The Supreme Court said on Monday that it would not interfere in policy decisions, even as the Centre informed it that the Reserve Bank of India had notified the amendments to the regulations permitting foreign direct investment in multi-brand retail.
Attorney-General G.E. Vahanvati produced before a Bench of Justices R.M. Lodha and Anil R. Dave the Gazette notification amending the Foreign Exchange Management (Transfer or Issue of Security by a Person, Resident outside India) Regulations, 2000, permitting foreign direct investment in the sector. The notification permits 100 per cent FDI in single-brand product retail and 51 per cent in multi-brand retail.
“The amended rules have been published in the Gazette of India on October 30, and everything has been done. The rules have been changed, and the new rules lay down sector-specific policies for FDI,” Mr. Vahanvati said.
Advocate Manohar Lal Sharma, who had challenged the notification, said the amendments would have to be placed before Parliament for its approval as per Sections 47 and 48 of the FEMA. He apprehended that the Centre might not do so.
Mr. Sharma pointed to Section 48, which says: “…any modification or annulment [of the regulations] shall be without prejudice to the validity of anything done under that rule or regulation.” The Centre had already issued about 50 FDI licences, and before getting parliamentary approval, it might issue more , and they could not be undone even if Parliament rejected the amendments.
Justice Lodha told counsel: “Why do you presume that the government will not place the amendments before Parliament. If the provisions require them to do so, they will have to do it. Your apprehensions are premature and unfounded. If Parliament does not approve the amendments, …it will be at their [the Centre’s] own risk and peril.”
Mr. Sharma said that through an additional affidavit, he sought a declaration that Section 48 insofar as it validated all acts done prior to Parliament’s approval was unconstitutional. Justice Lodha told him: “We would know about it only after the winter session of Parliament. Let us see whether it is placed before Parliament or not, and then we will decide. We are not passing any order now. They can take risk. If their action does not stand in Parliament, they have made the policy at their own peril.”
Counsel for Swadeshi Jagran Manch and the Federation of Delhi Traders Association wanted that they be impleaded in Mr. Sharma’s petition, saying a parliamentary committee had opposed FDI in multi-brand retail.
Justice Lodha told counsel that policy decisions were the government’s sole prerogative, and the court could not interfere in them. Judicial review, he said, had to be within the four corners of law. The Bench did not pass any order on the applications.
The notification has laid down the following conditions: fresh agricultural produce, including fruits, vegetables, flowers, grains, pulses, fresh poultry, fishery and meat products may be unbranded; the minimum amount to be brought in as FDI by the foreign investor would be $100 million; at least 50 per cent of the total FDI shall be invested in ‘back-end infrastructure’ within three years of the first tranche; and at least 30 per cent of the value of procurement of manufactured/processed products purchased shall be sourced from Indian ‘small farmers.’
It further stipulates that retail sales outlets be set up only in cities with a population of more than 10 lakh. In the States/Union Territories not having cities with a population of more than 10 lakh, these outlets may be set up in the cities of their choice, preferably in the largest, and the government will have the first right to procurement of agricultural products.
The Bench adjourned the matter to January 22, 2013, so as to enable the Centre to place the amendments before both Houses of Parliament in the winter session.