Genpact India Pvt. Ltd., v. the Assistant Director

Karnataka HC16 Sept 2026WP/16763/2026

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CNR: KAHC010371552026 NC: 2026:KHC:50422 WP…

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CNR: KAHC010371552026 NC: 2026:KHC:50422 WP No. 16763 of 2026 C/W WP No. 7283 of 2026 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 16TH DAY OF SEPTEMBER, 2026 BEFORE THE HON'BLE MR. JUSTICE SURAJ GOVINDARAJ WRIT PETITION NO. 16763 OF 2026 (GM-RES) C/W WRIT PETITION NO. 7283 OF

Disposed 3 months after registration.

Filed as

Partly Allowed2026

Genpact India Pvt. Ltd., Vs the Assistant Director — Karnataka HC (2026) — LawSathi Research

Genpact India Pvt. Ltd., v. the Assistant Director

Karnataka HC16 Sept 2026WP/16763/2026

Download

Case brief

from the order text

What is this about?

CNR: KAHC010371552026 NC: 2026:KHC:50422 WP…

Case summary

From the record, as published by the registry

Disposed 3 months after registration.

Filed as

Partly Allowed2026

¶572

63. We have already extracted Section 29(1) and we notice that the expression used is “general or special permission of the Reserve Bank of India” and that the expression is not qualified by the word “previous” or “prior”. While we are conscious that the word “prior” or “previous” may be implied if the contextual situation or the object and design of the legislation demands it, we find no such compelling circumstances justifying reading any such implication into Section 29(1). On the other hand, the indications are all to the contrary. We find, on a perusal of the several, different sections of the very Act, that the Parliament has not been unmindful of the need to clearly express its intention by using the expression “previous permission” whenever it was thought that “previous permission” was necessary. In Sections 27(1) and 30, we find that the expression “permission” is qualified by the word “previous” and in Sections 8(1), 8(2) and 31, the expression “general or special permission” is qualified by the word “previous”, whereas in Sections 13(2), 19(1), 19(4), 20, 21(3), 24, 25, 28(1) and 29, the expressions “permission” and “general or special permission” remain unqualified. The distinction made by Parliament between permission simpliciter and previous permission in the several provisions of the same Act cannot be ignored or strained to be explained away by us. That is not the way to interpret statutes. The proper way is to give due weight to the use as well as the omission to use the qualifying words in different provisions of the Act. The significance of the use of the qualifying word in one provision and its non-use in another provision may not be disregarded. In our view, the Parliament deliberately avoided the qualifying word previous in Section 29(1) so as to invest the Reserve Bank of India with a certain degree of elasticity in the matter of granting permission to nonresident companies to purchase shares in Indian companies. The object of the Foreign Exchange

¶578

Regulation Act, as already explained by us, undoubtedly, is to earn, conserve, regulate and store foreign exchange. The entire scheme and design of the Act is directed towards that end. Originally the Foreign Exchange Regulation Act, 1947 was enacted as a temporary measure, but it was placed permanently on the Statute Book by the Amendment Act of 1957. The Statement of Objects and Reasons of the 1957 Amendment Act expressly stated, “India still continues to be short of foreign exchange and it is necessary to ensure that our foreign exchange resources are conserved in the national interest”. In 1973, the old Act was repealed and replaced by the Foreign Exchange Regulation Act, 1973, the long title of which reads: “An Act to consolidate and amend the law regulating certain payments, dealings in foreign exchange and securities, transactions indirectly affecting foreign exchange and the import and export of currency and bullion, for the conservation of foreign exchange resources of the country and the proper utilisation thereof in the interest of the economic development of the country.” We have already referred to Section 76 which emphasises that every permission or licence granted by the Central Government or the Reserve Bank of India should be animated by a desire to conserve the foreign exchange resources of the country. The Foreign Exchange Regulation Act is, therefore, clearly a statute enacted in the national economic interest. When construing statutes enacted in the national interest, we have necessarily to take the broad factual situations contemplated by the Act and interpret its provisions so as to advance and not to thwart the particular national interest whose advancement is proposed by the legislation. Traditional norms of statutory interpretation must yield to broader notions of the national interest. If the legislation is viewed and construed from that perspective, as indeed it is imperative that we do, we find no difficulty in interpreting “permission” to mean “permission”, previous or subsequent, and we find no justification whatsoever for limiting the expression “permission” to “previous previous'” only. In our view, what is necessary is that the permission of the Reserve

