New Delhi, October 5
The Supreme Court now wants to know as to whether the Central Government’s controversial order allowing foreign direct investment (FDI) in multi-brand retail business is in consonance with the Foreign Exchange Management Act (FEMA) 1999.

A Bench of Justices RM Lodha and Anil Dave raised the doubt while hearing a PIL that has challenged the decision on retail FDI. The petitioner, advocate Manohar Lal Sharma, argued that FEMA had empowered the Reserve Bank of India (RBI) to frame regulations relating to FDI. Following this, the RBI came out with the regulations, clearly specifying that FDI would be allowed only for single brand retail chains, and not for multi-brand stores.

The government could not have allowed FDI in multi-brand retail without getting amended the RBI regulations that clearly barred this, he contended. “Can the policy go beyond regulations?” he asked.

Upon this, the Bench tried to have the presence of Attorney General GE Vahanvati, Solicitor General Rohinton Nariman or any other law officer at the hearing so that the government could throw light on the issue. Since, none of them could be located immediately, the Bench asked the petitioner to hand over a copy of his PIL to the AG or the SG and posted the matter for hearing on October 12.

The Bench also asked the petitioner to remove Principal Secretary in the Prime Minister’s Office (PMO) as respondent number one to which he agreed. The other respondents are the Finance Ministry and the RBI.

During the arguments, the Bench said perhaps the RBI had already amended the regulations which the petitioner was not aware of. “Perhaps a provision or two is missing which you are unable to show to us. Policies are the sole prerogative of the government and nobody else. There cannot be two opinions about that. On regulations, yes clarity is needed.”

The Bench also said it had no doubt that every government business was conducted under the rules of business. Further, it did not agree with the petitioner that the FDI move would badly affect 35 crore small businessmen. “That is your perception. The government’s perception is different. Don’t convert this court into a place for executive decisions. What we are concerned with is that whether this circular can have any legal sanction without RBI amending the regulation.That is the only concern we have.”Fully aware of the impact its move on the PIL would have on the sentiments of the investors and the stock market, the Bench verbally told the petitioner to give a copy to the AG, without passing any order to this effect or issuing notice to the government.