TMI Blog2021 (12) TMI 297X X X X Extracts X X X X X X X X Extracts X X X X ..... sufficient availability of PPE products, considering the ongoing pandemic, is legitimate - the 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. Suitability - HELD THAT:- It is evident that the role of an intermediary in MTTs was earlier only considered as providing a service. However, this has now evolved, where the intermediary is considered to be the owner of the goods during their transit from the supplier to the buyer. Hence, goods under MTTs are recorded as negative and positive exports from the intermediary s resident country, even when they never physically enter their territory - the international opinion favours the position taken by the respondents that MTTs are analogous to traditional imports and exports. Therefore, it was suitable for the RBI to link the permissibility of MTT in goods to the permissibility of their import/export under the FTP. As noted earlier, the appellant has not challenged notifications prohibiting the export of PPE products under the FTP. Hence, the prohibition of their MTT under Clause 2(iii) of the 2020 MTT Guidelines is also co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ory 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. In the instant case, the RBI has demonstrated a rational nexus in the prohibition of MTTs in respect of PPE products and the public health of Indian citizens. The critical links between FTP and MTTs have been established by the respondents. Facilitating MTTs in PPE products between two distinct nations may prima facie appear as having no bearing on the availability of domestic stocks - it is not this Court s stance that judicial review is stowed in cold storage until a public health crisis tides over. This Court retains its role as the constitutional watchdog to protect against State excesses. It continues to exercise its role in determining the proportionality of a State measure, with adequate consideration of the nature and purpose of the extraordinary measures that are implemented t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authorised bank on 1 May 2020 requesting documents (such as a letter of credit) that were required to execute the MTT contract. The bank informed the appellant on 4 May 2020 that RBI had denied permission for his MTT contract, on the basis of Clause 2(iii) of the 2020 MTT Guidelines. Clause 2(iii) is reproduced below: iii. The MTT shall be undertaken for the goods that are permitted for exports/imports under the prevailing Foreign Trade Policy (FTP) of India as on the date of shipment. All rules, regulations and directions applicable to exports (except Export Declaration Form) and imports (except Bill of Entry) shall be complied with for the export leg and import leg respectively. At the relevant time, the export of PPE products had been banned by the second respondent, the Union Ministry of Commerce and Industry and the Directorate General of Foreign Trade Ministry of Commerce and DGFT , through successive notifications dated 8 February 2020, 25 February 2020 and 19 March 2020, due to the ongoing COVID-19 pandemic. Therefore, MTT contracts concerning PPE products were considered impermissible under Clause 2(iii) of the 2020 MTT Guidelines. 3 Upon receiving the comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so prohibited under Clause 2(iii); and (iv) apart from the fact that the goods do not physically enter Indian territory, an MTT has all the trappings of an import/export transaction. Further, it involves India s foreign exchange. Hence, its regulation needs to be in conformity with the FTP set by the UOI. B Submissions 6 Mr Aayush Agarwala, learned Counsel for the appellant submitted that: (i) Clause 2(iii) of the 2020 MTT Guidelines prohibits MTTs for goods whose import/export is banned in India, which results in an absolute prohibition. This violates Articles 14, 19(1)(g) and 21 of the Constitution; (ii) The RBI has provided no cogent reason why it has linked the ban on MTTs completely to India s FTP, instead of independently deciding it under FEMA, since the objective while prohibiting goods under the FTP may not be fulfilled by also prohibiting MTTs. This is true in the present case, where the export of PPE products was banned to preserve stocks in India during the COVID-19 pandemic; however, MTTs in PPE products do not affect domestic stocks because the goods traded are from outside of India. Therefore, Clause 2(iii) is manifestly arbitrary and violates Article 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . There is an outflow of foreign exchange during the import leg of the MTT and an inflow of foreign exchange during the export leg. Hence, MTTs affect India s foreign reserves, which the RBI has to manage and harmonise with the UOI s FTP. Therefore, the RBI cannot permit MTTs in respect of goods whose import/export has been prohibited by the UOI under the Foreign Trade Act; (iv) Export of PPE products was prohibited by the UOI in order to ensure that adequate stocks are present in India during the COVID-19 pandemic. Hence, a prohibition of MTTs in respect of PPE products is also important because when an Indian entity facilitates the trade of these products to another nation, it takes away from India s possible stock in the global market; and (v) Courts should be wary of interfering in the economic policies of the State, which should be left to expert bodies. This proposition is supported by the decisions of this Court in Shri Sitaram Sugar Co. Ltd. v. Union of India (1990) 3 SCC 223 , Prag Ice Oil Mills v. Union of India (1978) 3 SCC 459 and P.T.R. Exports (Madras) (P) Ltd. v. Union of India (1996) 5 SCC 268 . 