The Congress-led UPA government scored partial victory on Monday, when the Supreme Court of India refused to stay foreign direct investment (FDI) in the retail sector but declared that the government's policy required legal sanction.

A Supreme Court bench comprised of Justice RM Lodha and Justice AR Dave told Attorney General GE Vahanvati that the government could not introduce FDI in retail sector until the Reserve Bank of India made amendments in the Foreign Exchange Management Act (FEMA) regulations.

Pronouncing its ruling, the bench said, "The RBI has already issued a circular amending the FDI limit, but it has not formally amended the regulations. We want to know from the attorney general when this amendment will formally take place."

The bench clarified that the government should complete legal requirements before implementing the FDI policy in retail.

The Attorney General assured the apex court that he would ask the central bank's governor to take urgent steps to make the required amendments in FEMA regulations.

The apex court's ruling came during the hearing of a PIL filed by ML Sharma, who challenged the government's decision to open the retail sector to foreign investors on the technical grounds that FEMA regulations firmly forbid retail trading.

The government was given two weeks' time to make the required amendments in the FEMA regulations. Next hearing will take place on November 5.