¶584

64. An argument which was strenuously pressed before us by Shri F.S. Nariman, learned Senior Advocate for the company, was that the very schema of the Act shows that the permission contemplated by Section 29(1) could only be previous permission, notwithstanding the circumstance that the word “previous'” does not qualify the expression “general or special permission” in Section 29(1) though it does in several other provisions. According to Sri Nariman, the Act was designed not merely to attract but also to regulate the inflow of foreign exchange. That was why, he said, the provisions were very stringent. We have no hesitation in agreeing with Mr Nariman that while the inflow of foreign exchange is welcomed by the Act, the inflow is also subject to stringent checks as otherwise in no time the economy of the country will be swamped with foreign money and taken over by giant multinationals. But that really does not affect the interpretation of the expression “permission” in Section 29(1). The Reserve Bank of India is not bound to give ex post facto permission whenever it is found that business has been started or shares have been purchased without its previous permission. In such cases, wherever the Reserve Bank of India suspects an oblique motive, we presume that the Reserve Bank of India will not only refuse permission but will further resort to action under Sections 50, 61 and 63, not merely punish the offender but also confiscate the property involved. We do not think that the scheme of the Act makes previous permission imperative under Section 29(1) though the failure to obtain prior permission may expose the foreign investor to prosecution, penalty, conviction and confiscation if permission is ultimately refused. Even if permission is granted, it may be made conditional. The expression “special permission” is wide enough to take within its stride a “conditional permission”, the condition being relevant to the purpose of the statute, in this case, the conservation and regulation of foreign exchange. For example, ex post facto permission may be granted

¶590

84. On an overall view of the several statutory provisions and judicial precedents to which we have referred we find that a shareholder has an undoubted interest in a company, an interest which is represented by his shareholding. Share is movable property, with all the attributes of such property. The rights of a shareholder are (i) to elect directors and thus to participate in the management through them; (ii) to vote on resolutions at meetings of the company; (iii) to enjoy the profits of the company in the shape of dividends; (iv) to apply to the court for relief in the case of oppression; (v) to apply to the court for relief in the case of mismanagement; (vi) to apply to the court for winding up of the company; (vii) to share in the surplus on winding up. A share is transferable but while a transfer may be effective between transferor and transferee from the date of transfer, the transfer is truly complete and the transferee becomes a shareholder in the true and full sense of the term, with all the rights of a shareholder, only when the transfer is registered in the company's register. A transfer effective between the transferor and the transferee is not effective as against the company and persons without notice of the transfer until the transfer is registered in the company's register. Indeed until the transfer is registered in the books of the company the person whose name is found in the register alone is entitled to receive the dividends, notwithstanding that he has already parted with his interest in the shares. However, on the transfer of shares, the transferee becomes the owner of the beneficial interest though the legal title continues with the transferor. The relationship of trustee and “cestui que trust” is established and the transferor is bound to comply with all the reasonable directions that the transferee may give. He also becomes a trustee of the dividends as also of the right to vote. The right of the transferee “to get on the register” must be exercised with due diligence and the principle of equity which makes the transferor a constructive trustee does not extend to a case where a transferee takes no active

¶595

interest “to get on the register”. Where the transfer is regulated by a statute, as in the case of a transfer to a non-resident which is regulated by the Foreign Exchange Regulation Act, the permission, if any, prescribed by the statute must be obtained. In the absence of the permission, the transfer will not clothe the transferee with the right “to get on the register” unless and until the requisite permission is obtained. A transferee who has the right to get on the register, where no permission is required or where permission has been obtained, may ask the company to register the transfer and the company who is so asked to register the transfer of shares may not refuse to register the transfer except for a bona fide reason, neither arbitrarily nor for any collateral purpose. The paramount consideration is the interest of the company and the general interest of the shareholders. On the other hand, where, for instance, the requisite permission under the FERA is not obtained, it is open to the company and, indeed, it is bound to refuse to register the transfer of shares of an Indian company in favour of a nonresident. But once permission is obtained, whether before or after the purchase of the shares, the company cannot, thereafter, refuse to register the transfer of shares. Nor is it open to the company or any other authority or individual to take upon itself or himself, thereafter, the task of deciding whether the permission was rightly granted by the Reserve Bank of India. The provisions of the Foreign Exchange Regulation Act are so structured and woven as to make it clear that it is for the Reserve Bank of India alone to consider whether the requirements of the provisions of the Foreign Exchange Regulation Act and the various rules, directions and orders issued from time to time have been fulfilled and whether permission should be granted or not. The consequences of non-compliance with the provisions of the Act and the Rules, orders and directions issued under the Act are mentioned in Sections 48, 50, 56 and 63 of the Act. There is no provision of the Act which enables an individual authority outside the Act or determine for his own or its own purpose whether the Reserve Bank was right or wrong in granting permission

