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India: Enemy property to be encashed for domestic uses

November 23, 2018

www.india.gov.in

India has been working towards carving out its position in the international market in terms of being one of the most favoured business destinations. Policies and strategies have been devised out to improve the investment in terms of investor friendly schemes, reduced procedural hurdles, elimination of cumbersome procedures, etc. which elevate the position of the country. However, change in circumstances often causes the Government to take actions against the international investors which may be extend for a time frame.

Enemy Property

Any person may be identified as an enemy by a country in respect of its safety attributable to his activities and past records. Owing to strained relations between nations, they often recognize each other as their enemies. It brings to halt all major transactions between them including social welfare activities, educational exchange programmes, transfer of technical and scientific know-how, trade practices, etc.

Enemy means a person or country who or which was an enemy, an enemy subject or an enemy firm, as the case may be, under the Defence of India Act 1971 and Rules 1971, but does not include a citizen of India. It also includes the legal heir or successor of the aforesaid person, whether or not citizen of India or the citizen of a country which is not an enemy or the enemy who has changed his nationality.

The categorization as an enemy jeopardizes the interests of those holding assets in the country holding them citizens of enemy country. The Enemy Property Act in 1968 (hereinafter referred to as the “Act”) regulates and monitors the vesting of enemy property in the custody of the Custodian of Enemy Property of India (also referred to as “Custodian”). The provisions of the Act allow the Custodian to dispose of whether by sale or otherwise, as the case may be, with prior approval of the Central Government.

Sale of enemy shares- Approved

The Union Cabinet approved for sale of the enemy shares on November 8, 2018, some of the features of its the mechanism and procedure are stated as follows[1]:

  • ‘In principle’ approval has been accorded for sale of enemy shares under the Custody of Ministry of Home Affairs/ Custodian of Enemy Property of India.
  • Department of Investment and Public Asset Management has been authorized to sell the enemy shares.
  • The process for selling these shares is to be approved by the Alternative Mechanism under Chairmanship of Finance Minister.
  • Before initiation of sale of any Enemy Shares, the Custodian shall certify that the sale of the Enemy Shares is not in contravention of any judgment, decree or order of any court, tribunal or other authority or any law for the time being in force and can be disposed-off by the Government.
  • Sale proceeds are to be deposited as disinvestment proceeds in the Government Account maintained by Ministry of Finance.
  • The advisors/ intermediaries like Merchant Bankers, Legal Adviser, Selling Brokers etc. as may be required for the disposal of movable enemy property, shall be appointed by Department of Investment and Public Asset Management through an open tender/limited tender process. An Inter-Ministerial Group shall guide the process of sale.

As many as 6,50,75,877 shares in 996 companies of 20,323 shareholders are under the custody of the Custodian have been lying dormant for decades. With a view to liquidate such securities and the disposal of enemy property a framework has been institutionalized enabling the usage of such fund for development and social welfare programmes.

[1] http://pib.nic.in/newsite/PrintRelease.aspx?relid=184643

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