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TMI Blog2024 (11) TMI 476X X X X Extracts X X X X X X X X Extracts X X X X ..... dent no. 5 on its proposal for investment made in the respondent no. 6 only on basis of submissions oral and documentary and documents already submitted to Committee prior to reconstitution till 17.03.2010. The reconstituted Committee under chairmanship of Sh. Bimal Julka should have afforded or given a fresh personal hearing to the petitioners no. 2 and 3 and the respondent no. 5 before according ex post facto approval to the respondent no 5. Although four members were common in Committees on 17.03.2010 and 04.08.2010 but on both occasions, Chairpersons of the Committee were different and reconstituted Committee without affording fresh opportunity to the parties and despite fact that personal hearing was given by the earlier Committee has accorded the approval to the respondent no. 5 which was in gross violation of the right to personal hearing and in turn Principles of Natural Justice. The approval to the respondent no. 5 either should have been granted by the Committee which was chaired by Ms. L. M. Vas or a fresh personal hearing must have given by the reconstituted Committed under chairmanship of Sh. Bimal Julka and failure to do so was gross violation of Principles of Natural ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essary for grant of approval to the respondent no. 5. The ex post facto approval dated 29.09.2010 was result of deliberations made in FIPB on the basis of recommendation made by Committee constituted by FIPB to examine rival contentions of the petitioners no. 2 and 3 and the respondent no. 5 about foreign investment made by the respondent no. 5 in the respondent no. 6. The petitioners no. 2 and 3 were given personal hearing by the Committee and written submissions were also submitted by the petitioners no. 2 and 3. It cannot be said that ex post facto Approval dated 29.09.2010 was granted without any reason although those reasons may not be specifically mentioned in Approval dated 29.09.2010. The argument advanced by the learned Senior Counsel for the petitioners that Approval dated 29.09.2010 was without any reason or passed without reasons does not have legal force. The contrary arguments advanced by the learned Senior Counsel for the respondents no. 5 and 6 carry legal force. In view of the fact that reconstituted Committee which recommended grant of approval to the respondent no. 5 on 04.08.2010 was not the Committee comprising same Chairperson/members which heard the petitione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s or a writ, order or direction in the nature of Mandamus ordering and directing respondent no. 2 to forthwith withdraw, cancel and revoke the impugned order viz., FC Approval No. 97 (2010) 210 (2009) dated 29th September 2010 issued by respondent no. 2 and the Impugned Amendment viz., Amendment bearing No. FC. II 97 (2010) 210 (2010) dated 10th November 2010 issued by respondent no. 2 to respondent no. 5. (c) issue an appropriate order or direction for enquiring into the conduct of respondents no. 1 to 4 and to take such action against them as is warranted in law. (d) issue a writ of mandamus or a writ, order or direction in the nature of mandamus ordering and directing the respondents to act in accordance with law and confiscate the illegal investment made by respondents no. 5 and 6 in breach of foreign Exchange Management Act. 1999 read with Press Note Nos. 1 and 3 (2005 Series). (e) for such further and other orders, directions and reliefs as the nature and circumstances of the case may require. 2. Briefly stated relevant facts are that the respondents no. 1 to 4 are the authorities of the Government of India and are under a duty to control and ensure the compliance of Foreign ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 Series) dated 12.01.2005 setting out the guidelines for approval of foreign/technical collaborations under the automatic route with previous ventures/tie up in India. Press Note No. 1 (2005 Series) stipulated that prior approval in cases where the foreign investor has an existing joint venture or technology transfer/trade mark agreement in the same field and the onus to provide requisite justification as well as proof to the satisfaction of the Government that the new proposal would or would not in any way jeopardize the interests of the existing joint venture or technology/trade mark partner or other stakeholders would be equally on the foreign investor/technology supplier and the Indian Partner. The respondent no. 1 issued Press Note. 3 (2005 Series) dated 15.03.2005 giving clarification regarding guidelines for approval of foreign/technical collaboration under the automatic route with previous ventures/tie-up in India. It is clear that the joint venture was existing on 12.01.2005 and it was necessary for the respondent no. 5 to seek prior approval of the Government of India/ Foreign Investment Promotion Board before making any investment in the same field. 2.2. The respondent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e automatic route while having an existing joint venture in India in the same field. The respondents no. 5 and 6 challenged the order dated 02.04.2007 by filing a writ petition bearing W.P.