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            REPORTABLE

IN THE SUPREME COURT OF INDIA

 CIVIL ORIGINAL JURISDICTION

           WRIT PETITION (C) NO. 417 OF 2012                 

MANOHAR LAL SHARMA ...   PETITIONER(s)                         Versus

UNION OF INDIA AND ANOTHER ...   RESPONDENT(s)

O R D E R  

We  have  heard  Mr.  Manohar  Lal  Sharma  –  

petitioner  in  person  and  Mr.  Goolam  E.  Vahanvati,  

learned  Attorney  General.   We  have  also  heard  Mr.  

Vikramjit Banerjee, learned counsel for the intervenor  

– Swadeshi Jagaran Foundation in I.A. No. 2 of 2012.

2. Mr. Manohar Lal Sharma – petitioner in person  

prays for withdrawal of the rejoinder-affidavit in its  

entirety  in  view  of  the  objectionable  statements  

contained therein. We allow him to do so.   It is  

directed that no part of the rejoinder-affidavit shall  

be treated as part of the record.

3. In the Writ Petition, the petitioner has prayed

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for quashing Press Note Nos. 4,5,6,7 and 8 of (2012  

Series) dated 20th September, 2012 being unconstitutional  

and without any authority of law.

4. By  these  Press  Notes,  the  policy  of  Foreign  

Direct Investment (FDI) in Single-Brand  Product Retail  

Trading,  Multi-Brand  Retail  Trading,  Air  Transport  

Services,  Broadcasting  Carriage  Services  and  Power  

Exchanges  has  been  reviewed.   In  the  forwarding  

circular,  it  is  mentioned  in  para  5  that  necessary  

amendments to Foreign Exchange Management (Transfer or  

Issue of Security by a Person Resident Outside India)  

Regulations,  2000  (for  short  “Regulations,  2000)  are  

being  notified separately.

5. When the matter came up for consideration  on  

15.10.2012, learned Attorney General submitted that the  

process  for necessary amendments to Regulations 2000  

by the Reserve Bank of India was on and that necessary  

amendments in Regulations 2000 would be made soon.

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6. On 5.11.2012, learned Attorney General placed  

for consideration of the Court, a copy  of the Foreign  

Exchange Management (Transfer or Issue of Security by a  

Person  Resident  Outside  India)  (Third  Amendment)  

Regulations,  2012  (for  short  “2012  Regulations”)  

published in the Gazette of India – Extraordinary on  

October 30, 2012.

7. By the  2012 Regulations, Reserve Bank of India  

in exercise of the powers conferred by clause (b) of  

sub-section (3) of Section 6 and Section  47 of the  

Foreign  Exchange  Management  Act,  1999  (for  short  

“FEMA”), has made amendments to the 2000 Regulations.

8. There is no challenge to the 2012 Regulations.  

In  the  absence  of  any  challenge  to  the   2012  

Regulations,  the  contention  of  the  petitioner  that  

Press Note Nos. 4,5,6,7 & 8 (2012 Series) dated 20th  

September, 2012 have no force of law,  does not survive  

for any scrutiny.

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09. Be that as it may. We have carefully considered  

the submissions of the petitioner and intervenor 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.

10. In the Counter-affidavit filed by the Union of  

India, the benefits of FDI in Multi-Brand Retail have  

been enumerated.  The impugned FDI policy have twin  

objectives, (one) benefit the consumer by enlarging the  

choice   of  purchase  at  more  affordable  prices;  and  

(two)  eradicating  the  traditional  trade  

intermediaries/middlemen to facilitate better access to  

the  market  (ultimate  retailer)  for  the  producer  of  

goods.

11. It is stated that the amended FDI policy will  

generate employment, improve infrastructure and provide  

better  quality  products.  The  farmers  will  benefit

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significantly  from  the  option  of  direct  sales  to  

organized  retailers.   In  this  regard,  the  Central  

Government has relied upon the study commissioned by  

the World Bank indicating that profit realization for  

farmers  selling  directly  to  organized  retailers  is  

about 60% higher than that received from selling in the  

Mandi.  The views in the  study commissioned by the  

World Bank are said to be supported by the findings of  

a study instituted by the Government of India on the  

subject  of  “Impact  of  Organized  Retailing  on  the  

Unorganized  Sector”  through  the  Indian  Council  for  

research on International Economic Relations (ICRIER)  

submitted in May, 2008.  According to ICRIER report,  

unorganized and organized retail not only co-exist, but  

also grow substantially in size.

12. The  salient  features  of  the  FDI  Policy  on  

Multi-Brand Retail Trading are also indicated in the  

counter-affidavit.  The policy mandates at least 30% of

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the  value  of  procurement  of  manufactured/processed  

products purchased shall be sourced from Indian 'small  

industries' which have a total investment in plant &  

machinery  not  exceeding  US  $  1.00  million.  It  also  

provides that retail sales outlets may be set up only  

in cities with a population of more than 10 lakhs as  

per 2011 Census and may also cover an area of 10 Kms  

around the municipal/urban agglomeration limits of such  

cities.  In States/Union  Territories not having cities  

with  population  of  more  than  10  lakhs  as  per  2011  

Census,  retail  sales  outlets  may  be  set  up  in  the  

cities of their choice, preferably the largest city and  

may  also  cover  an  area  of  10  Kms  around  the  

municipal/urban agglomeration limits of such cities.

13. We  find  that  impugned  policy  is  only  an  

enabling  policy   and  the  State  Governments/Union  

Territories  are free to take their own decisions in  

regard to implementation of the policy in keeping with

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local conditions.  It is , thus, left to the choice of  

the State Governments/Union Territories whether or not  

to  implement  the  policy  to  allow  FDI  up  to  51%  in  

Multi-Brand Retail Trading.

14. The  views  on  the  efficacy   of  a  government  

policy and the objectives such policy seeks to achieve  

may differ.  The counter-view(s) may have some merit  

but  under  our  Constitution,  the  executive  has  been  

accorded primary responsibility for the formulation of  

governmental policy.  The executive function comprises  

both the determination of policy as well as carrying it  

into execution.  If the Government of the day after due  

reflection, consideration and deliberation feels that  

by  allowing  FDI  up  to  51%  in  Multi-Brand  Retail  

Trading, the country's economy will grow and it will  

facilitate better access to the market for the producer  

of goods and enhance the employment potential, then in  

our  view,  it  is not  open for  the Court to go  into

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merits and demerits of such policy.  

15. On  matters  affecting  policy,  this  Court  does  

not interfere unless the policy is unconstitutional or  

contrary to the statutory provisions or arbitrary or  

irrational or in abuse of power.  The impugned policy  

that allows FDI up to 51% in Multi-Brand Retail Trading  

does not appear to suffer from any of these vices.

16. Notably,  the  Department  of  Industrial  Policy  

and Promotion (DIPP) as per the Allocation of  Business  

Rules, 1961 is allocated the subject of 'Direct foreign  

and non-resident investment in industrial and service  

projects, excluding functions entrusted to the Ministry  

of Overseas Indian Affairs'.  Seen thus, the 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

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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.   

17. Writ Petition is dismissed with no order as to  

costs.  Interlocutory Applications stand disposed of.

             ......................J.                             (R.M. LODHA)

            ......................J.

                  (MADAN B. LOKUR)

......................J. (KURIAN JOSEPH)

  NEW DELHI    MAY 1, 2013.