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ASSIGNMENT
DR . SHAKUNTALA MISHRA NATIONAL REHABILITATION UNIVERSITY
LUCKNOW
( LAW FACULTY)

SESSION: 2022-23
SUBJECT: LAW OF INVESTMENTS & SECURITIES

SUBMITTED TO

MR. SHAIL SHAKYA SIR

ASSISTANT PROFESSOR(LAW)
SUBMITTED BY

SHWETA TIWARI
B.COM.LLB( HONS.) , 8th SEM.
ROLL NO. 194140044
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ACKNOWLEDGMENTS

I am overwhelmed in all humbleness and gratefulness to acknowledge my depth to all those who have helped
me to put these ideas, well above the level of simplicity and into something concrete. I would like to express
My special thanks to my Law of Investment and Securities teacher MR. SHAILSHAKYA SIR who gave
such an important task problem based questions and during completing this task I have done so much
research and reading which enhanced my research skill and habit to solve complex questions and I am really
thankful to him .

Shweta Tiwari
B.COM.LLB( HONS.) , 8th SEM.
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Problem 01: “The approach and objective adopted by government of India towards attracting foreign
investments have undergone vast changes and modifications over a period of time.” In this perspective,
prepare a critical assessment of India’s contemporary policy on foreign investments. Would you like to
suggest changes or adaptations in the policy? If yes, support your suggestions with appropriate
reasons.

However, FY 2023 saw a drop in FDI inflows in India due to various factors, including the ongoing conflict
between Russia and Ukraine, changes in US monetary policy, and other global uncertainties.In terms of
foreign equity inflows, as per government data, India received US$52.34 billion in 2022, marking an increase
from the US$51.34 billion recorded in 2021 but falling short of the US$64.68 billion recorded in 2020. In FY
2023, India received equity inflows worth US$46.03 billion. UNCTAD World Investment Report (WIR)
2022 has ranked India at 7th rank among the top 20 host economies for 2021, in terms of FDI.
India's approach and objective towards attracting foreign investments have indeed evolved significantly over
time. The government has implemented several policy changes and modifications to create a more favourable
environment for foreign investors.
1. The transition from 'regulatory' approach to approach of ' management' has opened new avenues of
experience and collaboration among domestic and foreign enterprises. There have been various efforts
to attract investment in India which reforms to trade and licensing norms, instrumentalities of taxation
hold paramount importance.
2. Liberalisation and Ease of Doing Business: The Indian government has taken several steps to
liberalise foreign investment regulations and improve the ease of doing business in the country.
Reforms such as the introduction of the Goods and Services Tax (GST), the Insolvency and
Bankruptcy Code (IBC), and the implementation of the online single-window clearance system
have streamlined processes and reduced bureaucratic hurdles.
3. FDI Policy: The government has gradually relaxed foreign direct investment (FDI) regulations,
allowing higher FDI limits in various sectors such as defence, insurance, retail, and aviation. This has
encouraged greater participation from foreign investors and facilitated technology transfer, job
creation, and economic growth.
4. Investment Facilitation and Infrastructure Development: The government has recognized the
importance of infrastructure development in attracting foreign investments. Initiatives such as the
National Infrastructure Pipeline, dedicated industrial corridors, and the development of smart cities
are aimed at creating a robust physical and digital infrastructure that supports business growth.
5. Investor Protection: India has made efforts to enhance investor protection and resolve disputes
through mechanisms like the Investor Facilitation and Protection Agreement (BIPA) and the
introduction of commercial courts. These steps improve investor confidence by ensuring a fair and
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efficient resolution of disputes.
6. Bilateral investment treaties:India has signed several bilateral investment treaties (BITs) with other
countries to promote and protect foreign investments in India. These BITs provide for the resolution
of disputes between investors and the host country and offer protection against expropriation and
other forms of discrimination.
7. One major government initiative to attract foreign companies to invest in India is to build special
economic zones. A special economic zone (SEZ) is an area in which business and trade laws are
different from the rest of the country. SEZs are located within a country's national borders, and their
aims include: increased trade, increased investment, job creation and effective administration.

