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TMI Blog2021 (4) TMI 82X X X X Extracts X X X X X X X X Extracts X X X X ..... 9, we are also required to see that the reasons so mentioned are not arbitrary, whimsical and in accordance with the scheme of the FEMA. The reasons for rejection must be considered and also must relate to the dominant purpose of the FEMA Regulations which is conservation of Foreign Exchange. The reason contained in the e-mail of 30.12.2019 namely reservation expressed by DOE/on-going investigations and in the letter of 03.12.2019 namely conducting investigations against M/s Jindal Steel Power under FEMA in four cases and conducting investigations under PMLA in three cases, cannot be a ground for denial of permission. The appellant cannot deny approval merely on the premise of pending investigation. It is not the case of the RBI, in the appeal, counter affidavit in the writ petition or argued before us that the remittances made in the past by the respondent have been misused. Till date pursuant to the permission of the RBI the respondent has remitted a total amount of 241.14 million USD (USD 90 million+ USD 54.99 million+ USD 96.15 million). 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ual. The appellant has rejected the application of the respondent at the behest of ED - We have already, while adverting to the arguments of the learned Sr. Counsel for the appellant in ground (A) held that the reasons for rejection have been merely the apprehension expressed by the ED. The said apprehension of the ED is neither in spirit of the scheme of FEMA nor Regulation 9(3). The reliance of RBI on the apprehensions expressed by ED in its e-mail of 30.12.2019 and the letter of 03.09.2020 itself has been held by us to be incorrect and hence, the rejection by the appellant dated 30.12.2019 is incorrect. In view of the above, the reliance placed on the judgment State of Bihar v. Asis Kumar Mukherjee (Dr) [ 1974 (12) TMI 74 - SUPREME COURT] is misplaced. The appellant taking u-turn by taking permission - During the course of arguments the learned Sr. Counsel for the respondent has categorically made the statement that they would give a Board Resolution to deposit equivalent amount of the said financial 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Zoheb Hossain, Special Counsel for ED and Mr. Amit Mahajan, CGSC for Impleading Applicant/ED. JUDGMENT: JASMEET SINGH, J 1. The present appeal has been filed by the Reserve Bank of India (being the respondent in W.P.(C) No. 3601/2020 titled Jindal Steel Power Limited V/s Reserve Bank of India) being aggrieved by the order and judgment dated 04.12.2020. 2. The respondent (original petitioner in W.P.(C) 3601/2020,) herein namely, 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 ste ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions ) and more particularly under Regulation 9, the approval of RBI is subjective and based upon RBI s satisfaction. (vi) The RBI under the FEMA is a regulator of Foreign Exchange and has to see the adverse effects on the economy if permission for remission is granted. 7. The learned Single Judge considered the objections of the appellant and held as under:- a) The appellant rejected the application 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ments of the learned Sr. Counsel for the appellant is that the reason for rejection communicated to the respondent on 30.12.2019 was an administrative action and unless and until a Statute/Regulation requires decision to be given, administrative decisions do not require reasons to be given in writing . 2. Learned Sr. Counsel has further contended that even though the order dated 30.12.2019 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 Shr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 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 sati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unter affidavit has raised the following preliminary objections (i) lack of territorial jurisdiction; (ii) non joinder of necessary proper party, ie. Enforcement Directorate; (iii) Delays and laches; and (iv) Concealment of material facts and information. 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 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition of granting permission as the violations are Foreign Exchange Violation. The principle in Foreign Exchange Violations is to conserve the foreign exchange so that valuable foreign exchange does not leave the country. Unencumbered assets in INR cannot be a substitute for Foreign Exchange Violations. I. The learned Sr. Counsel has argued before us that the impugned judgment does not direct any permission to be given to the respondent. It is the submission of the learned 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 wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the respondent has stated that even the judgment relied upon by the appellant namely the E.G. Nambudir i case states that competent authority has no license to act arbitrarily, he must act in a fair and just manner . 21. The learned Sr. Counsel for the respondent has argued that even assuming without admitting that the reasons can be looked into, the bare perusal of the reasons clearly shows that the same are arbitrary and whimsical. In support, the learned Sr. Counsel for Respondent has drawn our attention to argue that the reasons communicated in the e-mail of 30.12.2019 as well as in the letter of 03.12.2019 only shows that the Directorate of Enforcement has indicated (a) pending of FEMA and PMLA cases. (b) in view of the above DOE has objections. 22. The learned Sr. Counsel for Respondent submitted that even after the letter of 03.12.2019 the appellant has granted permission to respondent on 09.09.2020. As per the letter of 09.09.2020, letter dated 09.09.20 reads as the appellant had no objection from the FEMA angle. 