Analysis of Recent Compounding Orders
An
analysis of some interesting compounding orders passed by Reserve Bank of India
in recent months of August 2018 and September 2018 and uploaded on the website
are given below. Article refers to regulatory provisions as existing at the
time of offence. Changes in regulatory provisions are noted in comments
section.
A. (Comment: Deleted since this section covers
orders passed under FDI / ECB and investment in partnerships, otherwise should
be bifurcated as (a) FDI compounding orders (b) ODI Compounding orders and (c)
Other compounding orders)
Aditya
Birla Idea Payments Bank Limited
Date
of order: 6th August 2018
Regulation:
FEMA 20/2000-RB Foreign Exchange Management (Transfer or Issue of Security
by a Person Resident Outside India) Regulations, 2000 (FEMA 20).
Issue:
Delay in meeting minimum capitalisation norms beyond the stipulated time
period.
Facts
- Applicant
is engaged in Banking Business, i.e., to accept deposits from individuals,
small businesses, other entities and public, as permitted by the Reserve Bank
of India from time to time.
- Idea Mobile Commerce Services Limited (IMCSL)
merged with Applicant and accordingly Applicant is successor entity of IMCSPL
for violation committed by IMCSPL .
- Until March 2014, IMCSL (wholly owned
subsidiary of Idea) was a business correspondent for a private sector bank in
India. Pursuant to authorisation dated 25th November 2013, granted
by RBI, IMCSL was engaged in the business of issuing prepaid payment
instruments (PPIs).
- As per the extant guidelines, activity of
issuing PPIs is covered under the 18 permitted NBFC activities where foreign
investment is permitted under 100% automatic route subject to complying with
minimum capitalisation norms.
- On 10th January 2007, Idea had
obtained an approval of the erstwhile Foreign Investment Promotion Board (FIPB)
for foreign equity participation of up to 74% in its paid-up capital, by virtue
of which it was now a foreign owned and controlled company, and thus, its WOS,
IMCSL also became foreign owned and controlled. IMCSL was thus required to
comply with the minimum capitalisation norms of USD 5 million.
- However, there was a delay in meeting these
norms. The norms were finally met on 26th April 2016, when the
applicant completed bringing in the deficit amount of Rs. 26,79,00,000/-
thereby fulfilling the shortfall amount in meeting the capitalisation
requirement of Rs. 31,29,00,000 (USD 5 million).
Regulatory
provisions:
- Regulation
5(1) of Notification No. FEMA 20/2000-RB permits purchase of shares by certain
persons resident outside India under Foreign Direct Investment Scheme, subject
to terms and conditions specified in Schedule I.
- Further,
Paragraph 24.2(1) (ii), later renamed as Paragraph F.8.2 (1) (iii) of Annexure
B of Schedule I of Notification No. FEMA 20/2000-RB specifies the minimum
capitalisation norms subject to which foreign investment in NBFC is allowed
under the automatic route. It specifies the same as “US $5 million for foreign
capital more than 51% and up to 74% to be brought up front.”
Contravention:
|
Relevant Para of FEMA 20 Regulation
|
Nature of default
|
Amount involved (in INR)
|
Time period of default
|
|
Paragraph F.8.2 (1) (iii) of Annexure B of Schedule I
|
Delay in meeting the minimum capitalisation norms.
|
Rs. 26,79,00,000/-
|
2 years 4 months approximately
|
Compounding
penalty:
Compounding
penalty of Rs.16,57,400 was levied.
Comments:
(I) Scenario until October, 2016
• Until October, 2016, 100% FDI in NBFC
sector under automatic route was permitted only for prescribed 18 activities.
Further, such activities were classified as fund based and non-fund based
activities and the investment was subject to minimum capitalisation norms as
prescribed in the FDI Policy and FEMA 20.
(II) Replacement of NBFC sector by OFS in October
2016
• On 25th October, 2016,
Department of Industrial Policy and Promotion (DIPP) released Press Note 6 of
2016 and liberalised the FDI Policy by replacing
the existing NBFC sector with Other Financial Services
(OFS) Sector.
• OFS includes activities which are regulated
by any financial sector regulator — RBI, SEBI, IRDA, Pension Fund Regulatory
and Development Authority, National Housing Bank or any other financial sector
regulator as may be notified by the government in this regard.