(C) No. 3443/2007 before this court which was dismissed by the learned Single Judge vide order dated 1.07.2008. The respondents no. 5 and 6 filed LPA bearing no. 387/2008 titled as Putzmeister AG, Germany others V UOI others and vide order dated 04.08. 2008 , the authorities were restrained from taking any coercive action in pursuance of order dated 02.04.2007. The Division Bench of this court without expressing any opinion on the right of the respondent no. 5 to approach The Foreign Investment Promotion Board allowed LPA to be dismissed as withdrawn vide order dated 11.08.2019 on the basis that the respondents no. 5 and 6 would be approaching the Foreign Investment Protection Board for ex post facto approval and directed that the application for approval would be decided in accordance with law. Accordingly, order dated 02.04.2007 passed by the respondent no. 1 became final and as such the respondent no. 5 accepted, admitted and acknowledged the violation of the public policy and guidelines laid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ght opinion of The Department of Legal Affairs, Ministry of Law and Justice, Government of India regarding grant of ex post facto approval under Press Note No. 1to investment of the respondent no 5 in the respondent no 6 and it was opined that ex post facto approval can be given. 2.5 The Foreign Investment Promotion Board in meeting held on 18.01.2010 has directed for constitution of the Committee under Chairmanship of Ms. L. M. Vas, Additional Secretary, Department of Economic Affairs with representation from the Department of Economic Affairs, Department of Industrial Policy and Promotion and Department of Heavy Industry as its members. The petitioners and the respondents no 5 were given personal hearing on 17.03.2010 by the Committee comprising Ms. L.M. Vas, Additional Secretary, Department of Economic Affairs-Chairman; Mr. Govind Mohan, Joint Secretary (I and I); Mr. Prabodh Saxena. Director (FIPB), Mr. P. K. Bagga, Officer on Special Duty (CM I), Mr. Deepak Narain, Director, Department of Industrial Policy and Promotion and Mr. Sushil Lakra. Industrial Adviser, Department of Heavy Industry. The said Committee was reconstituted by Office Memorandum dated 29.07.2010 and Shri. Bi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed and scraped with effect from 01.04.2011 and as such no approval is required by the respondent no. 5 for investment in the respondent no. 6. The respondent no. 2 is an expert and high-powered executive agency and empowered to examine foreign investment proposals and to take appropriate decisions in the matter connected with foreign direct investment. FIPB is consisting of senior government officials and functionaries. FIPB has considered the foreign investment proposal of the respondent no. 5 carefully and judiciously. FIPB Committee arrived at conclusion that the respondent no. 5 and the petitioners no. 2 3 parted their ways in July, 2005 in acrimonious fashion and based on various findings opined that no jeopardy caused to the petitioners. The Report of FIPB Committee was placed before 158th meeting of FIPB held on 10.09.2010 and FIPB considered background of the proposal in detail. The proposal of the respondent no. 5 and the objections and comments of the petitioners were considered and examined by FIPB in comprehensive manner. The decision of FIPB was based on objective, reasonable and transparent considerations. The decision of the respondent no. 2 was based on advice, deli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petition was dismissed vide order dated 01.07.2008. The respondent no. 5 and 6 filed LPA bearing no 387/2008 to challenge order dated 01.07.2008 wherein the respondent authorities were restrained from taking any coercive action in pursuance of letter dated 02.04.2007. The respondent no. 5 decided to withdraw LPA and to approach FIPB in the matter. The Division Bench allowed the respondent no. 5 to withdraw the writ petition and LPA vide order dated 11.08.2009. The respondent no. 5 decided to file its investment proposal for consideration and approval by FIPB and on 06.10.2009 made an application with complete disclosure of details to FIPB for grant of ex post facto approval under erstwhile Press Note No. 1 of 2005 for investment made in the respondent no 6. The Department of Economic Affairs (FIPB Unit) forwarded application of the respondent no. 5 to the petitioners for comments. The respondent no. 5 also furnished additional information. The petitioners no. 2 and 3 submitted their comments on 20.11.2009 to the respondent no. 2 which were also forwarded to the respondent no. 5 on 12.12.2009. The respondent no. 5 also filed detail reply on 01.01.2010. The representative of the resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... licy has occurred by the respondent no. 5 by setting up of a wholly owned subsidiary in India in same field. The respondent no 5. filed writ petition bearing no 3443 of 2007 which was dismissed by the learned Single Judge of this court vide judgment dated 01.07.2008. The respondent no. 5 preferred LPA which was allowed to be dismissed as withdrawn along with writ petition vide order dated 01.07.2008 and without expressing any opinion on merit of the case allowed the respondent no. 5 to approach the respondent no. 2 for relief. The respondent no. 2 received a proposal from