Is India Legally Prepared for the proposed changes in FDI in the Retail Sector?

The background research for this CLIF session was put together by Surabhi Rajpal, Teaching Associate for the Corporate Law courses here at NLS.

We started with a timeline of the proposed FDI changes - the discussion on this issue has been going on for well over ten years. The first instance was that of the Task Force set up under MS Ahluwalia in 1999 which focused on enhanced FDI limits in the retail sector as a means of achieving greater economic growth to the Parliamentary Standing Committee Report in 2009 which stated that the social impact of these measures had not been taken into account.

What distinguishes FDI is that it purports to create a "lasting interest" in the productive assets of the economy. It also allows for influence over management in the entity that is being invested in. India has a sector-specific FDI policy, which is governed by inter alia, the Foreign Exchange Management Act and the regulations thereunder. Other legal instruments that may be taken into account are the press notes and circulars by the Department of Industrial Policy and Promotion under the Ministry of Commerce and Industry. These circulars are usually notified by the RBI. Parliamentary approval is not necessary for the proposed changes, but the UPA government's idea was to create more legitimacy for this move.

The following issues were brought up to assess India's "legal" preparedness:

(a) under the constitutional scheme, the implementation of this policy would be the prerogative of the state governments (List II, Entry 27 in the Seventh Schedule) - does this move take the state governments into confidence?

(b) India's labour law situation is miserable - 95% of the labour force is unorganised sector; loss of jobs inevitable. Are our labour laws stringent enough to meet the challenge of violations in short term contracts & employment by MNCs?

(c) the megastores that invariably result from the opening up of these markets require huge tracts of land - under our land laws, acquisition for a "fair price" is allowed. Will acquisition proceed in a just fashion for private entities? How do we address the question of conversion of agricultural to non-agricultural land?

(d) will any of these measures fall foul of our obligations under GATS? Once investment is allowed, it will be difficult to regulate activity e.g. Thailand.

Our discussions on these questions brought up the following issues - (a) will it encourage innovation amongst the smaller vendors and thereby keep them in business? (b) what would be the role of the Competition Commission in this regard? (c) will greater regulation for e.g. limiting the number of players in a given geographical area like they did in China solve the problem? (d) Would minimum pricing as was the case in Germany when Walmart entered the market solve the problem? (e) what explains the attitude of the big domestic retailers?

Although the plans have been shelved for the time being because of political opposition, it was evident that India seemed legally unprepared for a move of this nature.

Temple Treasures and the Supreme Court

We discussed legal issues surrounding the 'treasure' discovered at the Sree Padmanabhaswamy temple in Trivandrum. Having first read through the decision of the Kerala High Court in January 2011, the discussants were familiar with the history of the litigation, the temple's administration and the issues that had been raised in appeal before the Supreme Court.

One of the two writ petitioners in the case were Uthradam Thirunal Marthanda Varma, the brother of the last ruler of Travancore, Chithira Thirunal Balarama Varma. The issues before the Kerala High court were a] who could manage the temple and b] in what manner is this administration to be carried out? This in turn hinged upon an interpretation of the term 'ruler' in the Travancore-Cochin Hindu Religious Institutions Act read with Article 366 (22) of the Constitution.

The case was apparently filed because Uthradam Thirunal had apparently made a comment during a press interview to a leading Malayalam daily that the assets of the temple 'belonged' to the Travancore royal family. The civil courts in Trivandrum were approached by concerned devotees and the case ultimately came before the Kerala High Court. The High Court upheld the

claim of the state government, stating the administration of the temple, after the demise of the last recognised ruler of Travancore vested with the state government. Meanwhile, Uthradam Thirunal, after the death of Chithira Thirunal in 1992, had continued with appointing people to the temple administrative bodies. The Supreme Court was approached, seeking the writ of quo warranto in this respect.

Some of the issues that we discussed were:

1. Does Uthradam Thirunal have a viable claim to be ruler under the TC Hindu Religious Institutions Act? The majority of the discussants felt, upon a reading of the relevant Sections, Articles 366 (22), 363A, 295 and 296 of the Constitution that the administration vests with the state. This is in line with the reasoning of the High Court, although there appears to be a genuine legal lacuna in terms of who will continue to administer the temple, given that the State Government seems unwilling to take this up. The High Court's suggestion was that a statutory body or a trust should be created afresh, while respecting the rights of the royal family / denomination to worship freely.

2. Can the wealth of the temple be legally claimed by the royal family? This appears to be a non-argument, since idols are juristic persons under Hindu law, who can hold property and be taxed.

3. Are there problems with the way in which an ostensibly secular state such as India is implicated in the running of religious institutions like temples? We discussed the distinction between administration of temples as a religious matter and the religious practices themselves as a religious matter. Some of us argued that this was an artificial distinction (along the lines of the distinction between religion and religious practice in Article 25 cases).

4. In re the opening of Vault B, should courts take into account faith and belief? The question was one of public legitimacy too, some argued. The courts cannot go completely against public opinion. On the other hand, it cannot also be a situation where legal procedure is completely ignored.

