Notification No. FEMA.40 /2001-RB.

Dated: March 2, 2001

In exercise of the powers conferred by clause (a) of sub-section (3) of Section 6 and Section 47 of the Foreign Exchange Management Act, 1999 (42 of 1999), and in partial modification of its Notification No. FEMA 19/RB-2000 dated May 3, 2000, the Reserve Bank of India makes the following Regulations to amend the Foreign Exchange Management (Transfer or Issue of any Foreign Security) Regulations, 2000, as amended from time to time, namely:-

1. a. These Regulations may be called the Foreign Exchange Management

2. In the Foreign Exchange Management (Transfer or Issue of any Foreign Security) Regulations, 2000,

1. in Regulation 6,

1. in sub-regulation (2) ,

2. in Regulation 8,

1. for sub-regulation (1), the following sub-regulation shall be substituted, namely: -

1. the Indian Party has already made an ADR and/or GDR issue and that such ADRs/GDRs are currently listed on any stock exchange outside India;
2. such investment by the Indian Party does not exceed the higher of the following amounts, namely: -

1. amount equivalent of US$ 100 mn., or
2. amount equivalent to 10 times the export earnings of the Indian Party during the preceding financial year as reflected in its audited balance-sheet, inclusive of all investments made under Regulations in Part I, including under (i) of this clause, in the same financial year,

3. the ADR and/or GDR issue for the purpose of acquisition is backed by underlying fresh equity shares issued by the Indian Party;
4. the total holding in the Indian Party by persons resident outside India in the expanded capital base, after the new ADR and/or GDR issue, does not exceed the sectoral cap prescribed under the relevant regulations for such investment;
5. the valuation of the shares of the foreign company is made, -

1. as per the recommendations of the Investment Banker if the shares are not listed on any stock exchange; or
2. based on the current market capitalization of the foreign company arrived at on the basis of monthly average price on any stock exchange abroad for the three months preceding the month in which the acquisition is committed and over and above, the premium, if any, as recommended by the Investment Banker in its due diligence report in other cases.'

3. after Regulation 9, the following Regulation shall be inserted, namely:-

4. in Regulation 12, in sub-regulation (3), for the words 'Regulation 10', the words 'Regulation 11' shall be substituted.
5. after Part I, the following Part shall be inserted, namely: -

(1) A firm in India registered under the Indian Partnership Act, 1932, may apply to the Reserve Bank for permission to invest abroad to the extent and in the manner specified in Part I.

2. Reserve Bank may, after taking into account the factors specified in sub regulation (3) of Regulation 9, grant permission subject to such terms and conditions as are considered necessary.

(1) A partnership firm registered under the Indian Partnership Act, 1932 which is engaged in providing professional services specified in the Schedule, may make investment in foreign concerns engaged in similar activity, by way of remittance from India and/or capitalization of fees/other entitlements due to it from such foreign concerns

Provided that:-

1. such investments do not exceed US$ 1 (one) million or its equivalent in one financial year,
2. the investing firm is a member of the respective All India professional organization/body; and
3. a report containing (i) name, full address, registration and membership particulars of the investing firm, (ii) full details of investment abroad, (iii) date and amount of remittance/amount of capitalization of fees/other entitlements due to the investing firm, (iv) name and address of the foreign concern together with its line of activity, (v)identification number , if already allotted by the Reserve Bank, is submitted to the Reserve Bank through the authroised dealer within 30 days of making such investments.'

6. in Regulation 19, in sub-regulation (2), in the proviso, for clause (b), the following clause shall be substituted, namely: -

(G) for Schedule I, the following Schedule shall be substituted, namely:-

1. Chartered Accountancy
2. Legal practice and related services
3. Information Technology and Entertainment Software related services
4. Medical and healthcare services'