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Calcutta High Court
Sajal Dutta vs Reserve Bank Of India And Ors on 24 December, 2025
IN THE HIGH COURT AT CALCUTTA
CIVIL APPELLATE JURISDICTION
ORIGINAL SIDE
Present:-
The Hon'ble Justice Madhuresh Prasad
And
The Hon'ble Justice Supratim Bhattacharya
APO 114 of 2016
With
WPO 1157 of 2004
SAJAL DUTTA
-Vs-
RESERVE BANK OF INDIA AND ORS.
OCOT 3 of 2016
IA No. GA/1/2025
SAJAL DUTTA
-Vs-
RESERVE BANK OF INDIA AND ORS.
For the Appellant : Mr. S. N. Mookherjee, Sr. Adv.
Mr. Shounak Mitra, Adv.
Mr. Samriddha Sen, Adv.
Mr. Vishwarup Acharyya, Adv.
For the Respondent No. 6 : Mr. S. N. Mitra, Sr. Adv.
Mr. Prantik Garai, Adv.
Mr. Subhojit Roy, Adv.
Mr. Ramanuj Roy Chowdhuri, Adv.
Mr. Atish Majumdar, Adv.
For the RBI : Mr. Debdatta Sen, Sr. Adv.
Ms. Suchismita Ghosh Chatterjee, Adv.
Mr. Prasun Ghosh, Adv.
Judgment on : December 24, 2025.
Calcutta High Court A.P.O. 114 of 2016 dt. 24.12.2025
Madhuresh Prasad, J.:
1. The Ruby General Hospital Company Limited (hereinafter referred to as
the Company) was incorporated in the year 1991 by two non-resident
Indians Dr. Kamal Dutta and Binod Prasad Sinha along with Sajal
Dutta, the younger brother of Dr. Kamal Dutta, and an Indian
entrepreneur. The company took up a project to establish a hospital
cum diagnostic centre at Calcutta. The project cost was about Rs. 11
crores. 88% of the project, i.e. Rs. 8 crores were to be by way of NRI
participation. The balance 11.12% of the shares was to be contributed
by resident Indians. The NRI investment was approved by the
Department of industrial development, government of India, Secretariat
of Industrial Approval (SIA for short).
2. Dr. Kamal Dutta was one of the 1st directors of the said company. He
along with Dr Binod Prasad Sinha held 52.74% of the equity shares in
the company. Dr. Kamal Dutta contributed Rs. 4.26 crores out of which
about Rs. 3.5 crores were by way of second-hand equipment brought
from the USA. Sajal contributed Rs. 1.23 crores.
3. The Reserve Bank of India granted permission on 29.03.1997 for
allotment of shares to Dr. Kamal Dutta for the equipment brought by
him from the United States of America (USA for short). The permission
however was withdrawn on 20.05.1998 at the instance of the company,
which challenged the approval granted by the Reserve Bank of India
Calcutta High Court A.P.O. 114 of 2016 dt. 24.12.2025
before the Calcutta High Court, by filing a writ petition No. 525 of 1999
The High Court directed for giving a personal hearing to the parties.
4. The Reserve Bank of India once again granted approval for allotment of
the shares. The approval was challenged by the company again, by filing
another writ petition No. 1977 of 1999.
5. In compliance of the directions passed by the High Court the Reserve
Bank of India again passed an order dated 07.05.2004 granting
permission to allot shares to Dr. Kamal Dutta against supply of second-
hand medical equipment imported from USA, treating the same as his
capital contribution.
6. Certain directions passed in this writ petition were allegedly not
followed properly, and another writ petition was filed by the company,
being writ petition No. 1157 of 2004, wherein the permission dated
07.05.2004 granted by GM, RBI was again challenged by filing the
present writ petition. The judgement dated 16.03.2016 passed therein
is under challenge in the present intra court appeal.
7. The Company was the 1st petitioner in the writ petition. Sajal Dutta,
the Managing Director was petitioner No.2. The writ petition was filed
seeking quashing of the Speaking order dated 07.05.2004 passed by
the General Manager of the Reserve Bank of India, Kolkata, (GM, RBI
for short) in terms of section 19 (1) (d) of the Foreign Exchange
Regulation Act, 1973 (FERA for short), granting permission to the
company to issue 30,55,329 shares of Rs. 10 each on non-repatriation
Calcutta High Court A.P.O. 114 of 2016 dt. 24.12.2025
basis in favour of Dr. Kamal Dutta (Dr. Kamal for short). The permission
was granted for issuance of shares against importation of second-hand
medical equipment, for which Dr. Kamal had made the payments
abroad. The GM RBI had also granted permission under section 29 (1)
(b) of the FERA to Dr. Kamal, an NRI, to hold such shares.
8. The writ petitioners alleged that during the hearing before the GM, RBI
the writ petitioners requested for certain documents. The request was
rejected by an earlier order dated 23.04.2004 passed by the GM RBI in
the same proceeding, which resulted in violation of the principles of
natural justice. This order dated 23.04.2004 was also challenged in the
writ petition.
9. A significant development after filing of the writ petition is that the
directors of the company at a meeting dated 16.09.2006 resolved not to
proceed with the pending writ petition (W.P. No. 1157 of 2004). As a
result, the company (petitioner No. 1) withdrew from the writ proceeding
on 30.11.2006.
10. The 2nd petitioner, namely Sajal Dutta, thus, remained the sole
writ petitioner. He continued to pursue the writ proceeding.
