Legal principle

The right to equality and the freedom to carry on trade cannot inhere a right to evade or avoid regulation, and courts owe nuanced deference to expert regulators where a measure bears a rational nexus to a legitimate state aim such as public health.

Court decision

The Supreme Court dismissed the appeal and affirmed the High Court's judgment dated 8 October 2020, holding that Clause 2(iii) of the 2020 MTT Guidelines was a proportionate measure, validly enacted in pursuance of a legitimate state interest, that did not disproportionately impact the appellant's fundamental rights and passes muster under Articles 14, 19(1)(g) and 21.

Facts

The appellant, managing director of a firm manufacturing and trading pharmaceuticals and PPE products (masks, gloves, sanitisers, PPE overalls, ventilators), secured an international merchanting trade transaction (MTT) contract to act as intermediary between a PPE supplier in China and a buyer in the United States. His authorised bank informed him that the Reserve Bank of India had denied permission under Clause 2(iii) of the Revised Guidelines on Merchanting Trade Transactions dated 23 January 2020, issued under Sections 10(4) and 11(1) of FEMA 1999, which permitted MTTs only for goods allowed for import/export under India's Foreign Trade Policy (FTP). Since the Union Ministry of Commerce and DGFT had banned export of PPE products through notifications dated 8 February, 25 February and 19 March 2020 amid the COVID-19 pandemic, MTT contracts in PPE were treated as impermissible. The Madhya Pradesh High Court (Indore Bench) dismissed the appellant's Article 226 writ petition on 8 October 2020, upholding Clause 2(iii), and the appellant appealed to the Supreme Court.

Key provisions

• Section 10(4), The Foreign Exchange Management Act, 1999 — Authorised person.
• Section 11(1), The Foreign Exchange Management Act, 1999 — Reserve Bank's powers to issue directions to authorised person.