8 Supporting the submissions of the RBI on behalf of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... MTTs which facilitate import and export between two different countries, he urges that a complete prohibition on MTTs in relation to PPE products, without a rational distinction of prohibiting their exports alone, is a constitutionally suspect infringement of his freedom to conduct his business. In order to test this claim, we will begin by analysing the precedents of this Court on the ambit of the freedom envisaged under Article 19(1)(g). The relevant freedoms and restrictions with respect to trade under the Indian Constitution are as follows: 19. Protection of certain rights regarding freedom of speech, etc.-(1) All citizens shall have the right [ ] (g) to practise any profession, or to carry on any occupation, trade or business. [ ] (6) Nothing in sub-clause (g) of the said clause shall affect the operation of any existing law in so far as it imposes, or prevent the State from making any law imposing, in the interests of the general public, reasonable restrictions on the exercise of the right conferred by the said sub-clause, and, in particular, nothing in the said sub-clause shall affect the operation of any existing law in so far as it relates to, or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Saghir Ahmed noted the following principles that govern the restrictions under Article 19(6): 13. [ ] (1) While considering the reasonableness of the restrictions, the court has to keep in mind the Directive Principles of State Policy. (2) Restrictions must not be arbitrary or of an excessive nature so as to go beyond the requirement of the interest of the general public. (3) In order to judge the reasonableness of the restrictions, no abstract or general pattern or a fixed principle can be laid down so as to be of universal application and the same will vary from case to case as also with regard to changing conditions, values of human life, social philosophy of the Constitution, prevailing conditions and the surrounding circumstances. (4) A just balance has to be struck between the restrictions imposed and the social control envisaged by clause (6) of Article 19. (5) Prevailing social values as also social needs which are intended to be satisfied by restrictions have to be borne in mind. (See: State of U.P. v. Kaushailiya [AIR 1964 SC 416 : (1964) 4 SCR 1002] .) (6) There must be a direct and proximate nexus or a reasonable connection between th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the right guaranteed under Article 19(1)(g). The phrase in the interest of the general public has come to be considered in several decisions and it has been held that it would comprise within its ambit interests like public health and morals . (emphasis supplied) 15 Various principles have been espoused by this Court to bring about a balance between the perceived interest of the state of social control over the economy, with the rights and freedoms of individuals. The appellant has cited various decisions to argue for heightened scrutiny of legislative or administrative action which places an absolute prohibition on an individual s right to conduct trade or business Mohd. Faruk v. State of Madhya Pradesh, 1969 (1) SCC 853; Cellular Operators Association of India v. Telecom Regulatory Authority of India, (2016) 7 SCC 703; Internet and Mobile Association of India v. Reserve Bank of India, 2020 SCC OnLine SC 275 . The judicial evolution of a four-pronged analysis of proportionality displaces the varying standards that were prescribed to determine reasonableness under Article 19(6). The qualitative nature of a right and the corresponding scrutiny of its violation cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... posed only by legislation. In cases where such legislation is made and the restrictions are reasonable yet, if the statute concerned permitted the administrative authorities to exercise power or discretion while imposing restrictions in individual situations, question frequently arises whether a wrong choice is made by the administrator for imposing restriction or whether the administrator has not properly balanced the fundamental right and the need for the restriction or whether he has imposed the least of the restrictions or the reasonable quantum of restriction etc. In such cases, the administrative action in our country, in our view, has to be tested on the principle of proportionality , just as it is done in the case of the main legislation. This, in fact, is being done by our courts. 