11. In such circumstance, the company filed a General Application
bearing G.A. No. 360 of 2007 seeking dismissal of the writ petition on
the ground of its non-maintainability in law, since the company had
withdrawn from the proceeding. The company also raised an issue
regarding the 2nd writ petitioner, an individual shareholder, having no
Calcutta High Court A.P.O. 114 of 2016 dt. 24.12.2025
locus standi to pursue the writ proceeding since the nature of grievance
and relief did not involve any infringement of the writ petitioner's
individual/fundamental rights.
12. The writ petition was dismissed by the Learned Single judge by a
judgment dated 16.03.2016. The same was put to challenge by Sajal by
filing an appeal (APO 114 of 2016).
13. G.A. No. 360 of 2007 was disposed of by the learned single judge
by the self-same judgement dated 16.03.2016, which was assailed by
Dr. Kamal, by filing a cross objection (OCOT No. 3 of 2016).
14. Thus, the appeal filed by Sajal Dutta (APO 114 of 2016) was taken
up for consideration by this court along with the cross objection (OCOT
3 of 2016) filed by Dr. Kamal.
15. There is a relevant development in the meantime. Dr. Kamal,
along with Dr. Binod Prasad Sinha moved the Company Law Board
(CLB for short) on or about 12.11.1997, by filing an application under
Sections 397 and 398 of the Companies Act, 1956, alleging various acts
of oppression and mismanagement in the affairs of the company.
Certain relief was granted by the CLB by its order dated 29.10.1999
passed in Company Petition No. 86 of 1997, subject to result of the
present writ proceeding.
16. Order of the CLB was challenged by Sajal by filing an appeal
before the Ld. single judge of the Calcutta High Court. Cross appeal was
also filed by Dr. Kamal.
Calcutta High Court A.P.O. 114 of 2016 dt. 24.12.2025
17. APO No. 746 of 1999 filed by Sajal and APO No. 759 of 1999 filed
by Dr. Kamal was disposed of by the Ld. Single Judge by an order dated
31.03.2005. The Ld. Single Judge found that the applicants before the
CLB failed to make out a case for winding up of the company. The
Learned single judge recorded that Sajal acted with prejudice to the
interest of the company but the conditions precedent for winding up of
a company were not made out. Setting aside the order passed by the
CLB, the learned single judge left it to the applicants to avail
appropriate remedy by way of a Company Suit.
18. The order dated 31.03.2005 was put to challenge by Dr. Kamal
and Dr. Binod Prasad Sinha by way of an appeal before the Hon'ble
Supreme Court of India, which was numbered as Civil Appeal No. 3471
of 2006, and was decided by the apex court on 11.08.2006 confirming
the order and direction of the CLB. This judgement of the apex court in
Kamal Kumar Dutta and Another vs. Ruby General Hospital Ltd.
And Others is reported in (2006) 7 SCC 613.
19. Sri. S.N. Mookherjee, the learned senior advocate, appeared and
made submissions on behalf of the appellant, Sajal Dutta. Submissions
were advanced on behalf of Dr Kamal by Sri S.N. Mitra learned Senior
Advocate. The Reserve Bank of India was represented by Sri Debdatta
Sen.
20. At the very outset Mr. Mitra, learned Senior Advocate raised a
preliminary objection regarding maintainability of the writ petition. He
Calcutta High Court A.P.O. 114 of 2016 dt. 24.12.2025
submits that initially the writ petition was filed by the Company on the
ground that the Board of Directors had not resolved to send any
application to the RBI seeking permission for allotment of equity shares
against second-hand medical equipment sent by Dr. Kamal. The
application for allotment, was founded on an alleged resolution taken
in a meeting dated 03.03.1997, which is not reflected in the Company
records. The Company had sent communication in this regard to the
RBI by its letters dated 16.04.1997 and 26.05.1997. The writ petition
was thus filed by the Company challenging the permission granted by
the RBI.
21. There is a significant development after filing of the writ petition.
The Company resolved not to proceed with the writ petition. Pursuant
to such decision, the Company has withdrawn its name from the writ
petition, meaning thereby that the Company was not making an issue
in respect of the permission for issuing shares in favour of Dr. Kamal,
granted by the RBI on 07.05.2004. Therefore, Sajal could not have
continued to pursue the writ petition. The resolution of the Board dated
16.09.2006, not to proceed with the writ petition was taken after Sajal
seized to be Managing Director of the Company. He also seized to be a
director. He, thereafter, was merely a shareholder of the Company.
Therefore, there was no question of continuance of Sajal as petitioner
No. 2, who was a petitioner as the Managing Director of the Company.
22. On the issue of maintainability Mr. Mitra further submitted that
the CLB findings regarding acts of oppression committed by Sajal
Calcutta High Court A.P.O. 114 of 2016 dt. 24.12.2025
against Dr. Kamal were affirmed by the Apex Court in the case of Kamal
Kumar Dutta (Supra). Dr. Kamal was thus appointed as the Managing
Director of the Company and under his leadership the Board took a
decision not to proceed further with the writ petition. Therefore,
allowing Sajal to continue to pursue the writ petition amounts to
overreaching the effect of the apex court judgement. Therefore, the
judgement of the learned single judge insofar as it acknowledges
maintainability of the writ petition by Sajal is unsustainable.
23. He further submitted that the writ petition does not raise any
issue of violation of any right/fundamental right of Sajal. Therefore,
there was no scope for Sajal to continue to pursue the writ petition.
24. In support of his submissions regarding non-maintainability of
the writ petition at instance of the petitioner No. 2, Mr. Mitra relied
upon decision in the case of Life Insurance Corporation of India vs.
