You are a company secretary of Escorts Ltd.
Write the minutes of a recently held meeting of
the sales team.
Answers
1. The questions that arise for consideration in this writ petition filed by Escorts Ltd. and its shareholder and managing director are quite unique and important. The decision thereon may affect not only the petitioner-company but the entire corporate sector and the public financial institutions. Naturally, this writ petition has attracted considerable public attention both lay and legal. Quite a few facts are required to notice to appreciate the issue canvassed in this case. Though inferences sought to be down and the conclusions sought to be pressed by the parties form the facts leading to the filing of this writ petition differ, the facts themselves in the ultimate analysis are not very much in dispute.
2. Till 1980, among the non-residents, only individuals of Indian nationality origin were given the facility to invest in Indian Industries; not the companies. The Government of India was eager to attract larger foreign remittances into India. In a report of the Working Group of Foreign Remittances into India by India nationals resident abroad and foreign nationals of Indian origin, a view was expressed that this facility should be extended to companies, partnership firms, trusts, societies and other corporate bodies owned predominately by non-residents of Indian nationality/origin. However, with a view to safeguard the interests of the Indian companies and investors, it was suggested that "the criteria for such predominate ownership should be that at least 51% of the ownership of the companies, partnership firms, trusts, societies and other corporate bodies should be with non-resident Indians." Certain other suggestions were also made. Basing on this report and the policy decision indicated in 1982-83 Budget Speech of the Union Finance Minister, the Reserve Bank of India (for shorter referred to as "the RBI"), in exercise of the powers conferred on it under s. 73(3) of the Foreign Exchange Regulation Act, 1973 (for shorter "the FERA"), issued Circular No. 9, dated April 14, 1982, (Exh."G"), liberalising the policy in respect of "investment by non-residents of Indian nationality/origin." The Circular was addressed to all authorized dealers in foreign exchange. Basically, the facility which was available only to individuals and largely without repatriation benefits, was extended under this Circular to overseas companies and other corporate bodies predominately owned by non-residents of Indian nationality/origin and full repatriation benefit were also allowed. The non-resident Indian individuals and these foreign companies would now hereinafter referred to as "NRI"and "NRI companies" and wherever both are intended to be referred compendiously as "NRI investors". The portfolio investment scheme facility with full repatriation benefits made available to entities other than individuals was subject to the condition that" at least 60% of interest therein was owned by these bodies and the shares were purchased through the stock exchange." A non-resident investor could make investments not exceeding Rs. 1 lakhs in face value of 1% of the paid-up share capital of the company, whichever was lower, the payments for such investments were to be either by fresh remittances from abroad or out of the funds held in the Non-resident (External) Account/FCNR Account with a bank in India. They were also required to submit a certificate in the prescribed OAC forms form an Overseas Auditor/Chartered Account/Certified Public Account though designated banks authorized banks authorised to deal in foreign exchange for purchase of shares. The non-resident Indians could appoint residents in India as their agents with appropriate powers of attorney. For the purpose of this Circular, "a person of Indian origin" was defined to mean" a person holding an Indian passport or a person either of whose parents or grant-parents was an Indian resident in undivided India."