Tarun Sharma Moneycontrol News
Nayara Energy (formerly known as Essar Oil) has approached the Bombay High Court against the Reserve Bank of India (RBI) governor, revenue department and the Enforcement Directorate (ED). Essar has sought a stay on the RBI order dated April 2017 imposing compounded amounts (penalty). It also sought quashing of the summons for alleged breach of Foreign Exchange Management Act (FEMA) limits.
Nayara Energy, now part of the Russian energy giant Rosneft and Trafigura-United Capital Partners-led consortium, has approached the court under the writ of mandamus to get relief on the allegations of breaching the limit of Liberalised Remittance Scheme while issuing Global Depositary Shares (GDS). Under LRS, residents of India are permitted to transfer funds abroad up to $250,000 in a financial year for permitted current or capital account transactions or for both.
A writ of mandamus is a form of judicial remedy or an order from a court to any subordinate court or lower government official for proper execution of duties or correction of an abuse of discretion.
Nayara Energy in its prayer sought a writ of mandamus, “holding that the letter dated May 25, 2018, issued by the General Manager, RBI rejecting the application of Nayara Energy invoking the supervisory jurisdiction of RBI Governor, is unreasonable, arbitrary, illegal and void as the same is in contravention of Rule 4(3) of Foreign Exchange (Compounding Proceedings) Rules 2000.”
Moneycontrol has reviewed a copy of the petition.
The ED had also initiated an investigation into the matter in January 2018. In its writ, Nayara Energy sought the court's intervention to quash summons of January 11, 2018, by the Assistant Director of ED.
The secretary of the department of revenue has also been made a respondent in the matter.
The ED initiated an investigation after RBI apprised the agency of an alleged breach of the limit of LRS while issuing GDS. Moneycontrol was the first to report this investigation report on February 5, 2018.
RBI had first raised concern following a delay by Essar Oil in the allotment of GDS. In 2010, the company allotted equity shares in two tranches – 92,844,531 at a price of Rs 144/- per share aggregating Rs 1,336.96 crore on April 27, 2010, and 71,292,951 equity shares at a price of Rs 144/- per share aggregating Rs 1,026.62 crore on May 28, 2010 -- to an overseas depository. The funds were raised for part financing the refinery expansion project and other general corporate purposes.
Rosneft and Trafigura bought Essar Oil for Rs 338.28 per share in October 2016. The transaction was completed in August 2017.
As the writ was filed by Essar Group, the current management of Nayara Energy refused to comment on the story. Essar Group has also declined any comments.
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