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Union of India - Section

Section 18A in The Foreign Exchange Management (Transfer or Issue of any Foreign Security) Regulations, 2004

18A. Creation of charge on domestic and foreign assets

(1)An Indian party may create charge (by way of mortgage, pledge, hypothecation or otherwise) on its assets [including the assets of its group company, sister concern or associate company in India, promoter and / or director] in favour of an overseas lender as security for availing of the fund based and/or non-fund based facility for its Joint Venture (JV) or Wholly Owned Subsidiary (WOS) or Step Down Subsidiary (SDS) outside India.Provided that
(a)The value of the facility is reckoned as financial commitment for the Indian party and the total financial commitment of the Indian party remains within the limit stipulated by the Reserve Bank from time to time for overseas direct investments in the JV / WOS;
(b)The overseas lender is regulated and supervised as a bank as per the law of the host country;
(c)A `No Objection' is obtained from the domestic lender in whose favour if charge is already created on the domestic assets; and
(d)Subject to the additional terms and conditions prescribed by the Reserve Bank from time to time.
(2)An Indian party may create charge (by way of mortgage, pledge, hypothecation or otherwise) on the assets of its overseas JV or WOS or SDS in favour of an AD bank in India as security for availing of the fund based and/or non-fund based facility for itself or its JV or WOS or SDS outside India.Provided that
(a)The value of the facility is reckoned as financial commitment for the Indian party and the total financial commitment of the Indian party remains within the limit stipulated by the Reserve Bank from time to time for overseas direct investments in the JV / WOS;
(b)The overseas lender is regulated and supervised as a bank as per the law of the host country;
(c)A `No Objection' is obtained from the overseas lender or domestic AD bank in whose favour if charge is already created on the overseas assets;
(d)The facility extended by the domestic AD bank to the Indian party / JV / WOS / SDS is governed by the prudential norms and other guidelines issued by the Department of Banking Operations and Development, Reserve Bank; and
(e)Subject to the additional terms and conditions prescribed by the Reserve Bank from time to time.]
Substituted by Notification No. G.S.R. 868 (E) dated 14.10.2014 (w.e.f. 19.11.2004)[Substituted by Notification No. G.S.R. 868 (E) dated 14.10.2014 (w.e.f. 19.11.2004)]
18. Pledge of shares of Joint Ventures and Wholly Owned Subsidiaries.--An Indian party may transfer, by way of pledge, shares held in a Joint Venture or Wholly Owned Subsidiary outside India as a security for availing of fund based or non-fund based facilities for itself or for the Joint Venture or Wholly Owned Subsidiary from an authorised dealer or a public financial institution in India[or to an overseas lender, provided the lender is regulated and supervised as a bank and the total financial commitment of the Indian party remains within the limit stipulated by the Reserve Bank for overseas investments in JV/WOS].[18A. Creation of charge on immovable/movable property and other financial assetsAn Indian Party, with prior approval of the Reserve Bank, may transfer, by way of mortgage/pledge/hypothecation, the immovable/movable property and other financial assets (except shares of JV/WOS) of the Indian party and its group companies as a security for availing of fund based and/or non-fund based facilities for its JV or WOS from an authorised dealer bank or a public financial institution in India or to an overseas lender, provided the lender is regulated and supervised as a bank, the total financial commitment of the Indian Party remains within the limit stipulated by the Reserve Bank for overseas investments in JV/WOS and a 'No Objection' is submitted by the Indian party and its group companies from their resident lenders.][Inserted by Notification No. G.S.R. 516 (E) dated 8.5.2013 (w.e.f. 28.3.2012)]