2013 (5) TMI 352 - SC - FEMA

Supreme Court upholds validity of FDI Policy, emphasizing benefits to consumers and farmers.

The Supreme Court dismissed a petition challenging the validity of Press Notes related to Foreign Direct Investment (FDI) policies. The Court found that ... Writ petition against the reviewed policy of FDI in Single-Brand Product Retail Trading, Multi-Brand Retail Trading, Air Transport Services, Broadcasting Carriage Services and Power Exchanges. As per petitioner that the impugned FDI Policy is not founded on any material obtained from the government agency and no extensive consultation was made before formulation of the impugned Policy. Held that:- DIPP is empowered to make policy pronouncements on FDI. There is no merit in the submission of the petitioner that Central Government has no authority or competence to formulate FDI Policy. The competence of the Central Government to formulate a policy relating to investment by a non-resident entity/person resident outside India, in the capital of an Indian company is beyond doubt. The Reserve Bank of India (RBI) is empowered to prohibit, restrict or regulate various types of foreign exchange transactions, including FDI, in India by means of necessary regulations. RBI Regulates foreign investment in India in accordance with Government of India's policy. Writ Petition is dismissed Issues:1. Challenge to the validity of certain Press Notes related to Foreign Direct Investment (FDI) policies.2. Examination of the legality and authority of the impugned FDI Policy.3. Evaluation of the consultation process and material basis for formulating the impugned FDI Policy.4. Analysis of the benefits and objectives of the FDI Policy, particularly in Multi-Brand Retail Trading.5. Consideration of the role of the State Governments/Union Territories in implementing the FDI Policy.6. Review of the judicial interference in matters of policy formulation by the executive.7. Determination of the authority and competence of the Central Government in formulating FDI policies.The Supreme Court heard a petition challenging the validity of Press Notes related to Foreign Direct Investment (FDI) policies. The petitioner sought to quash certain Press Notes dated 20th September, 2012, alleging them to be unconstitutional and lacking legal authority. However, the Court noted that necessary amendments to the Foreign Exchange Management Regulations had been made. The Reserve Bank of India had amended the Regulations in accordance with the Foreign Exchange Management Act, 1999. As there was no challenge to these amendments, the Court held that the contention against the Press Notes lacked merit.The Court deliberated on the legality and authority of the impugned FDI Policy, emphasizing that the policy aimed to benefit consumers by providing more choices at affordable prices and eliminating middlemen in the market. The policy was supported by studies indicating increased profit for farmers and improved product quality. The Court observed that the FDI Policy was an enabling measure, allowing State Governments/Union Territories to decide on its implementation based on local conditions.Regarding the consultation process for formulating the FDI Policy, the Court considered submissions questioning the lack of extensive consultations and material basis. However, it upheld the government's authority in policy formulation, stating that the executive holds the primary responsibility in such matters. The Court emphasized that it does not interfere in policy decisions unless they are unconstitutional, contrary to statutes, arbitrary, irrational, or an abuse of power.The judgment highlighted the role of the Central Government and the Department of Industrial Policy and Promotion (DIPP) in formulating FDI policies. The Court affirmed the competence of the Central Government in making policy decisions related to foreign investments, with the Reserve Bank of India regulating foreign investments in alignment with government policies. Ultimately, the Court dismissed the Writ Petition challenging the FDI Policy, emphasizing that the policy did not exhibit any constitutional flaws or statutory violations.