Delhi HC Issues Notice to Jindal Steel on RBI's Plea Over Transfer of Money to a Foreign Subsidiary

The Division Bench of Delhi High Court has issued a notice to Jindal Steel and Power Ltd on a plea moved by the Reserve Bank of India challenging single judge bench order in a matter related to the JSPL's transfer of money to its foreign subsidiary.

The Bench of Justice Vibhu Bakhru and Justice Prateek Jalan on Wednesday issued a notice to Jindal Steel and sought reply on RBI plea challenging single bench order and slated the matter for January 15, 2021.

Earlier this month, the Delhi High Court had allowed Jindal Steel and Power Limited (JSPL) to transfer money to its foreign subsidiaries.

The single bench of High Court in a recent judgement clarified Regulation 6 and 9 of the RBI FEMA Regulations 2004.

"The powers and discretion of the RBI in providing approval for remittance by an Indian company to its foreign subsidiaries have been clarified and reinforced by the judgement. If an Indian entity does not fall in the ambit of Regulation 6 for making a direct investment in a joint venture or wholly-owned subsidiary outside India under the automatic route, Regulation 9 provides that it may apply to RBI as per specified process," it had said.

Advocate Parag P Tripathi and Advocate Vijay Aggarwal represented the JSPL. The matter was remanded back to RBI to reconsider the application made by the firm afresh as per law in accordance with the principles noted above.

The Court's judgement had stated that RBI cannot revoke its nod to remit money at the behest of ED.

"RBI cannot stop remittance of money merely on basis of ED's probe against JSPL. Manifest from the reading of Regulation 6 and 9 is 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 a joint venture or wholly-owned subsidiary outside India, etc," read the court order.

"For approvals under Regulation 9, Regulation 9(3) spells out the criteria to be adopted by RBI while considering an application. It is a settled position in law that an authority cannot share its power with someone else or allow someone else to dictate to it by declining an act or by submitting to their wishes and instructions. If such be the case, then the resulting decision is ultra vires and void. In the present case RBI acting on behest of the ED amounts to the impugned order being clearly vitiated," it said.