FDI policy misuse by few can derail India's robust foreign investments

FDI policy misuse by few can derail India's robust foreign investments

By: || Updated: 11 Jan 2018 05:45 PM

New Delhi [India], Jan.11 (ANI): India's foreign direct investment policy was liberalised further recently, with investment caps being raised and more sectors being put on the automatic route. This has given a fillip to FDI inflows and between April and September 2017. Total FDI inflows were in this period pegged at USD 33.75 billion as per Department of Industrial Policy and Promotion (DIPP) figures.

Amidst these improved inflows, some recipients have allegedly misused the liberalised investment environment to their advantage, reportedly tricked some foreign investors, and thus giving a negative rub to India's image as a preferred FDI destination.

One such case involved the promoters of Indian school Education Company selling its stake to a foreign company. The Varkey Group's GEMS Education had invested nearly Rs.500 crore in Everonn in 2011 to gain a foothold in the Chennai-based education and training company. Much to GEMS dismay, it realised post-acquisition that the Indian promoters had taken massive loans via misrepresenting assets and had allegedly siphoned off the money for personal use. As a result, the company has gone into liquidation under Madras High Court directives.

In 2016, the Madras High Court appointed a provisional liquidator and inter alia directed the said provisional liquidator to take possession of all of the company's assets. While the liquidation has begun, several banks have reportedly started separate litigation proceedings against the company for default in which they have claimed that there has been misappropriation and diversion of funds by the erstwhile promoters.

The Madras High Court has already instructed the Ministry of Corporate Affairs to investigate the affairs of the company during the tenure of the erstwhile promoters and file a report of investigation. The matter is sub-judice," a GEMS' spokesman had said at the end of 2016.

Another such example is of Zynergy Solar Projects & Services Pvt Ltd based in Chennai where the Indian promoter Rohit Rabindranath had engaged with Phoenix Solar Pte Ltd Singapore. The services rendered by Phoenix, however, went unpaid.

The case between these two companies was adjudicated by the Singapore-based International Arbitrations Centre and Phoenix Solar was compensated substantially. Attempts by Rabindranath to get the award stayed by the Madras High Court were rejected.

Rabrindranath has now reportedly filed more frivolous cases against Phoenix to avoid paying anything.

In another case, Rabindranath has allegedly accused a foreign investor of transferring funds illegally to a joint venture in which he was a partner and promoter. He asked the Central Bureau of Investigation (CBI) to investigate the foreign investor for money laundering allegations under FEMA (Foreign Exchange Management Act) 1999.

The CBI, however, rejected his complaint, saying 'there is no case of money laundering and described it as just a dispute between two parties,' after its investigation. (ANI)


This story has not been edited. It has been published as provided by ANI

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