SC dismisses petition against FDI in multi-brand retail

The apex court will not interfere unless the policy is unconstitutional, contrary to statutory provisions, arbitrary, irrational or abuse of power

The Supreme Court today dismissed a writ petition challenging the notifications and regulations permitting foreign direct investment in multi-brand retail sector.

The court reiterated that “in matters of policy, this court will not interfere unless it is unconstitutional, contrary to statutory provisions, arbitrary, irrational or abuse of power.” 

In this case of FDI, the policy does not suffer from any of these, the order dictated by a bench presided over by Justice R M Lodha said.

The government has the competence and authority to make policy regarding FDI and the power exercised by Reserve Bank of India was valid.

Discussing the provisions of Foreign Exchange Management Act and the regulations notified under it, the court did not find that the petition merited further consideration, though it was argued for nearly two hours by petitioner, Manohar Lal Sharma.

The court accepted the contentions of Attorney General G E Vahanvati that the government had considered the benefits of the policy for the economy.

He had submitted that the policy will benefit the consumer by giving him wide choice of products in all sectors. Further, it will eradicate the negative role played by middlemen, especially in the agricultural sector.

The government had also justified the policy decision by citing a World Bank study. Moreover, FDI is permitted only in the metros and therefore the small traders will  not be affected by the policy.

Sharma, a lawyer, and Swadeshi Jagran Manch, a public interest organization, had argued that FDI will eliminate the small farmers and traders.

Showing the examples of Coca-Cola and Pepsi, Sharma said that first foreign companies  will sell products with predatory prices and after eliminating the Indian manufacturers, they will hike the price manyfold. Local firms will not be able to survive against such international giants with huge resources, he said.

His main legal challenge was to the rule-making powers. However, during the arguments, the judges observed that the rules of procedures have been followed and proper amendments enabling the change in policy have been made.

Though the judges agreed that middlemen are a “curse on the economy, Shylocks and suckers”, the government has shown with data that FDI has helped economy of Indonesia, Thailand and other emerging economies.