17 A Constitution Bench, in Modern Dental College and Research Centre v. State of Madhya Pradesh (2016) 7 SCC 353 ( Modern Dental College ), validated the test of proportionality for determining the reasonableness of a restriction under Article 19(6). Justice A K Sikri accepted the Canadian Supreme Court s analysis of the doctrine of proportionality and held it to be applicable to constit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able and necessary in a democratic society and such an exercise involves the weighing up of competitive values, and ultimately an assessment based on proportionality i.e. balancing of different interests. (emphasis supplied) 18 The decision in K S Puttaswamy (9J) Para 325 (supra) introduced the proportionality standard in determining violations of fundamental rights, particularly the right to privacy. This doctrine was affirmed in the judgments of five out of the nine judges on the Bench. Subsequently, a Constitution Bench in K S Puttaswamy v. Union of India (2019) 1 SCC 1 ( Aadhar (5J) ) fleshed out the contours of a proportionality analysis and applied it to determine the constitutionality of the Aadhar Scheme and the Aadhar Act 2016. Justice A K Sikri conducted a comparative analysis of the types of proportionality analysis globally and elucidated a four-pronged approach that could be suitable for the Indian Constitution. This test was laid down in the following terms: 319. This discussion brings out that following four sub-components of proportionality need to be satisfied: 319.1. A measure restricting a right must have a legitimate goal (legitimate goa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nalysis, is useful in providing a structure to the arguments; (ii) in multiple jurisdictions, the provision of the right itself contains a limitation clause (such as Article 19 in the Indian Constitution) and even then, the courts have opted to use the proportionality analysis. In such circumstances, the courts use the proportionality analysis to test the application of the limitation clause; and (iii) the proportionality analysis is particularly helpful when the dispute between a right and its limitation is recast as one between a right and a measure which limits that right but only to promote a different right Alec Stone Sweet and Jud Mathews, Proportionality Balancing and Global Constitutionalism (2008-2009) 47 Columbia Journal of Transnational Law 72 . 23 On the other hand, in an illuminating article in the Yale Law Journal, Professor Vicki Jackson has pointed out that there are structural differences between various rights, due to which a proportionality analysis may not be suitable for some of them. While Professor Jackson agrees with the principle of balancing that underlies proportionality as a principle, she issues a note of caution that the protection of certain rig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e judicial function turned out to be enormous. And it was our Court that was made responsible for guiding the legal community to embrace and internalize the necessary changes. Much more was involved than simply making a technical shift from what the lawyers call a literalist to a purposive approach to interpretation. The Constitution brought about a seachange in the very nature of the judicial function [It] necessitated moving beyond an approach based on the application of purportedly inexorable rules towards accepting the duty in most matters for the judges to exercise constitutionally-controlled discretion. The transformation involved a journey from preoccupation with classification and strict adherence to formal rules to focussing on principled modes of weighing up the competing interests as triggered by the facts of the case and assessed in the light of the values of an open and democratic society (emphasis supplied) Therefore, this Court must unhesitatingly use the proportionality analysis while assessing the violation of the appellant s rights under Articles 14, 19(1)(g) and 21. 25 The present case poses another issue, which is whether an integrated proportional ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A.K. Gopalan v. State of Madras [A.K. Gopalan v. State of Madras, 1950 SCR 88 : AIR 1950 SC 27 : (1950) 51 Cri LJ 1383] that fundamental rights must be seen in watertight compartments. We have seen how this view was upset by an eleven-Judge Bench of this Court in Rustom Cavasjee Cooper v. Union of India[Rustom Cavasjee Cooper v. Union of India, (1970) 1 SCC 248] and followed in Maneka Gandhi [Maneka Gandhi v. Union of India, (1978) 1 SCC 248] . Arbitrariness in legislation is very much a facet of unreasonableness in Articles 19(2) to (6), as has been laid down in several judgments of this Court, some of which are referred to in Om Kumar [Om Kumar v. Union of India, (2001) 2 SCC 386 : 2001 SCC (L S) 1039] and, therefore, there is no reason why arbitrariness cannot be used in the aforesaid sense to strike down legislation under Article 14 as well. [ ] 87. The thread of reasonableness runs through the entire fundamental rights chapter. What is manifestly arbitrary is obviously unreasonable and being contrary to the rule of law, would violate Article 14. Further, there is an apparent contradiction in the three-Judge Bench decision in McDowell [State of A.P. v. McDowell and C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cise of their freedom of trade or to carry on a business, it is the State s burden to demonstrate the reasonableness of the restriction and that it is in the interest of the general public Sukhnandan Saran Dinesh Kumar v. Union of India, AIR 1982 SC 902; Laxmi Khandsari v. State of Uttar Pradesh, AIR 1981 SC 860 . The authority of the RBI in issuing the impugned notification is not in challenge. Additionally, the legitimacy of the aim of ensuring adequate domestic supplies of PPE products is also not in challenge. The appellant assails the suitability of the measure restricting MTTs in ensuring domestic supplies and for being overbroad in its ambit, since an Indian entity acting as an intermediary in an MTT between two different countries does not impact the availability of PPE products in India. Thus, this Court will be relying on the justification furnished by the RBI in determining the proportionality of the impugned measure (Clause 2(iii) of the 2020 MTT Guidelines). This analysis will be structured along with the following questions: (i) Is the measure in furtherance of a legitimate aim?; (ii) Is the measure suitable for achieving such an aim?; (iii) Is the measu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 3. Dealing in foreign exchange, etc.