HC directs RBI to consider JSPL plea to remit $300 mn to its subsidiary JSPML

New Delhi: The Delhi high court on Friday directed the Reserve Bank of India (RBI) to reconsider Jindal Power and Steel Ltd (JSPL)'s application to remit $300 million to its wholly owned Mauritius-based subsidiary, Jindal Steel & Power (Mauritius) Ltd (JSPML). The petition by JSPL had sought directions from RBI to permit it to make additional commitments and payments of $300 million to its wholly-owned subsidiary namely JSPML 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.

“... I may note that there is not even a whisper anywhere that there is any attempt on the part of the petitioner to carry out an illegal transaction or that the proposed transactions are an attempt to siphon away funds out of India beyond the reach of law enforcing agencies. Clearly the rejection of the application of the petitioner on 30.12.2019 is illegal. It is also contrary to Regulation 9 of the 2004 Regulations. I accordingly quash the communication dated 30.12.2019. The matter is remanded back to RBI to reconsider the application made by the petitioner afresh as per law and in accordance with the principles noted above. Needful be done by RBI expeditiously”, the court order reads.

The court has observed that transactions carried out pursuant to the interim orders of this court shall be treated as valid and in order. The court has relied on its earlier orders passed this year.

It added, “These undertakings were taken from the petitioner keeping into account the apprehension of the Enforcement Directorate as the said Directorate on 03.12.2019 had informed RBI that granting approval to the petitioner may result in non-availability of properties for attachment and would jeopardize the on-going investigation of the Directorate. A year has now passed since the said communication dated 03.12.2020 was issued by the Enforcement Directorate. No demand appears to have been raised on the petitioner by the ED in the past one year.”

The court has observed that even otherwise, the Directorate of Enforcement has enough powers under various statutory regimes to attach properties and assets of a defaulting individual or take other steps.

“As the impugned order has been set aside, the bond in question shall come to an end and the embargo on the assets shall cease.” The court order reads.

The petitioner wished to remit $300 million to JSPML by way of equity subscription/loan/corporate guarantee/bank guarantee or through other permitted mode. This is within the permitted limit of 400% of the net worth of the petitioner, it has been said.

It has been stated that had there been no trials/investigations pending, the petitioner was entitled to automatically make payment to the extent of 400% of its net worth without approval of RBI. However, as the aforesaid trials/investigations are pending, the petitioner submitted an application on 3 September 2019 for respondent’s approval to make an additional financial commitment in JSPML. In December 2019, RBI refused to grant permission to the petitioner to make additional commitment/payment as above. Hence, the petition was filed.

The senior counsel for the petitioner has reiterated that the petitioner had given the corporate guarantee after taking prior permission from RBI.

He submitted before the court: “The respondent cannot now on the instructions of the Enforcement Directorate take a u-turn and obstruct the petitioner to honour its guarantees given with the prior permission of RBI. Just because certain investigations, etc. are pending by FEMA authorities or the Enforcement Directorate cannot be a ground to reject the application of the petitioner. It is stressed that mere pendency of proceedings before the stated Authorities per se cannot be a ground to reject the application of the petitioner.”

The counsel for the respondent has vehemently reiterated that the petitioner a guilty of suppressing pendency of various proceedings initiated against them by the Enforcement Directorate.

“It has been vehemently urged that the respondent was justified in rejecting the application of the petitioner in view of the stand taken by the Enforcement Directorate.” He said.