Delhi HC's notice to govt on RBI circular on e-retail

22 Apr '16

2 min read

The Delhi High Court today sought the Centre's response on a petition challenging a circular by the Reserve Bank of India (RBI) which bans companies which receive foreign direct investment (FDI) from retail trading in any form through e-commerce.

A bench of Chief Justice G Rohini and Justice Jayant Nath issued notice to the Centre and asked it to file its response within four weeks. The court has fixed the matter for May 24, according to a PTI report.

During the hearing, the RBI' s counsel told the bench, which had earlier sought its reply on the plea, that they would file their response soon.

The public interest litigation has contended that as per the July 1, 2015 master circular of the RBI, while FDI is allowed in business-to-business (B2B) e-commerce, companies that get FDI cannot undertake single and multi-brand retail trading through e-commerce.

It has sought an inquiry into the affairs and transactions of all FDI recipient companies and stop operation of those found to be directly or indirectly carrying out e- commerce in retail sector.

The petitioner also said that "100 per cent FDI is permissible through automatic route for buying and selling by a company through the e-commerce platform but this is subject to the condition that such companies would engage only in B2B e-commerce as against business to consumer (B2C) pattern and not in retail trading".

The plea had alleged that "in order to mislead and confuse the competent authorities, the said e-commerce companies are creating a conundrum of group websites/companies amongst the closely held/managed sister companies/business concerns and thereby causing tremendous loss to the government exchequer."

Last month, the government gave the green light to 100% FDI in the marketplace format of e-commerce retailing with a view to attract more foreign investments.

According to the guidelines issued by the Department of Industrial Policy and Promotion (DIPP) on FDI in e-commerce, FDI has not been allowed in inventory-based model of e-commerce. (SH)

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