New Delhi: The Supreme Court Monday refused to stay the Centre's decision to allow Foreign Direct Investment (FDI) in retail sector.
A bench of justices R M Lodha and A R Dave, however, said that the policy suffers from "curable" irregularity of want of legal sanction and asked the RBI to amend the Foreign Exchange Management Act (FEMA) regulations to allow implementation of the government's policy.
The bench said the RBI should have amended the FEMA regulations before the implementation of FDI policy and asked the banking regulator to take steps to remove the lacunae in the way of giving a final shape to the policy.
The court observed that the regulations should have been amended before the Centre issued the notification, but clarified that the irregularity can now be cured with RBI amending FEMA regulation.
"At least 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.
During the argument, the court said the policy cannot be stayed just because of this irregularity.
Attorney General G E Vahanvati submitted that he would talk to the RBI Governor to take immediate steps for bringing amendment in the FEMA regulations.
The bench after hearing his submission adjourned the matter for further hearing on November 5.
The court was hearing a PIL filed by lawyer M L Sharma, who has said that RBI's nod was missing from the Centre's policy allowing FDI in retail sector.
The apex court on October 5 had sought the assistance of top law officers in hearing the PIL filed by Sharma against opening the multi-brand retail sector to the FDI saying there was a need for clarification since some link is missing pertaining to the RBI regulation on the issue.
Sharma has said in his petition that that retail trading is strictly prohibited under the law of FEMA under which the power to come out with a circular is vested with the RBI which has not issued any regulation after 2008.
He has alleged in his PIL that the Centre's notification was issued without the authority of law as approval of neither the President nor the Parliament was secured.
The apex court had, however, rejected the allegation saying "this assumption that the policy has to be in the name of the President is flawed and unfounded."
"The Constitution does not provide that the policy should be in the name of the President."
It further said a policy is never required to be placed before Parliament.
The apex court had also said that correctness of the policy has to be challenged on the touch stone of the circular whether it is ultra vires of the law or not.