• OFS are categorised as (A) Regulated OFS
and (B) Unregulated / Unregistered / Exempted OFS. Entities engaged in
Regulated OFS are permitted to receive up to 100% FDI under automatic route
whereas entities engaged in Unregulated OFS are permitted to receive up to 100%
FDI only with Government approval.
• The said Press Note further provided that
FDI in OFS Sector (both Regulated OFS and Unregulated OFS) shall be subject to
conditionalities and minimum capitalisation norms that may be prescribed by the
concerned Financial Services Regulator or Government agency, as applicable.
However, the Government did not prescribe such minimum capitalisation norms
pursuant to Press Note 6.
• The same conditions applicable to OFS
Sector under the 2016 FDI Policy have been retained under the current
consolidated FDI policy of 2018, FEMA 20R and RBI Master Directions on FDI in
India.
(III) 2018 Press Release introducing Minimum
Capitalisation Norms for unregulated OFS
• Ministry of Finance vide press release
dated 16th April 2018,
proposed to introduce Minimum Capital Requirements for Unregulated OFS. The
said press release prescribes minimum FDI Capital of US $ 20 Mn for Unregulated
/ Exempted / Unregistered Fund-Based activities and US $ 2 Mn for Unregulated /
Exempted / Unregistered Non Fund-Based activities. It has further given a list
of what activities which are fund based and non-fund based.
• However, it may be noted that this press
release has not yet been notified.
B. Aircom International India Private Limited
Date of Order: 23rd August 2018
Regulation:
FEMA 3/2000-RB Foreign Exchange Management (Borrowing or Lending in Foreign
Exchange) Regulations, 2000
Issue:
1. Availing ECB from a non-recognized lender
2. Availing ECB for an end-use that was not
permitted
3. Drawdown of ECB before obtaining Loan
Registration Number (LRN) from RBI
4. Delay in meeting the reporting requirements
Facts:
- Applicant is engaged in the business of import
of software for further resale in India and export of management services, software
consultancy and training services, and is the wholly owned subsidiary (WOS) of
M/s Aircom International Limited, UK.
- Applicant raised foreign currency loan of GBP
75,000 (equivalent to INR 51,15,398) on 7th February 2001 from its
holding company for general corporate expenses. The lender was not a recognised
lender at the time of giving loan and became eligible only from June 2001.
- The applicant company also raised foreign
currency loans of GBP 3,93,000 and USD 5,33,477 (in totality equivalent to INR
5,56,75,886) in 7 tranches from July 15, 2004 to May 15, 2006 from the parent
company, for working capital purposes and without obtaining LRN. ECB was
allowed for working capital purposes only from 4th September 2013.
- Reporting requirements were also not adhered
to.
Regulatory
Provisions:
Regulation
6 of Notification No. FEMA 3/2000-RB read with paragraphs 1(iii), 1(iv), (xi)
and (xii) of Schedule I.
Contravention:
|
Relevant
Para of FEMA 20 Regulation
|
Nature
of default
|
|
Paragraph 1(iii) of
Schedule I
|
Availing ECB from a
non-recognised lender.
|
|
Paragraph 1(iv) of
Schedule I
|
Availing ECB for an
end-use that was not permitted.
|
|
Paragraph 1(xi) of
Schedule I
|
Drawdown of ECB
before obtaining LRN from RBI
|
|
Paragraph 1 (xii)
of Schedule I
|
Delay in meeting
the reporting requirements.
|
- Period of default is approximately 4 months to
17 years and total amount of default is Rs. 6,07,91,284/-.
Compounding
penalty
Compounding
penalty of Rs. 5,05,935 was levied.
Comments:
Under
the erstwhile ECB Policy, ECB was not permitted to be utilised for General
Corporate Purpose. RBI vide notification
dated 4th September 2013, permitted eligible borrowers to avail ECB
under approval route from their foreign equity holder company for general
corporate purposes subject to certain conditions.
As a
simplification measure, RBI vide notification dated 16th May 2014 permitted
companies belonging to manufacturing, infrastructure, hotels, hospitals and
software development sectors to avail ECB only from Direct Equity Holders
for general corporate purpose (including working capital financing) under
the Automatic Route.
As
on date, ECB Policy permits Eligible Borrowers to avail ECB for general
corporate and working capital purpose from ‘Foreign Direct Equity
Holders as well as Indirect Equity Holders and Group Companies (as defined
under FEMA 3/2000) under Automatic Route provided that the minimum
average maturity period is of 5 years.
