Case: Burn Standard Company Limited Vs. Mcdermott International Inc. And Another

taken by the RBI as disclosed in the further affidavit of January 24, 1991 leave no doubt that the remittance was permitted only after the RBI was satisfied that all the terms and conditions were duly satisfied. To place the matter beyond the pale of doubt, the further affidavit filed on behalf of the RBI carries the following statement "As per the practice of the RBI, the permission under para 24-A. 11, that is, grant of sanction under Section 28(1) (b) as well as permission under Section 9 for allowing remittances are generally authorised by the Assistant Controller." * This statement places the question regarding the grant of permission under Section 28(1) beyond doubt. The affidavits filed on behalf of the RBI show that the RBIs approval remained to be communicated to the appellant company. Failure to discharge the ministerial duty cannot obliterate the conscious decision taken by the RBI after application of mind 13. But counsel for the appellant stressed that the facts placed on record clearly reveal that no application for permission under Section 28(1) was made in the prescribed FNC5 as contemplated by paragraph 25-A. 2 of the manual. It is indeed true that the record does not disclose making of an application in the said prescribed form by either party to the agreement. Counsel, therefore, submitted that once it is found that no application for permission was ever made in the prescribed form, the provisions of sub-sections (2) and (3) of Section 47 of FERA cannot save the agreement declared void by the statute itself. He further submitted that the case was governed by paragraph 25-A. 2 and not 24-A. 11 and hence making of an application in the prescribed FNC5 form was imperative and failure to do so raised a clear inference that the RBI had not granted permission under Section 28(1) since it had never been approached for such permission. He emphasised that the prescribed form for SIA approval under paragraph 24-A. 11 is not the same as FNC5 and hence the administrative direction in the said paragraph that it will not be necessary for the foreign collaborators to seek Reserve Bank permission under this section separately cannot override the statutory requirement of Section 28(1). The statutory duty cast on the RBI by Section 28(1) cannot be abdicated by the RBI by the deeming clause contained in paragraph 24-A. 11(i) extracted earlier. To buttress the submission counsel invited our attention to two cases viz., (i) Dhanrajamal Gobindram v. Shamji Kalidas & Co. ( 1961 (3) SCR 1020 : 1961 AIR(SC) 1285), and (ii) LIC of India v. Escorts Ltd. ( 1986 (1) SCC 264 , 318) wherein this Court held that paragraph 24-A. 1 was merely an explanatory statement of guideline for the benefit of the authorised dealers and was neither a statutory direction nor a mandatory instruction. On the other hand counsel for the respondent argued that the RBIs action in regard to grant of permission under Section 28(1) being essentially administrative. See Shri Sitaram Sugar Co. Ltd. v. Union of India ( 1990 (3) SCC 223 , 246-47) it is enough to show that the RBI had granted the permission no matter whether it had followed the procedure of paragraph 24-A.11(i) or 25-A. 2 of the manual. We think there is considerable force in this contention for the simple reason that we are concerned with the factum of permission and not the procedure followed by the RBI for granting the same. The prescription of the form is merely to aid the RBI to process the application for permission. Emphasis must be laid on substance and not on mere form. If there has been substantial compliance, as in this case, the mere lapse on the part of the RBI in failing to communicate its decision should make no difference. Paragraph 25-A. 2 is not in derogation of paragraph 24-A. 11(i) nor does it dilute the requirement of Section 28(1). In any case the facts of the present case clearly reveal that the RBI had applied its mind to the question of grant of permission and had only thereafter permitted remittance on the first instalment of the fees payable to the foreign collaborator. Merely because application for such permission was not made FNC5 form cannot cloud the fact that the decision to grant the permission was actually taken but the ministerial function of communicating the same remained to be done by oversight. This lapse cannot erase the decision already taken. We are, therefore, of the opinion that the RBI had granted the permission contemplated by Section 28(1) and hence the agreement cannot be voided by virtue of Section 28(2) of FERA. It is not the case of RBI that it at any time had second thoughts about its action. It never contemplated withdrawal of the permission at any point of time thereafter. Once the decision to grant the permission is taken, whether through the course charted by paragraph 24-A. 11(i) or 25-A. 2, that decision stands unless rescinded and the authorities are bound to act in aid thereof14. In the view that we take it is unnecessary to examine the question whether clause 12.1 of the agreement would stand or perish if the agreement is rendered void under Section 28(2) for failure to secure permission under Section 28(1). Since we have come to the conclusion that the RBI permission was in fact secured under Section 28(1), the second question recedes in the background. We, therefore, need not examine the same15. Before we part we are constrained to observe that we were pained at the attitude of the appellant company attempting to thwart a valid agreement, part performed by the payment of the first instalment, on hyper-technical grounds, an attitude which would scare away collaborators and tarnish the image and credibility of our entrepreneurs abroad. We do hope the appellant company will honour its obligations under the agreement and settle its differences with the respondent across the table in a businesslike manner rather than litigate

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]e think there is considerable force in this contention for the simple reason that we are concerned with the factum of permission and not the procedure followed by the RBI for granting the same. The prescription of the form is merely to aid the RBI to process the application for permission. Emphasis must be laid on substance and not on mere form. If there has been substantial compliance, as in this case, the mere lapse on the part of the RBI in failing to communicate its decision should make no difference. Paragraph 25-A. 2 is not in derogation of paragraph 24-A. 11(i) nor does it dilute the requirement of Section 28(1). In any case the facts of the present case clearly reveal that the RBI had applied its mind to the question of grant of permission and had only thereafter permitted remittance on the first instalment of the fees payable to the foreign collaborator. Merely because application for such permission was not made FNC5 form cannot cloud the fact that the decision to grant the permission was actually taken but the ministerial function of communicating the same remained to be done by oversight. This lapse cannot erase the decision already taken. We are, therefore, of the opinion that the RBI had granted the permission contemplated by Section 28(1) and hence the agreement cannot be voided by virtue of Section 28(2) of FERA. It is not the case of RBI that it at any time had second thoughts about its action. It never contemplated withdrawal of the permission at any point of time thereafter. Once the decision to grant the permission is taken, whether through the course charted by paragraph 24-A. 11(i) or 25-A. 2, that decision stands unless rescinded and the authorities are bound to act in aid thereof14. In the view that we take it is unnecessary to examine the question whether clause 12.1 of the agreement would stand or perish if the agreement is rendered void under Section 28(2) for failure to secure permission under Section 28(1). Since we have come to the conclusion that the RBI permission was in fact secured under Section 28(1), the second question recedes in the background. We, therefore, need not examine the same15. Before we part we are constrained to observe that we were pained at the attitude of the appellant company attempting to thwart a valid agreement, part performed by the payment of the first instalment, on hyper-technical grounds, an attitude which would scare away collaborators and tarnish the image and credibility of our entrepreneurs abroad. We do hope the appellant company will honour its obligations under the agreement and settle its differences with the respondent across the table in a businesslike manner rather than litigate