Matter pertains to Rs. 456 cr. investment by Wal-Mart, USA, in multi-brand retail

The Madras High Court on Wednesday directed the Additional Solicitor General (ASG) to get instructions from the Enforcement Directorate regarding the action taken on an allegation of violation of Foreign Exchange Management Act (FEMA) and its regulations by certain companies whereby Foreign Direct Investment (FDI) was made during March/April 2010 in multi-brand retail.

A Division Bench of Justices R. Banumathi and K.K. Sasidharan passed the interim order on a public interest litigation petition by the Federation of Tamil Nadu Traders’ Association.

Sensitive sectors

The petitioner said the PIL had been filed to place before the court the facts pertaining to an investment of Rs. 456 crore by Wal-Mart, USA, in multi-brand retail in India violating the prohibition against foreign direct investment in the sector at the relevant period.

If left unchecked, foreign entities and multinational companies could make similar investments in sensitive sectors where FDI was completely banned.

Preliminary counter affidavit

When the matter came up, the Department of Industrial Policy and Promotion, Ministry of Commerce and Industry, New Delhi, filed the preliminary counter affidavit.

ASG P. Wilson said the RBI had already referred the matter relating to the investment to the Enforcement Directorate, New Delhi, for an investigation in accordance with the FEMA Act. The directorate was now seized of the matter and as such the prayer in the petition had become infructuous.

The petitioner’s counsel, B. Kumar, said it was only a routine procedure and no enquiry had been ordered by the government. It was only because of filing of the writ petition that the RBI initiated action.

The Bench said the letter dated November 2 this year of RBI clearly indicated that the bank had taken cognisance of the present writ petition.

Since the Enforcement Directorate was seized of the matter, it was not proper for the court to consider the merits or otherwise of the contentions, including the maintainability of the writ petition at this stage.

In view of the submission that the Enforcement Directorate was seriously looking into the matter and after conducting a detailed investigation the agency would arrive at a definite finding as to whether the companies concerned had violated the provisions of Foreign Exchange Management Act, the Bench said it was giving the direction to the Additional Solicitor General to get instructions from the directorate with regard to the action taken pursuant to the reference by the RBI, and the stage of investigation.

Posted for January 31

The Bench posted the matter for January 31 next year.

  • PIL petition filed by Federation of Tamil Nadu Traders’ Association

  • Enforcement Directorate seized of the matter, says Bench