Delhi High Court - Orders
Jindal Steel And Power Limited vs Reserve Bank Of India on 19 June, 2020
Author: Jayant Nath
Bench: Jayant Nath
$~A-12
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ W.P.(C) 3601/2020
JINDAL STEEL AND POWER LIMITED ..... Petitioner
Through Mr. Parag Tripathi, Sr. Adv.
And Mr.Gopal Jain, Sr.Adv. with Mr Saket
Sikri, Mr.Vijay Agarwal,Mr. Naman
Joshi,Mr.Gurpreet Parwanda,Mr. Mudit
Jain,Ms. Priya Singh, Mr. Manish
Kharbanda, Advs. Mr. Srinivas Ramaswamy
and Ms Meera Menon, Advs.
versus
RESERVE BANK OF INDIA ..... Respondent
Through Mr.Atul Sharma along with
Mr.Abhinav Sharma and Ms.Abhilasha
Singh, Advs. for Respondent- Reserve Bank
of India
CORAM:
HON'BLE MR. JUSTICE JAYANT NATH
ORDER
% 19.06.2020 This hearing is conducted through Video Conferencing.
W.P.(C) 3601/2020 & CM No.12827/2020
1. This writ petition is filed seeking the following relief:
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;
W.P.(C) 3601/2020 Page 1
2. The case of the petitioner is that it has wholly owned subsidiaries (WOS) including Jindal Steel & Power (Mauritius) Ltd. (JSPML), Sky High Overseas Limited and Jindal Steel Bolivia S.A. The petitioner states to have made overseas direct investment and has also undertaken financial commitments for the afore-noted subsidiaries after getting approval from RBI through SBI which is an authorized dealer under the Foreign Exchange Management Act. The petitioner states that a total direct investment in equity shares of 172.64 million dollars has been made. Similarly, there are loans of 307.61 million US dollars. The petitioner has also given a corporate guarantee of 864.82 million dollars.
3. It is further stated that the petitioner and its wholly owned subsidiary JSPML and its lenders have restructured payment of aforesaid due amount to lenders by restructuring agreement dated 07.02.2018. Under the said agreement a sum of USD 153 million was to be paid on or before 31.03.2020. Accordingly, the petitioner made an application on 03.09.2019 to respondent through its authorized agent for remittance of USD 300 million to JSPML to fulfil its debt obligations. However, the application of the petitioner was rejected by the respondent by e-mail dated 30.12.2019 on the ground that "reservations expressed by the Enforcement Directorate".
4. As there was delay on the part of the respondent, the remittance payable on 31.03.2020 was re-negotiated with the lenders, the said amount payable was renegotiated and an agreement was signed on 29.05.2020. It is pleaded that a sum of Rs.75 million US dollars has to be remitted by 24.06.2020 and another 15 million dollars has to be remitted by 30.06.2020.
W.P.(C) 3601/2020 Page 2
5. I have heard learned counsel for the parties. Learned senior counsel for the petitioner has strongly urged that the entire transaction, namely, the loans of 279.5 million dollars and the corporate guarantee of USD 865 million have been given by the petitioner after taking due permission from RBI. It is also urged that since 2015 there has been no fresh inquiry under FEMA or PMLA initiated by the law enforcement agencies. The old inquiries which are of insignificant amounts continue to be languishing. Despite pendency of those inquiries it is pleaded that several permissions have been given by RBI earlier.
6. Now, for no reason merely on the saying of the concerned Enforcement Directorate, permission is being refused to the petitioner. It is also pleaded that under Regulation 6 which is the automatic route for making payment without permission from RBI, the petitioner could have done so only in case no investigation is going on by the Law Enforcement Agencies. He further submits that as investigation by agencies are going on the petitioner has chosen to approach the RBI under Regulation 9. Under Regulation 9 it is pleaded that no such permission is required. He further states that unless urgent permission is granted by this court to pay the agreed instalment of loans noted above, namely, total of 90 million US dollars by 30.06.2020, the petitioner would be in default of the guarantees given and also the credit rating of the petitioner would drastically fall making it very difficult for the petitioner to carry on business.
7. Learned counsel appearing for the RBI has pointed out that the permission has been declined on the saying of the Enforcement Directorate. He has in Court shown the communications dated 14.08.2019 and 03.12.2019 from the Directorate of Enforcement. He relies upon the W.P.(C) 3601/2020 Page 3 communication dated 14.08.2019 which mentions a fresh inquiry.
