On 23rd January 2020, the Reserve Bank of India (RBI) issued a circular with respect to Merchant Trading Transactions. Clause 2(iii) of the Circular restricted import/export of goods which were not permitted under the prevailing Foreign Trade Policy. Similar circulars were issued by RBI at various instances- August’00, June’03. January’14 and March’14. Further, in the backdrop of COVID-19, the Union Government prohibited the export of N-95/ FFP2 masks or its equivalent.
The Petitioner was a businessman and trader of pharmaceutical products including Personal Protective Equipment (PPE). He operated under the ‘Merchant Trade Transactions’ and had negotiated a deal for supply of PPE kits with a buyer from the United States of America. The order was purchased from a Chinese company via financial transactions facilitated by the RBI and an Indian bank. However, the government notification when read along with the RBI circular had invalidated his trade, rendering it to be a void sale/ export.
Therefore, he filed a writ petition challenging the constitutionality of the impugned notification and circular. He alleged that it violated Article 19(1)(g) of the Constitution which provides for the fundamental right to carry on any trade or business.
The Court rejected the Petitioner’s submission that the notification inhibited the freedom of trade and commerce. It observed that the impugned provision does not put a blanket ban on export and import of all the products. The Petitioner was free to either export products not placed under the restricted category or sell the restricted ones within the territory of India.
It also commented on the current pandemic situation in India and stated that a large number of front-line health workers and doctors have succumbed to COVID-19 due to inadequate Personal Protective Equipment Kits.
Thus, it is imperative for the government playing the role of a welfare State to ensure adequate supply rather than garnering profits.
Further, it remarked that the Government of India was the best judge to decide on the terms and conditions of foreign trade. Under Section 3 of the Foreign Trade (Development and Regulation) Act, 1992, power is conferred to the Government to regulate the foreign trade policies in the light of prevailing circumstances. The Court placed reliance on the Supreme Court judgement in Kasinka Trading v. Union of India. The Apex Court had held that Courts should not interfere with State policies unless has been well-established that the provisions are fraudulent and mala-fide in the eyes of law.
The Order was pronounced by a Division Bench consisting of Justice S. C. Sharma and Justice Shailendra Shukla. It held that it was within the powers of the Central Government to regulate export and import of any product within the subcontinent of India.
Further, it held that the present case was ‘purely a policy matter’ and the Court shall not interfere unless it would amount to a violation of fundamental rights.
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