Karnataka HC - Radio House and Ors. Vs Union of India (Uoi) and Anr. On 11 October, 2007

Radio House And Ors. vs Union Of India (Uoi) And Anr.
on 11 October, 2007
Karnataka High Court

Radio House And Ors. vs Union Of India (Uoi) And Anr. on 11 October, 2007
Equivalent citations: 2008 (2) KarLJ 695
Author: A B Hinchigeri
Bench: A B Hinchigeri
ORDER Ashok B. Hinchigeri, J.
1. The subject-matter of this petition is the corporatisation of the retail sector by bringing Foreign
Direct Investment ('FDI' for short). The cause of the retail traders is espoused in this petition. The
petitioners' grievance is that if the foreign companies are permitted to enter into the field of retail
trade, the business of retail traders in India would be affected adversely; it results in the deprivation
of their solitary source of livelihood.
2. The second respondent is a wholly owned subsidiary of Metro AG, a German Multinational
Company, the World's fourth largest retailer. It has established two 'State of the Art' Cash and Carry
stores in Bangalore at Yeshwanthpur and on Kanakapura Road. The first respondent accorded the
approval to the second respondent, to carry on Cash and Carry wholesale business in India, subject
to certain terms and conditions. The material condition at Sl. No. 6 in the approval order, dated 5th
December, 2000 (Annexure-B to the writ petition), reads as follows:
6. The approval is subject to the condition that the company would need to ensure that the selling of
the products stocked by it to retailers who would possess sales tax registration and not to
consumers.
3. The inclusion of the aforesaid condition is only to ensure that the second respondent would not
resort to retail trading. It is not supposed to sell any commodities to the end consumers. It is the
petitioners' case that the second respondent, though obtained permission to do wholesale business,
has obtained retail licence to deal in over the counter pharmaceutical drugs and the retail licence for
the sale of IML Liquor. It is also doing the business of selling spectacles, jewelry, audio, visual and
compact discs, etc. The petitioners have referred to the statement of second respondent's Managing
Director that the price would be the same whether a person buys 100 units or one unit, thereby
indicating that the second respondent would indulge in retail business by selling even a single unit.
Such manifest statements and activities do not lend credence to the claim of second respondent to
be doing only wholesale trading. The petitioners have also complained of the distribution of two
lakhs membership cards of the respondent 2 in Bangalore; the cardholders include Architects,
Interior Designers, Finance Companies, who cannot be construed as retailers by any stretch of
imagination. The petitioners have also given illustration that a registered retail trader dealing in
garments may purchase the television sets, although he is not dealing in television sets. The mere
production of the sales tax registration number would not convert a retail sale into a wholesale sale.
4. It is the further case of the petitioners that the respondent 2, apart from indulging in retail
trading would also indulge in price war to attract the general consumers. As the petitioners would be
in no position to compete with the prices offered by the respondent 2, they would only be forced to
Indian Kanoon - http://indiankanoon.org/doc/620294/
close down their business. All over the country the retail traders and their associations have been
protesting against the grant of permission by the first respondent to the second respondent.
5. Aggrieved by the granting of the approval to the second respondent to carry on cash and carry
wholesale trading business within India but not stipulating any guidelines or checks or control
mechanisms in the approval letter for preventing the second respondent from indulging in retail
trading activities, this petition is instituted.
(i) Sri R.N. Narasimhamurthy, the learner Senior Counsel appearing for M/s. AAKEN Associates for
the petitioners urged the following contentions:
(i) The blanket permission, without any riders for the purpose of preventing the respondent 1 from
entering the retail sector, runs in sharp contrast to the industrial policy formulated by the first
respondent itself;
(ii) The impugned permission is violative of Article 21 to the Constitution of India. As the
small-timers are being deprived of their only source of livelihood, the impugned permission is
violating the fundamental right guaranteed under Article 21 to the Constitution of India;
(iii) The term 'wholesale' used in Foreign Exchange Management (Transfer or Issue of Security by a
Person Resident outside India) (Second Amendment) Regulations, 2003, is to be understood in the
sense in which it is defined in Indian Statutes and the rules framed thereunder, relating to trade,
such as the definitions contained in the Monopolies and Restrictive Trade Practices Act, 1969,
Standards of Weights and Measures (Packaged Commodities) Rules, 1977, etc. While bringing out
the distinction between 'wholesaler' and 'retailer', he relied on the following.-----------------------------------------------------------------------------------------Sl.
No.
Definition of
retailer/retail
sales/retail dealer
Definition of
wholesaler/wholesale
dealer, cash and carry, etc.
Source
-----------------------------------------------------------------------------------------1.
Section 2(p) of the

