In a relief to the Centre, the Supreme Court on Wednesday upheld the government’s proposal to allow foreign direct investment (FDI) in multi-brand retail trade (MBRT) saying the move did not suffer from any unconstitutionality, illegality, arbitrariness or irrationality.

A three-judge bench of Justices R.M. Lodha, Madan B. Lokur and Kurian Joseph said “consumer is the king and if that is the philosophy working behind the policy then what is wrong in it.” The Bench referred to the Centre’s counter and said the decision to allow FDI in retail has a legal basis – FEMA 2000. The court welcomed what it called the focus on benefiting the consumer by “enlarging the choice of purchase at more affordable prices and by eradicating the traditional trade intermediaries/middlemen to facilitate better access to the market [ultimate retailer] for the producer of goods.”

The Bench also said that the new policy aims to throw out middlemen, “who are a curse to Indian economy and who are sucking it.” Farmers will benefit significantly from the option of direct sales to organised retailers. The bench said: “This court does not interfere in the policy matter unless the policy is unconstitutional, contrary to statutory provisions or arbitrary or irrational or there is total abuse of power. The impugned policy cannot be said to suffer from any of the vires.”

The Bench also noted that the policy to allow FDI, up to 51 per cent in retail trade was only an enabling policy. “The State governments/Union Territories are free to take their own decisions in regard to implementation of the policy in keeping with local conditions.” It said the Department of Industrial Policy and Promotion (DIPP) was empowered to make policy pronouncements and there was no merit in the contention that the Government of India had no authority to formulate the FDI policy.

Petitioner’s advocate Manoharlal Sharma said the notification was issued without any source of law and parliamentary approval.

The Attorney General G.E. Vahanvati said: “FDI is covered by the definition in section 2(e) of FEMA Capital Account Transaction. Under Section 6(2) of FEMA, RBI is empowered in consultation with the Central Government to specify and permit any class of capital account transactions which can be regulated by RBI under Section 6(3) of FEMA.”

He said: “The Policy of the Government (set out in the Press Notes issued on FDI) falls within the jurisdiction of the Department of Industrial Policy and Promotion as per Allocation of Business Rules. Once the Policy is announced the RBI follows it up with the issuance of notifications.”

“Consumer is the king and if that is the philosophy working behind the policy then what is wrong in it”

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