FDI: SC says policy must be approved by parliament

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SME Times News Bureau | 06 Nov, 2012
Hearing a plea against FDI in retail, the Supreme Court Monday said if the government formulates a policy which is not approved by parliament then it would be doing so at its own peril.

"The executive is mandated to rule. It is for it to decide how to go about the governance and if it violates the constitution then judiciary would step in," said the apex court bench of Justice R.M. Lodha and Justice Anil R. Dave.

The court's remark followed the government's statement that it had effected the necessary amendments in Foreign Exchange Management Act (FEMA) and Reserve Bank of India (RBI) regulations to facilitate multi-brand foreign direct investment (FDI) in the retail sector.

The judges said the courts should be circumspect in interfering with the economic policies of the government. However, they said they were not suggesting that the entire economic policies of the government were beyond judicial review.

"We have not said that the entire economic policy (of the government) was beyond judicial review but court should be extremely low and slow in interfering (with economic policy) unless it violates values which flow from the constitution and does not conform to the music and spirit of the constitution," Justice Lodha said.

The court said this when NGO Swadeshi Jagran Foundation (SJF) assailed the policy of permitting multi-brand FDI in the retail sector saying that it was contrary to the principles of social and economic justice.

SJF's counsel told the court that permitting FDI in retail would lead to unemployment and permitting it in the Indian market would be contrary to the recommendations of a parliamentary committee.

Not granting its plea to be impleaded in the case, the court said recommendations of the parliamentary committee were more in nature of an advisory, the economic policy was the sole prerogative of the government which was ultimately answerable to parliament for its actions.

The "executive (government) must listen to parliament. It is answerable to parliament and all its actions are subject to scrutiny by parliament", the court said.

Pointing out that the constitution clearly demarcated the jurisdiction of the executive, the legislature and the judiciary, Justice Lodha said: "What is good for the country and in the best interest of the people can be decided by the government which is mandated to govern the country."

The court described as "premature and unfounded" petitioner advocate Manohar Lal Sharma's "apprehensions" that the government would not place before parliament the amendment to the Foreign Exchange Management (Transfer or issue of Security by a person Resident outside India) (Fourth Amendment) Regulations, 2012, and the Foreign Exchange Management (Deposit) (Third Amendment) Regulation, 2012, and the RBI notification providing multi-band retail trading.

The court would next hear the matter Jan 22.