MRTP Act, 1969
"Retailer" in relation to
the sale of any goods,
includes every person,
other than a wholesaler,
who sells the goods to
any other person, and in
respect of the sale of
goods by a wholesaler, to
any person, for any
purpose other than
resale, includes that
Section 2(x) of the MRTP

Act, 1969 "Wholesaler" in
relation to the sale of any
goods, means a person who
sells the goods, either in
bulk or in large quantities,
to any person for the
purpose of resale, whether
in bulk or in the same or
smaller quantities
As per
Monopolies and
Restrictive Trade
Practices (MRTP)
Act, 1969
wholesaler
----------------------------------------------------------------------------------2.
Rule 2(o) of Standard of
Rule 2(w) of Standards of
The Standards of
Weights and Measures
Weights and Measures
Weights and
(Packaged Commodities)
(Packaged Commodities)
Measures Law
Rules, 1977 "Retail
Rules, 1977 "Wholesale
Manual
dealer" in relation to any
dealer" in relation to any
commodity in packaged
commodity in packaged
form means a dealer
form means a dealer who
who directly sells such
does not directly sell such
packages to the
commodity to any consumer
consumer and includes,
but distributes or sells such
in relation to such
commodity through one or
packages as are sold
more intermediaries.
directly to the consumer,
a wholesale dealer who
makes such direct sale.
----------------------------------------------------------------------------------3.
x x x x
x x x x
x x x x
----------------------------------------------------------------------------------4.
"Retail package" means
"Whole package" means a
The Standards of
a package containing
package containing.Weights and
any commodity which is
Measures
produced, distributed,
(i) a number of retail
(Packaged
displayed, delivered or
packages, where such first
Commodities)
stored for sale through
mentioned package is
Rules, 1977, Rule
retail sales agencies or
intended for sale,
2(p) and 2(x)
other instrumentalities
distribution or delivery to a
for consumption by an
intermediary and is not
individuals or a group of
intended for sale direct to a
individuals
single consumer;
(ii) a commodity sold to an
intermediary in bulk to
enable such intermediary to
sell, distribute or deliver
such commodity to the
consumer in smaller
quantities;
(iii) packages containing
ten or more than ten retail
packages provided that the
retail packages are labelled
as required under the rules
----------------------------------------------------------------------------------5.
Defines "Wholesale dealer"
The Law Lexicon,
as a trader who stores bags
2nd Edition, 2002
and sells grain by the bulk
without breaking the bags
is a wholesale dealer
"Wholesale dealer" is a
person who keeps for
wholesale to traders a
commodity for the purposes
of trade
----------------------------------------------------------------------------------6.
Defines "Retail" as the
Defines "wholesale" as sale
The Law Lexicon,
sale of goods in small
in large quantities; where a
2nd Edition, 2002
quantities to ultimate
trader sells the whole or a
consumers
large part of his produce
direct, at fixed price to
customers, that price also
can be described as the
"wholesale price"
----------------------------------------------------------------------------------7.
Defines "Retail sale" is
The Law Lexicon,
to sell goods in small
2nd Edition, 2002
parcels and not in gross
If a person takes a
house, or part of a
house, either in his own
name or in the name of
any other person, and
then, either personally
or by his agent, makes
sale of spirits by retail,
he carries on business
there as a retailer of
spirits, notwithstanding
he keeps no spirits
there, and the spirits
which he sells there are
kept in and delivered
from a store in another
town where he carries
on the business of a
wine and spirit merchant
----------------------------------------------------------------------------------8.
Defines "Retail" as the
Oxford Dictionary defines
Oxford Dictionary
sale of goods to the
"Wholesale" as the selling
public for use or
of goods in large quantities
consumption rather
to be retailed by others
than for resale
----------------------------------------------------------------------------------9.
Defines "Retailer" as a
Defines "Wholesaler" as a
Oxford
distributor that sells
distributor that sells goods
Dictionary of
goods, or services to
in large quantities, usually
business
consumers (compare
to other distributor.
wholesaler). There are
Typically, a wholesaler
broadly three categories
buys and stores large
of retailer; multiple
quantities of several
shops, co-operative
producers' goods and
retailers and
breaks into the bulk
independent retailer
deliveries to supply
retailers with smaller
amounts assembled and

