-Aug-19 51 02-Aug-19 10,00,000 52 02-Aug-19 20,00,000 02-Aug-19 02-Aug-19 53 27-Aug-19 20,00,000 29-Aug-19 54 27-A....