Point of Law: Financial irregularities – Impead of parties - Disputes in question can be effectively, completely and properly be adjudicated in the absence of applicant – Hence cannot be impleaded

JUDGMENT :

JASMEET SINGH, J.

1. The present appeal has been filed by the Reserve Bank of India (being the respondent in W.P.(C) No. 3601/2020 titled Jindal Steel & Power Limited V/s Reserve Bank of India) being aggrieved by the order and judgment dated 04.12.2020.

2. The respondent (original petitioner in W.P.(C) 3601/2020,) herein namely, Jindal Steel & Power Limited filed a writ petition in this Hon’ble Court seeking the following reliefs:-

“A. Issue a writ, order or direction including a writ in the nature of Mandamus, directing Respondent to permit Petitioner to make additional commitments and payments of USD 300 Million to its wholly owned subsidiary namely Jindal Steel and Power (Mauritius) Limited by way of equity subscription or loan or corporate guarantee or bank guarantee or through other permitted mode from Indian Bank for meeting its debt obligations;

B. Pass any other Order(s) as this Hon’ble Court may deem fit in the given facts and circumstances of the present case.”

3. The Respondent is said to be a company with business interest in steel manufacturing, power generation, mining of iron ore, lime stone and coal. To optimise the cost of raw material required for manufacturing and also to have a linkage to raw material like coking coal, the respondent set up various overseas subsidiaries including (i) Jindal Steel & Power (Mauritius) Ltd. (herein after called JSPML), a company incorporated under the laws of Mauritius; (ii) Skyhigh Overseas Ltd. (also called SOL), a company incorporated under the laws of Mauritius; and (iii) Jindal Steel Bolivia (also called JSBSA).

4. The respondent has been making overseas direct investment and has also undertaken other financial commitments in respect of aforesaid subsidiaries after getting approval from RBI, through SBI. The respondent’s wholly owned subsidiary JSPML has loans of USD 370 million and has issued corporate guarantees of USD 864.5 million. JSPML has made various obligations towards its lenders. The respondent, JSPML and the lenders have restructured the payment of the aforesaid due amount of lenders by restructuring agreements dated 07.02.2018 and 15.06.2018. This was further revised on 29.05.2020. The respondent has received a letter dated 13.06.2020 from JSPML stating that they do not have the funds available and the lenders may enforce the corporate guarantee of the respondent for the entire amount of USD 864.5 million. In addition, there is also a debt of the wholly owned subsidiary of JSPML namely Jindal Steel Power (Australia) Limited, JSPAL.

5. It is further stated that JSPML does not have funds available to meet its cash flow requirements and also cannot make payment to its wholly owned subsidiary JSPAL. Hence, the respondent sought to make additional financial commitments and payments of USD 300 million to its wholly owned subsidiary JSPML for meeting its debt obligations.

6. The appellant filed its counter affidavit before the learned Single Judge and took various objections as under:-

(i) Delhi Court lacks territorial jurisdiction;

(ii) ED is a proper and necessary party; and

(iii) The petition suffers from delay and laches.

(iv) The respondent concealed material information about inquiries and investigations it is facing at the hands of the ED.

(v) Under Regulation 6 and 9 of Foreign Exchange Management (Transfer or Issue of Any Foreign Security) Regulations, 2004 (“FEMA ODI Regulations”) and more particularly under Regulation 9, the approval of RBI is “subjective” and “based upon RBI’s satisfaction.”

(vi) The RBI under the FEMA is a regulator of Foreign Exchange and has to see the adverse effects on the economy if permission for remission is granted.

7. The learned Single Judge considered the objections of the appellant and held as under:-

(a) The appellant rejected the application of the respondent on account of objections raised by ED.

(b) A conjoint reading of Re