Further,
extant ECB guidelines permits companies engaged in software development sector
to avail ECB for general corporate purpose (including working capital).
Software development sector is not defined but it would generally mean
development of software. In facts of case, applicant is engaged in business of
import of software for further resale in India and export of management
services, software consultancy and training services. Accordingly, even though
other disabilities in terms of permitted lender, end-use restriction are
removed over period of time, trading of software would not fall within scope of
‘software development sector’. It is advisable to obtain upfront clarification
from RBI by companies engaged in IT and ITES services before obtaining ECB.
C. ElringKlinger Automotive Components (India)
Private Limited.
Date of Order: 6th September 2018
Regulation FEMA 20/2000-RB Foreign Exchange Management (Transfer or Issue of
Security by a Person Resident Outside India) Regulations, 2000 (FEMA 20).
Issue:
- Neither equity instruments were issued nor
money was refunded to foreign investor within 180 days of receipt of inward
remittance.
- Delay in reporting receipt of foreign inward
remittance towards subscription to equity.
- Delay in submission of Form FC-GPR to RBI
after issue of shares to foreign investor.
- Failure to obtain, specific and prior
Government approval for issue of shares to person resident outside India against
pre-operative / pre-incorporation expenses.
Facts:
- Applicant is engaged in the business of
designing, assembling, manufacturing, selling, distributing, importing,
exporting etc., of cylinder head gaskets, cover modules and shielding parts and
related and allied products.
- Applicant received foreign inward remittance
from Elringklinger AG, Germany, towards equity / preference share capital and
reported the same to RBI with delay.
- In respect of remittances amounting to Rs
8.31 crore, applicant allotted shares after 180 days of receipt of such
investment.
- Applicant is Wholly Owned Subsidiary (WOS)
of Elringklinger AG, Germany. In November, 2006 Applicant’s WOS directly made a
payment of Rs.1.95 crore to Maharashtra Industrial Development Corporation (‘MIDC’)
on behalf of the Applicant to acquire land for setting up its manufacturing
plant in Pune, Maharashtra as pre-operative/pre-incorporation expenses.
- In February 2007, Applicant allotted
19,50,505 equity shares to Elringklinger AG, Germany against pre-incorporation
expenses without obtaining prior approval of Foreign Investment Promotion Board
(FIPB). Later on Company made application to FIPB for approval. However, same
was denied vide FIPB letter dated 31st March 2017 and Applicant was
also directed to unwind the said transaction by way of repatriation of
investment proceeds to the parent entity. In order to implement the said order,
Applicant unwounded the transaction on 29th December 2017.
Contravention:
|
Relevant
Para of FEMA 20 Regulation
|
Nature
of default
|
Amount
involved (in INR)
|
Approx.
Time period of default
|
|
Paragraph
8 of Schedule 1
|
Shares
were not issued to person resident outside India within 180 days from date of
receipt of inward remittance / share application money not refunded to person
resident outside India within 180 days from date of receipt of inward
remittance.
|
Rs.8,31,25,640
|
5
days
|
|
Paragraph
9(1) (A) of Schedule 1
|
Delay
in reporting of receipt of foreign inward remittance towards subscription to
shares.
|
Rs.37,10,75,095
|
3
to 5 years
|
|
Paragraph
9(1) (B) of Schedule 1
|
Delay
in submission of Form FC-GPR to RBI
|
Rs.62,14,24,090
|
12
days to 5 years
|
|
Para
3 (e) of schedule 1
|
Issue
of shares against pre-incorporation expenses without prior FIPB Approval
|
Rs.
1,95,05,050
|
11
Years
|
Compounding
penalty:
Compounding
penalty of Rs.35,28,759/-was levied.
Comments:
Erstwhile
FEMA Regulations did not permit issue of shares against pre- incorporation
expenses.
Existing
FDI Regulations permit issue of Capital Instruments against pre -incorporation
/ pre-operative expenses by Indian Entities which are WOS of a non-resident
entity subject to the following conditions:
• WOS should be operating in a sector where
100 percent foreign investment is allowed under the automatic route and there
are no FDI linked performance conditions.
• Issue of Capital Instruments by such WOS
against such pre -incorporation expenses is allowed only upto 5% of the
Authorised Share Capital of the Indian Entity or USD 500,000 whichever is less.