sorted to order
----------------------------------------------------------------------------------10.
Defines "Wholesaler" as
Hyper Dictionary
someone who buys large
and Wordnet (r)
quantities of goods and
1.7
resells to merchants rather
than to the ultimate
customers
----------------------------------------------------------------------------------11.
Defines "Wholesaler" as an
Dictionary of
Enterprise which makes its
purchasing and
profits through buying
supply -supplies in bulk at Trade
Terminology for
prices and sells and
buying and
distributes them to retail
selling - H.K.
business and industrial
Compton and
enterprises on trade terms.
D.A. Jessop
Originally a wholesaler was
(Tudor
so designed as a middleman
Publication)
who sold "wholesale pieces'
of materials and goods to
retail customer's via
shop-keepers
----------------------------------------------------------------------------------12.
Defines 'Cash and carry' as
Dictionary of
buyer pays cash and
purchasing and
collects, loads and carries
supply -away the goods he has
Terminology for
purchased. More usually
buying and
applicable to the domestic
selling -- H.K.
market
Compton and D.A.
Jessop (Tudor
Publication)
----------------------------------------------------------------------------------13. Defines "Retailer" as a
Defines "Wholesaler-" as a
The Marketing
middleman company
company serving as the
Glossary-Key
that purchases goods
middleman between a
Terms, Concepts
from a manufacturer or
manufacturer and a
and Applications
wholesaler for resale to
retailer. A wholesaler buys
in
the goods' ultimate
goods from the
Marketing
consumption at a profit.
manufacturer for resale (at
Management/
Retailers usually sell
a profit) to retailers and,
Advertising/
merchandise for
occasionally, directly to
Direct
personal and household
consumers. There are two
Marketing/Sales
consumption, with the
basic types of wholesalers:
Promotion/
merchandise both stored
Market
and displayed on the
(1) Full-service wholesalers
Research/Public
store's premises
provide services such a
Relations/Salescarrying stock, maintaining
Mark N. Clement
Store retailers are the
sales forces, and offering
(American
operators of department
management and credit
Management
stores, superassistance to buyers; and
Association
markets, clothing
boutiques and so on
Publication)
(2) Limited service
wholesaler's offer some, but
not all of the services
rendered by full-service
wholesalers
Non-store retailers
include companies that
sell through mail order
catalogs, engage in
direct selling (e.g.
House-to house) or
operate vending
machines
----------------------------------------------------------------------------------14. Defines "Retailing" as
Defines "Wholesaling as the
The Marketing
the practice of making
process of buying
Glossary-Key
goods available to
merchandise in large
Terms, Concepts
consumers for their
quantities from a
and Applications
personal use in a
manufacturer for resale to
in Marketing
location or situation that
retailers or business users.
Management/
provides a forum for
Unlike retailing,
Advertising/
exchanging those goods.
wholesaling generally does
Direct
There are four basic
not involve actively
Marketing/Sales
functions of retailing:
promoting products, nor
Promotion/
(1) Buying and storing
does it involve establishing
Market
goods;
the wholesale outlet in a
Research/Public
(2) Transferring title
location convenient to or
Relations/Salesof those goods;
appealing to buyers. This is
Mark N.
(3) Providing information
because wholesaling entails
Clemente
on the nature
selling products primarily
(American
and uses of those
to businesses that come
Management
items; and
from a wide geographic
Association
(4) (In some cases)
area and that are generally
Publication)
extending credit to
indifferent to promotional
consumers
trappings
----------------------------------------------------------------------------------15.
Defines "Cash and carry
The Marketing
wholesaler" as a type of
Glossary-Key
limited service wholesaler
Terms, Concepts
selling products to
and Applications
retailers, who pay for and
in Marketing
pick up the product at the
Management/
wholesaler's location. For
Advertising/
example, a retailer drives
Direct
to a cash and carry
Marketing/Sales
wholesaler to buy a set
Promotion/
quantity of product, paying
Market
cash to the merchandise
Research/Public
and taking possession of
Relations/Sales the goods. Cash and carry
Mark N.
wholesalers typically deal
Clemente
in fast moving (e.g.
(American
perishable) products, such