Escorts Ltd. And Others reported in (1986) 1 SCC 264. He has
referred to paragraph 84 of the judgment to submit that RBI was the
competent authority, vested with discretion to consider issuance of
shares to Dr Kamal, and allowing him to hold such shares. There is no
provision under FERA enabling an individual to challenge such
decision. Neither Company nor the individual (Sajal) could take it upon
themselves to question the merits of the GM, RBI decision. He also
submitted that bona fides of the Reserve Bank of India vested with
statutory power and discretion in this regard cannot be doubted. He
also relied upon judgment of the Apex Court in the case of Peerless
Calcutta High Court A.P.O. 114 of 2016 dt. 24.12.2025
General Finance and Investment Co. Limited and Another vs.
Reserve Bank of India reported in (1992) 2 SCC 343.
25. Mr. Mookherjee on the other hand submitted that the petitioner
no.2 in the writ petition (Sajal) being a shareholder had a vital interest
in the affairs of the Company. Dr. Kamal had obtained the permission
from the GM, RBI for allotment of shares in his favour against import
of second-hand low-quality equipment purchased by him abroad. The
same was in conflict with the SIA approval dated 06.08.1993 which
contemplated import of equipment of Rs.420 lacs to be financed out of
non-resident Indian (NRI) Investment in petitioner no.1 (Company). The
issue and allotment of shares therefore could only be made against
funds (foreign exchange) remitted/ invested in the Company from
abroad by Dr. Kamal; and only if such funds were utilized for covering
the cost of import of new capital goods. The SIA Approval was under the
statement of industrial policy dated 24.07.1991, which contemplated
such investment. The GM, RBI however, granted permission for
allotment of shares on non-repatriable basis against import of second-
hand low-quality equipment which was purchased abroad by Dr. Kamal
contrary to the terms of SIA approval.
26. Grant of such permission by the RBI was therefore legally
unsustainable and issuance of shares in favour of Dr. Kamal against
import of such second-hand inferior equipment, would result in
wrongly enhancing Dr. Kamal's shareholding and reducing the writ
petitioner shareholding in the Company. It is under such
Calcutta High Court A.P.O. 114 of 2016 dt. 24.12.2025
circumstances that specific averments have been made in the writ
petition regarding the RBI's order dated 07.05.2004 imposing
unreasonable restriction on the petitioner's right to carry on trade, and
that the RBI permission is to the benefit of Dr. Kamal, and at the
expense of petitioner No. 1 as well as petitioner No. 2 (Sajal).
27. Insofar as petitioner No. 2 is concerned, the effect of import of
such second-hand low quality equipment based on permission of RBI
dated 07.05.2004, adversely effected and diminished his percentage
shareholding in the Company, at the cost of undue enhancement in
shareholding of Dr. Kamal, as a result Dr Kamal would enjoy control
over the decisions and affairs of the Company. This was an individual
injury upon the petitioner because of illegal decision of GM, RBI dated
07.05.2004. The petitioner No. 2 (Sajal Dutta) therefore, had a
personal/ individual interest to pursue in the writ proceeding. Thus,
despite petitioner No. 1 withdrawing from the writ petition, such right
was recognised by the judgment of the Hon'ble Single Judge in the writ
proceeding.
28. Mr. Mukherjee, has also drawn attention of the Court towards
statement of the Apex Court in the same paragraph of the judgment in
the case of Life Insurance Corporation of India (Supra) wherein the
Apex Court held that there are limited class of cases where grant of
permission by the RBI may be questioned by an interested party in a
proceeding under Article 226 of the Constitution of India. According to
him, challenge to an RBI permission, as per the judgment is permissible
Calcutta High Court A.P.O. 114 of 2016 dt. 24.12.2025
on the ground of mala fide, non-application of mind or being in
contravention of the provisions of the Act, Rules, Orders and directions
issued under the Act.
29. In support of his submissions regarding maintainability of the
writ petition Mr. Mookherjee placed several judgments before the
learned Single Judge including judgments in the case of Calcutta Gas
Company (Proprietary) Ltd. Vs. State of West Bengal and Others
reported in AIR 1962 SC 1044, Rustom Cavasjee Cooper vs. Union
of India reported in AIR 1970 SC 564, Union of India and Another
vs. Arulmozhi Iniarasu and Others reported in (2011) 7 SCC 397,
Ayaaubkhan Noorkhan Pathan vs. State of Maharashtra and
Others reported in (2013) 4 SCC 465, Rajasthan State Industrial
Development & Investment Corporation. vs. Subhash Sindhi
Cooperative Housing Society, Jaipur and Others reported in (2013)
5 SCC 427 as also decision of the Apex Court in the case of Bennett
Coleman & Co. Ltd. and Others vs. Union of India and Others
reported in AIR 1973 SC 106.
30. Considering decision in the case of the Rustom Cavasjee Cooper
(Supra) the Hon'ble Single Judge took note of extract from paragraph
14 of the decision wherein the Apex Court considered that an action
may impair the rights of a company, as also rights of a shareholder.
Considering such a circumstance the Apex Court took into
consideration that if the State action impairs the right of the
shareholders as well as the company, the writ Court may not deny its
Calcutta High Court A.P.O. 114 of 2016 dt. 24.12.2025
jurisdiction to grant relief. The learned Single Judge considered that
this principle was reiterated by the Apex Court in the case of the
Neptune Assurance Co. Ltd. And Others vs. Union of India and
Another reported in AIR 1973 SC 602 as also in the case of Bennett
Coleman & Co. (Supra). The learned Single Judge further took note of
the law stated by the Apex Court in the case of Press Trust of India
and Another vs. Union of India and Others reported in AIR 1974 SC
1044. Paragraph 8 of the judgment has been taken note of. Upon a
careful consideration of the above citations dealing with the invocation
of writ jurisdiction by a shareholder the learned Single Judge found
with reference to the facts of the present case that at the time of
incorporation of the company Dr. Kamal had 52% shares and Sajal had
48% shares. The learned Single Judge took note of the fact that an
alteration in the shareholding of Dr. Kamal, would have the effect of
enhancing his existing shareholding. Since there were principally only
two shareholders further allotment of shares in favour of Dr. Kamal
would have the direct consequence of shifting control of the company
in his favour. Allotment of shares in favour of Dr. Kamal therefore, was
found by the learned Single Judge to directly affect Sajal's individual
rights as a shareholder in the Company.
