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2015 (5) TMI 940 - HC - Companies LawWinding up application by Debenture Trustee - Failed to pay the amounts due to the Petitioner under the Deed of Corporate Guarantee - FDI In India in contravention of FDI policy / Fema regulations - Held that:- From the afore-stated facts it appears that FMO, a foreign entity wanted to invest a substantial sum by way of FDI in a slum rehabilitation project being undertaken in Mumbai by Rubix, and an Industrial Park being undertaken by Amazia. The FDI Policy and the statutory FEMA Regulations (which incorporates the FDI Policy as a Schedule thereto) permit FDI in townships, construction of houses, only by way of equity investments (which is defined to also include debentures which are compulsorily required to be converted into equity : CCDs). The FDI Policy and the FEMA Regulations prohibit any other form of investment (non equity) in the said sector with an assured return/rate of return. However, FMO was interested in an investment which would ensure an assured fixed return to it. Since this was not permissible under the FEMA Regulations/FDI Policy, the investment structure was devised/adopted. The conduct of FMO in routing its FDI nominally through Vinca to Amazia and Rubix against issuance by them of OPCDs and the amendments/provisions made in Vinca’s Articles of Association, establishes that FMO was fully aware that it could not under the FDI Policy and FEMA Regulations directly invest in the OPCDs, or require that its FDI amount/investment be returned back to it with a fixed rate of return after a stipulated period i.e. without bearing an equity investment risk. The complex structure devised for FMO’s FDI investment establishes that all parties (including FMO) were aware that the transaction which was premised on return back of the FDI amount along with a fixed rate of return thereon, was not permissible under/in violation of the FDI Policy and the FEMA Regulations. It is clear that in claiming the amount and initiating the present proceedings, the Petitioner is acting at the instance of FMO/FMO nominees on the Board of Directors of Vinca. This is the stipulation in Vinca’s articles and under the DTD. In any event, inasmuch as the transaction (based on return of the FDI/principal amount invested along with a fixed rate of return thereon) is not permissible/prohibited under the FDI Policy and the FEMA Regulations, neither IDBI nor FMO can seek the assistance of the Court to effectuate/implement/enforce such a prohibited/illegal transaction. The aforesaid facts prima facie support the contention of the Company that the factual matrix and the transaction documents establish that the transaction of routing the FDI through the newly interposed Vinca was a colourable device and was structured to enable FMO to secure repayment of its FDI amount (Rs. 418 crores) and a rate return of 14.5% per annum thereon, contrary to the FDI Policy and the statutory FEMA Regulations and in any event the transaction is illegal and prohibited by law, is unenforceable, and consequently the Bank Guarantee issued by Vinca being part of the said structure is also unenforceable. The FMO is as much a party to the aforestated colourable device/structure designed as the Respondent Company. In my view, the Company has raised a dispute which requires adjudication on further evidence in a properly constituted Suit. - Decided against the appellant.
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