Nudged by the Supreme Court for first putting in place a legal regime,the Centre on Monday conceded that its new notification allowing FDI in multi-brand retail sector should have come after amendment in regulations by the RBI and that it would bring in the amendment within two weeks.
The court,however,refused to pass any interim order to restrain the government from taking any decision pursuant to the September notification. As per the court,it could be an irregularity if the Centre went ahead and took a decision but it could be cured in law after the amendment.
Appearing before a Bench led by Justice RM Lodha,Attorney General GE Vahanvati agreed that a more proper procedure to issue the notification was only after necessary amendments in the foreign exchange regulations of 2000 but the government had opted a different route since the amendment could consume some time. He added that there was a provision in the the Foreign Exchange Management Act (FEMA) that authorised the Centre to issue a circular regarding capital account transactions.
The Bench told the AG that a notification alone could not grant a legal sanctity to a policy decision and that the legal process,once initiated by issuing a notification,had to be taken to its logical conclusion after fulfilling all legal requirements under FEMA.
Otherwise,the question would be if the procedure is defective? How do you put in place a legal regime? We are broadly concerned with compliance with the legal requirements. Can it be said that an RBI noting in a file will suffice the purpose of law? This notification is just like that and hence to give it a legal shape,the regulations will have to be formally amended, observed the Bench.
The Bench further told the AG that what the Centre has done appeared to be a step towards a policy decision but it would have to be given an ultimate legitimacy.