8. I may first look at the relevant regulations issued by RBI being notification no. FEMA 120/RB-2004 dated 17.07.2004 which reads 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 as on the date of the last audited balance sheet;
Explanation: - For the purpose of the limit of 100% of the net worth the following shall be reckoned, namely:
(a) cash remittance by market purchase and /or equivalent rupee investments in case of Nepal and Bhutan
(b) capitalisation of export proceeds and other dues and entitlements as mentioned in Regulation 11;
(c) fifty per cent of the value of guarantees issued by the Indian party to or on behalf of the joint venture company or wholly owned subsidiary.
(d) investment in agricultural operations through overseas offices or directly
(e) External Commercial Borrowing in conformity with other parameters of the ECB guidelines.
Notwithstanding anything contained in these Regulations investment in Pakistan shall not be permitted.
W.P.(C) 3601/2020 Page 4
(ii) The direct investment is made in an overseas JV or WOS engaged in a bonafide business activity.
(iii) The Indian Party is not on the Reserve Bank's Exporters caution list /list of defaulters to the banking system circulated by the Reserve Bank or under investigation by any investigation /enforcement agency or regulatory body.
(iv) The Indian party has submitted up to date returns in form APR in respect of all its overseas investments;
........
Similarly, Regulation 9 reads as follows:
"9. Approval of the Reserve Bank in certain cases (1) An Indian Party, which does not satisfy the eligibility norms under Regulations 6 or 7 or 8, may apply to the Reserve Bank for approval.
(2) Application for direct investment in Joint Venture/Wholly Owned Subsidiary outside India, or by way of exchange for shares of a foreign company, shall be made in Form ODI, or in Form ODB, as applicable......"
9. What follows from the reading of the above regulations is that in case an Indian party does not satisfy the eligibility norms of Regulation 6 then it may apply for RBI for approval. It is Regulation 6 which states that permission cannot be given in case the investigations are pending by the Law Enforcement agencies. Regulation 9 does not provide any such stipulation. Hence, prima facie the petitioner was correct in having approached RBI under Regulation 9.
10. I also cannot help noticing that the petitioner has filed a chart showing that permissions have been given by RBI on 24.03.2015, 20.04.2018, W.P.(C) 3601/2020 Page 5 14.09.2018 and 10.12.2018. The corporate guarantee, hence, for 865 million USD has been given after prior permission of RBI. These permissions have been given as late as in 2018. Learned senior counsel for the petitioner has vehemently argued that no FEMA or any other investigation has been initiated by the law enforcement agencies after 2015.
11. Learned counsel for RBI has pointed out to some inquiry initiated recently as mentioned in communication dated 14.08.2019 by Enforcement Directorate. The petitioner refutes this. I cannot help noticing that the corporate guarantee and the loans have prima facie been taken with the prior permission of RBI. It would hardly be appropriate for the RBI to now let the petitioner go in default and dishonour its corporate guarantee because some investigation proceedings are pending by law enforcement agencies which appears to have been pending since 2015. In fact, as noted above while these proceedings were pending as late as in 2018, RBI has given permission to the petitioner. The petitioner has made a prima facie case.
12. In case the necessary permission for transmission of 90 million USD is not granted, as sought for, it is manifest that irreparable loss and injury would be caused to the petitioners as their credit rating would get downgraded.
13. In these facts and circumstances, I pass the following directions:-
The respondent shall permit the petitioner to transmit the sum of 75 million USD forthwith, the respondent will also permit the petitioner to transmit another sum of 15 million USD by 30.06.2020 as has been prayed for. This permission is however subject to the following:
(i)The petitioner shall furnish an undertaking from the Board of Directors that if for some reason this court passes a direction to W.P.(C) 3601/2020 Page 6 the petitioner to deposit the said remitted amount amounting to 90 million USD, the petitioner shall forthwith deposit the same in court.
(ii)The petitioner shall give an undertaking that it has unencumbered assets worth 100 million USD or above and that the petitioner shall not sell, alienate or transfer or encumber these assets till the next date of hearing.
14. Issue notice. Learned counsel for the respondent/RBI Mr. Atul Sharma accepts notice. Counter affidavit be filed within three weeks, as sought for. Rejoinder, thereto, if any, be filed within one week.
15. List on 20.07.2020.
JAYANT NATH, J
JUNE 19, 2020
n
W.P.(C) 3601/2020 Page 7