Reserve Bank Circular on Foreign Investment in Infrastructure Companies Upheld

The court upheld the legality of a circular on foreign investment in infrastructure companies issued by the Reserve Bank of India, rejecting the petitioner's claims of unconstitutionality and lack of jurisdiction. It affirmed the Reserve Bank's authority to regulate foreign exchange management, including imposing conditions on foreign investment in infrastructure companies in securities markets. The court emphasized the broad interpretation of "infrastructure companies" to include stock exchanges and dismissed the petition due to lack of standing for public interest litigation and delay in filing without a valid explanation.

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Issues:
Challenge to legality of circular on foreign investment in infrastructure companies in securities markets issued by Reserve Bank of India.

Analysis:
The petitioner, an Advocate, challenged the circular's legality, contending it was unconstitutional, without jurisdiction, and ultra vires the Foreign Exchange Management Act, 1999. The petitioner argued the circular restricted trade activities beyond the Reserve Bank of India's scope. The circular permitted foreign investment in infrastructure companies subject to specific conditions, including FDI and FII caps and prior approvals. The petitioner also raised concerns about the classification of stock exchanges as infrastructure companies. However, the court found the Reserve Bank of India had the authority to issue such circulars under the Act's provisions, emphasizing the wide power granted to regulate foreign exchange management.

The court highlighted that the circular applied to infrastructure companies in securities markets, including stock exchanges, depositories, and clearing corporations. It rejected the petitioner's argument that the circular did not apply to stock exchanges, emphasizing the broad interpretation of "infrastructure companies." The court also addressed the petitioner's delay in filing the petition, noting the circular's full implementation without challenging the government's policy decision. Policy decisions are generally not subject to judicial review unless they violate constitutional mandates or abuse power, as established in relevant case law.

The court dismissed the petition, emphasizing the lack of standing for a public interest litigation and the delay in filing without a plausible explanation. The court noted the circular's alignment with the government's policy decision and the Reserve Bank of India's issuance of further directions based on that policy. Judicial intervention in policy decisions is limited unless they contravene constitutional principles or represent an abuse of power. The court referenced specific judgments to support its decision and concluded by dismissing the petition without costs.

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