the respondent no. 5 and comments were called from the respondent no. 5 and the petitioner no. 1. The respondent no. 2 in its 149th meeting held on 18.01.2010 directed for constitution of a committee under Chairmanship of Additional Secretary, Department of Economic Affairs to examine the rival contentions of the respondent no. 5 and the petitioners and to make recommendations. The Committee also included representatives from Department of Industrial Policy Promotion, Department of Economic Affairs and Administrative ministries. Accordingly, Committee was constituted. Notices were issued to both the parties to rep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7.03.2010 wherein a personal hearing was granted to the petitioners and the respondent no. 5. The parties also filed their written submissions before the Committee and the Committee in third meeting held on 04.08.2010 after dealing with the issues raised by the petitioners and the respondent no. 5 in detail decided to recommend to FIPB to accord ex post facto approval to the respondent no. 5 with certain conditions and also referred names of the members present in the meeting held on 04.08.2010. He argued that there was a change in the composition of the Committee but four members of the Committee remained the same and as such there was no violation of Principles of Natural Justice and placed reliance on Madhya Pradesh Industries Ltd. V Union of India others, 1965 SCC OnLine SC78 and Union of India another V Jesus Sales Corporation, (1996) 4SCC 69. He further stated that the Committee considered the arguments advanced by the petitioners in its meeting held on 04.08.2020. He further argued that the petitioners have failed to demonstrate whether any prejudice was caused to the petitioners. The petitioners were well aware about change in the constitution of the Committee and never rai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which forms the bedrock of the constitutional order. 7.2. The Supreme Court in Southern Power Distribution Company Limited of Andhra Pradesh (APSPDCL) another V M/s Hinduja National Power Corporation Limited another, 2022 Livelaw (SC) 117 and observed as under:- Every action of a State is required to be guided by the touchstone of non-arbitrariness, reasonableness and rationality. Every action of a State is equally required to be guided by public interest. Every holder of a public office is a trustee, whose highest duty is to the people of the country. The Public Authority is therefore required to exercise the powers only for the public good. 7.3. The principles of natural justice are equally applied in purely administrative functions. The Supreme Court in A.K. Kraipak V Union of India, AIR 1970 SC 150 observed that the principles of natural justice are applicable to administrative inquiries and established that observance of principles of natural justice in decision making process of the administrative body having civil consequences. The Supreme Court again in Neelam Mishra V Harinder Kumar Paintal, AIR 1990 SC 1137 observed that administrative order involving civil consequences m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 and thereafter comments were invited from the respondent no. 5 and the petitioner no. 1. A Committee was constituted as per decision taken by the respondent no. 2 in its 149th meeting held on 18.01.2010 under Chairmanship of Additional Secretary, Department of Economic Affairs to issues between the respondent no. 5 and the petitioners and to make recommendations. Ms. L.M. Vas, AS (DS); Sh. Govind Mohan, Joint Secretary, DEA; Sh. Prabodh Saxena, Director, DEA; Sh. P. K. Bagga, OSD (CM I), DEA, Sh. Deepak Narain, Director, DIPP and Sushil Lakra, Industrial Advisor, DHI were the Chairperson/ members of the Committee and the second meeting of the Committee was held on 11.06.2010. Sh. Bimal Julka, Director General, Directorate of Currency replaced Ms. L. M. Vas as Chairperson of the Committee. The third meeting of the Committee was held on 04.08.2010 under Chairmanship of Sh. Bimal Julka and the respondent no. 2/FIPB on basis of opinion of the Committee accorded ex post facto approval to the respondent no. 5 vide letter dated 29.09.2010 which was subsequently amended vide letter dated 10.11.2010. 9. The petitioners did not allege that proper, appropriate and meaningful opportunity of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duty on the State Government to give a personal hearing and the procedure prescribed by the Rules impose a duty on the Secretary to hear and the Chief Minister to decide. It was observed that the divided responsibility is destructive of the concept of judicial hearing and such a procedure defeats the object of personal hearing. The personal hearing enables the authority concerned to watch the demeanour of the witnesses and clear up its doubts during the course of arguments and the party appearing to persuade the authority by reasoned arguments to accept this point of view. It was further held that if one person hears and another decides, then personal hearing becomes an empty formality. The Coordinate Bench of this court in Hyundai Rotem Company V Delhi Metro Rail Corporation which is also cited by the learned Senior Counsel for the petitioners also observed that if one authority is hearing and another authority is passing the order then it defeats the very purpose of personal hearing. 