While India has made significant strides in attracting foreign investments, there are areas where
further changes and adaptations could be considered:
Simplification of Regulatory Environment: Despite progress, regulatory complexities and
bureaucratic processes remain a challenge. Streamlining regulations, reducing red tape, and improving
transparency can help create a more investor-friendly environment..
Skill Development and Education: India needs to focus on skill development initiatives to address
the gap between industry requirements and the available workforce. Emphasising vocational training,
enhancing the quality of education, and aligning it with industry needs would attract more foreign
investors.
Infrastructure Development: While efforts have been made, infrastructure gaps still exist in certain
regions. Continued investment in physical and digital infrastructure, including logistics,
transportation, and high-speed internet connectivity, will be crucial for attracting foreign investments.
Strengthen intellectual property rights (IPR) protection: Robust protection of intellectual property
rights is critical for attracting investments in knowledge-based industries such as technology and
pharmaceuticals. Strengthening IPR laws and their enforcement can enhance investor confidence and
encourage technology transfer and innovation.
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Problem 02:“The policy of liberalisation in favour of promoting foreign investments has not only
provided
capital support to Indian companies but has also internationalised Indian companies” – Do you agree
with the statement?” If yes, support your response with minimum FIVE (05)examples of contemporary
relevance.

The year 1991 marked a transition in India's foreign investment policy. The government decided to encourage
long term capital flows as a major source of funds for supplementing domestic savings. Government
introduced first foreign policy which was articulated in new industrial policy announced on 24th July 1991
entry barriers for private players were removed the various procedural controls to the inflow of FDI .This
point of time is considered as beginning of foreign investments in India.Yes, I agree with the statement that
the policy of liberalisation in favour of promoting foreign investments has not only provided capital support
to Indian companies but has also internationalised Indian companies. Here are five contemporary examples
that support this response:
Indian IT and Software Companies: Liberalisation policies have opened up avenues for foreign
investments in the Indian IT and software sector. As a result, companies like Tata Consultancy Services
(TCS), Infosys, and Wipro have expanded their operations globally, establishing a strong international
presence. They have gained clients from various countries and have set up offices and delivery centres
worldwide.
Automotive Industry: Foreign investments and liberalisation policies have played a crucial role in the
growth and internationalisation of Indian automotive companies. For instance, Tata Motors acquired Jaguar
Land Rover (JLR), a British luxury car manufacturer, in 2008. This acquisition allowed Tata Motors to enter
the global luxury car market and expand its global footprint.
Retail Sector: The liberalisation of the retail sector in India has attracted foreign investment, leading to the
internationalisation of Indian retail companies. For example, companies like Reliance Retail, Aditya Birla
Group (with its brand More), and Future Group have formed strategic partnerships with international
companies, such as Walmart and Amazon, to enhance their retail operations and expand their presence both
domestically and internationally.
Telecom Industry: The liberalisation policies in the telecom sector have encouraged foreign investments and
facilitated the internationalisation of Indian telecom companies. Reliance Jio, a subsidiary of Reliance
Industries, has emerged as a major player in the telecom market, offering affordable and innovative services.
With the support of foreign investments, Reliance Jio has expanded its operations and investments globally,
acquiring stakes in international companies like Radisys Corporation and Saavn.
Renewable Energy Sector: The liberalisation policies in the renewable energy sector have attracted foreign
investments and contributed to the internationalisation of Indian companies in this field. Suzlon Energy, an
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Indian wind turbine manufacturer, has expanded its operations globally, establishing a presence in several
countries, including the United States, China, Australia, and Brazil. Similarly, ReNew Power, an Indian
renewable energy company, has received investments from international players like Goldman Sachs and
Canada Pension Plan Investment Board, allowing it to expand its renewable energy projects both
domestically and internationally.
Flipkart: Flipkart, India's leading e-commerce company, received substantial foreign investments, including
a significant stake acquisition by Walmart. This investment not only provided capital support to Flipkart but
also led to the internationalisation of the company. With Walmart's expertise and global network, Flipkart has
been able to expand its operations and compete with international e-commerce giants.
Pharmaceutical industry: The policy of liberalisation has encouraged foreign investments in the Indian
pharmaceutical sector, resulting in the internationalisation of Indian pharmaceutical companies. Companies
like Sun Pharmaceuticals, Dr. Reddy's Laboratories, and Cipla have established a global presence through
acquisitions, partnerships, and export of pharmaceutical products.

These examples demonstrate how the liberalisation policies in favour of promoting foreign investments have
not only provided capital support but also enabled Indian companies to internationalise and establish a global
presence in various sectors.