• Form FC-GPR to be filed by the Indian
Entity within 30 days from the date of issue of such Capital Instruments but
not later than 1 year from the date of incorporation
• Certificate
issued by the statutory auditor of the Indian company that the amount of
pre-incorporation/ pre-operative expenses against which capital instruments
have been issued has been utilised for the purpose for which it was received
should be submitted with Form FC-GPR.
An
inclusive definition of Pre-incorporation/ pre-operative expenses has been set
out in the regulations which is as under :
“Pre-incorporation/
pre-operative expenses will include amounts remitted to the investee Company’s
account or to the investor’s account in India if it exists or to any consultant
or attorney or to any other material/ service provider for expenditure relating
to incorporation or necessary for commencement of operations”
As
can be seen, issue of shares to compensate parent for pre-incorporation/
pre-operative expense even though permitted is subject to various conditions
especially that WOS is operating in sector where 100% FDI is permitted and
there are no FDI linked performance condition. In facts of case, FIPB has taken
a strict view and asked Applicant to unwind said transaction by repatriation of
proceeds to parent. Unwinding may have significant tax and regulatory
implications and hence FEMA regulations should be complied at threshold.
D. Expedition Voyages
Date
of Order: 3rd September 2018
Regulation:
Notification No. FEMA 24/2000-RB Foreign Exchange Management (Investment in
Firm or Proprietary Concern in India) Regulations, 2000
Issue:
FDI in partnership without obtaining prior approval.
Facts:
- Expedition Voyages (Applicant)
is a Partnership Firm formed vide a Deed of Partnership made on 23rd
March 2015 between a New York Resident Individual and individual resident of
India with a profit sharing ratio of 70:30. Main business of partnership firm
is to carry on travel and tourism business from India by undertaking cruise
travel which include ultra-luxury cruises also, marketing expeditions and all
allied services.
- The foreign resident
remitted approx. Rs.38.51 lakh in five tranches in India.
- Applicant subsequently
reversed the transaction and remitted the above amount back to the foreign resident
on 28th May 2018.
- Applicant has not taken
RBI approval for investment by a person resident outside India by way of
contribution to capital of the Applicant partnership firm thereby contravening
Regulation 3 of FEMA 24/2000-RB.
Regulatory
Provision:
Regulation
3 of FEMA 24/2000-RB – a person resident outside India shall not make any
investment by way of contribution to the capital of a firm or a proprietary
concern or any association of persons in India without prior approval of RBI
Contravention:
The
period of default is around 2 years approximately and total amount of
contravention is Rs.38,51,373.22
Compounding
penalty:
Compounding
penalty of Rs. 73,108/- was levied.
Comments:
FEMA regulations also do not allow non-residents to
invest in / contribute to the capital of any firm or proprietary concern in
India without prior approval of RBI. However, NRIs or OCIs are allowed to
invest on a non-repatriation basis, by way of contribution to the capital of a
firm or a proprietary concern in India provided such firm or proprietary
concern is not engaged in any agricultural/ plantation activity or print media
or real estate business. Accordingly it is necessary to undertake suitable restructuring
in partnership firm to ensure that entity in which FDI capital is infused is
FEMA compliant.
E. Invesco Asset Management (India) Private
Limited
Date
of Order: 9th August 2018
Regulation:
Notification No. FEMA 20/2000-RB Foreign Exchange Management (Transfer or
Issue of Security by a Person Resident Outside India) Regulations, 2000
Issue: Indirect foreign investment in Indian
Company without prior Government approval.
Facts:
- Applicant, Invesco Asset Management (India)
Private Limited is an Asset Management Company (AMC). On 30th June
2014, MF Utilities India Private Limited (MFU) issued 5,00,000 equity shares of
Rs. 1 each amounting to Rs.5,00,000 to the applicant.
- At the time of this investment, 51%
shareholding of the applicant was held by resident entities [Religare
Securities Ltd. (RSL) 46.5% and RGAM Investment Advisors Pvt. Ltd.(RGAM) –
4.5%]. Subsequently in April 2016, RSL and RGAM transferred their shareholding
of 51% to Invesco Hong Kong Ltd., and Invesco Asset Management Pacific Ltd.
Applicant thus became a foreign owned and controlled company and accordingly,
investment in MFU by the applicant became an indirect foreign investment in
MFU.
- In September 2017 FIPB (Foreign Investment
Promotion Board) granted post facto approval for the indirect investment in MFU
subject to the applicant applying for compounding to the Reserve Bank. At the
time of investment, activity of MFU was under other financial activities
requiring Government approval. Pursuant to FEMA Notification No.375 dated 9th
September 2016, the activity was brought under automatic route. As post facto
approval from FIPB has been received the administrative action is complete in
this regard.
