IndiaPost.com - FIPB permits Autoliv’s India venture

NEW DELHI: The Foreign Investment Promotion Board (FIPB) has given a conditional go-ahead to Swedish auto-component manufacturer Autoliv's independent venture in India. It has ruled out the clash of interests through violation of Press Note 18, as alleged by its Indian partner IFB Automotive Pvt Ltd. Press Note 18 required foreign investors to take a no objection certificate from its Indian partner, if it wanted to venture in to the same or allied fields.

However, this requirement was subsequently modified in Press Note 1, 2005. The FIPB in 2000 had allowed Autoliv Sweden to set up a 100 per cent subsidiary for manufacture of steering wheels. In the same year, the approval was amended to include integrated steering wheels retrofitted with safety features like airbags, side bags and knee bags. After the approval, Autoliv India invested $3 million to set up facilities in India. It has already contracted orders worth $43 million from Suzuki, Takata, Mahindra and Mahindra, and Nissan.

IFB Autoliv, in which Autoliv has a 50 per cent minus one share stake, objected to this saying that it was a violation of Press Note 18, which was applicable at that time. The company, which manufactures seat belts, argued that between 1998 and 2000 it was in talks with its Swedish partner for manufacture of steering wheel and airbags.

More over, Autoliv did not inform its Indian partner IFB about its intention to enter in to the steering wheel and safety bag business and misrepresented facts to the FIPB. In its meeting in July 20, the FIPB came to the conclusion that the joint venture modalities between IFB and Autoliv only pertained to manufacture of seat belt systems and did not specify any competition or exclusivity clause, which would have restrained the Swedish company Autoliv to enter into manufacture of other safety components for automobiles.

The board concluded that the interests of IFB Autoliv were not jeopardized by Autoliv's decision to venture on its own into the steering wheel business. However, the go-ahead conditions to Autoliv included that it would continue to abide by its joint venture modalities with IFB and not manufacture any items, which could cause competition with the Indian partner. More over, the FIPB has allowed IFB Autoliv the liberty to get into any automotive safety component systems for the automobile sector.

However, Autoliv would not be able to obstruct any such plans of its Indian partner. In January 2001, the FIPB came to the conclusion that Autoliv Sweden did not violate Press Note 18 and IFB Autoliv moved a writ petition in the Calcutta and Delhi high courts in 2002 against this decision. The Delhi High Court, in May this year, directed the FIPB to re-consider the case, taking into consideration the status in 2005, when the board had decided to wait for a judicial verdict on the case.