Problem 03:Enumerate and discuss the procedure adopted in controlling foreign ownership of Indian
entities through the FDI policy. Whether such restrictions prohibit additional growth which could
otherwise have been realised? Prepare a comparative analysis of approach & perspectives to foreign
investments in India & USA.

Controlling foreign ownership of Indian entities is primarily governed by the Foreign Direct Investment
(FDI) policy in India. The FDI policy is formulated by the Department for Promotion of Industry and Internal
Trade (DPIIT) and the Reserve Bank of India (RBI). The objective of the FDI policy is to regulate and
promote foreign investment in India while safeguarding national interests and promoting economic growth.
The procedure adopted in controlling foreign ownership of Indian entities through the FDI policy
involves several steps and regulations:
Sectoral Caps: The FDI policy sets limits on foreign ownership in various sectors. It classifies sectors into
different categories based on the maximum percentage of foreign investment allowed, such as 100%
automatic route (no government approval required), up to 49% under automatic route (government approval
required beyond 49%), and sectors where FDI is prohibited or restricted.
Government Approval: For sectors where government approval is required beyond the automatic route,
foreign investors need to obtain prior approval from the relevant authorities, such as the DPIIT or the Foreign
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Investment Promotion Board (FIPB) for specific sectors.
Conditions and Compliance: In certain sectors, the FDI policy may impose conditions on foreign investors,
such as minimum capitalization requirements, mandatory sourcing from domestic suppliers, or technology
transfer obligations. Foreign investors are required to comply with these conditions and report their
investments to the RBI or other designated authorities.
Security Clearances: In sectors considered sensitive from a national security perspective, foreign
investments are subject to security clearances from relevant ministries or departments, such as the Ministry of
Home Affairs or the Ministry of Defence.
The restrictions on foreign ownership of Indian entities through the FDI policy aim to protect strategic
sectors, national security, and domestic industries.
These restrictions may limit additional growth that could be realised through greater foreign investment.
They can create barriers to entry for foreign companies and hinder technology transfer, capital inflows, and
market competition. Restrictive policies can discourage foreign investors who may choose other countries
with more liberal investment regimes.

Comparative analysis of approach & perspective to foreign investments in India & USA

Regulatory Framework: Both India and the USA have regulatory frameworks to manage foreign
investment, but they differ in their approaches. India's FDI policy focuses on sectoral restrictions and
government approval, while the USA follows a more liberal approach with fewer restrictions and relies on
regulatory bodies like the Committee on Foreign Investment in the United States (CFIUS) for national
security reviews.
Sectoral Focus: India's FDI policy places emphasis on controlling foreign ownership in sectors such as
defence, telecom, retail, and media, considering strategic and national security concerns. In contrast, the USA
primarily focuses on critical infrastructure, technology, and industries with potential national security
implications.
Ease of Doing Business: The USA generally offers a more conducive environment for foreign investment,
with streamlined procedures and fewer restrictions. India has made efforts to improve the ease of doing
business in recent years but still faces challenges related to bureaucracy, legal complexities, and regulatory
compliance.
Investment Promotion: Both countries actively promote foreign investment, but with different approaches.
India has launched initiatives like "Make in India" and "Digital India" to attract foreign investments.
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Problem 04:Prepare a list of general and specific prohibitions on foreign investments under applicable
relevant laws. What purposes are reserved behind such general and specific restrictions on foreign
investments? Critically evaluate the appropriateness of each of such restrictions with the help of
suitable examples and illustrations.