as baked goods
Management
Association
Publication)
-----------------------------------------------------------------------------------
(iv) Based on the above referred expressions of 'wholesale dealer' and 'retail dealer', Sri
Narasimhamurthy submitted that a wholesale transaction does not and cannot include a sale in
which the goods are sold for own use or consumption by an individual or a business concern;
(v) The said regulations do not define the term 'wholesale' so as to include business to business
sales;
(vi) Sri Narasimhamurthy submitted that while interpreting the term 'wholesale dealer', the Court
has to evolve, affirm and adopt the principle which will further and not hinder the goals set out in
the Directive Principles of State Policy. In support of his submissions, he relied upon the judgment
of the Hon'ble Supreme Court in the case of Uttar Pradesh State Electricity Board and Anr. v. Hari
Shanker Jain and Ors. AIR 1979 SC 65 : (1978) 4 SCC 16 : 1978-II-LLJ-399 (SC);
(vii) Based on the aforesaid judgment, he submitted that if the term 'wholesale trading' is
interpreted to include the sales of goods to business enterprises for their own use or consumption
for their business purposes, such an interpretation would not be in consonance with the Directive
Principles of State Policy contained in Articles 38(1) and (2) and 39(a) and (c) of the Constitution of
India. The said articles are extracted hereinbelow:
38. State to secure a social order for the promotion of welfare of the people.-(1) The State shall strive
to promote the welfare of the people by securing and protecting as effectively as it may, a social
order in which justice, social, economic and political, shall inform all the institutions of the national
life.
(2) The State shall, in particular, strive to minimise the inequalities in income, and endeavour to
eliminate inequalities in status, facilities and opportunities, not only amongst individuals but also
amongst groups of people residing in different areas or engaged in different vocations.
39. Certain principles of policy to be followed by the State.-The State shall, in particular, direct its
policy towards securing.(a) that the citizens, men and women equally, have the right to an adequate means of livelihood;
(b) xx xxx
(c) that the operation of the economic system does not result in the concentration of wealth and
means of production to the common detriment.
(viii) The purchase of goods by the industrial, commercial and institutional concerns or by
professionals for its/his/their business purpose, the goods are so purchased in the capacity of a
consumer and not of a retailer;
(ix) The first respondent's letter dated 5/10th December, 2002 (Annexure-R5 to the first
respondent's statement of objections) clarifying that business to business sales is permissible under
the extant policy, which cannot be termed as retail trade, such a definition is not contemplated in
either the Policy Statement or 2003 Regulations. He further pointed out that this clarificatory letter
runs contrary to the first respondent's statement of objections that there cannot be any sale by the
second respondent to direct consumers;
(x) Sri Narasimhamurthy relied on two judgments of the Hon'ble Supreme Court in the case of
Anwarkhan Mahboob Company v. State of Bombay and Ors. and in the case of State of Karnataka v.
B. Raghurama Shetty , which throw light on the term 'consumption'; on its basis 'consumer' is to be
understood in the Indian context. Sri Narasimhamurthy summed up his submission stating that
viewed from any perspective, either under the Policy Statement or under 2003 Regulations,
business to business activities of the second respondent is not permissible; they amount to retail
trading, which is specifically prohibited under the Policy Statement and the Regulations, 2003.
7. Sri G.E. Vahanvati, the learned Solicitor General of India appearing for the first respondent
submitted that giving the restricted interpretation to the meaning and scope of 'wholesale cash and
carry trading' would be against the very purpose of the policy relating to FDI. Highlighting the
benefits of FDI, he brought to my notice the foreword to the document containing the latest FDI
Policy - April 2006. The same reads as hereunder:
Foreign Direct Investment (FDI) plays an important role in the long term economic development of
a country not only as a source of capital but also for enhancing the competitiveness of the domestic
economy through transfer of technology, strengthening infrastructure, raising productivity and
generating new employment opportunities. FDI also has an important role in enhancing exports.
We in India see FDI as a developmental tool.
The policy of the Government of India is to strive to maximise the developmental impact and the
spin offs of FDI. While Government encourages, and indeed welcomes FDI in all sectors where it is
permitted, we are especially looking for large FDI inflows in the development of infrastructure,
technological upgradation of the Indian Industry through green field investment in manufacturing
and in projects having the potential for creating employment opportunities on a large scale....
India has been consistently classified as amongst the most attractive investment destinations by a
slew of reputed international rating organisations.... .
8. He also brought to my notice the definitions of "wholesale trade' and 'retail trade' as given by the
World Trade Organisation. The same read as follows.-
Wholesaling consists of the sale of goods/merchandise to retailers, industrial, commercial,