We also discussed at some length the decisions in (a) N. Muraleedharan Nair (1991 - Ker HC), (b) M.P. Gopalakrishnan Nair (2005 - SC) and (c) G. Raman Nair (2005 - Ker HC) which deal with the question of whether elected representatives who are to be part of the Devasom Boards have to believe in temple worship themselves.

SC orders in the Salwa Judum Case

We discussed the recent directions issued by the Supreme Court in the Salwa Judum case (Nandini Sundar and ors. v. State of Chhattisgarh) and the following broad issues:

1. Is the reasoning of the Court as far as Articles 14 and 21 are concerned unnecessarily convoluted? The reasoning of the court, in the case of Article 14 seems to be that the SPOs, appointed under the Chhattisgarh Police Act, 2007 (read with May 2011 rules) seem to be facing risks incommensurate with the skills training that they receive. Their service conditions are inadequate, again, for those purpotedly involved in a counter-insurgency operation. The second part of the Article 14 reasoning pertains to the fact that given that many of the appointments are of tribal youth, some of whom have had only limited schooling. This does not allow them to exercise proper judgment, given the particular conditions that they are facing. Q: Could this case have been wrapped up just by noting the lacunae of rules at the time of appointment?

The manner in which 'dignity', particularly, has been discussed in the context of Articles 14 and 21 seems to be a novel approach adopted by the Supreme Court. The order discusses this in the context of the Directive Principles (equitable distribution and sustainable development, among others) were "principles fundamental to the governance of the state'. Previously, it has been noted by the SC in the context of Article 21 (life as being more than mere animal existence).

2. Why was the implication of the Central Government in these orders important? The Central Government had submitted that beyond specifying the maximum number of SPOs who could be appointed and from supplying the funds required for the honararium, the Central Government pleaded ignorance of the situation. We discussed how historically the role of the Ministry of Home Affairs is deeply involved in the "management" of internal conflict, particularly on Naxalite violence. There is blatant disbelief expressed at the Government's affidavits in the order. Q: Apart from more obvious reasons why there is this disbelief, is the involvement of the Central Government important from the compensation for the SPOs affected by Naxalite violence (that the petitioners had asked for?)

3. Does this case demonstrate the limitations of the PIL model? The order is particularly concerned about the security of the SPOs who would be disarmed, and asks the very Government which was complicit in these unconstitutional appointments to ensure their safety.

4. The original petition (250/2007) had asked to stop the appointments of SPOs who were minors. Apart from the reference to tribal "youths" or "youngsters", the Court does not look at the impact of minority in any detail. Perhaps it is assumed. In one part of the order, the Court discusses how the "informed consent" of those who had received such limited training / skills could not be presumed, even if they were not above the age of eighteen.

Note that the decision has not completely negated the use of SPOs in Chhattisgarh, but has only restricted their deployment in case of natural / manmade disasters where relief work is necessary or to regulate traffic. Essentially the idea seems to place them in non-combatant positions.

We also discussed the use of SPOs in other states - particularly, Karnataka and Kashmir, and what the manner of regulation was in these instances. It appears that the SC's interpretation also takes cognisance of the peculiar nature of the Chhattisgarh situation, without buying into the argument by the Government that it was an exceptional situation which demanded "extraordinary" measures.

5. Were all the reliefs that were asked for addressed in the order? Notably, the case does not address the question of compensation even though a rehabilitation scheme has been proposed by the petitioners during the course of litigation. Further, the evacuation of the schools and hospitals is still being monitored. The CBI has also been directed by the Court to look into the burning of villages.

6. What were the consequences of the order? We briefly looked into how the disarming of SPOs was immediately carried out, but that there were some disquieting responses in and around the villages. The order specifically noted how the Court had ordered that the security of the SPos be ensured. Perhaps the disarming was immediate, proof of the SC's growing legitimacy as a public institution. In this context, we also discussed the not-so-immediate responses in the Right to Food cases or the deletrious effects of some of the orders from the Forest Bench.

7. Should the first few pages of the order (discussing constitutional visions and the ill effects of globalisation etc.) be ignored? Some expressed the idea that these might be necessary to convince the presiding judges of the gravity of the situations. Others shared experiences where the observations in a case (as opposed to the ratio of the case) had been cited before other benches in order to get a favourable order! While rhetoric in and of itself would not be useful without a legally reasoned order, it does play an important supplemental role. We also noted how cases such as Olga Tellis are cited and used to press constitutional arguments on say, dignity of

citizens, although the final order in the case was not favourable to the petitioner. Another example in this regard seems to be Menaka Gandhi.

There was also a brief discussion on the role of the Supreme court and judicial overreach and why citizens approach the appellate courts rather than use avenues open to approach the legislature. We also discussed a few initiatives where this scenario appears to be changing.

We're thinking of reviving CLIF over the course of the next trimester at NLS! CLIF this year will be different because it will carry no course credit, it will be a discussion group in which people can voluntarily participate! Do write in with suggestions as to what you are interested in thinking through.

On an aside, we recently had a small group discussion on the rise and fall of the jury trial in India, using material from Gyan Prakash's new book, Mumbai Fables and the events surrounding Nanavati case. Issues that were raised included the role of laypersons in adjudication, the role of media in 'deciding' court verdicts and contemporary trials that have captured public imagination. More on this later. Watch this space!