Harsco India Pvt. Ltd.

In the RESERVE BANK OF INDIA Foreign Exchange Department Secretariat Road Saifabad, Hyderabad 500 004 Present Ramanath Dash Regional Director Date: August 19, 2016 C.A. HYD 139 In the matter of M/s. Harsco India Pvt. Ltd B-2-684/40, Anand Banjara Colony Road no. 12, Banjara Hills Hyderabad-500 034 (Applicant) In exercise of the powers conferred under Section 15 (1) of Foreign Exchange Management Act, 1999 and the Regulations/ Rules/ Notifications/ Orders made there under, I pass the following Order The applicant has filed the compounding application dated June 09, 2016 for compounding of contravention of the provisions of the Foreign Exchange Management Act, 1999 (the FEMA) and the regulations issued there under. The contraventions sought to be compounded are (i) neither the equity instruments were issued nor the money refunded to the foreign investor, a person resident outside India, within 180 days of the receipt of the inward remittance; and the consideration has not been received before the issuance of shares to non-residents (ii) delay in reporting receipt of foreign inward remittances; (iii) delay in submission of Form FC-GPR to the Reserve Bank after issue of shares towards subscription to equity to a person resident outside India in terms of Paragraph 8, Paragraph 9 (1) (A) and Paragraph 9 (1) (B) of Foreign

FED M/s. Harsco India Pvt. Ltd. CA No. HYD 139 Exchange Management (Transfer or issue of Security by a Person Resident outside India) Regulations, 2000 of Schedule 1 to Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000 notified vide Notification No. FEMA.20/2000-RB dated 3rd May 2000 and as amended from time to time (hereinafter referred to as Notification No. FEMA 20 /2000-RB). 2. The relevant facts of the case are as follows: a) The applicant is a resident company incorporated on 16.05.2008.The company is engaged in the activity of undertaking materials recovery i.e. slag handling and slag processing services in steel mills. b) The applicant had received foreign inward remittances from overseas investors towards advance for subscription to equity shares as indicated below:

Sl. Name of Total Amount Date of Reported No. Remitter ( ) Receipt to RBI on Harsco ₹ Investments 1 Europe BV 5,23,949.63 30.07.08 18.01.10 Multiserv International 2 BV 1,65,437.09 30.07.08 18.01.10 Harsco Investments 3 Europe BV 80,00,000.00 29.08.08 18.01.10 Harsco Investments 4 Europe BV 1,00,72,500.00 24.03.09 18.01.10 Harsco Investments 5 Europe BV 1,02,42,000.00 31.08.09 18.01.10 Harsco International 6 Finance BV 3,32,97,242.50 04.12.09 10.09.12 Harsco International 7 Finance BV 8,38,00,000.00 10.06.10 10.09.12

FED M/s. Harsco India Pvt. Ltd. CA No. HYD 139 Harsco Investments 8 Europe BV 8,58,69,000.00 20.08.10 16.09.10 Harsco Investments 9 Europe BV 7,95,21,000.00 20.10.10 18.11.10 Harsco Investments 10 Europe BV 5,77,81,500.00 13.12.11 07.01.12 Harsco Investments 11 Europe BV 10,95,48,657.60 24.08.12 22.01.13 Harsco Investments 12 Europe BV 5,74,56,400.00 14.06.13 03.07.13 Harsco Investments 13 Europe BV 8,34,94,000.00 11.07.13 07.08.13 Harsco Investments 14 Europe BV 5,99,19,340.00 30.10.13 29.11.13 Harsco Investments 15 Europe BV 6,03,88,800.00 15.01.14 05.02.14 Harsco Investments 16 Europe BV 7,28,62,440.00 06.02.14 04.03.14

Total 81,29,42,266.82 The applicant reported receipt of remittances towards share subscription amounting to 81,29,42,266.82/- to the Regional Office of Reserve Bank of India and remittances ₹ amounting to 25,56,49,786.82/- was reported with delay ranging from 3 months 18 days to 2 years 8 months 7 days approximately as indicated above. Whereas in terms ₹ of paragraph 9 (1) (A) of Schedule 1 to Notification No. FEMA 20/2000-RB, an Indian company issuing shares or convertible debentures in accordance with these Regulations should report to the Reserve Bank of India as per the prescribed procedure not later than 30 days from the date of receipt of the amount of consideration.