31. We find that even in the two decisions relied upon by Mr. Mitra
in the case of Life Insurance Corporation of India (supra) and
Peerless General Finance and Investment Co. Limited (Supra) the
Apex Court acknowledged the Court's function to see that lawful
Calcutta High Court A.P.O. 114 of 2016 dt. 24.12.2025
authority is not abused by a statutory authority. The Apex Court also
recognized that there may be limited class of cases where grant of
permission by RBI may be questioned by an interested party in a
proceeding under Article 226 of the Constitution of India on the ground
that it was mala fide or that there was no application of mind, or in
contravention with the statute or Rules, orders and directions issued
under the statute.
32. Insofar as submission of Mr. Mitra that since RBI is the
competent authority to examine whether there was compliance with
FERA for grant of permission for issuance of shares in favour of Dr.
Kamal Dutta and Dr. Binod Dutta, and that the RBI decision was not
open to challenge under Article 226 of the Constitution of India, we find
that such submission cannot be accepted as a rule. The exercise of writ
jurisdiction by now is well recognized, to be discretionary, yet
circumscribed by well settled principles for exercise of writ jurisdiction.
We are therefore, not inclined to accept submission of the learned
Advocate in this regard that decision of the RBI is not open to challenge
under Article 226 of the Constitution of India. In the instant case itself,
prior to the present writ petition, at least two writ petitions were
entertained an order passed thereupon by the High Court in respect of
the RBI permission for issuance of shares in favour of Dr. Kamal and
Dr Binod Prasad Sinha.
33. There can be no dispute that RBI is the authority/competent to
consider the issue regarding compliance with FERA for the purpose of
Calcutta High Court A.P.O. 114 of 2016 dt. 24.12.2025
permission to issue shares in favour of Dr. Kamal. However, we cannot
conceive of such a situation where any decision of the RBI taken in this
regard would be beyond the scope of scrutiny under Article 226 of the
Constitution of India. In an appropriate case where decision of a
statutory authority is perverse without any basis, without taking into
consideration relevant material and without jurisdiction, then it cannot
be said that a Constitutional court exercising judicial review under
Article 226 of the Constitution of India would be powerless to interfere
with such decision. In such circumstances, including an order passed
in violation of principles of natural justice, having civil consequences,
in an appropriate case, decision of the RBI would be amenable to the
writ jurisdiction under Article 226.
34. The learned Single Judge, therefore, in our opinion rightly found
that the Company, and its principal shareholders i.e. Dr. Kamal as well
as the writ petitioner (Sajal) had a vital interest in the grant of such
license, or its revocation. The learned Single Judge, after a detailed
consideration of the facts and law, rightly concluded that the company,
Dr. Kamal, as well as Sajal had right to approach the writ Court
assailing decision of the GM, RBI.
35. Upon consideration of the judgments cited in this regard, noted
above we further add that it is well settled that in every case a
shareholder cannot be barred from seeking legal remedy. Being a
shareholder in a company, in our opinion cannot be made a basis to
contend that even individual rights and injury cannot be raised in
Calcutta High Court A.P.O. 114 of 2016 dt. 24.12.2025
appropriate judicial proceeding before a forum/ Court of competent
jurisdiction. Merely because the injury/right sought to be remedied
/enforced is in some way also effecting the company, the individual
shareholder, in our opinion, cannot be deprived of legal remedies. It is
needless to say that whether the shareholder is able to make out a case
for any relief before a Court is required to be considered on a case to
case basis, in the facts and circumstances of a particular case. In view
of consideration above we find no infirmity in decision of the learned
Single Judge, having regard to the nature of right, claimed by the
petitioner (Sajal Dutta) in this case, in holding that he was entitled to
approach the writ Court in his individual capacity.
36. Another submission advanced on behalf of Sajal is that the GM,
RBI permission was sought by an application made under para 39B of
the statement of industrial policy. The approval dated 06.08.1993
contemplated allotment of shares to NRI (Dr. Kamal) on repatriable
basis. Import of new capital goods was to be financed out of such NRI
investment. The approval was binding on RBI. The RBI had in principle
conveyed its approval to issue of equity shares in the Company to the
NRI with repatriation benefit.
37. Paragraph 39B of the statement of Industrial Policy dated
24.04.1991, dealt with Foreign Investment. 39B (iii) is the relevant
provision under which the application for grant of shares was made. It,
therefore, was required to be considered under the said provision.
Paragraph 39B also contained a note 4 which reads:
Calcutta High Court A.P.O. 114 of 2016 dt. 24.12.2025
"Foreign investment must cover the cause of imported capital
goods which must be new and not second-hand."
38. This statement of industrial policy was binding on the RBI, and
was ignored and overlooked while granting the permission impugned in
the writ proceedings. In the instant case admittedly, second-hand
equipment was brought into the Company by Dr. Kamal, therefore, the
importation of second-hand equipment, which was also of very inferior
quality could not be acknowledged by the RBI so as to allow issuance
of shares in lieu thereof. Under the provisions of the FERA, GM, RBI
was bound to consider and follow the mandate laid down in the SIA
approval. The RBI approval dated 07.05.2004, therefore, was
unsustainable.
