FDI bone finally goes down the Centre’s neck – Consumers to get International shopping flavour

Supreme Court upholding hte proposal to allow Foreign Direct Investment in Multi-brand retail trade

First day of May, year 2013 – brought a big relief to the Union Government when the three judges bench of the Supreme Court, comprising of Justices R.M. Lodha, Madan B. Lokur and Kurian Joseph, in the matter Manohar Lal Sharma vs. Union of India & Another upheld the proposal to allow Foreign Direct Investment (FDI) in Multi-brand retail trade.

The Press Note Nos. 4,5,6,7 and 8 of (2012 Series) dated 20th September, 2012 were sought to be quashed on the ground of they being unconstitutional and without any authority of law and the impugned FDI Policy was not founded on any material obtained from the government agency and no extensive consultation was made before its formulation. These Press Notes had reviewed the FDI policy in Single-Brand Product Retail Trading, Multi-Brand Retail Trading, Air Transport Services, Broadcasting Carriage Services and Power Exchanges and in the forwarding circular, it was mentioned that necessary amendments to Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000 would be notified separately.

The Supreme Court held that the impugned policy is only an enabling policy and the State Governments/Union Territories are free to take their own decisions in regard to implementation thereof keeping in view the local conditions, thus, it would be to the State Governments/Union Territories whether or not to implement the policy to allow FDI up to 51% in Multi-Brand Retail Trading. Bench categorically declined the view that Central Government has no authority or competence to formulate FDI Policy. The Central Government can formulate a policy relating to investment by a non-resident entity/person resident outside India, in the capital of an Indian Company. It is the Reserve Bank of India (RBI), which is empowered to prohibit, restrict or regulate various types of foreign exchange transactions, including FDI, in India by means of necessary regulations. Union of India in its counter-affidavit highlighted the benefits of FDI in Multi-Brand Retail enumerating that the policy will benefit the consumer by enlarging the choice of purchase at more affordable prices and will eradicate the traditional trade intermediaries/middlemen to facilitate better access to the market i.e. the ultimate retailer for the producer of goods.