Three FDI offers fail transparency test

FIPB rejects proposals from firms that have not divulged details of beneficial ownership or source of funding

India has a weak legal framework

MICHAEL FROMAN, the new US Trade Representative, tells Nayanima Basu that India remains on his countrys watch list because of weak IPR laws

DEVILS IN THE DETAIL The 5 applications under scrutinyatthe FIPB meet

REJECTED

SURAJEET DAS GUPTA

New Delhi, 14 July

1MCX sought post-facto approval to a

2007 investment by Alexandra Mauritius Ltd, a subsidiary of the British Virgin Islands-based Alexandra Global Master Fund Issue: Applicant failed to explain the source of funds and give details of the holding company and its Mauritius arm, besides the names of principal shareholders and directors

in an Indian investee company Issue: Beneficial ownership details with regard to 62.6% shareholding not made available

3 Alliance Insurance Brokers sought

approval for Mayfield FVCI Ltd, Mauritius, to invest 25.1% in early-stage companies in India Issue: DoR objected, saying the firm had not provided beneficiaries details or explained the availability of funds

2 Highdell Investment, Mauritius, part

of the Warburg Pincus group, sought approval to invest up to 100 per cent

DEFERRED

1 Proposal from
Soma Tollways to get investment via Mauritius

2 Proposal from
Scripbox.com India to get investment via Mauritius

mid talks of some foreign investors abusing double taxation avoidance treaties, the Foreign Investment Promotion Board (FIPB) has rejected foreign direct investment (FDI) proposals from firms that have not divulged details of beneficial ownership or source of funding. This is seen as a significant move because concerns were being raised, especially by the Department of Revenue (DoR), that there was no clarity on the source of funds routed from certain countries such as Mauritius with which India had double taxation avoidance agreements. Besides, in many cases, even after FIPBs recommendation for clearance, applications have been brought back to the table after Finance Minister P Chidambarams direction to the board that such details be sought. As many as five applications came under scrutiny at the FIPB meeting last month. Of those, three from a Warburg Pincus group company, insurance broking firm Alliance Insurance Brokers and Multi Commodity Exchange (MCX) were rejected. The oth-

er two filed by Soma Tollways and Scripbox.com India (both getting investment via Mauritius) were deferred. These companies were requested to provide details of beneficial ownership and source of the funds of their foreign investors. In the case of MCX, based on the deliberations, the company had asked for postfacto approval in respect of the investment (390,754 shares) made by Alexandra Mauritius Ltd, a subsidiary of Alexandra Global Master Fund, a British Virgin Islands company, in 2007. Though it had been told to do so by RBI and FIPB had recommended clearance of the proposal, the finance minister pointed out Alexandra Mauritius was a subsidiary of another company based in the British Virgin Islands. So, the applicant was asked to explain the source of funds of the investor. But the applicant failed to give details. The minister then noted that the company should be asked to obtain the details of the holding company and of Alexandra Mauritius, besides the names of principal shareholders and directors, as well as the source of their funds.
Turn to Page 9 >

The US shares the concerns of its industry regarding Indian policies affecting investment and innovation. These include localisation measures that give preferential treatment to products manufactured in India, as well as insufficient protection and enforcement for intellectual property rights

MICHAEL FROMAN US Trade Representative

ECONOMY

P5 >