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TMI Blog2020 (12) TMI 187X X X X Extracts X X X X X X X X Extracts X X X X ..... r-affidavit would normally not be accepted. It is settled position of law that the respondent cannot improve its case in this manner. In the reasons that have been given for rejecting the application of the petitioner, there is absolutely no reference to any of the aforesaid factors stipulated in Regulation 9(3) of the 2004 Regulations as a ground for rejecting the application of the petitioner. The criteria stated in Regulation 9(3) may not be exhaustive and other issues may be taken into account if facts so warrant. However, no such facts are stated by the respondent. It is manifest that the said order dated 30.12.2019 is wholly contrary to Regulation 9 in question. Can RBI, the respondent while dealing with an application filed under Regulation 9 reject the same at the behest of any other statutory agency like CBI, Enforcement Directorate, etc.? - only basis for passing the impugned order is the objections raised by the ED. It is settled position of law that an authority cannot share its power with someone else or allow someone else to dictate to it by declining an act or by submitting to their wishes or instructions. In this context reference may be had to the ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... porate guarantee or bank guarantee or through other permitted mode from Indian Bank for meeting its debt obligations; 2. The petitioner is said to be a company with business interest in steel manufacturing, power generation, mining of iron ore, lime stone and coal. It is claimed that the petitioner has a business strategy of both forward and backward integration so as to be the most competitive company in the market. To optimise the cost of raw material required for manufacturing as also to have a linkage to raw material like coking coal, the petitioner set up various overseas subsidiaries including (i) Jindal Steel Power (Mauritius) Ltd. (also called JSPML), a company incorporated under the laws of Mauritius; (ii) Skyhigh Overseas Ltd. (also called SOL), a company incorporated under the laws of Mauritius; and (iii) Jindal Steel Bolivia (also called JSBSA). 3. It is stated that the petitioner has been making overseas direct investment and has also undertaken other financial commitments in respect of the aforesaid subsidiaries after getting them approved from RBI through SBI. It is stated that as on 31.03.2020, the aggregate financial commitment of the petitioner in the af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y Foreign Security) Regulations, 2004(hereinafter referred to as Regulations 2004 ), every Indian party is entitled to make direct investment upto 400% of its net worth in a joint venture or wholly owned subsidiary outside India for an amount upto 1 billion US Dollars in a financial year without any approval of RBI or any other agency. The Regulation also requires that in case the amount of direct investment in a joint venture or wholly owned subsidiary outside India in a financial year is above 1 billion USD or if an Indian party is in Reserve Bank s Exporters caution list or list of defaulters to the banking system circulated by RBI or under investigation by any investigation/enforcement agency or regulatory body, prior approval of RBI for making direct investment in a joint venture or wholly owned subsidiary outside India is required under Clause 9 of the said 2004 Regulations. 6. The writ petition lists out trials and investigations that the petitioner is facing. The details of which are as follows:- 23.1 A case bearing CC No. 248/2019 (erstwhile CC No. 44/2016 in RC No. 219 2013 E 0006) is pending before the Ld. Special Judge CBI, Rouse Avenue Courts, New Delhi agai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tioner and other unknown public servants under sections 120 B read with 409 420 of IPC and section 13 (1) (C), read with section 13 (1) (d) of the PC Act, in connection with the Gare Palma IV/1 coal block in Chhattisgarh. The matter is pending investigation since 2014. 23.6 Notice bearing number F. No. ECIR/24/DLZO/2014/AD/ VM has been received by the Petitioner from the Enforcement Directorate with regard to an investigation being made under the provisions of the PMLA in respect to Gare Palma IV/I Coal block. The relevant documents have been submitted to the office of Enforcement Directorate, and the matter is pending investigation. 23.7 Notice bearing No. 1044/PE 219/2012/E/0004/CBI/EOIII New Delhi dated 25.3.2020 has been received from CBI for preliminary enquiry being conducted with regard to Petitioner seeking allocation of Utkal-D coal block in December 1999. It is pertinent to mention that the Utkal-D coal block was formally not allocated to Petitioner. The relevant documents have been submitted to the office of CBI. 7. The petitioner wishes to remit USD 300 Million to JSPML by way of equity subscription/loan/corporate guarantee/bank guarantee or through o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Petition. (iv) It is further pleaded that the petitioner has concealed material information about investigations and enquiries it is facing at the hands of ED and is, therefore, disentitled from claiming any equitable reliefs. It