Devvrat Singh Shekhawat (pursuing B.P.Sc.(Hons.) LL.B.(Hons.)) (28 Points)
16 December 2011My query is:
What is the enforceability of a corporate guarantee issued by a foreign entity to an Indian entity where the Indian entity has taken a loan from lenders in India?
What are the relevant provisions governing this?
meenakshi
(Audit Manager)
(81 Points)
Replied 16 December 2011
the foreign company giving guarantee to an indian company for a loan taken in india does not have any attract any legality unless the indian company fails to repay the loan.
if the indian company (Principal debtor) fails to repay the loan, the provisions of FEMA are invoked. the principal debtor has to make payment to a person outside india, who has met the liability under the guarantee (foreign company). the amount repaid by the indian company to the foreign company should not exceed the rupee equivalent of the amount paid by the foreign company under the guarantee. and the RBI has granted a general permission for making such payments.
CS RAJESH C.CHOUDHARY
(ASSISTANT MANAGER)
(14607 Points)
Replied 16 December 2011
This situation is to be seen by the banker. it is the prerogative and full discretion of loan lender to be satisfied from Indian guarantor or a foreign guarantor against the security of his loan advancement. Guarantor is equally responsible with the mortgagee for the repayment of all outstanding amounts of loan.
Jeevesh Mehta
(Advocate- Corporate Commercial & Indirect Tax Advisory)
(861 Points)
Replied 16 December 2011
Dear,
In the present matter with us. The banker of Foreign Company ( Holding Co) is demanding composite gurantee from Subsidiary company in India againt the loan to be advanced to Holding co.
Kindly throw some light if the above gurantee by indian subsidiary is goverened by RBI or FEMA laews and regulations.
Urgent
regards
CAclubindia