39. Dr. Kamal's reliance placed on the Ministry of Finance letter
dated 03.01.1994 to sustain the approval dated 07.05.2004 is
misplaced and unsustainable. It is submitted that the RBI could not
ignore the provisions of the statement of Industrial Policy, which did
not permit import of second-hand capital equipment. The decision of
the RBI to grant permission for allotment of shares on repatriable basis
in lieu of second-hand medical equipment is in deviation from and
contrary to the SIA approval. The permission granted by the GM, RBI
de horse the terms of SIA approval and the prevailing industrial policy
and import policy is, therefore, unsustainable. The GM, RBI could not
ignore these provisions while considering an application. In support of
such contention, Mr. Mukherjee has relied upon Union of India vs.
ABN Amro Bank and Others reported in (2013) 16 SCC 490 and
Calcutta High Court A.P.O. 114 of 2016 dt. 24.12.2025
Elizabeth Jacob vs. District Collector, Idukki and others reported
in (2008) 15 SCC 166.
40. The RBI approval without taking into consideration and contrary
to the terms of the SIA approval is, therefore, unsustainable and is fit
to be set aside. The RBI has further failed to take into consideration the
fact that the second-hand machinery brought in by Dr. Kamal, was over
invoiced and of inferior quality.
41. This issue has been contested by Mr. Mitra learned Senior
Advocate appearing for Dr. Kamal. It is submitted that the EXIM Policy
relied upon by the writ petitioner applied only where there was an
actual inflow of foreign capital. In such case, purchase of new capital
equipment was required to be purchased by utilizing foreign currency.
In the present case, in lieu of his capital contribution Kamal had
purchased the second-hand equipment with his own funds, abroad. He
had supplied the machinery which was purchased abroad. Such import
of second-hand machinery was permissible observing all formalities. It
is nobody's case that the requisite formalities for import was not
complied.
42. In support of his submission he has drawn attention of the Court
towards the export and import policy for the period 01.04.1992 and
31.03.1997 issued by the Ministry of Commerce, Government of India.
The same is published by the Central Government under Section 5 of
the Foreign Trade (Development and Regulation) Act 1992. The
statutory policy records the following clause in paragraph 25:
Calcutta High Court A.P.O. 114 of 2016 dt. 24.12.2025
"25. All Second-hand capital goods, having a minimum residual
life of 5 years, may be imported by the Actual Users, without a
licence, subject to Actual User condition. The Actual User shall
furnish to the Customs at the time of clearance of goods, a self
declaration to the effect that the second-hand capital goods being
imported have a minimum residual life of 5 years, in the
prescribed form as given in Appendix XI of the Handbook of
Procedures. If the CIF value of second-hand capital goods being
imported is Rs. One crore and above, the importer shall also
furnish to the Customs at the time of clearance of goods, a
Certificate from an internationally reputed Inspection and
Certification Agency to the effect that the purchase price is
reasonable."
43. We find no force in such submission regarding any lapse
committed by the GM, RBI, by not considering the terms of approval for
foreign investment under the SIA policy dated 06.08.1993. The reliance
placed on decisions in the case of ABN Amro Bank (Supra) and Elizabeth
Jacob (Supra) is misplaced. A lack of consideration would arise only if
an authority overlooks, or ignores a provision or policy relevant to the
decision. Under such circumstance, in an appropriate case there may
be scope to interfere with such decision taken by a statutory authority,
ignoring other mandatory applicable provisions. In the present case, we
have noticed that the modus of investment, approved by SIA policy
dated 06.08.1993 was not pursued. There was a conscious decision to
resort to different modus of investment, which did not involve bringing
in any foreign capital or outflow of any foreign currency for purchase of
equipment. Thus, there was no occasion whatsoever for the RBI to take
into consideration the approval under the SIA policy dated 06.08.1993.
Calcutta High Court A.P.O. 114 of 2016 dt. 24.12.2025
44. The learned Advocate also made submissions with reference to
the judgment of the Company Law Board dated 29.10.1999 in C.P. No.
86 of 1997, paragraph 28 of which reads:
"28. ...In this case, as is evident from the facts of the case, that it
was decided to invest by way of supply of equipments as is
apparent from the annual report for 1994-95 wherein, not only in
the directors report but also in the balance sheet, it is recorded
that the petitioner had supplied imported equipments. In this
connection reference may also be made to a fax dated 31st
January, 1995 (page 81 of Vol. III) from the 3rd respondent to the
petitioner wherein the petitioner was informed that two
consignments of imported equipments had already been sent to
the hospital and that on the basis of valuation made by the
customs, further disbursement of about Rs. 80 lakh was expected
from the IDBI.
....Thus, both the company and the respondent were aware that
the petitioner had supplied imported equipments and as a matter
of fact the company had treated the cost of the same as 'share
application money'. We feel that the objection that the import of
equipments was not envisaged in the SIA/RBI approvals cannot
be raised nearly three years after the import and acceptance of
the equipments and having treated the cost of the same as "share
application money".
45. The order of the CLB having been affirmed by the Apex Court in
the case of Kamal Kumar Dutta (supra). It is submitted that now there
is no occasion to raise any issue in this regard.
46. We further find that there is a letter dated 03.01.1994 issued by
the Government of India, which allows the RBI to take action with
respect to certain issues as follows:
" a) Government of India have no objection to the capitalisation of
payments made by NRIs directly for import of capital goods.
b) In those cases where such direct payment is for import of new
capital goods, the equity participation may be permitted on
repatriable basis.
Calcutta High Court A.P.O. 114 of 2016 dt. 24.12.2025
c) In all such cases where the amounts are paid directly by NRIs
against import of secondhand-capital-goods, the investment is
permissible only on non-repatriable basis."
