Nayara Energy takes RBI, ED to court over Fema

Mumbai: Nayara Energy, earlier known as Essar Oil Ltd, has moved the Bombay high court seeking a stay on a Reserve Bank of India (RBI) order fining it for alleged violation of foreign exchange regulations and an investigation launched by the Enforcement Directorate (ED) into the matter.

RBI imposed a penalty of ₹4.96 crore on the refiner after finding it guilty of violating the Foreign Exchange Management Act (Fema). According to the central bank, the company breached the limit for transfer of foreign exchange under the Liberalised Remittance Scheme while issuing global depositary shares in 2010.

Nayara Energy takes RBI, ED to court over Fema

After the matter came to the attention of RBI, it imposed the penalty on 27 April 2017 and directed the ED to look into it in January 2018. The ED then initiated an investigation in January 2018 and summoned the company’s representatives to appear before it. Nayara Energy appealed RBI in April 2018 to quash the penalty. This was, however, rejected by the central bank in May 2018.

Nayara Energy, now part of Russian energy major Rosneft and Trafigura-United Capital Partners (UCP), said in its application to Bombay high court: “Pass an ad-interim order staying the investigations being carried out by the Directorate of Enforcement, Mumbai pursuant to the summons dated January 11, 2018, issued by the Respondent No 3 (ED) to the Petitioner No 1 (Nayara Energy).”

“Holding that the letter dated May 25, 2018, issued by the General Manager, RBI, rejected 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,” the company said in its petition.

The petition was filed on 2 August 2018 and there has been one hearing so far, on 15 October.

A division bench of the Bombay high court, comprising Justices B.P. Dharmadhikari and S.V. Kotwal, will hear the case again on 25 January.

Law firm Cyril Amarchand Mangaldas is representing Nayara Energy while law firm Udwadia & Co is representing the central bank in the case

A Nayara Energy spokesperson declined to comment on the ground that the case was filed by the erstwhile management.

An email query to Essar Group did not elicit any response till the time of filing the report.

In August 2017, Russian oil major Rosneft and Kesani Enterprises (a consortium of Trafigura group and UCP PE Investments) acquired a 49.13% stake each in Nayara Energy Ltd (then Essar Oil Ltd), along with captive port and power assets from the Essar group for $12.9 billion.

Nayara Energy operates a 20 million tonne oil refinery at Vadinar in Gujarat and more than 4,473 petrol pumps across the country.

source: livemint


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