institutional or other professional business users or other wholesalers and related subordinated
services.
Retailing services consists of the sale of goods/merchandise for personal or household consumption
either from a fixed location (e.g. store, kiosk etc.) or away from a fixed location and related
subordinate services.
He submitted that the Government cannot be precluded from accepting the international definition
of 'wholesale trade', as laid down by the World Trade Organisation.
9. Sri Vahanvati submitted that one has to look at the issue from the point of view of an
international investor as well to the wholesale cash and carry trade. Such an investor would
approach the concept of this business from the point of view of what is internationally accepted.
10. Sri Vahanvati submitted that the executive is the best Judge; the Courts do not interfere with the
economic decision making. In this regard he relied on a judgment of the Hon'ble Supreme Court in
the case of BALCO Employees Union (Registered) v. Union of India and Ors. . The relevant
paragraph of the said judgment is extracted hereinbelow.36. In State of Madhya Pradesh v. Nandlal Jaiswal , the change of the policy decision taken by the
State of Madhya Pradesh to grant licence for construction of distilleries for manufacture and supply
of country liquor to existing contractors was challenged. Dealing with the power of the Court in
considering the validity of policy decision relating to economic matters, it was observed at pp. 605
and 606 as follows.34. But, while considering the applicability of Article 14 in such a case, we must bear in mind that,
having regard to the nature of the trade or business, the Court would be slow to interfere with the
policy laid down by the State Government for grant of licences for manufacture and sale of liquor.
The Court would, in view of the inherently pernicious nature of the commodity allow large measure
of latitude to the State Government in determining its policy of regulating, manufacture and trade in
liquor. Moreover, the grant of licences for manufacture and sale of liquor would essentially be a
matter of economic policy where the Court would hesitate to intervene and strike down what the
State Government has done, unless it appears to be plainly arbitrary, irrational or mala fide. We had
occasion to consider the scope of interference by the Court under Article 14 while dealing with laws
relating to economic activities in R.K. Garg v. Union of India AIR 1981 SC 2138. We pointed out in
that case that laws relating to economic activities should be viewed with greater latitude than laws
touching civil rights such as freedom of speech, religion, etc. We observed that the Legislature
should be allowed some play in the joints because it has to deal with complex problems which do not
admit of solution through any doctrinaire or strait-jacket formula and this is particularly true in case
of legislation dealing with economic matters, where, having regard to the nature of the problems
required to be dealt with, greater play in the joints has to be allowed to the Legislature. We quoted
with approval the following admonition given by Frankfurter, J. in Morey v. Doud (1957)354 US
457:
In the utilities, tax and economic regulation cases, there are goods reasons for judicial self-restraint
if not judicial deference to legislative judgment. The Legislature after all has the affirmative
responsibility. The Courts have only the power to destroy, not to reconstruct. When these are added
to the complexity of economic regulation, the uncertainty, the liability to error, the bewildering
conflict of the experts, and the number of times the Judges have been overruled by events self-limitation can be seen to be the path to judicial wisdom and institutional prestige and stability.
What we said in that case in regard to legislation relating to economic matters must apply equally in
regard to executive action in the field of economic activities, though the executive decision may not
be placed on as high a pedestal as legislative judgment insofar as judicial defence is concerned. We
must not forget that in complex economic matters every decision is necessarily empiric and it is
based on experimentation or what one may call 'trial and error method' and, therefore, its validity
cannot be tested on any rigid 'a priori' considerations or on the application of any strait-jacket
formula. The Court must while adjudging the constitutional validity of an executive decision relating
to economic matters grant a certain measure of freedom or 'play in the joints' to the executive. 'The
problem of Government' as pointed out by the Supreme Court of the United States in Metropolis
Theatre Company v. State of Chicago (1912)57 Law Ed 730:
are practical ones and may justify, if they do not require, rough accommodations, illogical, it may be,
and unscientific. But even such criticism should not be hastily expressed. What is best is not
discernible, the wisdom of any choice may be disputed or condemned. Mere errors of Government
are not subject to our judicial review. It is only its palpably arbitrary exercises which can be declared
void.
The Government, as was said in Permian Basin Area Rate cases, (1968)20 Law Ed 2d 312 is entitled
to make pragmatic adjustments which may be called for by particular circumstances. The Court
cannot strike down a policy decision taken by the State Government merely because it feels that
another policy decision would have been fairer or wiser or more scientific or logical. The Court can
interfere only if the policy decision is patently arbitrary, discriminatory or mala fide. It is against the
background of these observations and keeping them in mind that we must now proceed to deal with
the contention of the petitioners based on Article 14 of the Constitution.
11. Nextly the Solicitor General submitted that the Government being the author of the policy, has
every right to remove any ambiguity about the policy. He defended issuance of the clarificatory letter
dated 5/10th December, 2002 by citing the judgment of the Hon'ble Supreme Court in the case of
Ajeet Singh Singhvi v. State of Rajasthan 1991 Supp. (1) SCC 343 : 1991 SCC(L and S) 1026. The
relevant portion of the said judgment is extracted hereinbelow:
12. .. The view of the Government in maintaining that the super time scale posts are highest posts is
not only a bare and literal interpretation given by it to the Rules but also is reflective of its policy in
this regard and no decision needs to be given by the Court in normal circumstances to amend or
alter such policy. In such a realm even contemporaneous exposition of a similar rule in another set
of rules cannot play their part to influence either the Court or the Government to give the same
interpretation or exposition to the Rules requiring interpretation herein. Besides the Government
10
being the author of the rule, has kept to itself, as a matter of prudence, the right to remove any
ambiguity about the identification of any post including the highest post/posts. The stance of the
Government in this regard should have clinched the matter but since the same had been put forth as
a defence in the High Court, its view nonetheless is entitled to great weight and the burden of the
appellants to lift that weight, an uphill task by all means, has remained unfulfilled.
12. He submits that the petitioners' prayer for a direction to the first respondent to hold an enquiry
into the trading activities of the second respondent has become infructuous. The first respondent
has already conducted a full and comprehensive inquiry and has found substantial compliance with
the conditions of approval. Over and above, the inquiry report has recommended additional
restrictions on the second respondent. He further submits that from July 2004 there has been no
significant complaints of misuse of approval by the respondent 2.
13. Sri Soli J. Sorabjee, the learned Senior Counsel appearing for Sri Vivek Chandy for the second
respondent submitted that the meaning and expression 'cash and carry wholesale trading' has to be
based on international commercial understanding. He brought to my notice the definition of cash
and carry wholesale trading' of Statistical Office of the European Communities (Eurostat), which is
as follows.... the only decisive characteristic of wholesale is whether the offer is made to business/professionals
or to private consumers. A trade between a wholesale warehouse and business/professional
customers (retailers, professional users, caterers, institutional buyers, etc.) constitutes a wholesale
trade irrespective of the quantity, package size or value of goods sold.
14. Sri Sorabjee also relied upon the World Trade Organisation definitions of 'wholesale trading' and
the 'retail trading', as was done by Sri Vahanvati.
15. The Encyclopaedia Social Sciences, Volume 3, page 246 states as follows.The distinguishing feature of the retail trade...consists in selling merchandise to ultimate
consumers' whereas wholesaling is said to cover sales 'to a retailer, a wholesaler, or an industrial
consumer so long as the purpose of the customer in buying such goods is to resell them in one form
or another or to use them for business needs as supplies or equipment.
16. Going by the afore-extracted definitions, the second respondent's activities fall under the
definition of the 'cash and carry wholesale trading.
17. Sri Sorabjee submits that the cash and carry wholesale trading is an international concept and
