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A Division Bench comprising of newly appointed Chief Justice NV Ramana and Justice Pradeep Nandrajog issued notice in a petition filed by Dr. Subramanian Swamy challenging the permission accorded by the Government of India and the Foreign Investment Promotion Board (FIPB) to the Foreign Direct Investment (FDI) in the joint venture company Air Asia (India) Pvt. Limited (Air Asia).
In his petition, Swamy has contended that the reasoning adopted by the government to open up the civil aviation sector was that it would safeguard the interests of the domestic airline companies which were suffering huge losses. He had submitted that as per the consolidated FDI policy of 2012, FDI upto 49% by foreign airline companies was permitted only in domestic companies already operating airlines and not “Greenfield” airlines. Further, he had contended that while seeking approval for FDI under the policy, details of ownership, shareholding, control and voting rights as set out in the inter se agreement between the shareholders have to be furnished and that the “substantial ownership and effective control” of the company have to be vested in Indian nationals.
It was his case that the approval granted to Air Asia (India) Pvt. Ltd., a joint venture between the Malaysian company Air Asia Investment Ltd. (AAIL), Tata Sons Ltd. and Telestra Tradeplace Private Limited (Telestra), was in violation of the FDI policy in that neither of the Indian companies were domestic airline operators and, as mentioned earlier, FDI was not allowed in “Greenfield” companies.
Further, he has contended that the Memorandum of Agreement between these companies envisaged execution of “definitive documents” like Shareholders agreements and Share Purchase Agreements subsequent to the grant of FIPB approval. The effect of this was that the “substantial ownership and effective control” of the JV company could not be ascertained while granting the approval. He has also raised the issue that Telestra might be the benamidar of AAIL thereby giving AAIL an effective shareholding way above the sectoral cap of 49%.
Senior Advocate Abhishek Manu Singhvi appeared for Air Asia and submitted that the FDI policy was also meant to infuse fresh capital in the domestic airline industry, and relied on a government press release to buttress this argument. However, the Court observed that the preamble to the policy reveals that the policy is to help the ailing domestic airline companies, and subsequently issued notice in the matter.
In the course of arguments, Singhvi also said that Swamy had first filed this PIL before the Supreme Court and in that petition there was no allegation of Telestra being a benamidar. This, according to Singhvi, showed that the allegation was a mere afterthought and could not be taken seriously. Singhvi also said that Swamy’s petition was only a means to stall the project and gain media attention, an allegation that Swamy vehemently denied. The next date of hearing is October 30, 2013.