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S K Modi says Kansagras are not Indians: ModiLuft spat

Bhupesh Bhandari

In the battle for ModiLuft/ Royal Airways, the S K Modi camp has charged that the Kansagras, who have a controlling interest in Royal Holding Services, are not Indian nationals or non-resident Indians and hence cannot take control of the airline.

"The civil aviation policy clearly says that the control of the company shall be with Indian nationals. If the control is passed on to the Kansagras, the company will lose its licence to operate a domestic airline," sources said.

Royal Holding Services was issued 81,077,500 cumulative redeemable convertible preference shares by Modiluft/Royal Airways. Last year, Royal Holding said it had converted these shares to acquire a 56.87 per cent stake in the airline and was, hence, in control.

Modi has filed a petition in the Delhi High Court saying that, since the government's civil aviation policy does not allow foreign nationals to be in control of a domestic airline, the conversion of these preference shares was illegal.

He is also known to have written to the ministry of civil aviation to this effect.

Sources close to him mention that the Kansagras, who are British nationals, hold over 60 per cent shares in Royal Holding Services.

As a result, this company does not qualify as an overseas corporate body. For an overseas company to qualify as an OCB, at least 60 per cent of the control should be with Indian citizens including NRIs.

"Royal Holding Services does not qualify as an OCB as the Kansagras are British passport holders," the sources said.

Sources close to the Kansagras, on their part, cited the Foreign Exchange Management (Deposit Regulations) 2000 Rules which define an NRI as a person residing outside India who is either an Indian citizen or a person of Indian origin (PIO).

It defines a PIO as a citizen of any country other than Pakistan or Bangladesh either of whose parents or grandparents was a citizen of India. "As their father was an Indian citizen, under this rule the Kansagras qualify as NRIs," the sources said.

In return, sources in the Modi camp said that this definition of an NRI is for bringing in or taking out foreign exchange from the country and not for the current dispute.

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