2021 Supreme(SC) 772

SUPREME COURT OF INDIA
(For the High Court of Madhya Pradesh at Indore)
DHANANJAYA Y. CHANDRACHUD, VIKRAM NATH, B.V. NAGARATHNA, JJ.
Akshay N. Patel - Appellant
Versus
Reserve Bank of India & Anr. - Respondents
Civil Appeal No. 6522 of 2021
Decided On : 06-12-2021

IMPORTANT POINTS
(1) Right to carry on trade or business is subject to reasonable restrictions which are imposed in interests of general public.
(2) A regulated economy is a critical facet of ensuring a balance between private business interests and State’s role in ensuring a just polity for its citizens.
(3) RBI is empowered by FEMA to manage, regulate, and supervise foreign exchange of India – Courts do not interfere with economic or regulatory policy adopted by government.
(4) Conceptualising constitutional rights is incomplete without analysing their corresponding limitations – Court can adopt an integrated proportionality analysis where limitation on each of rights is common and affects them in a similar way – Ban on exports, imports and MTTs of PPE products is to ensure availability of adequate domestic supplies during a global health pandemic.

Headnote:

(A) Constitution of India – Article 19(1)(g) – Right to carry on trade or business – Right to carry on trade or business is subject to reasonable restrictions which are imposed in interests of general public – Apex Court has propounded several tests for determining “reasonableness” for the purpose of Article 19(1)(g) – These have ranged from testing restrictions for arbitrariness, excessiveness and discerning their objective of compliance with Directive Principles of State Policy – Restrictions on freedom to carry on trade and business can take form of a complete prohibition – A legitimate object and prejudice to general public by non-imposition of such prohibition has to be demonstrated by State, to discharge its burden of demonstrating reasonableness under Article 19(6) – Qualitative nature of a right and corresponding scrutiny of its violation cannot be a sole function of degree of restriction – Every violation of rights, irrespective of degree of infraction, must be evaluated through an uniform principle that promotes a culture of justification – An analysis of legitimate social control for the purpose of Article 19(6) has been streamlined by this Court through lens of proportionality. (Paras 12, 14, 15 and 16)

(B) Foreign Exchange Management Act, 1999 – Sections 10(4) and 11(1) – Constitutionality of Clause 2(iii) of 2020 MTT Guidelines – Use of proportionality analysis reflects shift from a culture of authority to a culture of justification where State action is best held accountable for its violation of fundamental rights – Fundamental rights in Part III are not understood in silos, but as an inter-related enunciation of rights and freedoms that uphold basic rubric of human rights – Conceptualising constitutional rights is incomplete without analysing their corresponding limitations – Court can adopt an integrated proportionality analysis where limitation on each of rights is common and affects them in a similar way – Ban on exports, imports and MTTs of PPE products is to ensure availability of adequate domestic supplies during a global health pandemic – Adequate stocks of PPE products are critical for healthcare system to combat COVID-19 pandemic – State’s aim of ensuring supplies is in furtherance of right to life under Article 21 and Directive Principles of State Policy mandating State’s improvement of public health as a primary duty under Article 47 – Appellant has not challenged legitimacy of this aim of ensuring adequate PPE in India – Executive’s aim to ensure sufficient availability of PPE products, considering ongoing pandemic, is legitimate – Impugned measure is enacted in furtherance of a legitimate aim that is of sufficient importance to override a constitutional right of freedom to conduct business. (Paras 22, 25, 26, 27 and 29)

(C) Constitution of India – Article 19(1)(g) – Social importance of prohibition on Constitutional rights – RBI is empowered by FEMA to manage, regulate, and supervise foreign exchange of India – Courts do not interfere with economic or regulatory policy adopted by government – This lack of interference is in deference to democratically elected government’s wisdom, reflecting will of people – Apex Court must be circumspect that rights and freedoms guaranteed under Constitution do not become a weapon in arsenal of private businesses to disable regulation enacted in public interest – A regulated economy is a critical facet of ensuring a balance between private business interests and State’s role in ensuring a just polity for its citizens – Regulating economy is reflective of compromise between interests of private commercial actors and democratic State that represents and protects interests of collective – With transformation in economy, Courts must also be alive to socio-economic milieu – Right to equality and freedom to carry on one’s trade cannot inhere a right to evade or avoid regulation – In liberalized economies, regulatory mechanisms represent democratic interests of setting terms of operation for private economic actors – Apex Court does not espouse shunning of judicial review when actions of regulatory bodies are questioned – Rather, it implores intelligent care in probing bona fides of such action and nuanced deference to their expertise in formulating regulations – A casual invalidation of regulatory action in garb of upholding fundamental rights and freedoms, without a careful evaluation of its objective of social and economic control, would harm general interests of public – In present case, RBI has demonstrated a rational nexus in prohibition of MTTs in respect of PPE products and public health of Indian citizens – Critical links between FTP and MTTs have been established by respondents – However, Apex Court retains its role as constitutional watchdog to protect against State excesses – It continues to exercise its role in determining proportionality of a State measure, with adequate consideration of nature and purpose of extraordinary measures that are implemented to manage pandemic – Democratic interests that secure well-being of masses cannot be judicially aborted to preserve unfettered freedom to conduct business, of few – Judgment of High Court upheld. (Paras 54 to 59)

Facts of the case:

Genesis of the case lies in an international MTT contract which appellant obtained to serve as an intermediary between the sale of PPE products by a supplier in China to a buyer in United States. Present appeal arises from a judgment and order dated 8th October 2020 of a Division Bench of High Court of Madhya Pradesh at its Bench at Indore. High Court upheld Clause 2(iii) of Revised Guidelines on Merchanting Trade Transactions (MTT) dated 23rd January 20202 issued by first respondent, Reserve Bank of India, in the exercise of its power under Sections 10(4) and 11(1) of Foreign Exchange Management Act 1999.

Findings of Court:

As a developing country with a sizeable population, RBI’s policy to align MTT permissibility with the FTP restrictions on import and export of PPE products cannot be questioned. Thus, this Court is constrained to defer to the regulations imposed by RBI and the UOI, in the interests of preserving public health in a pandemic. This deference is by no means uncritical.

Result : Appeal dismissed.