AKSHAY N PATEL versus RESERVE BANK OF INDIA & ANR.

Citation: [2021] 13 S.C.R. 231 · Decided: 06-12-2021 · Supreme Court of India · Bench: D.Y. CHANDRACHUD · Disposal: Dismissed

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Judgment (excerpt)

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AKSHAY N PATEL
v.
RESERVE BANK OF INDIA & ANR.
(Civil Appeal No. 6522 of 2021)
DECEMBER 06, 2021
[DR. DHANANJAYA Y CHANDRACHUD,
VIKRAM NATH AND B.V. NAGARATHNA, JJ.]
Constitution of India – Art. 14, 19(1)(g) and 21 – Foreign
Exchange Management Act, 1999 – ss. 10(4), 11(1) – Merchanting
Trade Transactions Guildelines, 2020 – Clause 2(iii) –
Proportionality of clause 2(iii) – The appellant is the managing
director of a firm that manufactures and trades in pharmaceuticals
and personnel protection equipment products such as masks, gloves,
sanitizers, PPE overalls, and ventilators etc. –  Appellant obtained
International Merchanting Trade Transaction (MTT) contract to
serve as an intermediary between the sale of PPE products by a
supplier in China to a buyer in the United States – Appellant
requested its bank for required documents to execute the MTT
contract – The bank informed the appellant that RBI had denied
permission for his MTT contract, on the basis of clause 2(iii) of the
2020 MTT Guidelines – At the relevant time, the export of PPE
products were banned by the Government through various
notifications due to ongoing COVID-19 pandemic – Therefore, MTT
contracts concerning PPE were considered impermissible – Writ
petition by the appellant – Appellant challenged the Constitutionality
of clause 2(iii) of 2020 MTT guidelines – High Court upheld the
constitutionality of clause 2(iii) – On appeal, held: The UOI’s 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 –  A mere ban on exports would not regulate the utilisation
of Indian foreign exchange – Hence, in order to keep India’s policy
[2021] 13 S.C.R.231
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SUPREME COURT REPORTS
[2021] 13 S.C.R.
position consistent across the board, the prohibition of MTTs in
respect of PPE products was necessary and the only alternative of
ensuring the realisation of legitimate State interest – The High Court
was correct in holding that clause 2(iii) of the 2020 MTT Guidelines
was a proportionate measure ensuring the availability of sufficient
domestic stock of PPE products – 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 u/Art.14, 19(1)(g) and 21.
Dismissing the appeal, the Court
HELD: 1. 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. 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 be a sole function
of the degree of restriction. Every violation of rights, irrespective
of the degree of the infraction, must be evaluated through a
uniform principle that promotes a culture of justification. The
decision of a nine-judge Bench of this Court in K S Puttaswamy
v. Union of India (“K S Puttaswamy (9J)”) prescribed a
proportionality analysis for determining violations of fundamental
rights under Part III. A proportionality analysis can adequately
consider the constitutionality of prohibitive measures on
commercial activities. Therefore, this Court will structure the
judgment on an analysis of the proportionality of RBI’s decision
to prohibit MTTs in PPE products, in order to determine its
constitutionality. [Para 15][248-G; 249-A-C]
2. 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 ques

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