The Supreme Court on Monday observed that “a regulated economy is a critical facet of ensuring a balance between private business interests and the State’s role in ensuring a just polity for its citizens.” It added that the court “must be circumspect that the rights and freedoms guaranteed under the Constitution do not become a weapon in the arsenal of private businesses to disable regulation enacted in the public interest.”
A bench of Justices D Y Chandrachud, Vikram Nath and B V Nagarathna said this while dismissing an appeal against a Madhya Pradesh High Court order upholding the Reserve Bank of India’s January 2020 guidelines on Merchandising Trade Transactions (MTT), under which permission was denied to a businessman for an international MTT contract for sale of PPE (personal protective equipment) products by a supplier in China to a buyer in the United States.
The court was hearing an appeal by Akshay N Patel, the managing director of Anzalp Herbal Products Private Limited, which manufactures and trades in pharmaceuticals, herbal and skincare products, and masks, gloves, sanitisers, PPE overalls, and ventilators, among others, besides engaging in MTTs.
Patel argued that the prohibition of the international MTT infringed his fundamental rights and freedoms under Articles 14, 19(1)(g) and 21 of the Constitution. The appellant contended that a prohibition of exports in PPE products was sufficient to achieve the objective of ensuring adequate supplies, and it was not necessary to also prohibit MTTs. It was also argued that the appellant facilitating an MTT of PPE products between two countries does not impact their stock in India.
The court rejected the arguments on two grounds.
Writing for the bench, Justice Chandrachud said, “While MTTs in PPE products may not directly reduce the stock of these products in India, it still does contribute to their trade between two foreign nations. In doing so, it directly reduces the available quantity of PPE products in the international market, which may have been bought by India, if so required…”
“Second, the… policy to ban the export of PPE products reflects their stance on the product’s non-tradability during the Covid-19 pandemic. It highlights a clear policy choice under which Indian entities shall not be allowed to export these products outside of India, in all probability to the highest buyers across the globe who may end up hoarding the global supply. Hence, banning MTTs in PPE products was critical in ensuring that Indian foreign exchange reserves are not utilized to facilitate the hoarding of PPE products with wealthier nations,” the bench said.
The court held that the “RBI has demonstrated a rational nexus in the prohibition of MTTs in respect of PPE products and the public health of Indian citizens... As a developing country with a sizeable population, RBI’s policy to align MTT permissibility with the FTP (Foreign Trade Policy) 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.”
Elaborating, the court said that “Constituent Assembly Debates had carefully curated restrictions on rights and freedoms, in order to retain democratic control over the economy. Regulation must of course be within the bounds of the statute and in conformity with executive policy.”
Regulating the economy, it said “is reflective of the compromise between the interests of private commercial actors and the democratic State that represents and protects the interests of the collective.”
The court said that “scholars across the world have warned against the judiciary constitutionalising an unregulated marketplace” and added “this Court must be bound by a similar obligation, in order to preserve its fidelity to the Constitution. With the transformation in the economy, the Courts must also be alive to the socio-economic milieu. The right to equality and the 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 the terms of operation for private economic actors. This Court does not espouse shunning of judicial review when actions of regulatory bodies are questioned. Rather, it implores intelligent care in probing the bona fides of such action and nuanced deference to their expertise in formulating regulations. A casual invalidation of regulatory action in the garb of upholding fundamental rights and freedoms, without a careful evaluation of its objective of social and economic control, would harm the general interests of the public.”
It added that “democratic interests that secure the well-being of the masses cannot be judicially aborted to preserve the unfettered freedom to conduct business, of the few.”
(With inputs from agencies)