Chinese investors on alert over amendment of Enemy Property Act, 1968

Published on 22 Jan 2018 by Tushar

The property worth crores of rupees which once belonged to citizens of India but the heirs of the owners of these properties are now deemed to be enemies. How should such properties be treated?

  1. Enemy property as a legal issue has been one of the concerns of past governments as well. The Legislature has passed 5 ordinances.

  2. These Ordinances have gone a step further from what was settled by the Supreme Court in 2005.
  3. The Ordinances have effectively vested ownership rights over enemy property in the hands of the Custodian, which effectively makes the central government the owner of the enemy property.
  4. While the first four Ordinances lapsed, the last Ordinance, issued in December 2016, has been replaced by the law (amendment to Enemy Property Act, 1968) passed by Parliament this week.

The ‘Global Times’, a daily Chinese tabloid newspaper has reported these developments to be a warning sign to Chinese investors

The daily states that “Although the Act mainly applies to heirs of enemy property, ensuring that the descendants of those who emigrated to Pakistan and China during Partition and afterwards will have no claim over property left behind in India, there is certainly reason for concern.”

  1. It goes on to add that in the scenario of China and India becoming involved in a military conflict, the assets of Chinese companies doing business in India may be confiscated by the Indian government. 
  2. These apprehensions have been caused owing to the amendment of the definition of ‘enemy property’.
  3. Enemy Property now refers to ‘any property belonging to, held or managed on behalf of an enemy, an enemy subject or an enemy firm’.

Properties of nations at war become Alien Properties

  1. When nations go to war, they often seize the properties in their countries of the citizens and corporations of the enemy country.
  2. Properties that are seized under these circumstances are referred to as ‘alien properties’ or ‘enemy properties’.
  3. The idea behind seizing these properties is that an enemy country should not be allowed to take advantage of its assets in the other country during war.

Cases of the recent past

  1. India also seized properties belonging to Pakistani and Chinese citizens when it was at war with these countries.
  2. This seizure by India took place under the Enemy property Act, 1968.

How the Enemy Property Act works

  1. The term ‘enemy property’ has been defined as a property belonging to, held or managed on behalf of an enemy, an enemy subject or an enemy firm. 
  2. The responsibility of handling the seized enemy properties lies with the custodian of an enemy property who is an officer of the central government.
  3. Every state has its Nodal officers appointed by the state governments to coordinate identification, vesting and valuation of enemy properties.

The properties which are prone to seizure under the Enemy Property Act are:

  1. Immovable Properties
  2. Shares held in companies
  3. Gold and other Jewellery
  4. Bank Balances
  5. Investment in Govt. securities and Fixed Deposits
  6. Other Movables

Ground reality of company assets belonging to Pakistan and China

  1. The parliament’s select committee revealed that there are 9280 properties in total of those citizens who have migrated to Pakistan and 9400 properties of those who are citizens of china, amounting to more than 1 lakh crores if sold off.
  2. Apart from this, there are 149 immovable enemy properties of Chinese nationals with the custodian in West Bengal, Assam, Meghalaya, Tamil Nadu, Madhya Pradesh, Rajasthan, Karnataka and Delhi. 
  3. An investigation group in 2008 revealed that the shares vested with the custodian were in listed entities such as Wipro, Cipla ACC, Tata and DCM group companies, Bombay Burmah Trading Co., Ballarpur Industries, DLF, Hindustan Unilever, ITC, Bajaj Electricals, India Cement etc,.  

Are Chinese companies Like Xiaomi and Lenovo at commercial risk?

  1. The 49 Year-old-act was recently amended to auction the seized properties which shocked the world especially china and Pakistan.
  2. Regarding China, there has been substantially increased military conflict with India in recent times due to the over construction in the Doklam region.
  3. The reality is that, China’s investment in India has increased in the past 2 years which puts them under fear of confiscation of all the assets of their companies, based in India, under this act if they stay on the same path of creating conflict.
  4. In fact, China has been the only country who is affected by this amendment the most because the Smartphone maker xiaomi and computer producer Lenovo are the largest selling brands in India who have their maximum properties situated in India.
  5. Although the Act may not hit the Chinese investors directly as of now, the mood amongst Chinese media houses seems to be that of apprehension over these developments.

Indian economy may also be put on risk

  1. Due to the major Economic reforms brought about in India in the past few years, there are huge investments attracted in various sectors in India but the amendment in the enemy property act in 2017 will fail all such reforms and lower the investment and might affect the Economy of the country.
  2. This amendment has the potential to dwindle the investor confidence who might not invest in India due to this newly formed rule.
  3. The Central Government has clarified that the properties which are free from encumbrances will be disposed of for a quick monetization under the enemy protection act but the tenants living in such properties will be governed by the tenancy act.

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