¶600

under Section 29(1) of the Act. As we said earlier, under the scheme of the Act, it is the Reserve Bank of India that is constituted and entrusted with the task of regulating and conserving foreign exchange. If one may use such an expression, it is the “custodian-general” of foreign exchange. The task of enforcement is left to the Directorate of Enforcement, but it is the Reserve Bank of India and the Reserve Bank of India alone that has to decide whether permission may or may not be granted under Section 29(1) of the Act. The Act makes it its exclusive privilege and function. No other authority is vested with any power nor may it assume to itself the power to decide the question whether permission may or may not be granted or whether it ought or ought not to have been granted. The question may not be permitted to be raised either directly or collaterally. We do not, however, rule out the limited class of cases where the grant of permission by the Reserve Bank of India may be questioned, by an interested party in a proceeding under Article 226 of the Constitution, on the ground that it was mala fide or that there was no application of the mind or that it was opposed to the national interest as contemplated by the Act, being in contravention of the provisions of the Act and the Rules, orders and directions issued under the Act. Once permission is granted by the Reserve Bank of India, ordinarily it is not open to anyone to go behind the permission and seek to question it. It is certainly not open to a company whose shares have been purchased by a non-resident company to refuse to register the shares even after permission is obtained from the Reserve Bank of India on the ground that permission ought not to have been granted under the FERA. It is necessary to remind ourselves that the permission contemplated by Section 29(1) of the Foreign Exchange Regulation Act is neither intended to nor does it impinge in any manner on any legal right of the company or any of its shareholders. Conversely neither the company nor any of its shareholders is clothed with any special right to question any such permission.

¶961

*No.*	*Activity*	*Minimum* *Owned* *Fund* *Requirement*	*Exempted* *Regulations, if* *any*
1	Undertaking only operating lease transactions for aircraft lease	USD 0.2 mn or equivalent amount in any other freely convertible currency	Regulation (4) and Regulation (8) subject. to the following:
2	Undertaking one or more of the non-core activities	USD 0.2 mn or equivalent amount in any	(i) To have a Board approved prudential policy
3	Undertaking to act as facilitators or core activities as and when permitted by the Authority	other freely convertible currency or any such amount as may be required to seek specific	(ii) Fit and Proper criteria set out by the
4	Undertaking any of the permissible activities, if operating	registration for a proposed non- core activity.	Authority
5	Undertaking one or more core activities with or without non-core activities.	USD 3 mn or equivalent amount in any other freely convertible currency.
6	Undertaking specialised activities with or without core or non-core activities	USD 5 mn or equivalent amount in any other freely convertible currency.	None

¶2308

“Henderson v. Henderson abuse of process, as now understood, although separate and distinct from cause of action estoppel and issue estoppel, has much in common with them. The underlying public interest is the same : that there should be finality in litigation and that a party should not be twice vexed in the same matter. This public interest is reinforced by the current emphasis on efficiency and economy in the conduct of litigation, in the interests of the parties and the public as a whole. The bringing of a claim or the raising of a defence in later proceedings may, without more, amount to abuse if the court is satisfied (the onus being on the party alleging abuse) that the claim or defence should have been raised in the earlier proceedings if it was to be raised at all. I would not accept that it is necessary, before abuse may be found, to identify any additional element such as a collateral attack on a previous decision or some dishonesty, but where those elements are present the later proceedings will be much more obviously abusive, and there will rarely be a finding of abuse unless the later proceeding involves what the court regards as unjust harassment of a party. It is, however, wrong to hold that because a matter could have been raised in earlier proceedings it should have been, so as to render the raising of it in later proceedings necessarily abusive. That is to adopt too dogmatic an approach to what should in my opinion be a broad, merits-based judgment which takes account of the public and private interests involved and also takes account of all the facts of the case, focusing attention on the crucial question whether, in all the circumstances, a party is misusing or abusing the process of the court by seeking to raise before it the issue which could have been raised before. As one cannot comprehensively list all possible forms of abuse, so one cannot formulate any hard and fast rule to determine whether, on given facts, abuse is to be found or not […]”

Genpact India Pvt. Ltd., v. the Assistant Director

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