-Save as otherwise provided in this Act, rules or regulations made thereunder, or with the general or special permission of the Reserve Bank, no person shall- (a) deal in or transfer any foreign exchange or foreign security to any person not being an authorised person; (b) make any payment to or for the credit of any person resident outside India in any manner; (c) receive otherwise through an authorised person, any payment by order or on behalf of any person resident outside India in any manner; Explanation.-For the purpose of this clause, where any person in, or resident in, India receives any payment by order or on behalf of any person resident outside India through any other person (including an authorised person) without a corresponding inward remittance from any place outside India, then, such person shall be deemed to have received such payment otherwise than through an authorised person; (d) enter into any financial transaction in India as consideration for or in association with acquisition or creation or transfer of a right to acquire, any asset outside India by any person. Explanation.-For the purpose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... art B - Merchanting Trade Authorised dealers may take necessary precautions in handling merchant trade transactions or intermediary trade transactions to ensure that (a) goods involved in the transaction are permitted to be imported into India, (b) such transactions do not involve foreign exchange outlay for a period exceeding three months, and (c) all Rules, Regulations and Directions applicable to export out of India are complied with by the export leg and all Rules, Regulations and Directions applicable to import are complied with by the import leg of merchanting trade transactions. Authorised dealers are also required to ensure timely receipt of payment for the export leg of such transactions. (emphasis supplied) From the above, it is clear that an MTT could only be in respect of goods whose import was permitted into India. A similar direction was retained in the circular A.P. (DIR Series) Circular No 106 dated 19 June 2003. 33 Thereafter, the RBI issued a circular A.P. (DIR Series) Circular No. 95 dated 17 January 2014 titled Merchanting Trade Transactions , which revised the MTT guidelines in light of the recommendations of the Technical Committee on Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the very first circular, it has relied upon the goods position under India s FTP to regulate MTTs. Till 2013, MTTs were prohibited in relation to goods whose import was not allowed under the FTP. Since 2013, they have also been prohibited in relation to goods whose export is not allowed under the FTP. 36 The RBI is responsible for issuing guidelines to authorized persons under FEMA. FEMA was introduced as an Act to consolidate and amend the law relating to foreign exchange with the objective of facilitating external trade and payments and for promoting the orderly development and maintenance of foreign exchange market in India . Hence, the role of the RBI under FEMA is directed towards ensuring that India s foreign exchange market is regulated, with a view to preserving India s foreign exchange reserves. On a review of the guidelines which have been issued by the RBI in respect of MTTs since 2000, it is clear that most of them are technical in nature and seek to regulate the manner in which India s foreign reserves are traded. Consequently, the RBI has not made the policy decision to classify products for which MTTs are impermissible but has opted to rely on the decision ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y (other than India) and then import/supply the said good or material to a Company or individual in another country, which is also other than India. In short, by MTT the Indian citizen while acting as intermediary, facilitates an international trade between two different countries. It is submitted that the MTTs are very closely analogous to, and have all the elements of, export as well as import except the fact that the goods are physically not located in India. The first leg of the transaction, known as import leg, requires outlay of foreign exchange by the entity located in India carrying on the transaction, for the purpose of making payment for the goods being purchased overseas. The payment is made by the Indian Entity by drawing foreign exchange or obtaining a letter of credit in India from its banker, authorised dealer of foreign exchange (i.e. authorised dealer bank) also located in India. Thus, there is a clear nexus of the first leg of the transaction to India and the involvement of its foreign exchange reserves. It is further submitted that in a successful trade, the Indian entity so purchasing the goods overseas recovers its money in the second leg of transaction, k ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osses or increases in inventories, net exports of goods under merchanting may be negative in some cases; and (d) Merchanting entries are valued at transaction prices as agreed by the parties, not FOB. This makes it clear that while the goods involved in an MTT never enter the territory of the intermediary, they are still recorded as negative and positive exports from the territory of intermediary during the import and export leg of the MTT, which is similar to how ordinary imports and exports would be recorded. 