47. The learned Advocate for the RBI has also taken a stand that the
grant of permission by the GM, RBI vide order dated 07.05.2004 was
with reference to paragraph 25 (Supra) of chapter 5 of the EXIM Policy
which provided for import of second-hand capital goods without license.
The GM, RBI while allowing the permission also relied upon the
Government of India letter dated 03.01.1994 wherein the Central
Government issued policy directive that in such case, as arose for
consideration herein, where the amount is directly paid by the NRI for
importing second-hand capital goods, the investment was permissible
only on non-repatriable basis. Therefore, the RBI, by the order dated
07.05.2004 granted permission to issue shares to Dr. Kamal on non-
repatriable basis against importation of second-hand capital equipment
for the Company. The RBI was the authority vested with statutory
power to grant permission in this regard.
48. The learned Advocate for the RBI further submitted that Clause
39B of the Industrial Policy and the extract from handbook for NRI
investment in India relied upon, governed direct foreign monetary
investment into a company on repatriable basis in view of the foreign
exchange requirement for import of capital goods. In the present case
there is no outflow of foreign exchange for import of new capital goods.
The second-hand capital goods were purchased by Dr. Kamal from his
own funds, outside the country, before bringing the second-hand
machinery into the country for use of the Company. It was under such
Calcutta High Court A.P.O. 114 of 2016 dt. 24.12.2025
a circumstance that permission was sought from the RBI under the
provisions of Section 19(1)(d) and 29(1)(b) of FERA for issuance of
shares against such direct importation of second-hand capital goods.
For such importation neither the policy relied upon by Sajal Dutta, nor
the handbook are relevant.
49. The learned Advocate further pointed out that the Company
originally intended foreign collaboration for NRI investment to establish
the hospital. It, therefore, applied before the SIA. At that time the
project envisaged foreign equity participation of 88.88% of the paid-up
capital (eight hundred lakhs). At that time the project contemplated that
capital goods worth Rs. 420 lakhs were to be purchased out of the
foreign investment. Under such circumstances, the approval was
granted by SIA vide letter dated 06.08.1993. The said modus of equity
participation or purchase of capital goods by the Company with foreign
currency was not pursued. Company did not pursue the modus of
acquisition approved by SIA under letter dated 06.08.1993. Therefore,
any reliance placed by Sajal on the SIA approval dated 06.08.193 to
allege any infirmity in the GM, RBI permission dated 07.05.2004, is
unsustainable.
50. Upon consideration of the submissions advanced on behalf of the
parties with reference to the EXIM Policy, SIA approval and the
Government's DO dated 03.01.1994 we find that the reliance placed by
the learned senior advocate, Mr. Mukherjee on the SIA approval dated
06.08.1993 and EXIM Policy are misplaced. The RBI is the statutory
Calcutta High Court A.P.O. 114 of 2016 dt. 24.12.2025
authority under the law. Even at the time the equipment was imported
by the Company, the RBI was the statutory authority competent to
grant permission for issuance of shares to an NRI under Section 19(1)(d)
and 29(1)(b) of the Foreign Exchange Regulation Act. This competent
authority has clarified the entire position with reference to the facts,
being the change in modus of the Company, in deciding not to utilise
the foreign exchange invested in the Company for procurement of
machinery; and instead relying upon importation of second-hand
machinery purchased abroad by Dr. Kamal (NRI). Because of change in
modus of acquisition of machinery the SIA approval dated 06.08.93 was
not applicable to the transaction. Thus in our opinion there is no scope
to find fault in the decision of the RBI based on the DO letter issued
from the Ministry of Finance, Government of India on 03.01.1994. The
decision is based on relevant material and government policy and after
hearing both the parties. The RBI has acted in terms of the DO letter
dated 03.01.1994. The same is evident from a plain reading of the
impugned order dated 07.05.2004, passed by the GM, RBI, relevant
extract of which reads:
"...I am of the opinion that the Reserve Bank has a rather a limited
role under the Provisions of FERA, 1973 in the dispute between
the parties and there are 3 issues to be addressed. I will be
addressing them serially as follows:
First Issue
"Whether approval shall at all be granted or not"
In terms of section 19(1)(d) any person (which includes a
company) has to obtain RBI's permission before, Issuing shares to
a person resident outside India. Section 19(1)(d) of FERA, 1973
reads as follows:
Calcutta High Court A.P.O. 114 of 2016 dt. 24.12.2025
"Notwithstanding anything contained in Section 81 of the
Company's Act, 1958, no person shall, except with the
general or special permission of the Reserve Bank issue,
whether in India or elsewhere, any security which is
registered or to be registered in India, to a person resident
outside India."
From the above, it is clear that any person (which includes a
company) can issue shares to NRIs only with the prior permission
of RBI for issuance of such shares.
The issuance of shares can be on repatriation or on non-
repatriation basis. RBI permitted issuance of shares on
repatriation basis when foreign remittance was received through
normal banking channel or when there was capitalization of new
equipment supplied by the NRIs. If the equipment supplied were
second hand, then the capitalisation of the same was allowed on
non-repatriation basis.
Admittedly, In this case, the equipments supplied by Dr. K.K.
Dutta were second-hand and there is no dispute on this point. SIA
approval was obtained on 6th August 1993 in which non-resident
equity participation allowed is 88.88 per cent. SIA letter also
states that Project envisages import of capital goods worth Rs.
420 lakhs to be financed out of NRI Investment. The Import of the
equipment was governed by the then EXIM policy in terms of
which there was no restriction on Import of second-hand capital
goods. Thereafter on 4th November 1993 In-principle approval
was granted by RBI for Issuance of shares on repatriation basis.