11. In the present case, the respondents no. 1 and 2 in counter affidavit alleged that it is not the general practice to ask the parties to participate in FIPB meetings but in cases where personal he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent made in the respondent no. 6 only on basis of submissions oral and documentary and documents already submitted to Committee prior to reconstitution till 17.03.2010. The reconstituted Committee under chairmanship of Sh. Bimal Julka should have afforded or given a fresh personal hearing to the petitioners no. 2 and 3 and the respondent no. 5 before according ex post facto approval to the respondent no 5. Although four members were common in Committees on 17.03.2010 and 04.08.2010 but on both occasions, Chairpersons of the Committee were different and reconstituted Committee without affording fresh opportunity to the parties and despite fact that personal hearing was given by the earlier Committee has accorded the approval to the respondent no. 5 which was in gross violation of the right to personal hearing and in turn Principles of Natural Justice. The approval to the respondent no. 5 either should have been granted by the Committee which was chaired by Ms. L. M. Vas or a fresh personal hearing must have given by the reconstituted Committed under chairmanship of Sh. Bimal Julka and failure to do so was gross violation of Principles of Natural Justice. Although it is stand of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e pretence of compliance with it would not satisfy the requirement of law . It was observed in Maneka Gandhi V Union of India, AIR 1990 SC 1984 that giving of reasons is a healthy check against abuse or misuse of power. The requirement of duty to give reasons was further crystallized in S.N. Mukherjee V Union of India, AIR 1990 SC 1984 and reasons due to which a reasoned decision must be passed were discussed. It was observed that reasoned decision: (i) guarantee consideration by the authority; (ii) introduce clarity in decisions; and (iii) minimize chances of arbitrariness in decision-making thereby ensuring fairness in the process. It was observed as under: In our opinion, therefore, the requirement that reason must be recorded must be recorded should govern the decisions of govern the an administrative authority exercising quasi judicial functions irrespective of fact whether the decision is subject to appeal, revision or judicial review. It may, however, be added that it is not required that the reasons should be as elaborate as in the decision of a court of law. The extent and nature of the reasons would depend on particular facts and circumstances. What is necessary is that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that power after applying its mind to the facts and circumstances of the case. The authority should not act mechanically in exercise of discretion. The Supreme Court in East Coast Railway V Mahadev Appa Rao, (2010) 7 SCC 2794 observed that every order passed by a public authority must disclose due and proper application of mind by the person making the order. 15. Even at risk of repetition, it is stated that the petitioner no. 1 was incorporated due to execution of Joint Venture Agreement between the petitioners no. 2 and 3 and the respondent no. 5. The respondent no. 5 set up the respondent no. 6 on or about 14.06.2005 and made foreign investment therein. The petitioners made complaints to the respondents no. 1 to 3 for violation of Press Notes No. 1 3. The respondent no. 1 passed an order dated 02.04.2007 holding that the respondent no. 5 had violated FDI Policy in setting the respondent no. 6. The respondent no. 5 vide order dated 11.08.2009 passed in LPA bearing no 387 of 2008. LPA was permitted to approach FIPB for appropriate relief. Thereafter the respondent no. 5 filed an application/proposal on 6.10.2009 for grant of ex post facto approval under Press Note No. 1 (2005 Seri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of approval on 29.09.2010 by the respondent no. 2 to the respondent no. 5 needs fresh reconsideration again by the Committee which shall be hearing the petitioners no. 2 and 3 and the respondent no. 5 on the proposal of the respondent no. 5 and shall be taking decision on the proposal made by the respondent no. 5. Accordingly, the respondent no. 2/Ministry of Finance/FIPB is directed to constitute fresh/new Committee to hear afresh on proposal of the respondent no. 5 stated to have been made on 06.10.2009 vide application bearing Ref. No. 210/2009-FC.1 within six weeks from date of this judgment and said Committee shall hear the petitioners no. 2 and 3 and the respondent no. 5 on proposal of the respondent no. 5 and thereafter same committee shall take appropriate decision on the proposal of the respondent no. 5. It is made clear that there shall not be any change in composition of the Committee or reconstitution of the Committee in any circumstance. The new Committee shall afford opportunity of being heard to the petitioners and the respondent no. 5 which shall also include filing of written submissions if any by the petitioners no. 2 and 3 and the respondent no. 5. The freshly co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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