ECBs by Corporates under Investigation

Hitherto, companies that are under
investigation by law enforcement agencies such as the Directorate of
Enforcement are not entitled to taken on external commercial borrowings (ECBs)
under the automatic route, and are required to approach the Reserve Bank of
India (RBI) for approval.
Through a recent circular,
the RBI has relaxed such position. Now, such entities under investigation are
eligible to avail of ECBs under the automatic route. Where the pendency of
investigation is disclosed by the borrowing entity, the authorized dealers approving
the proposal must highlight this fact to the RBI.
This liberal approach reinforces the
well-known principle of presumption of innocence.

About the author

Umakanth Varottil

Umakanth Varottil is an Associate Professor at the Faculty of Law, National University of Singapore. He specializes in corporate law and governance, mergers and acquisitions and cross-border investments. Prior to his foray into academia, Umakanth was a partner at a pre-eminent law firm in India.

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