INDIA Law and Practice Contributed by: Raj Ramachandran, Kartik Jain, Mannat Nirola and Anmol Mahajan, JSA Advocates & Solicitors
the RBI or other competent authorities. Furthermore, both the company and its officers may be subject to regulatory scrutiny and enforcement action for non- compliance with the applicable foreign investment regulations. 2.3 Commitments Required From Foreign Investors There is no general requirement for foreign inves - tors to provide specific commitments as a condition for obtaining approval. However, investments falling under the government approval route may be subject to conditions or undertakings imposed by the relevant authorities on a case-by-case basis, having regard to the sector, the nature of the investment and any national security, public interest or regulatory consid - erations. Such conditions may include compliance with sector- specific regulations, foreign investment limits, owner - ship and control requirements, national security and data protection norms, and reporting obligations. In certain regulated sectors, including defence, tel - ecommunications, insurance, broadcasting and financial services, additional conditions may apply pursuant to the applicable sector-specific regulatory framework. 2.4 Right to Appeal There is no dedicated statutory appellate mechanism under the foreign investment approval regime against a decision refusing approval of a proposed foreign investment under the government approval route. Such decisions may, however, be challenged before the jurisdictional High Court through a writ petition under Article 226 of the Constitution of India. The scope of judicial review is limited. Courts do not ordinarily reassess the commercial merits or policy considerations underlying an investment approval decision. Instead, judicial review is confined to exam - ining the legality of the decision-making process. A different position applies where the matter relates to an enforcement action or adjudication order under FEMA arising from an investment undertaken without the requisite approval. FEMA prescribes a statutory
appellate mechanism for such adjudication orders, including appeals before the Special Director and the Appellate Tribunal. Further appeals on questions of law may be brought before the jurisdictional High Court in accordance with the provisions of FEMA. 3. Corporate Vehicles 3.1 Most Common Forms of Legal Entity Businesses in India may be carried on through incor - porated entities such as companies and limited liabil - ity partnerships (LLPs), or through unincorporated entities such as sole proprietorships and partnership firms. Foreign investors may also establish Branch Offices (BOs), Liaison Offices (LOs) or Project Offices (POs) for limited purposes. The principal characteris - tics of these vehicles are as follows. 1. Sole Proprietorship A sole proprietorship is owned and managed by a single individual and does not have a separate legal identity. The proprietor bears unlimited personal liabil - ity for all debts and obligations of the business. There is no minimum capital requirement, and the proprie - tor retains complete control over management and operations. Sole proprietorships are commonly used for small businesses, trading activities and consul - tancy services due to their ease of establishment and low compliance burden. 2. Partnership Partnerships may be constituted either as: (a) a part - nership firm under the Indian Partnership Act, 1932; or (b) an LLP under the Limited Liability Partnership Act, 2008 (“LLP Act”). A partnership firm does not have a legal identity sepa - rate from its partners, who are jointly and severally liable for the firm’s obligations. It is generally suited for professional practices, family-owned businesses and closely held ventures where partners actively partici - pate in management. An LLP is a separate legal entity with perpetual suc - cession. The liability of each partner is limited to the extent of the partner’s agreed contribution. An LLP combines the operational flexibility of a partnership
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