43 This conclusion is also supported by the IMF s accompanying Balance of Payments Compilation Guide Page 184, available at accessed on 25 November 2021 , which notes: Merchanting 11.29 Merchanting transactions-that is, the purchase of goods by a resident (of the compiling economy) from a nonresident combined with the subsequent resale of the same goods to another nonresident without the goods being present in the compiling economy-should be recorded in the balance of payments as transactions in goods. This a change from the BPM5, where merchanting was to be recorded as a service. The change in treatment is in line with the change of ownership rule th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the appellant facilitating an MTT of PPE products between two countries does not impact their stock in India. In any event, the appellant has argued that a less-intrusive alternative would be to ban MTTs only for goods whose imports have been prohibited under the FTP or allow individuals to seek exemptions from the RBI in relation to goods whose import/export has been prohibited by the FTP where the RBI can assess, on a case-by-case basis, whether their MTT should also be prohibited. While these measures have been suggested on a general basis, the appellant has limited his challenge in the present case only to the prohibition of PPE products. Hence, we shall be limiting our analysis in relation to that. 47 Having considered the nature of MTTs in Section C.2, we reject the appellant s arguments for two reasons. First, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing-up of any company. Before conducting an analysis of the constitutional challenge under Articles 14 and 19, the Constitution Bench prefaced its analysis with the raison d etre and importance of the RBI as a regulatory body. Justice M Hidayatullah (as the learned Chief Justice then was) observed the following: 16. Before we consider the arguments of the two sides in detail, we wish to say a few words about the position of the Reserve Bank in the financial affairs of India and also about its place in the scheme of the law. The Reserve Bank of India was established on April 1, 1935 by the Reserve Bank of India Act, 1934. Even before the establishment of the Reserve Bank, suggestions were made that there should be a central bank in India, and the Royal Commission on Indian Currency and Finance had recommended in 1926 that the currency and credit of the country could only be put on a firm foundation, if a central bank was established. The first Bill introduced in 1927 by Sir Basil Blackett was dropped. The Indian Central Banking Inquiry Committee, however, reported in 1931 that there was a need for a central banking institution in India for securing the development of the India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n and statistics. It advises Government and other banks on financial and banking matters, and for this purpose, it keeps itself informed of the activities and monetary position of scheduled and other banks, and inspects the books and accounts of scheduled banks and advises Government after inspection whether a particular bank should be included in the Second Schedule or not. [ ..] (emphasis supplied) 52 A two-judge Bench of this Court in Peerless General Finance and Investment Co. Limited v. Reserve Bank of India (1992) 2 SCC 343 considered an alleged constitutional infringement of Article 19(1)(g) in the context of RBI s regulation of savings schemes run by Residuary Non-Banking Companies. The thrust of the impugned regulation was to regulate deposit investment schemes issued by Residuary Non-Banking Companies, in order to ensure the security of deposits made by consumers. Justice N M Kasliwal elaborated on the role of the Courts with specific reference to the regulatory powers of the RBI. The decision highlighted the importance of judicial abstinence from matters of economic policy requiring expertise: 30. Before examining the scope and effect of the impugned parag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... my, the Constitution charges the State to prevent exploitation and so the RBI would play both promotional and regulatory roles. Thus the RBI occupies place of pre-eminence to ensure monetary discipline and to regulate the economy or the credit system of the country as an expert body. It also advices the government in public finance and monetary regulations. The banks or non-banking institutions shall have to regulate their operations in accordance with, not only as per the provisions of the Act but also the rules and directions or instructions issued by the RBI in exercise of the power thereunder. Chapter 3-B expressly deals with regulations of deposit and finance received by the RNBCs. The directions, therefore, are