therefore it is impermissible to borrow the meaning of 'wholesale trade' from the domestic statutes.
18. He submits that the respondent 2 has brought about FDI and State of the Art Technology. It has
generated local employment, has made the goods available at attractive prices and thus has brought
benefit to the public at large.
11
19. He submitted that 'challenge to executive action in the field of economic activities' is
impermissible. The petitioners have not challenged the policy of Government to permit hundred per
cent FDI. Knowing fully well that the policy of the Government cannot be assailed under Article 226
of the Constitution of India, they have impugned only the permission granted to the respondent 2.
The allegations that the multi-national companies are flooding this country and causing (sic)ment to
the local people, would have assumed relevance only if they have (sic)nged the policy of the
Government. What the petitioners are not permitted to do directly cannot be permitted to be done
indirectly.
20. He relied upon the judgment of the Hon'ble Supreme Court in the case of BALCO to buttress his
submission that the Court cannot examine the relative merits of different economic policies and
cannot strike down a policy merely on the ground that another policy would have been fairer and
better:
46. It is evident from the above that it is neither within the domain of the Courts nor the scope of the
judicial review to embark upon an enquiry as to whether a particular public policy is wise or whether
better public policy can be evolved. Nor are our Courts inclined to strike down a policy at the behest
of a petitioner merely because it has been urged that a different policy would have been fairer or
wiser or more scientific or more logical.
21. Sri Sorabjee also brought to my notice the order, dated 22nd November, 2004 passed by the
Delhi High Court in Writ Petition Nos. 9568 to 9570 of 2003 in the case of Federation of
Associations of Maharashtra, and Ors. v. Union of India and Ors., wherein it is held that it is for the
Government and not for the Courts to interpret the term 'wholesale sale'. The relevant paragraphs of
the said judgment are extracted hereinbelow;
57. The matter in issue is not even of any statutory interpretation, but of the policy. The
policy-framer is the concerned Ministry which itself has issued the clarification/modification. The
learned Additional Solicitor General is right in his submissions that the matter is one of policy
decision and allocation of businesses and FIPB functions as part of the concerned Ministry. It is the
said concerned Ministry which has issued the clarification and, thus, the aspect is one of the internal
functioning of the Government. The final decision has been communicated after due deliberations.
58. The complete emphasis of learned Senior Counsel for the petitioners was that the GOI was
wrongly interpreting the terminology of 'cash and carry wholesale trade'. The question which, thus,
arises is how is this term to be interpreted and by whom? The relevant authority is the Government
itself which had framed the policy. It is for the Government to interpret the terminology in question.
It has so interpreted the terminology, which facilitates what the private respondents are doing. The
petitioners can hardly have a complaint about the same.
59. The interpretation of the Government is also not out of thin hair. It is trite to say that with the
expansion of international commerce and trade, there are certain internationally understood
concepts, which have come into play. Is the Court to look to the traditional definition of what may be
wholesale or retail as may be considered in the dictionaries and in the country earlier or is the Court
12
to accept the definition adopted by the Government on international practice? The Government's
view is based on the WTO definition of wholesale trade. The Government can hardly be faulted on
this account and it is not for the Court to go into this question.
22. The submissions of the learned Counsel have received my anxious consideration. I am in
respectful agreement with the considered view expressed by the Delhi High Court in the matter. The
task of defining the term 'cash and carry wholesale trade' is to be best left to the Government, which
has formulated the policy of inviting the FDI. No directions can be given to the Government to
accept a particular definition of the term 'cash and carry wholesale trade' in preference to or to the
exclusion of its other definitions from other sources. Therefore the challenge to the approval order,
dated 5th December, 2000 (Annexure-B) fails. Similarly the first respondent cannot be held to be at
