FDI vote underlines regulatory power

Last Updated: Mon, Dec 10, 2012 03:57 hrs

pThe Union Government has pulled it off &ndash a vote on the proposal to introduce foreign direct investment FDI into multi-brand retailing in India Each House of Parliament has voted in favour of the proposal The government feels like a winner &ndash it has piloted its proposal through Parliament successfully The opposition parties that opposed it feel like a winner &ndash they were able to make noise publicly and project an image of having done their best They are after all not the ruling coalition Those who walked out of Parliament or found other means of hedging their position found their own comfort zones in which they could justify their actions to themselves and to their constituenciesppThis is the mela of democracy Discourse with varying degrees of maturity and nuance takes place Various political parties having won a mandate to participate in law-making in varying roles do so An eventual outcome may not be satisfactory to all concerned but there is an outcome involving participation of all those with a mandate to rule This column is not about FDI in retail It is about what the vote on FDI in retail highlighted to us as a Republic working under the rule of law founded in the Constitution of IndiappPermission for a certain level of FDI in retailing or for that matter in any sector is essentially brought into effect by amending a schedule to regulations made under the Foreign Exchange Management Act FEMA Parliament enacted FEMA and authorised the government to make rules and the Reserve Bank of India to make regulations to implement the law When government changes its policy on introducing FDI the RBI amends the regulations to implement the policyppIt is open to Parliament to empower a regulatory authority to make regulations to implement any legislation made by Parliament Such regulations are &ldquosubordinate legislation&rdquo and have to conform to the Act of Parliament that gave the authority to make the law Any such regulation made is required to be tabled in Parliament for a period of 30 days Parliament has a right to review such regulation and debate the wisdom of the measures adopted in the regulations It was the regulations under FEMA that was voted on in relation to FDI in retailppUpon review if Parliament builds consensus to reject the measure or modify the measure the regulation would change prospectively from the point at which the rejection or modification is passed by Parliament If there is no action from Parliament the regulations take effect &ndash after all it was Parliament that had delegated power to the regulatory authority to make regulations in the first place Parliament has its own rules on the conduct of such a review A proposal to reject or modify the regulation may be debated without a vote or may be debated and put to vote The political ruckus about FDI in retail was primarily about whether the proposal should be put to vote which it eventually was with the regulation surviving intactppEvery regulation made by a regulator has to undergo the same drill It is another matter that Members of Parliament do not take similar interest in other matters of governance that they have delegated to various regulatory authorities The intervention by Parliament in practice too ought to be more an exception than a rule If Parliament desired to have a say in every single regulation constituting delegated legislation it would not have delegated the power to make regulations in the first place However every single regulation made by regulatory authorities ought to have the capacity to withstand such scrutinyppSuch a nuanced check and balance is an important part of the texture of the fabric of rule of law To hold the office of a Member of Parliament one has to be elected by the people of the Republic To hold office in a regulatory authority the subordinate legislation-maker does not have to win any election The laws made by him are subject to such review by those who have the mandate of the people to govern the nationppEven after such scrutiny laws are subject to judicial review from the standpoint of constitutional validity Just because the process of law-making has been followed a regulation that is violative of the Indian Constitution cannot become law Such scrutiny is independent of the government and of Parliament Indeed as rightly underlined by a senior high court judge at a recent seminar on governance the only constituency of a high court judge should be the Constitution of IndiappThe reality is both Parliament and the courts are usually reluctant to strike down a regulation as being unconstitutional The presumption has to be one of constitutional validity rather than the lack of it &ndash else it would be impossible to govern the section of society the regulator has been asked to regulate This is why when a regulator passes off a regulatory measure as a &ldquocircular&rdquo or a letter purportedly written using powers under his statute he is contravening such a precious and important constitutional check and balanceppRegulators ought to be mindful that the regulations they write should have the capacity to withstand such scrutiny Probity in regulatory administration demands that they do not write regulations in the garb of correspondence or circulars invoking their powers Public consultation and engagement with society on a proposed law is critical to all stakeholders to feel involved Regulators should clearly state the purpose of the regulations to help society comply Motherhood statements should be abandoned in favour of standing up and declaring what they specifically stand for Finally after making regulations continued engagement with society is critical Else they will never know how they have faredhr pp alignrightemThe author is a partner of JSA Advocates & Solicitors  The views expressed here are his ownem a hrefmailtosomasekharjsalawcomsomasekharjsalawcoma  p

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