The Hindu Business Line : Press Note 18: A scorecard

Asian Paints refused to give a board resolution approving the share acquisition by ICI and the deal fell through. The genesis, however, of this press release of the Government of India may lie elsewhere.

It lay in the objections of several Indian companies to the forays of their foreign partner that they thought undermined their existing joint venture. Joint venture partners such as ITC-British American Tobacco, Modi-Philip Morris and Modi-Xerox had run into difficulties long before.

After the note was issued, press note was invoked in the spats between Modi-Walt Disney, TCL-Baron, Draeger-Usha Group, Graphite India-Amiantit and Kennametal-YK Birla to name a few.

Even Dabur, in its spat with Nestle in the case of their biscuits joint venture, wrote to the Foreign Investment Promotion Board that if Nestle proposes to start biscuit manufacturing unit then it would not have Dabur's consent. Press note 18 was also initially invoked in the case of Pfizer's proposal to set up a wholly owned subsidiary. The Board however ruled that press note 18 was not applicable and approved Pfizer's proposal albeit with a condition.

At one time, even the Government was reported to be mulling the use of its own note to deal with its problems with Suzuki. In addition, if not for press note 18, the outcome of the agreements between Hero-Honda, TVS-Suzuki or Yokogawa-Bluestar may have been different. The Indian partners in these cases did wangle for themselves a favourable deal, courtesy the roadblock put up by press note 18.

Press note 18 has however did not always thwart foreign companies. The Foreign Investment Promotion Board has overruled the objections of domestic partner and granted approval in a few cases.

Instances include the approval given to TCL (objections raised by Baron), Haier (Hotline), Amiantit (Graphite India) and Kennametal (Y.K. Birla). The note was also invoked only by a handful of companies each year.

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