FED M/s. Harsco India Pvt. Ltd. CA No. HYD 139 c) The company allotted equity shares and filed Form FC-GPRs as indicated below: Sl Name of Date of Number of Amount for Date of Date of No Investor allotmen shares which shares reporting reporting t of allotted allotted ( ) to RBI to AD as shares per ₹ applicati on Harsco Investment 1 s Europe 16.05.08 7,600 76,000 23.05.11 03.04.10 Multiserve 2 Internation al BV 16.05.08 2,400 24,000 23.05.11 03.04.10 Harsco Investment 3 s Europe BV 31.07.08 8,00,000 80,00,000 03.04.10 03.04.10 Harsco Investment 4 s Europe BV 02.04.09 10,07,250 1,00,72,500 03.04.10 03.04.10 Harsco Investment 5 s Europe BV 01.09.09 10,24,200 1,02,42,000 03.04.10 03.04.10 Harsco Investment 6 s Europe BV 24.09.09 44,794 4,47,940 23.05.11 03.04.10 Multiserve 7 Internation al BV 24.09.09 14,143 1,41,430 23.05.11 03.04.10 Harsco Investment s Europe 8 BV 06.12.10 1,50,34,536 20,29,66,236 09.01.12 14.12.11 Harsco Investment s Europe 9 BV 19.04.11 56,80,071 7,95,21,994 08.08.11 19.05.11

FED M/s. Harsco India Pvt. Ltd. CA No. HYD 139 Harsco Investment s Europe 10 BV 06.06.12 39,84,931 5,77,81,500 07.09.12 09.07.12 Harsco Investment s Europe 11 BV 22.02.13 27,38,716 10,95,48,640 02.04.13 25.03.13 Harsco Investment s Europe 12 BV 30.05.14 74,24,911 33,41,20,995 20.10.14 20.10.14

Total 3,77,63,552 81,29,42,335

The applicant filed Form FC-GPRs for the allotment of shares amounting to 73, 34, 20,341/- as indicated above with a delay ranging from 1 day to 1 year 9 months 16 days approximately beyond the prescribed limit. Whereas in terms of ₹ paragraph 9 (1) (B) of Schedule 1 to Notification No. FEMA 20/2000-RB, an Indian company issuing shares in accordance with these Regulations has to submit to Reserve Bank a report in Form FC-GPR along with documents prescribed therein within 30 days from the date of issue of shares to person resident outside India.

d) The company delayed in allotment of shares beyond the stipulated period of 180 days from the date of receipt of inward remittances and allotted shares without approval of RBI with delay ranging from 1 day to 7 months 26 days approximately as detailed under:

date of Sl. Name of Amount Date of value of shares issue of No. Remitter received ( ) Receipt issued ( ) shares ₹ ₹

FED M/s. Harsco India Pvt. Ltd. CA No. HYD 139 Harsco Investments 1 Europe BV 4,49,949.63 30.07.08 24.09.09 4,47,940 Multiserve International 2 BV 1,41,437.09 30.07.08 24.09.09 1,41,430 Harsco Investments 3 Europe BV 3,32,97,242.50 04.12.09 06.12.10 3,32,97,242.50 Harsco Investments 4 Europe BV 7,95,21,000 20.10.10 19.04.11 7,95,21,000 Harsco Investments 5 Europe BV 10,95,48,657.60 24.08.12 22.02.13 10,95,48,640 Harsco Investments 6 Europe BV 5,74,56,400 14.06.13 30.05.14 5,74,56,400 Harsco Investments 7 Europe BV 8,34,94,000 11.07.13 30.05.14 8,34,94,000 Harsco Investments 8 Europe BV 5,99,19,340 30.10.13 30.05.14 5,99,19,340 Total 42,38,28,026.82 42,38,25,992.50

The company has allotted shares before receipt of consideration as detailed below value of Amount Sl. Name of Date of issue Date of shares received No. Investor of shares remittance issued ( ) ( ) Harsco ₹ ₹ Investments 16.05.08 76,000 30.07.08 76,000 1 Europe BV Multiserve International 16.05.08 24,000 30.07.08 24,000 2 BV Harsco 31.07.08 80,00,000 29.08.08 80,00,000 3 Investments

FED M/s. Harsco India Pvt. Ltd. CA No. HYD 139 Europe BV

Total 81,00,000 81,00,000

The company received the remittances of Rs. 81, 00,000/- after the issue of shares with a delay ranging from 29 days to 2 months 14 days approximately.

