The Hindu Business Line : FIPB turns down Azorim’s proposal to transfer stake

New Delhi, April 9 Terming the proposed move as ‘treaty shopping’, the Foreign Investment Promotion Board (FIPB) recently rejected a proposal of Israel-based Azorim International to transfer its holding in joint venture company Omaxe Azorim Developers to another non-resident Cyprus group entity ‘Azorim Cyprus’.

Azorim International Holdings, a non-resident company, had approached FIPB in January for permission to transfer of shares of New Delhi-based Omaxe Azorim Developers, held by it, to another non-resident group company. Azorim International has invested a cumulative Rs 112.3 crore in two tranches in the joint venture company, where it holds 50 per cent stake while the balance is with Indian real estate company Omaxe.

Sources said that the company had decided that the entire shareholding of Azorim International in the joint venture be transferred to Azorim Cyprus on a ‘no profit and no loss’ basis. Subsequent to the rejig, Azorim Cyprus would hold 50 per cent stake while the balance would remain with Omaxe Ltd.

In support

The matter had come up before the FIPB during its March 7, 2008 meeting. Department of Industrial Policy & Promotion supported the proposal subject to the condition that the investment could not be repatriated before a period of three years from the completion of the minimum capitalisation norms and also compliance of all conditions of Press Note 2 of 2005. Ministry of Urban Development also supported the proposal.

However, the FIPB noted no fresh FDI was coming in and instead, the holding was being moved to another location, tantamounting to “treaty shopping”. Observing that the move could set a bad precedent, the FIPB recommended the proposal for rejection.