Notification No.FEMA.125/2004-RB
dated November 27, 2004
Foreign Exchange Management (Transfer or
Issue of Security by a Person Resident Outside India) (Fifth Amendment) Regulations,
2004
In exercise of the powers conferred by clause
(B) of sub-section (3) of Section 6 and Section 47 of the Foreign Exchange Management
Act, 1999 (42 of 1999) and in partial modification of its Notification No.FEMA.20/2000-RB,
dated 3rd May 2000, the Reserve Bank of India makes the following
Regulation to amend the Foreign Exchange Management (Transfer or Issue of Security
by a Person Resident Outside India) Regulations, 2000, namely :
1. Short title and commencement
(i) These regulations may be called the Foreign
Exchange Management (Transfer or Issue of Security by a Person Resident Outside
India) (Fifth Amendment) Regulations, 2004.
(ii) These amendments come into effect
from October 01, 2004.*
2. Amendment of the Regulations
(i) In Paragraph 2 of Schedule 1, after Sub-paragraph
(4), the following sub-paragraph may be added :
'(5) An Indian company, otherwise eligible
to issue shares under this Schedule may issue equity/preference shares,
subject to pricing guidelines as given in paragraph 5 of this Schedule,
to a person resident outside India,
(i) being a provider of technology/technical
know-how, against Royalty/Lumpsum fees due for payment;
(ii) against External Commercial Borrowing
(ECB) (other than import dues deemed as ECB or Trade Credit as per RBI
Guidelines)
Provided, that the foreign equity in the company
after the conversion of royalty/ lumpsum fee/ECB into equity is within the sectoral
cap notified, if any'.
(ii) In Paragraph 3, after the words 'beyond
the sectoral limits stipulated in Annexure B' the words 'either directly or
by conversion of ECB/royalty/lumpsum fee' may be added.
(iii) In Paragraph 8, the following explanation
may be added after sub-para (ii):
'Explanation : Conversion of Royalty/Lumpsum
fee due for payment or conversion of ECB, as given elsewhere in this Schedule,
shall be treated as consideration for issue of shares within the meaning of
this paragraph.'
(iv) In Paragraph 9, sub-paragraph (1)(B),
the following proviso may be added :
'Provided that, in addition to above, the company
shall report the conversion of ECB into equity, in ECB-2 Return of the respective
month in case of full conversion of ECB. In case of partial conversion of ECB,
the converted portion shall be reported in form FC-GPR to the concerned Regional
Office of Reserve Bank and non-converted portion in Form ECB-2.'
Sd/-
Shyamala Gopinath
Deputy Governor
Foot Note :
(i) *This has been mentioned as the date
on which the directions were issued to Authorised Dealers vide A.P. (DIR Series)
Circular No.15 dated October 1, 2004.
(ii) The Principal Regulations were published
in the Official Gazette vide G.S.R.No.406(E) dated May 8, 2000 in Part II, Section
3, Sub-section (i) and subsequently amended as under :
G.S.R.No.175(E) dated 13/3/2001
G.S.R.No.182(E) dated 14/3/2001
G.S.R.No.158(E) dated 2/3/2001
G.S.R.No.574(E) dated 19/8/2002
G.S.R.No.4(E) dated 2/1/2002
G.S.R.No.223(E) dated 18/3/2003
G.S.R.No.225(E) dated 18/3/2003
G.S.R.No.558(E) dated 22/7/2003
G.S.R.No.835(E) dated 23/10/2003
G.S.R.No.899(E) dated 22/11/2003
G.S.R.No.12(E) dated 7/1/2004
G.S.R.No.278(E) dated 23/4/2004
G.S.R.No.625(E) dated 21/9/2004
G.S.R.No.799(E) dated 08.12.2004