SC dismisses petition against retail FDI

The govt, said the court, has the authority to make policy regarding FDI and the power in this regard, exercised through the RBI, was valid

The Supreme Court on Wednesday dismissed a petition challenging the notifications and regulations permitting foreign direct investment (FDI) in the multi-brand retail sector. "In matters of policy, this court will not interfere unless it is unconstitutional, contrary to statutory provisions, arbitrary, irrational or abuse of power," the judges declared. In this case, the policy did not suffer from any of these, said the order from a bench chaired by R M Lodha. This came after the petition was argued for two hours by the person who'd filed it, Manohar Lal Sharma. The government, said the court, has the authority to make policy regarding FDI and the power in this regard, exercised through the Reserve Bank of India, was valid.

Discussing the provisions of the Foreign Exchange Management Act and the regulations notified under it, the court said it did not find the petition merited further consideration. The court accepted the contention of Attorney General G E Vahanvati that the government had considered the benefits of the policy for the economy.

He had argued the policy would benefit the consumer by giving him a wider choice of products in all sectors. It would help eradicate the negative role of middlemen, specially in agriculture. The government had also cited a World Bank study in its support. The AG noted FDI was being permitted only in the metropolitan cities and, therefore, the impact on small traders would be limited.

The government also cited examples from other countries, including Thailand and Indonesia, to make its case that FDI in such sectors had helped these economies. Sharma, a lawyer and a member of Swadeshi Jagran Manch, describing itself an organisation formed to further the public interest, had argued FDI would eliminate small farmers and traders.

Taking the examples of Coca-Cola and Pepsi, he said foreign companies would first use predatory pricing to oush their products. After eliminating Indian manufacturers, they would then raise prices manifold. Local firms would 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 the rules of procedure had been followed and proper amendments enabling the change in policy had been made. Incidentally, the judges agreed that middlemen were a "cudrse on the economy, Shylocks and suckers".