Apex court refuses to interfere with policy on FDI in retail

November 6, 2012

Asserting that Policy making is exclusive right of the executive, the Supreme Court refused to interfere with the policy on FDI in retail.

The Centre informed the court that Reserve Bank of India had notified the amendments to the regulations permitting foreign direct investment in multi-brand retail.

Amendments in the Foreign Exchange Management (Transfer or Issue of Security by a Person, Resident outside India) Regulations, 2000, allow foreign direct investment in retail sector. It permits 100% FDI in single-brand product retail and 51% in multi-brand retail. The amended rules have been published in the Gazette of India on October 30

What petitioner said in its plea?

The petitioner had challenged the notification saying that the amendments would have to be placed before Parliament for its approval as per Sections 47 and 48 of the FEMA. He assumes that the Centre might not place it before the Houses.

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. The petitioner told the court that if amendments paving the way for multi-brand FDI in retail sector were rejected by parliament, then this rejection would not erase the licences issued in pursuance of this amendment.

He urged the court to declare the last part of Section 48 of the FEMA, 1999, "as unconstitutional" and declare it as excess delegation of legislative powers.

What does Section 48 of FEMA say?

Section 48 of FEMA says “Every rule and every regulation made under this Act shall be laid, as soon as may be after it is made, before each house of parliament, while in session…that any such modification or annulment shall be without prejudice to the validity of anything previously done under that rule and regulation."

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