is claimed that the following investigations/enquiries which are mentioned by ED in its letter dated 14.08.2019 and 03.12.2019 have been concealed by the petitioner. Investigations are underway against the Petitioner for its offshore investment and disinvestment in its WOS JSPML. Investigation against the Petitioner regarding unrealized export proceeds. Investigation in this case was initiated on the basis of communication received from SIT which in turn was received from RBI. Unrealised export proceeds for an amount of ₹ 751,48,99,454/- of the Petitioner for period prior to March 2014 and March 2014 to March 2015 were reported in the said communication. In this regard clarification was sought from the concerned AD Bank, which has reported Nil pendency regarding aforesaid amount. However, one transaction of USD 9.03 Million of the Petitioner with M/s Ircon International Ltd, Bangladesh is still under investigation for suspected co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the role of the respondent as a regulator of the foreign exchange and adverse effect on our economy, if any, in case such permission is granted. 9. The counter-affidavit admits that the petitioner has wholly owned subsidiaries which have been noted above. The petitioner had undertaken certain financial commitments for the aforesaid subsidiaries after getting approval from the respondent through SBI which is an authorized dealer under the Foreign Exchange Management Act. The counter-affidavit also states that the petitioner has given a corporate guarantee of 864.82 million dollars. It is further stated that the petitioner and its wholly owned subsidiary JSPML have restructured the payment of the aforesaid due amount to lenders by restructuring agreement dated 07.02.2018. It is admitted that the petitioner had been granted permission by the respondent to remit certain sums and to furnish a corporate guarantee in relation to a loan taken by JSPML. It is further claimed that post grant of such approval, on 14.09.2018 certain enquiries/investigations have been initiated with regard to the transactions between the Petitioner and JSPML. It is in the course of such enquiry that the E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y FEMA authorities or the Enforcement Directorate cannot be a ground to reject the application of the petitioner. It is stressed that mere pendency of proceedings before the stated Authorities per se cannot be a ground to reject the application of the petitioner 13. Learned counsel for the respondent has vehemently reiterated that the petitioner are guilty of suppressing pendency of various proceedings initiated against them by the Enforcement Directorate. It has been vehemently urged that the respondent was justified in rejecting the application of the petitioner in view of the stand taken by the Enforcement Directorate. 14. I may now look at the impugned order dated 30.12.2019 by which order the application of the petitioner was rejected. The same reads as follows:- IP, Jindal Steel and Power Ltd -WOS, Jindal Steel and Power (Mauritius) Ltd, (UIN:NDWAZ20070442): Request for undertaking outward Remittance. Please refer to your letter dated October 23, 2019 on the captioned subject. 2. In this connection, we advise that your application concerning IP s request for undertaking additional financial commitment(s) to its captioned WOS was considered carefully, but ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dal Steel Power Ltd (Mauritius) as the same may result in non-availability of properties of attachment and jeopardise the ongoing investigations by this Directorate. 5. This issues with the approval of Director of Enforcement. Hence, essentially the respondent have rejected the application of the petitioner and have not granted permission for making the additional financial commitment/payment of USD 300 million on account of the objection raised by the Enforcement Directorate. 18. I may now look at the applicable regulations, namely, the Foreign Exchange Management (Transfer or Issue of Any Foreign Security) (Amendment) Regulations 2004. Regulation 6 and Regulation 9 of the said Regulations read as follows:- 6. Permission for Direct Investment in certain cases (1) Subject to the conditions specified in sub-regulation (2), (and Regulation 7 in case investment in financial services sector) an Indian party may make direct investment in a Joint Venture or Wholly Owned Subsidiary outside India. (2) (i) The total financial commitment of the Indian party in Joint Ventures/Wholly Owned Subsidiaries shall not exceed 100% of the net worth of the Indian Party a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e from India, in an existing company outside India, shall be accompanied, by the valuation of shares of the company outside India, made- (i) where the investment is more than USD 5 (five) million, by a Category I Merchant Banker registered with SEBI or an Investment Banker/Merchant Banker registered with the appropriate regulatory authority in the host country; and (ii) in all other cases, by a Chartered Accountant or a Certified Public Accountant. (b) for the purposes of investment by acquisition of shares of an existing company outside India where the consideration is to be paid fully or partly by issue of