The Supreme Court on Monday refusedto stay the FDI in retail sector but said the government policy suffers from lack of legal sanction which could be cured by amending the regulations in the Foreign Exchange Management Act by the RBI.
A bench of justices R.M. Lodha and A.R. Dave, said the policy suffers from 'curable' irregularity as the RBI has not amended the Foreign Exchange Management Act (FEMA) regulations which should have been done before the Centre issued its notification.
It allowed the Centre two weeks time to get the regulation amended by the RBI saying it is a legal requirement before implementing the policy.
"It is a legal process which has to be taken to logical conclusion. It is a routine thing and it has to be done," the bench said adding 'there is no question of any stay on the policy."
The court was hearing a PIL filed by lawyer M.L. Sharma challenging the Centre's policy on a technical ground that retail trading is strictly prohibited under FEMA for which the power to come out with a circular is vested with the RBI which has not issued any regulation after 2008.
Agreeing with the contention raised in the petition, the bench, however said that it is 'curable' irregularity and it cannot be alleged that RBI was not aware of the policy as the regulator has recently issued a circular regarding the policy.
"At best it can be said that it is an irregularity that is curable and as soon as amendment is brought it would be cured," the bench said.
"This (FDI policy) is done by the Central Government and it is not that RBI has been kept in the dark by the Centre. RBI has already issued circular amending FDI limit yet it has not formally amended the regulations and we want to know from the Attorney General when this amendment will formally take
place," it added.