The consolidated FDI policy of India 2012 introduced many far reaching reformative steps in the direction of foreign direct investment (FDI) in India. At the same time it tried to balance the national interests and interests of its citizens.
One such are that was of great importance to foreign investors was FDI in multi brand retail sector. Indian Parliament permitted use of FDI in multi-brand retail during the winter session of Parliament in December 2012. This would definitely help in streamlining of e-retailing environment of India as well.
Meanwhile a probe against Walmart was initiated by Indian government to ascertain any market access lobbying and FDI violations by Walmart. The probe against Walmart included ascertainment of the alleged beneficiaries of the payments made while engaging in industrial lobbying.
As per the company the lobbying was made in U.S. for the purposes and territorial jurisdictions of U.S. alone. The company has alleged that it did not utilise any portion of the amount for its Indian business. Presently, Indian e-retailing, FDI regulations and cyber due diligence are not complied with by various national and international e-retailing players.
Further, with the approval for FDI in retail sector of India, the labour laws of India would also be required to be suitably adapted. Even an efficient e-retailing dispute resolution mechanism among investors and consumers must be established in India.
In a major win for the FDI investors in multi brand retail sector of India, the Supreme Court of India approved the FDI policy for multi brand retail sector of India. The Court held that the policy aimed at throwing out the middleman, who are curse to Indian economy and sucking it, has to be welcomed. The Court further held that the policy does not suffer from any unconstitutionality or illegality requiring it to be quashed.
It is well settled in India that the Courts do not interfere in the policy matter unless the policy is unconstitutional, contrary to statutory provisions or arbitrary or irrational or there is total abuse of power. The present FDI policy for multi retail sector does not suffer from any of the vires, opines the Court. The Court dismissed the public interest litigation (PIL) that challenged the notification on the FDI in multi-brand retail sector.
The Court also believes that the policy is for the benefit of the consumer, farmers and the retailers with the objective to eliminate middlemen. The Court observed “Consumer is the king and if that is the philosophy working behind the policy what is wrong. The policy is to free the economy from the middleman. Middleman is sucking our economy. These are suckers to be thrown out for direct benefit of consumers. If that is the objective of the policy what is wrong with it”.
The Court further observed “The middleman is a curse to Indian economy. They work as sucker and they have to be thrown out and that is the object of the policy and you have to welcome it’. The Court also believed that the policy would bring choice for the consumers who are the real king.
Now it is for the State Governments to implement or not implement the policy to allow FDI upto 51 per cent in multi-brand retail. The Court also dismissed the contention that Department of Industrial Policy and Promotion (DIPP), under its business rule, was not empowered to make policy pronouncement.
The Court further held that there is no merit in the contention that the Centre has no authority to formulate FDI policy. Further, as there is no challenge to the amendments in Foreign Exchange Management (Transfer or issue of Security by a person, resident, outside India) Regulation, 2000, by which FDI in multi-brand retail sector was allowed, the PIL must be dismissed.
The Court also observed that the policy of FDI in multi-brand retail was discussed and debated in detail in both Houses of Parliament before it was voted in favour of the government.
The Court noted that the policy was prepared after detail study of the economy of developing countries like China, Brazil, Argentina, Singapore, Indonesia and Thailand where FDI is permitted upto 100 per cent, local retailers co-exist along with organised retail and are integral in the organised retail chain.
The Court also accepted the submission made by the Centre in its affidavit in which it said that the decision to allow FDI in multi-brand retail is a policy formulated by the Government of India in conformity with FEMA 2000.