Section 7(2) in The Foreign Exchange Management (Transfer Or Issue Of Security By A Person Resident Outside India) Regulations, 2000
(2)[ Where a Scheme of Arrangement for an Indian company has been approved by a Court in India, the Indian company may issue non-convertible redeemable preference shares or debentures out of its general reserves by way of distribution as bonus to the shareholders resident outside India, subject to the following conditions, namely:a) the original acquisition of shares convertible debentures (including non-convertible/ optionally convertible/ partially convertible preference shares issued as on and up to April 30, 2007 and optionally convertible/ partially convertible debentures issued up to June 7, 2007 under Foreign Direct Investment Scheme and treated as eligible (FDI) compliant instruments under the then applicable guidelines) of the Indian company by non-resident shareholders entitling them to hold non-convertible redeemable preference shares or debentures is in accordance with these Regulations and the conditions specified in the relevant Schedule;b) in accordance with the provisions of the Companies Act, as applicable and the terms and conditions, if any, stipulated in the scheme approved by the Court in India have been complied with;c) the Indian company or transferee company or a new company has a 'No objection certificate' from Income Tax authority; andd) the Indian company shall not engage in any activity/sector mentioned in Annex A to Schedule 1 to these Regulations.]
