Rights, freedoms shouldn't be used by private biz to avoid regulation: SC

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SME Times News Bureau | 06 Dec, 2021
The Supreme Court on Monday observed that the court must be circumspect that rights and freedoms guaranteed under the Constitution do not become a weapon in the arsenal of private businesses to disable regulations enacted in the public interest.

A bench of Justices D.Y. Chandrachud, Vikram Nath, and B.V. Nagarathna said: "The right to equality and the freedom to carry on one's trade cannot inhere a right to evade or avoid regulation."

The bench further added that in liberalised 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," it noted in the 55-page judgment.

Justice Chandrachud, who authored the judgment on behalf of the bench, said: "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."

He added that 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.

The bench noted scholars across the world have warned against the judiciary constitutionalising an unregulated marketplace.

The bench said: "This 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."

The top court dismissed an appeal by Akshay N. Patel against the Madhya Pradesh High Court order, which upheld Clause 2 (iii) of the Revised Guidelines on Merchanting Trade Transactions (MTT) dated January 23, 2020 issued by the first respondent, Reserve Bank of India, in the exercise of its power under Section 10(4) and 11(1) of the Foreign Exchange Management Act 1999.

The appellant obtained an international MTT contract to serve as an intermediary between the sale of PPE products by a supplier in China to a buyer in the US. In May 2020, the bank informed the appellant that the RBI had denied his MTT contract on the basis of Clause 2(iii) of the 2020 MTT Guidelines. The government had then banned the export of PPE products against the backdrop of the Covid pandemic.

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. His counsel further argued facilitating an MTT of PPE products between two countries does not impact their stock in India.

The bench 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. As such, MTTs contribute to reducing the available stock of PPE products in the international market that India could have acquired," it noted.

It further added that the Centre's policy to ban the export of PPE products reflects their stance on the product's non-tradability during the Covid 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 utilised to facilitate the hoarding of PPE products with wealthier nations," said the bench.

Upholding the high court verdict delivered on October 8 last year, the bench said: "The measure was validly enacted, in pursuance of legitimate state interest and did not disproportionately impact the fundamental rights of the appellant. Hence, Clause 2(iii) passes muster under Articles 14, 19(1)(g) and 21. For the reasons noted in this judgment, we see no need to interfere."