Generally it is thought that Prohibition & Restrictions are synonyms to each other , but in reality it is not the
same as both have different meanings. Prohibition means something which is absolutely barred while
restrictions means something which is allowed but some limitations. Foreign investments in India are
regulated by various laws and regulations. Here is a list of general and specific prohibitions on foreign
investments under the relevant Indian laws.
Prohibition and Restrictions related foreign investments under FEMA Act 1999 with relevant sections
The Foreign Exchange Management Act (FEMA) of 1999 governs foreign exchange transactions, external
commercial borrowings, and foreign investments in India. It sets out regulations and guidelines for foreign
investments in various sectors. While the FEMA Act promotes foreign investments, it also imposes certain
restrictions and prohibitions to safeguard national interests. Here are some relevant sections of the FEMA Act
that deal with prohibition and restrictions related to foreign investments:
Section 3: Dealing in Foreign Exchange, etc.: Prohibits individuals from dealing in foreign exchange, foreign
security, or any immovable property situated outside India without the general or special permission of the
Reserve Bank of India (RBI).
Section 4: Holding of Immovable Property, etc., outside India:Prohibits a person resident in India from
holding any immovable property outside India, except as permitted by RBI's general or special permission.
Section 5: Current Account Transactions:transfer foreign exchange for current account transactions, subject
to the conditions or limitations specified by the RBI.
Section 6: Capital Account Transactions:Restricts capital account transactions involving foreign exchange,
except as permitted by the RBI.Subsection (2): Gives the RBI the authority to regulate capital account
transactions and impose restrictions, prohibitions, or conditions on such transactions.
Section 7: Prohibition on export or import of goods or services without compliance with FEMA regulations.
Section 46 : There is also power of the Central government to private and restrict investment by making rules
on a case to case basis.
Prohibitions & regulations under "TISPROI REGULATIONS 2017"
Section 3 : no person resident outside India shall make investment in India.
Section 4 : an Indian entertaining or a venture capital fund or a firm shall not receive any investment in
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India from a person resident outside India.
Section 15 : investment by a person resident outside India is prohibited in certain prescribed activities.
Section 16 : there is also prohibition on investments beyond investment limit in violation of linked conditions
and in excess of sectoral caps prescribed under the regulations.
Foreign Contribution ( Regulation ) Act 2010
Section 38 of this Act Receiving foreign contribution by institutions , society etc for non permitted purposes
and without prior approval of the Government have also been prohibited under foreign contribution
regulation Act 2010 .
General Prohibitions on Foreign Investments in India:
Nuclear Energy: Foreign investments in the nuclear energy sector are prohibited due to national security
concerns.
Gambling and Betting: Foreign investments in gambling and betting activities, including online platforms, are
prohibited to prevent money laundering, fraud, and social issues.
Lottery Business: Foreign investments in the lottery business are prohibited to prevent money laundering and
illegal activities.
Chit Funds: Foreign investments in chit fund schemes, which are a type of savings and investment system,
are prohibited to protect investors from potential scams and fraud.
. Nidhi company
Cigars, cheroots, cigarillos and cigarette manufacture
Specific restrictions on foreign investment in India:

Multi-Brand Retail: Foreign direct investment (FDI) in multi-brand retail is restricted to a maximum of 51%
ownership. This restriction aims to protect small-scale domestic retailers from competition and maintain the
livelihoods of local traders.
Broadcasting and Print Media: Foreign investments in certain broadcasting sectors, such as terrestrial TV
channels, FM radio, and print media, are subject to limits to maintain Indian control and prevent undue
foreign influence on media content.
Defence Sector: Foreign investments in the defence sector are restricted to a certain percentage and require
government approval. This restriction is primarily for national security reasons and to protect sensitive
technologies and information.
Pharmaceuticals: Foreign investments in pharmaceutical companies engaged in the manufacture of critical
drugs and vaccines are subject to scrutiny and government approval to safeguard public health interests and
ensure availability of essential medicines.
Purposes Reserved Behind Restrictions on Foreign Investments:

National Security: Certain sectors, such as defence and nuclear energy, have restrictions to prevent undue
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foreign influence, safeguard sensitive technologies, and protect national security interests.

Protection of Local Industries: Restrictions in sectors like multi-brand retail aim to protect small-scale
domestic industries from intense competition and prevent adverse effects on employment and livelihoods.
Safeguarding Public Interest: Restrictions in sectors like gambling, chit funds, and pharmaceuticals aim to
protect the public from potential scams, fraud, and health risks.
Appropriateness of Restrictions
The appropriateness of each restriction depends on various factors and viewpoints. While some restrictions
are essential for national security and protecting local industries, others may be seen as barriers to foreign
investment and economic growth.
For example, the restriction on multi-brand retail has faced criticism as it limits foreign investment and
hampers the entry of global retail giants. Proponents argue that it protects small retailers and promotes self-
reliance, while critics argue that it inhibits competition, limits consumer choices, and impedes the flow of
foreign capital.
Similarly, restrictions on foreign investment in sectors like broadcasting and print media may raise concerns
about freedom of the press and the potential for biassed reporting. Striking the right balance between
safeguarding national interests and promoting investment can be a complex task, and ongoing evaluation and
amendments are necessary to ensure the appropriateness of these restrictions
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