Summary
The Court upheld the RBI guideline linking merchanting trade transactions to goods permitted for import or export under India’s Foreign Trade Policy, as applied to PPE during the COVID-19 pandemic. Though the goods moved between foreign countries, the transactions implicated Indian foreign exchange and could reduce global supplies available to India. Applying the four stages of proportionality, the Court found the restriction justified by public health. Regulatory expertise warranted considered deference while remaining subject to judicial review.
Issues
- Whether prohibiting merchanting transactions in PPE by reference to Foreign Trade Policy restrictions violated Articles 14, 19(1)(g) and 21.
- Whether an integrated proportionality analysis justified the restriction despite the goods never entering India.
Provisions considered
- Articles 14, 19(1)(g), 19(6) and 21, Constitution of IndiaThe Court tested the common restriction through an integrated proportionality analysis and found no unconstitutional infringement. (¶¶ 11, 19, 20, 27, 58)
- Article 47, Constitution of IndiaEnsuring adequate PPE during a pandemic furthered the State’s public-health duty and the right to life. (¶ 29)
- Sections 10(4) and 11(1), Foreign Exchange Management Act, 1999These provisions empowered RBI directions regulating authorised persons’ foreign-exchange dealings, including merchanting transactions. (¶¶ 31, 32, 36)
- Section 3(2), Foreign Trade (Development and Regulation) Act, 1992The Union’s power to restrict imports and exports supplied the policy framework to which RBI linked merchanting permissibility. (¶¶ 37, 38)
- Clause 2(iii), Revised Guidelines on Merchanting Trade Transactions, 23 January 2020The requirement that merchanting concern goods permitted under the prevailing Foreign Trade Policy was upheld as applied to PPE. (¶¶ 2, 35, 44, 47, 58)
Held
- Proportionality requires a legitimate goal, suitability, necessity through absence of an equally effective less restrictive alternative, and balancing of the impact on the right. Integrated review was appropriate because the challenges to the common measure rested on similar grounds; it is not necessarily appropriate where different rights are affected differently. (¶¶ 15, 18, 19, 27, 28)
- Ensuring adequate PPE supplies during the pandemic was a legitimate objective of sufficient importance. Merchanting transactions involved foreign-exchange outflows and inflows, and were analogous to imports and exports despite goods remaining abroad. Linking their permissibility to Foreign Trade Policy was suitable. (¶¶ 29, 31, 40, 42, 43, 44)
- The necessity analysis was confined to PPE. Merchanting could reduce supplies in the international market that India might acquire and use Indian foreign exchange to facilitate their concentration elsewhere. An export ban alone would not address that use of foreign exchange; the proposed alternatives did not displace the need for the restriction. (¶¶ 46, 47)
- RBI’s expertise and statutory role warranted considered deference, while its measures remained subject to proportionality and judicial review. The pandemic did not suspend constitutional scrutiny. On the demonstrated links between foreign exchange, merchanting and available PPE supplies, the restriction appropriately balanced commercial freedom against public health. (¶¶ 53, 54, 55, 56, 57, 58)
Result
Appeal dismissed. The High Court’s judgment upholding Clause 2(iii) as a proportionate restriction in relation to PPE was affirmed; pending applications disposed of.