Courts Should Defer To Institutional Economic Decisions Absent Arbitrariness Or Mala Fides: Delhi High Court
The Court clarified that Press Note-1 (2005) guidelines are administrative in nature, and validated ex-post facto Foreign Investment approvals.
Chief Justice Devendra Kumar Upadhyaya, Justice Tushar Rao Gedela, Delhi High Court
The Delhi High Court has set aside a Single Judge’s order for fresh review of the ex-post facto FDI approval granted to Putzmeister, holding that courts should not interfere with institutional economic decisions absent arbitrariness or illegality. It clarified that the “prior approval” requirement under Press Note-1 (2005 Series) is administrative, preserving the Government’s discretion to grant post facto approval where no jeopardy is caused to an existing joint venture.
The Court further held that the approval, granted after assessing the absence of such jeopardy, was a valid exercise of administrative discretion. It also observed that institutional decision-making in complex policy matters does not require the ultimate authority to personally hear the parties, so long as the decision is based on the record.
Chief Justice Devendra Kumar Upadhyaya and Justice Tushar Rao Gedela observed, “...Having regard to the nature of decision required to be taken by the Government for approval to direct investment in terms of Press Note-1 (2005 Series) read with Press Note-3 (2005 Series), which we have held to be in the nature of policy decision, we are of the considered opinion that interference in such decisions in writ jurisdiction has to be restricted to violation of any constitutional provision or Fundamental Rights or in case such decision is absolutely arbitrary or if it suffers from any element of malice".
Senior Advocate Jayant Mehta appeared for the appellant and Mukul Singh, CGSC, Senior Advocate Shyam Mehta appeared for the respondent.
In 1997, Putzmeister Concrete Pumps GmbH (Appellant No. 1) entered into a joint venture with Indian partners (Respondent Nos. 5-7) to manufacture concrete pumps. Tensions arose when the Appellant established a wholly-owned subsidiary, Putzmeister Concrete Machines Pvt. Ltd. (Appellant No. 2), and invested approximately ₹55.41 crore between 2005 and 2009.
The Indian partners alleged that this violated Press Note-1 (2005), which required prior government approval for new ventures in the "same field" by a foreign investor with an existing tie-up. The Appellants eventually sought ex-post facto approval, which was granted by the Government in 2010 subject to compounding of the initial procedural lapse.
The Indian partners challenged the 2010 approval through a writ petition. A Single Judge, while noting the approval was "well-reasoned", set it aside on October 29, 2024, on the grounds that the principles of natural justice were violated because the committee chairperson had changed during the deliberations. The Appellants moved the Division Bench to restore the government's approval.
The Bench noted that the "limited scope of scrutiny" under the policy is to check for "jeopardy" to the existing partner. Since the FIPB committee found that the Indian unit had actually increased capacity and sales despite the new venture, no real jeopardy was established. Furthermore, the Court rejected the "he who hears must decide" argument, noting that government decisions are institutional and impersonal, often involving multiple levels of staff expertise.
“…thus, what can safely be observed is that the departure from 1998 policy by issuing Press Note-1 (2005 Series) aimed at ease of doing business by foreign investors in India by permitting foreign investment in a Joint Venture where an Indian entity is a partner, under the automatic route, albeit with the approval of the Government…Therefore, in our considered opinion, merely because the Committee which had communicated its opinion to FIPB did not comprise of Ms. L.M. Vas, the earlier Chairman of the Committee or Mr. Prabodh Saxena who was a part of the earlier Committee, it cannot be said that principles of natural justice, in the instant case, having regard to the nature of decision, were violated”, the Bench observed.
“What we also notice from a perusal of Press Note-1 (2005 Series) is that the inquiry by the Government for according approval to foreign investment under the automatic route relates to determination of the point as to whether new proposal would or would not, in any way, jeopardise the interests of the existing Joint Venture. On satisfaction that the proposed investment by a foreign entity under the automatic route would not jeopardise the interests of the existing Joint Venture in the same field, the government is to grant its approval to such investment being sought to be made by a foreign entity under the automatic route”.
The Bench, thus, allowed the appeal and quashed the Single Judge’s order dated October 29, 2024. The Court restored the Government’s ex-post facto approval dated September 29, 2010, confirming the validity of the foreign investment.
Cause Title: Putzmeister Concrete Pumps GmbH and Anr. v. Union of India and Ors. [Neutral Citation: 2026:DHC:2653-DB]
Appearances:
Appellants: Jayant Mehta, Sr. Adv., Rohin Dubey, Sagar Chawla and Mansvini Jain, Advocates.
Respondents: Mukul Singh, CGSC, Ira Singh, Aryan Dhaka, Shyam Mehta, Sr. Adv., Rishi Agrawala, Rajesh Vaidya, Gaurav Goel, Aditya Bapat, Abhay Agnihotri and Abhishek Anand, Zoheb Hossain, Gurnami, Panel Counsel, Kartik Sabharwal, Pransal Tripathi and Chinmay Anand Panigrahi, Advocates.