Whereas in terms of Paragraph 8 of Schedule 1 to Notification No. FEMA 20/2000-RB, if the shares are not issued within 180 days from the date of receipt of the inward remittance, the amount of consideration so received shall be refunded to the person concerned, provided the Reserve Bank may on an application made to it and for sufficient reasons permit to refund the amount of consideration received towards issue of security, if such amount is outstanding beyond a period of 180 days from the date of receipt. Whereas in terms of Paragraph 8 of Schedule 1 to Notification No. FEMA 20/2000-RB, the consideration from non-resident has to be received before the issuance of shares. The amendment in paragraph 8 of Schedule 1 to Notification No. FEMA 20/20000-RB was introduced by issue of Foreign Exchange Management (Transfer or Issue of Security by a Person outside India) (Third Amendment Regulation, 2007 notified, vide Notification No. FEMA 170/2007-RB dated November 13, 2007 in the official Gazette of the Govt. of India.

3 a) The applicant was given an opportunity for personal hearing vide Reserve Bank’s letter No. HY.FE.FID/397/14.66.003/2016-17 dated August 10, 2016 for further submission in person and/or producing documents, if any, in support of the application. (b) The applicant appeared for personal hearing on August 19, 2016 during which Shri. Krishna Jonnalagadda, Head Finance and Company Secretary and Shri. Chaitanyakumar K, Manager-Accounts and Compliance represented the applicant. The applicant admitted the contraventions for which the compounding has been sought. During the personal hearing it was submitted that the delay was due to administrative

FED M/s. Harsco India Pvt. Ltd. CA No. HYD 139 reasons in initial time and was not willful or with a malafide intention. In view of the foregoing, the applicant requested to take a lenient view in disposal of the application. The application for compounding is, therefore, being considered on the basis of the averments made in the application as well the submissions made in this context by the applicant during the personal hearing. 4. I have given my careful consideration to the documents on record and submission made by the applicant during the personal hearing. Accordingly, I hold that the applicant has contravened the following FEMA provisions issued in terms of: (a) Paragraph 8 of Schedule 1 to Notification No. FEMA 20/2000-RB for allotting the shares beyond the stipulated period of 180 days from the date of receipt of foreign inward remittances. The contravention relates to an amount of 42, 38, 25,992.50/-and the period of contravention ranges from 1 day to 7 months 26 days approximately. ₹ Paragraph 8 of Schedule 1 to Notification No. FEMA 20/2000-RB for allotting the shares before receipt of consideration. This contravention relates to an amount of 81, 00,000/- and the period of contravention ranges from 29 days to 2 months and 14 days ₹ approximately. (b) Paragraph 9 (1) (A) of Schedule 1 to Notification No. FEMA.20/ 2000-RB due to delay in reporting of receipt of foreign inward remittances towards subscription to equity shares as detailed above. The contraventions relate to an amount of 25, 56, 49,786.82/- and the duration of contravention ranges from 3 months 18 days to 2 years ₹ 8 months 7 days approximately. (c) Paragraph 9 (1) (B) of Schedule 1 to Notification No. 20/2000-RB due to delay in submission of Form FC-GPR to Reserve Bank after issue of shares to persons resident outside India and the contravention relates to an amount of 73,34,20,341/- and the duration of contravention ranges from 1 day to 1 year 9 months 16 days approximately. ₹

5. In terms of Section 13 of the FEMA, any person contravening any provision of the Act shall be liable to a penalty up to thrice the sum involved in such contravention upon adjudication. However, taking into account the relevant facts and circumstances of the FED M/s. Harsco India Pvt. Ltd. CA No. HYD 139 case as stated in the foregoing paragraphs, I am persuaded to take a lenient view on the amount for which the contravention is to be compounded and I consider that an amount of /- (Rupees Twenty Two Lakh Forty Five Thousand only) will meet the ends of justice. ₹ 22,45,000 6. Accordingly, I compound the admitted contraventions namely, the contraventions of Paragraph 8, Paragraph 9 (1) (A) and Paragraph 9 (1) (B) of Schedule 1 to Notification No. FEMA-20/2000-RB by the applicant on the facts discussed above in terms of the Foreign Exchange (Compounding Proceedings) Rules, 2000 on payment of an amount of /- (Rupees Twenty Two Lakh Forty Five Thousand only) which shall be deposited by the applicant with the Reserve Bank of India, Foreign Exchange ₹ 22,45,000 Department, 1st Floor, Saifabad, Hyderabad - 500004 by a demand draft drawn in favor of the "Reserve Bank of India" and payable at Hyderabad within a period of 15 days from the date of this order. In case of failure to deposit the compounded amount within the above mentioned period, Rule10 of the Foreign Exchange (Compounding Proceedings) Rules, 2000 dated May 3, 2000 shall apply.

The application is disposed accordingly. Dated this 19th day of August 2016.

Sd/- (Ramanath Dash) Regional Director