23. In para 22 of counter affidavit filed by the appellant in the writ petition filed by the respondent, the appellant has clearly st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... operty derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence or the value of any such property; 29. The present case is not a PMLA violation as it is not the case of the RBI nor is the case of the appellant that the amounts of 90 million USD, 54.99 million USD and 96.15 million USD which were remitted in the past were not used for the purpose for which they were remitted. The learned senior counsel further argued that the letter dated 14th August, 2019 shows that there is not even an investigation against the respondent but only an enquiry. 30. The learned Sr. Counsel has further drawn our attention to the letter of the 03.09.2020 of DOE to state that the DOE was perfectly satisfied with the order of 24.07.2020 passed by the learned Single Judge which is reproduced herein under:- 15. In these circumstances, in my opinion, the petitioner has made out a prima facie case. The interim directions as stated in the order of this court dated 19.06.2020 are reiterated. 16. In the facts I pass the following directions:- The respondent shall permit the petitioner to transmit the sum of 54.99 million USD fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssuming for the sake of arguments that the reasons are contained in the e-mail of 30.12.2019 as well as in the letter of 03.12.2019, we are also required to see that the reasons so mentioned are not arbitrary, whimsical and in accordance with the scheme of the FEMA. The reasons for rejection must be considered and also must relate to the dominant purpose of the FEMA Regulations which is conservation of Foreign Exchange. The reason contained in the e-mail of 30.12.2019 namely reservation expressed by DOE/on-going investigations and in the letter of 03.12.2019 namely conducting investigations against M/s Jindal Steel Power under FEMA in four cases and conducting investigations under PMLA in three cases, cannot be a ground for denial of permission. The appellant cannot deny approval merely on the premise of pending investigation. It is not the case of the RBI, in the appeal, counter affidavit in the writ petition or argued before us that the remittances made in the past by the respondent have been misused. Till date pursuant to the permission of the RBI the respondent has remitted a total amount of 241.14 million USD (USD 90 million+ USD 54.99 million+ USD 96.15 million). Since, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot been referred to by the learned Single Judge. i. Lack of territorial jurisdiction We are of the view that the authorised dealer bank i.e. the entity through which overseas direct investment is sought to be made, is State Bank of India, overseas branch New Delhi. The appellant himself in communication dated 01.01.2008(page 414), has directed the respondent to approach New Delhi Regional Office. Hence, no fault is found in the order of the learned Single Judge in entertaining the writ petition. ii. ED is a proper necessary party The writ petition in the present case is impugning the order dated 30.12.2019 rejecting the respondent s request to remit funds abroad. The same has to be tested in the context of the FEMA ODI Regulations. iii. Delays and laches The challenge in the writ petition is to the impugned order of the RBI dated 30.12.2019 and the writ petition has been filed on 17.06.2020. It is pertinent to mention that on account of COVID19, there had been a complete lockdown in the country from the last week of March, 2020. Hence, to our mind there is no delay which merits dismissal of the writ petition on this account. iv. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has granted permission to the respondent ie. much after the alleged Panama/Mauritius Leaks on 14.08.2019 subject to 3. The said approval is subject to the following terms and conditions: i. IP shall furnish an undertaking from the Board of Directors, that if on the basis of its investigations DOE, for some reason, requires the IP to deposit equivalent amount of the said financial commitment amounting to USD 407 million, AUD 6.35 million and AUD 40.15 million respectively, the IP shall forthwith deposit the same with their designated AD bank. ii. The IP shall give an undertaking that it has unencumbered assets worth USD 450 million, AUD 7.00 million and AUD 45.00 million or above and that the IP shall not sell, alienate or transfer or encumber these assets without prior permission of DOE. This clearly shows that the only requirement of the RBI was i. an undertaking from the Board of Director to deposit equivalent amount and ii. give an undertaking that the respondent has unencumbered assets worth the remittance amount. During the course of arguments the learned Sr. Counsel for the respondent has categorically made the statement that they would g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irmity in the order and judgment dated 04.12.2020 of the learned Single Judge passed in W.P. (C) No. 3601/2020. Consequently, the present appeal is devoid of any merits and is dismissed along with accompanying applications. CM APPL. 1571/2020 (Impleadment) 39. The present application has been filed under Order I Rule 10 read with Section 151 of CPC by the Directorate of Enforcement seeking impleadment as a respondent in the present appeal. 40. The case set up by the DOE is that the DOE informed the appellant that an inquiry under FEMA is being initiated against the respondent and others in respect of purchase and sale of four vessels registered in the name of respondent s subsidiaries in Marshal Island during the year 2012-017. The applicant has further stated that the present proceedings will have an impact on the investigation being carried out by the DOE and hence sought impleadment in the present application as respondent. 41. The law with regard to impleadment has been settled by the Hon ble Supreme Court in Mumbai International Airport (P) LTD. Vs. Regency Convention Centre and Hotels Private LTD. And Ors. (2010) 7 SCC 417 as well as Vidur Impex And Trad ..... X X X X Extracts X X X X X X X X Extracts X X X X
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