(Delivered on this 08

^th October, 2020)

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The petitioner before this Court has filed this present petition

challenging the circular issued by the Reserve Bank of India dated

23/01/2020 which is in respect of Merchanting Trade Transactions

(MTT).

02-

The petitioner's contention is that the petitioner is an Indian

citizen and is engaged in the business of manufacturing and trading of

Pharmaceutical, Herbal, Skin Care and Personal Protective

Equipment (PPE) products in India and several other countries. The

petitioner has further stated that Corona Virus has infected large

number of people over the entire globe and Personal Protective

Equipment (PPE) Kits, Masks and Ventilators are in acute shortage all

over the globe.

03-

The petitioner has further stated that as there was an acute

shortage of PPE Kits, Masks, Sanitizer, etc. and as some of the

countries were manufacturing more than the demand in their own

country, the petitioner wanted to supply the goods to United States of

America (USA).

04-

The petitioner has further stated that he has negotiated the

supply of PPE Kits and other goods with a buyer of United States of

America and he has placed an order for purchase of KN95 Masks

from a manufacturing Company based in China, meaning thereby, the

petitioner wanted to purchase the goods from China and to supply in

United States of America by exploiting the system of Merchanting

Trade Transactions which involves an Indian Bank as well as Reserve

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Bank of India.

05-

The petitioner has further stated that under the Merchanting

Trade Transactions an Indian Citizen facilitates the export of any

goods or material from a Company or individual of an export country

(other than India) and then import / supply of the said goods to a

Company in another country, which is also other than India. Thus, in

short their contention is that goods are neither manufactured in India

nor imported to India at any point of time, however, the profit comes to

India in various currencies.

06-

The petitioner has further stated that Merchanting Trade

Transaction Contracts are regulated and governed by Reserve Bank

of India by issuing circulars from time to time and the Reserve Bank of

India in the year 2000 in exercise of its powers conferred under

Section 10(4) and Section 11(1) of the Foreign Exchange

Management Act, 1999 has issued a circular dated 24/08/2000 to

regulate any Merchanting Trade Transaction contract entered into by

any Indian national. The aforesaid circular was amended later on in

the year 2014 i.e. on 27/01/2014.

07-

The petitioner has further stated that on 23/01/2020 the

Reserve Bank of India has issued another notification dated

23/01/2020 and revised guidelines for

Merchanting Trade

Transactions have been issued superseding its earlier guidelines. The

petitioner's grievance is that Rule 2 Clause (iii) provides that MTT

shall be undertaken for the goods that are permitted for export / import

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under the prevailing Foreign Trade Policy (FTP) as on the date of

shipment.

08-

The petitioner has further stated that after receiving the

Merchanting Trade Transaction contracts for supply of KN95 Masks

manufactured in China to the buyer based in United States of

America, the petitioner on 01/05/2020 contacted its banker for

execution of necessary international trade documents and requested

its bankers to open a Letter of Credit in favour of manufacturer /

supplier based in China.

09-

The petitioner has further stated that on 05/05/2020 the officials

of HDFC Bank wrote to the petitioner that at present on account of

spread of Corona Virus Disease, the Union of India through Director

General of Foreign Trade (DGFT) has prohibited export of PPE Kits,

Masks, Ventilators and Sanitizer from India and because Merchanting

Trade Transactions regulations dated 23/01/2020 as contained in

Clause 2(iii) which is in respect of the MTT contracts read with the

For