Regulatory
Provision:
Regulation14(6)(i)
of FEMA 20 – Downstream investment by an Indian Company owned or controlled by
Non Residents have to comply with the relevant sectoral conditions on entry
route, conditionalities and caps
Para 2(1) of Schedule 1 to FEMA 20 – An Indian company,
not engaged in any activity / sector mentioned in Annex A to this Schedule may
issue [shares or convertible debentures or warrants] to a person resident
outside India, subject to the limits prescribed in Annex B to this Schedule, in
accordance with the Entry Routes specified therein and the provisions of
Foreign Direct Investment Policy….”
Sr.No.F.8
of Annex B to Schedule 1 of FEMA 20 – Foreign investment in ‘Other Financial
Services’, other than those specifically stated therein, would require prior
approval of the Government.
Contravention:
Period
of default is 5 months approximately and total amount of contravention is Rs.
5,00,000/-
Compounding
penalty:
Compounding
penalty of Rs. 52,500 /-was levied.
Comments:
Until
October, 2016, 100% FDI in NBFC sector under automatic route was permitted only
for prescribed 18 activities. This did not include mutual funds.
On
25th October, 2016, Department of Industrial Policy and Promotion
(DIPP) released Press Note 6 of 2016
and liberalised the FDI Policy by replacing the existing NBFC sector with Other
Financial Services (OFS) Sector.
OFS
includes activities which are regulated by any financial sector regulator —
RBI, SEBI, IRDA, Pension Fund Regulatory and Development Authority, National
Housing Bank or any other financial sector regulator as may be notified by the
government in this regard
Foreign
owned and controlled Indian Entities need to be extra cautious before making
any downstream investment in other Indian Entities and especially check whether
the operations carried on by such Investee Indian Entities fall under the
Automatic or Approval route of RBI. Sectoral caps and other conditionalities
associated with the operations of the Indian Investee Entities also need to be
taken care of. Furthermore, compliance in term of sectorial condition is not to
be seen at the time of investment but needs to be monitored continuously. This
aspect is relevant just not for FDI entity receiving investment but also for
downstream investment held by FDI entity.
F. Jetair Private Limited
Date
of Order: 28th August 2018
Regulation:
Notification No. FEMA 20/2000-RB Foreign Exchange Management (Transfer or
Issue of Security By a Person Resident Outside India) Regulations, 2000.
Issue: Delay in reporting of downstream investment to the designated
agencies within 30 days of such investment
Facts:
- Applicant company, owned and controlled by
non-resident entities, is engaged in the business of acting as travel and
tourist agents for every mode of travel by sea, air or land, and arranging for
tourists and travellers, the provision of conveniences, reserve places, hotel
and lodging accommodation etc.
- In May 2015, Applicant made downstream
investment in India to the extent of Rs. 4.81 crore into Jetair Tours Private
Limited (Investee Indian Company).
- This downstream investment made by applicant
company, on account of the aforesaid indirect FDI, was required to be reported
to the (then) Secretariat of Industrial Assistance (SIA), Department of
Industrial Policy and Promotion (DIPP) and the then Foreign Investment
Promotion Board (FIPB) within 30 days of such investment.
- However, there was a delay in meeting the
above-mentioned reporting requirements beyond the stipulated period of 30 days.
Regulatory
Provision:
Regulation
14(6)(ii)(a) of Notification No.FEMA.20/2000-RB, as then applicable –
Downstream investments by Indian companies was required to be notified to
Secretariat for Industrial Assistance (SIA), DIPP and FIPB within 30 days of
such investment.
Contravention:
The
period of default is 2 years 11 months approximately. Total amount of
contravention is Rs. 4.81 crore.
Compounding
penalty:
Compounding
penalty of Rs. 1,55,833/- was levied.
Comments:
Under
the existing regulations, downstream investments made by Indian companies which
are majority owned / controlled by non-residents are required to be reported to
DIPP in Form DI within a period of 30 days of the Indian Entity making such
downstream Investment.