fault for issuing the, clarificatory letter dated 5/10th December, 2002 (Annexure-R2 to the second
respondent's statement of objections). The Hon'ble Supreme Court in the case of Ajeet Singh
Singhvi, has held that the Government being the author of the rule, has the right to remove any
ambiguity in the matter.
23. Nothing survives for any consideration of the petitioners' alternative prayer for a direction to the
respondent 1 to hold the proper enquiry into the trading activities of the respondent 2. An enquiry
into the operations of the respondent 2 is already held and the report, along with a brief assessment
of the first respondent on the findings of the enquiry committee, are already placed on the record of
this Court.
24. The contention advanced on behalf of the petitioners that the expanded definition of the term
'wholesale trading' is not in consonance with the directive principles of the State Policy contained in
Articles 38(1) and (2) and 39(a) and (c) of the Constitution of India and that therefore the
respondent 2 is to be restrained from carrying out its commercial activities amounting to retail sale,
cannot be accepted in view of the considered view of the Hon'ble Supreme Court in the case of
Ashoka Smokeless Coal Ind. (Private) Limited and Ors. v. Union of India and Ors. . The relevant
portion of the said judgment is extracted hereinbelow:
106. It may not be correct to say that any action which is not in consonance with the provisions of
Part IV of the Constitution would be ultra vires but there cannot be any doubt whatsoever that the
principles contained therein would form a relevant consideration for determining a question in
regard to price fixation of an essential commodity. Directive principles of State Policy provide for a
guidance to interpretation of fundamental rights of a citizen as also the statutory rights.
25. It is a matter of serious concern that the petitioners and similarly placed reliance are suffering
on account of the Government's policy to invite FDI. But it is for the Government to evolve a policy
to safeguard the interest of the retailers. It is trite position in law that the Court should not
substitute its wisdom for the wisdom of the Government in policy matters.
26. The opening of the gate should not result in bringing prosperity to the few and deprivation to
many. Few pertinent questions could be: What has been happening to poverty? What has been
happening to employment? What has been happening to inequality? If all three of these have
13
become less severe, then beyond doubt there has been a period of development in the country. If one
or two of these central problems have been growing worse, especially if all three have, it would be
strange to call the result development even if per capita income has soared. The policy has to bring
about the greatest happiness of the greatest number. The greatness of the policy maker is in not
falling, but in rising every time it falls. That is why in BALCO's case, the Apex Court has held that the
Government has, while taking a policy decision relating to economic issues, right to 'trial and error'.
27. In the result, I dispose off this petition with the following order.ORDER
(i) Liberty is reserved to the petitioners to give appropriate representations to the first respondent
on how their interests are to be safeguarded. The first respondent shall meaningfully consider the
grievances of the petitioners and evolve the policy that it deems appropriate;
(ii) The respondent 1 shall closely monitor the activities of the respondent 2 for the purpose of
ensuring compliance of the respondent 2 with the provisions of the Foreign Exchange Management
Act, 1999 and the Regulations framed thereunder and the clauses of the approval order, dated 5th
December, 2000 (Annexure-B). Further the respondent 1 shall take action in accordance with law, if
the petitioners point out specific breaches of the said Act and Regulations and the terms of the
impugned approval order.
28. This petition is allowed in part. No order as to costs.
14

Karnataka HC - Radio House and Ors. Vs Union of India (Uoi) and Anr. On 11 October, 2007

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Radio House And Ors. vs Union Of India (Uoi) And Anr.

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Section 2(p) of the

Indian Kanoon - http://indiankanoon.org/doc/620294/

Section 2(x) of the MRTP

amounts assembled and

perishable) products, such

Indian Kanoon - http://indiankanoon.org/doc/620294/

Wholesaling consists of the sale of goods/merchandise to retailers, industrial, commercial,

Indian Kanoon - http://indiankanoon.org/doc/620294/

Indian Kanoon - http://indiankanoon.org/doc/620294/

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