statutory regulations. [ ] 65. No one can have fundamental right to do any unregulated business with the subscribers/depositors' money. [ .]Thus there is a reasonable nexus between the regulation and the public purpose, namely, security to the depositors' money and the right to repayment without any impediment, which undoubtedly is in the public interest. (emphasis supplied) Justice V Ramaswamy further articulated the role of judicial revie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peaking on behalf of the Court, observed that the RBI assumes a special role, compared to other statutory bodies. Its decisions are reflective of its expertise and guide the monetary policy of the country. Hence, a policy decision of the RBI warrants deference from this Court. The Court held: 84. A careful scan of the RBI Act, 1934 in its entirety would show that the operation/regulation of the credit/financial system of the country to its advantage, is a thread that connects all the provisions which confer powers upon RBI, both to determine policy and to issue directions. [ ] 189. It is contended by Shri Ashim Sood, learned Counsel for the petitioners that the impugned Circular does not have either the status of a legislation or the status of an executive action, but is only the exercise of a power conferred by statute upon a statutory body corporate. Therefore, it is his contention that the judicial rule of deference as articulated in R.K. Garg v. Union of India [R.K. Garg v. Union of India, (1981) 4 SCC 675 : 1982 SCC (Tax) 30] , Balco Employees' Union v. Union of India [Balco Employees' Union v. Union of India, (2002) 2 SCC 333] and Swiss Ribbons (P) Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tutory creatures can do, could as well be done by the executive. The power conferred upon the delegate in other statutes can be tinkered with, amended or even withdrawn. But the power conferred upon RBI under Section 3(1) of the RBI Act, 1934 to take over the management of the currency from the Central Government, cannot be taken away. The sole right to issue bank notes in India, conferred by Section 22(1) cannot also be taken away and conferred upon any other bank or authority. RBI by virtue of its authority, is a member of the Bank of International Settlements, which position cannot be taken over by the Central Government and conferred upon any other authority. Therefore, to say that it is just like any other statutory authority whose decisions cannot invite due deference, is to do violence to the scheme of the Act. In fact, all countries have Central banks/authorities, which, technically have independence from the Government of the country. To ensure such independence, a fixed tenure is granted to the Board of Governors, so that they are not bogged down by political expediencies. [ ..]Therefore, we do not accept the argument that a policy decision taken by RBI does not warrant a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is accorded to executive and Parliamentary policy. 55 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 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. 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. The Constitution Bench in Modern Dental College (supra) had remarked on the role of regulatory mechanisms in liberalized economies. Speaking for the Bench, Justice A K Sikri had observed: 87. Regulatory mechanism, or what is called regulatory economics, is the order of the day. In the last 60-70 years, economic policy of this country has travelled from laissez faire to mixed economy to the present era of liberal economy with regulatory regime. With the advent of mixed economy, there was mushrooming of the publ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate commercial actors and the democratic State that represents and protects the interests of the collective. Scholars across the world have warned against the judiciary constitutionalising an unregulated marketplace Robert Post Amanda Shanor, Adam Smith s First Amendment, 128 HARVARD LAW REVIEW FORUM 165, 167 (2015), available at . 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate Governments within the domain of their functioning under the law, in coordination with the Central Government. Unless the threshold of an economic hardship is so extreme that it leads to disruption of public order and threatens the security of India or of a part of its territory, recourse cannot be taken to such emergency powers which are to be used sparingly under the law. Recourse can be taken to them only when the conditions requisite for a valid exercise of statutory power exist under Section 5. That is absent in the present case. [ ] 40. The need for protecting labour welfare on one hand and combating a public health crisis occasioned by the pandemic on the other may require careful balances. But these balances must accord with the rule of law. A statutory provision which conditions the grant of an exemption on stipulated conditions must be scrupulously observed. It cannot be interpreted to provide a free reign for the State to eliminate provisions promoting dignity and equity in the workplace in the face of novel challenges to the State administration, unless they bear an immediate nexus to ensuring the security of the State against the gravest of threats. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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