G. Take Business Cloud Private Limited
Date of Order: 8th August 2018
Regulation:
FEMA 120/2004-RB – Foreign Exchange Management (Transfer or Issue of any
Foreign Security) Regulations, 2004
Issue:
1. Delay in reporting outward remittances made
to overseas entity
2. Delay in receipt of share certificate
towards outward remittance made to overseas entity
3. Disinvestment
of stake in overseas entity with write-off without necessary prior approval
when Applicant was not eligible to undertake disinvestment under automatic route
4. Disinvestment from the overseas entity
without submission of Annual Performance Reports (APRs).
Facts:
- In March 2007, Applicant made outward
remittance amounting to USD 21 million to an overseas entity in USA viz Navitas
Inc (formerly Take Solutions Inc). Such outward remittance was reported in Form
ODI with delay. There was also a delay in receipt of share certificate in
relation to the said outward remittance
- In March, 2012, Applicant disinvested its
stake in Navitas Inc with write-off and transferred its stake to another
overseas entity viz Take Solutions Global Holdings Pte Ltd, Singapore without
obtaining RBI Approval. Also, disinvestment was made without filing of APRs
- As the applicant was an unlisted company and
the amount of the overseas direct investment in the overseas entity was in
excess of USD 10 million, the applicant was not permitted to undertake
disinvestment with write-off under the automatic route.
Contravention:
|
Relevant Para of FEMA 20 Regulation
|
Nature of default
|
Amount involved
(in INR)
|
Approx time period of default
|
|
Regulation 6(2)(vi)
|
Applicant
did not report investments made in overseas entity within prescribed time
period of 30 days
|
USD 21 million
(Rs.92.82 crore)
|
10 years
|
|
Regulation 15(i)
|
Delay
in receipt of the share certificate towards the outward remittance made to
the overseas entity.
|
USD 21 million
(Rs.92.82 crore)
|
10 years
|
|
Regulation 16(1)(v)
|
Applicant
disinvested its stake in overseas JV without submission of APRs
|
USD 184,68,121 (Rs.
94.72 crore)
|
5 years
|
|
Regulation 16(1A)
|
Applicant
disinvested its stake in overseas entity with write off without obtaining
prior RBI approval
|
USD 184,68,121 (Rs.
94.72 crore)
|
5 years
|
Compounding
penalty:
Compounding
penalty of Rs.1,49,78,167 was levied.
Comments:
Indian
Entities to take care of various FEMA compliances while remitting funds outside
India and also at the time of disinvestment as such non-compliance / breach of
regulations invites heavy compounding penalties.
H. Wipro Limited
Date
of Order: 10th August, 2018
Regulation:
FEMA 120 / RB-2004 Foreign Exchange Management (Transfer or Issue of any
Foreign Security) Regulations, 2004
Issue: Issuance of corporate guarantees by Applicant
on behalf of its overseas step-down subsidiaries beyond the 1st level
subsidiary, without prior RBI approval
Facts:
- Applicant is engaged in the business of
providing software and IT services.
- Applicant incorporated multiple wholly owned
subsidiaries (WOSs) in Mauritius and Cyprus.
- Applicant issued corporate guarantees in
favor of step-down subsidiaries (SDSs) of these WOSs, beyond the 1st
level, without prior approval of RBI.
Regulatory Provisions:
Regulation
6(4) of Notification No. FEMA.120/2004-RB, as then applicable provided that An
Indian Party may extend a loan or a guarantee to or on behalf of the Joint
Venture/ Wholly Owned Subsidiary abroad, within the permissible financial
commitment, provided that the Indian Party has made investment by way of
contribution to the equity capital of the Joint Venture.
Contravention:
Issuance
of corporate guarantees by the applicant on behalf of its overseas step-down
subsidiaries, which were 2nd, 3rd and 4th level step down subsidiary, i.e.
beyond the 1st level subsidiary, without prior approval of the Reserve Bank of
India.? Period of contravention is 8 to 10 years. ? Amount of contravention is
Rs. 855.71 crore.
Compounding penalty:
Compounding penalty of Rs. 69,17,862/- was
levied.
Comments:
Under the erstwhile ODI Regulations, an Indian Party was permitted
to extend corporate guarantees only on behalf of its JV / WOS.
In
2013, ODI Regulations have been amended whereby in addition to the above,
Indian Parties are permitted to extend corporate guarantees on behalf of its
firstgeneration step down operating company within the prevailing ODI Limit.
Issue of Corporate guarantee on behalf of second level or subsequent level
operating step-down subsidiaries may be permitted with RBI Approval.It is to be
noted that the above Amendment has been given retrospective effect from 27th
May, 2011.