the Indian party s shares, shall be accompanied by the valuation carried out by a Category I Merchant Banker registered with the SEBI or an Investment Banker/Merchant Banker registered with the appropriate regulatory authority in the host country. (3) The Reserve Bank may, inter alia, take into account 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence in this context may be had to the judgment of the Supreme Court in the case of Mahender Singh Gill Vs. Chief Election Commissioner, (1978) 1 SCC 405 where the Supreme Court held as follows:- 8. The second equally relevant matter is that when a statutory functionary makes an order based on certain grounds, its validity must be judged by the reasons so mentioned and cannot be supplemented by fresh reasons in the shape of affidavit or otherwise. Otherwise, an order bad in the beginning may, by the time it comes to court on account of a challenge, get validated by additional grounds later brought out...... 23. In the present case, admittedly there are no reasons given. This on the face of it shows that the said impugned order is vitiated and liable to be set aside. 24. Secondly, I may for completely dealing with the case of the respondent in any case look at the reasons given by the respondent in the counter-affidavit to justify rejection of the application of the petitioner. As noted above, the counteraffidavit shows that the application of the petitioner was rejected in view of the objection raised by the Enforcement Directorate in its letter dated 03.12.2019, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te by the State. The passage from Wade and Forsyth in Administrative Law, 10th Edn., at page 269 was approved which states as follows:- Closely akin to delegation, and scarcely distinguishable from it in some cases, is any arrangement by which a power conferred upon one authority is in substance exercised by another. The proper authority may share its power with someone else, or may allow someone else to dictate to it by declining to act without their consent or by submitting to their wishes or instructions. The effect then is that the discretion conferred by Parliament is exercised, at least in part, by the wrong authority, and the resulting decision is ultra vires and void. So strict are the courts in applying this principle that they condemn some administrative arrangements which must seem quite natural and proper to those who make them. 29. Hence, where the authority which is given to a functionary is exercised, at least in part, by the wrong authority, the resulting decision is ultra virus and void. 30. Reference may also be had to another judgment of the Supreme Court in the case of Dipak Babaria Anr. vs. State of Gujarat Ors. (2014) 3 SCC 502 where the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dominant purpose and Section 47(1)(b) to (f) are only its sub-categories or illustrations. If any matter taken into consideration is not shown to be correlated to the dominant purpose or, the relationship or the effect of a particular fact, which has operated in favour of a grant is such as to show that it is opposed, on the face of it, to public interest, the grant will be bad. The power to grant permits under Section 47 of the Act is limited to the purposes for which it is meant to be exercised. Considerations which are relevant for applying Articles 14 and 19(1)(g) of the Constitution could not be foreign to the scope of Section 47(1)(a) which is fairly wide. 32. The facts and the counter-affidavit of the respondent reveal that the respondent has acted at the behest and saying of the Enforcement Directorate and has rejected the application of the petitioner by passing the impugned order dated 30.12.2019. The same amounts to the respondent acting at the behest of another Agency. The impugned order is clearly vitiated. 33. There is another aspect which persuades me to hold that the impugned order is illegal. Admittedly the commitments and transactions carried out earlier b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter the last permission was granted on 10.12.2018 for the respondent to take a stand to deny the permission other than communications received from Enforcement Directorate on 14.08.2019 and 03.12.2019 . 34. Clearly, there is no explanation why RBI seeks to set at naught the earlier permission given in this manner. 35. Clearly, while exercising powers under Regulation 9 of the 2004 Regulations, RBI has completely ignored the relevant factors and has merely at the behest of the Enforcement Directorate passed the impugned order dated 30.12.2019. Past permissions given have been ignored. I may note that there is not even a whisper anywhere that there is any attempt on the part of the petitioner to carry out an illegal transaction or that the proposed transactions are an attempt to siphon away funds out of India beyond the reach of law enforcing agencies. Clearly the rejection of the application of the petitioner on 30.12.2019 is illegal. It is also contrary to Regulation 9 of the 2004 Regulations. I accordingly quash the communication dated 30.12.2019. The matter is remanded back to RBI to reconsider the application made by the petitioner afresh as per law and in accordance wi ..... 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