During the financial year 1994-95 and 1995-96, Dr. K. K. Dutta
supplied/imported second-hand medical equipments and applied
for shares against the second-hand equipment. The Import of such
medical equipments against which shares were to be issued,
pending RBI permission for the same, was reflected in the Annual
Report and Balance Sheet of the Company for the years ending
31st March 1995 and 31st March 1996. This fact was also known
to Shri Sajal Dutta as he had signed the above Balance Sheets as
Director of the Company. The above Balance Sheet also showed
Income over Rs. 100 lakhs from out of the operation of the hospital
obviously with the use of equipment supplied by Dr. Dutta and
commissioned by the Hospital.
The permission granted by RBI vide its letter dated 22nd March
1997 was on the basis of the RGHL application dated 17th March
1997 signed by Dr. K. Κ. Dutta as the Chairman of the company
enclosing thereto all the requisite documents. The same was
scrutinized by ECD, RBI, Kolkata as, at that point of time, the
Regional Offices of RBI were delegated with the powers of
Calcutta High Court A.P.O. 114 of 2016 dt. 24.12.2025
approval for permission for Issuance of shares on non-repatriation
basis. Permission was granted by ECD, RBI, Kolkata, after
scrutinizing all the required documents submitted by RGHL and
after finding the same to be in order. At that point of time RBI,
Kolkata did not have the information that Dr. Kamal Kumar Dutta
had ceased to be the Chairman of the company and there was a
Board Resolution of the company not to apply for shares against
second-hand equipment. Hence the act of RBI, Kolkata was based
on the documents/papers signed/submitted by Dr. Dutta
representing himself as the Chairman of the Company. Therefore,
the aforesaid permission was granted In good faith and without
negligence. Dr. Dutta took delivery of the permission letter
addressed to RGHL. In original, personally which was given to
him as he represented himself as the Chairman of the Company
and as such, the letter was not posted to the company at its
registered office address.
This permission was objected to by the Ruby General Hospital
represented by Shri Sajal Dutta, the Managing Director of the
company vide its letter 26th May 1997 mainly on the two. grounds
mentioned earlier. RBI, Kolkata withdrew its approval letter dated
22.3.1997 on the basis of this complaint. However, RBI, Kolkata
in good faith believing in the representation of Shri Sajal Dutta
withdrew the approval letter issued to RGHL and handed over to
Dr. Dutta on 22nd March 1997 by issuing another letter dated
2.6.1997 a copy of which was endorsed to Dr. Dutta.
Dr. Dutta represented against the same. The representation was
examined by the Bank and a decision was taken to maintain
status quo and in view of the fact that Dr. K. K. Dutta, NRI
Investor has already made payment to the suppliers of second
hand machineries abroad. The aforesaid decision of the Bank
was communicated vide letter dated March 6, 1999 to RGHL and
copy endorsed to Dr. Dutta.
Incidentally, the CLB vide its order dated 20.10.1999 has held
that Dr. K. K. Dutta has not vacated his office as Chairman and
as such restored Dr. K. K. Dutta as Director-Chairman of the
Company and has nullified the Board meeting in which the
decision was taken for not applying to RBI for Issuance of shares
against secondhand equipment. This order of CLB has not been
stayed or super ceded or nullified by any court of law which has
been confirmed by Shri Sujal Dutta. Therefore, on the date of
application, I.e.,17.3.1997, Dr. Dutta was the Chairman of the
company who had duly applied for permission for Issuance of
shares on non-repatriation basis for which the permission was
granted.
Calcutta High Court A.P.O. 114 of 2016 dt. 24.12.2025
In view of the above, I am of the opinion that the RBI's permission
for issue of shares shall be granted in terms of section 19 (1) (d)
of FERA, 1973 to RGHL. The permission granted to RGHL to Issue
shares to the person resident outside India (i.e. to Dr. K. K. Dutta)
shall also to be treated as permission to such person (i.e. to Dr. K.
K. Dutta), resident outside India to acquire or hold such shares
under section: 29 (1) (b) of the Act, Ibid.
Second Issue
"Whether the approval shall be on non-repatriation basis alone"
As discussed above, the equipment's supplied by Dr. K. K. Dutta
were secondhand. The company had received and utilized the
same for which Dr. Dutta had made payment abroad. Since as
per the then existing policy of RBI, capitalization of secondhand
equipment could be permitted on non-repatriation basis only, I am
of the view that permission shall be granted for issue of shares on
non-repatriation basis alone. Though there was conflicting claims
and counter claims regarding functionality or dysfunctionality of
the medical equipment's or its valuation etc. by both the parties
producing various documents and papers in support of their own
stand, I am of the view that it is beyond the scope and purview of
my Investigation to delve into each and every claim and counter
claim.
Third Issue
"Whether there shall be any monitory limit or limit to the number
of shares"
The permission shall be granted for the issue of 30,55,329 equity
shares of Rs. 10/- each against import of secondhand medical
equipment's to D. K. K. Dutta, NRI Investor on non-repatriation
basis for which he had made the payments abroad and in support
of which he had submitted documentary evidence at the time of
making application which was scrutinized and found to be in
order.
I hereby direct that a copy of this Order be sent to both the parties
to the proceedings before me...."
51. We are conscious of the limited scope of judicial review in such
circumstance where there is no lack of jurisdiction in a statutory
authority, and the decision dated 07.05.2004 is in exercise of statutory
Calcutta High Court A.P.O. 114 of 2016 dt. 24.12.2025
discretion, taking into consideration relevant material being the DO
letter dated 03.01.1994. We, therefore, considering the settled law
circumscribing the scope of judicial review in such matters refrain from
sitting in appeal over the decision of a statutory body such as RBI. We
find no infirmity in the permission dated 07.05.2004 granted by the
General Manager, RBI for issuance of shares in favour of Dr. Kamal.
52. Since in the present case there was no issue of importation of
goods involving outflow of any foreign exchange, RBI has rightly relied
upon the DO letter dated 03.01.1994 which governed the transaction
carried on by the Company since amount was paid directly by the NRI
(Dr. Kamal) against import of second-hand capital goods. Such
investment is permissible as manifests from extract of the DO letter
dated 03.01.1994, taken note of above, but on non-repatriable basis.
In the present case such investment had been permitted and issuance
of shares allowed on non-repatriable basis and, therefore, we find no
infirmity whatsoever in the permission dated 07.05.2004 granted by the
RBI.
53. The learned Single Judge has considered two other issues raised
by the parties. Regarding issue, estoppel or res judicata. Mr. Mitra
submitted that in Kamal Kumar Dutta (supra) the Apex Court found
that there was a case of oppression of Dr. Kamal under Section 397(1)(b)
of the Companies Act. In view of such findings having been recorded by
the Apex Court in the judgment, challenge to the RBI permission dated
07.05.2004 by the declared oppressor was barred by res judicata or
Calcutta High Court A.P.O. 114 of 2016 dt. 24.12.2025
issue, estoppel. The learned Single Judge has considered this aspect
but has taken note of the fact that in the judgment in the case of Kamal
Kumar Dutta (supra) the Apex Court did not make any comment with
regard to issuance of 30,55,329 equity shares to Dr. Kamal. The finding
of the learned Single Judge in this regard in our opinion does not
require any interference. In paragraph 48 the Apex Court has taken
notice of the fact of pendency of the present writ petition regarding grant
of shares against importation of medical equipment by Dr. Kamal.
Taking note of the pendency of the present writ petition the Apex Court
in paragraph 48 observed:
"...48. Since the issue of granting of equity shares against the
medical equipments supplied by Appellant 1 to the tune of Rs 3.5
crores is pending before the Calcutta High Court in a writ petition,
therefore, CLB has not passed any final order but passed a
limited order as mentioned above. However, we have examined
the matter in detail and we are satisfied that there is fool proof
case of oppression. But at the same time we do not feel inclined
to pass an order for winding up of the Company because it will
not be in the interest of the Company nor in the interest of the
parties. Therefore, we allow the appeals and set aside the
impugned order dated 31-3-2005 passed by the learned Single
Judge of the High Court and pass limited direction that all the
resolutions which have been passed by the Board of Directors, or
in the annual general meeting or extraordinary general meeting
with regard to the raising of funds of Rs 40 lakhs in the meeting
of 19-4-1995 and the meeting dated 16-2-1996 whereby
Appellant 1 was stripped off his powers as Managing Director, the
resolution by which Dr. Binod Prasad Sinha was removed from
the office of Director and other resolutions by which the shares
were allotted to the subsidiary company of Sajal Dutta or other
persons are bad and we restore the position ante 19-4-1995 and
direct that a fresh meeting be convened and proper decision be
taken in the matter in the interest of the Company. We confirm the
order and direction of CLB..."
Calcutta High Court A.P.O. 114 of 2016 dt. 24.12.2025
54. The Apex Court has taken notice of pendency of the present writ
petition. The judgment of the Apex Court extracted above takes note of
the fact. In this connection, we find that the issue of allotment of shares
in favour of Dr. Kamal was not decided by the Apex Court. We agree
with the finding of the Hon'ble Single Judge that the Apex Court did not
comment with regard to issuance of 3055329 equity shares issued in
favour of Dr. Kamal. Therefore, we find no force in submission of Mr.
Mitra as regards res judicata or issue estoppel.
55. Insofar as the issue regarding violation of the Foreign Exchange
Regulation Act, alleged by Mr. Mukherjee on behalf of Sajal we find no
force in such submission. The permission was granted by RBI on
07.05.2004. Much prior thereto the Foreign Exchange Regulation Act
was repealed and, in its place, the Foreign Exchange Management Act,
1999 came into effect on 01.06.2000. There is no dispute that under
FEMA no permission was required from RBI to allot shares on
importation of capital goods to non-resident Indians.
56. The rights and liabilities of the erstwhile FERA were governed by
a sunset clause wherein Mr. Mukherjee claimed his client's rights were
preserved under Section 6 of the General Clauses Act. In view of our
finding recorded above regarding the approval dated 07.05.2004 being
issued by the RBI in accordance with law and under the applicable
statutory provisions and directive issued by the Government of India,
we find such issue not arising in the facts and circumstances of the
present case.
Calcutta High Court A.P.O. 114 of 2016 dt. 24.12.2025
57. No allegation regarding statutory incompetence of the RBI to
grant the permission dated 07.05.2004 has been raised. There is also
no allegation of mala fide being raised against the GM, RBI, the
authority who granted the permission on 17.05.2004. As far as the DO
letter dated 03.01.1994 is concerned, the writ petitioner never
challenged the same. The RBI decision is founded on such directive.
58. We have given our anxious consideration to the issue. In view of
our findings above, we find no infirmity in decision of the learned Single
Judge requiring interference by this Court in the present intra Court
Appeal.
59. The appeal deserves to be and is hereby dismissed.
60. OCOT is disposed of accordingly.
61. Urgent Photostat certified copy of this judgment, if applied for, be
supplied to the parties, expeditiously after complying with all necessary
legal formalities.
(Madhuresh Prasad, J.)
I agree.
(Supratim Bhattacharya, J.)
