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TMI Blog2021 (12) TMI 297X X X X Extracts X X X X X X X X Extracts X X X X ..... first respondent, Reserve Bank of India "RBI", in the exercise of its power under Section 10(4) and 11(1) of the Foreign Exchange Management Act 1999 "FEMA". 2 The appellant is the managing director of a firm that manufactures and trades in pharmaceuticals; herbal and skincare products; and personnel protection equipment products such as masks, gloves, sanitisers, PPE overalls, and ventilators Collectively, they are being referred to as "PPE products". The genesis of the case lies in an international MTT contract which the appellant obtained to serve as an intermediary between the sale of PPE products by a supplier in China to a buyer in the United States. In accordance with the 2020 MTT Guidelines, the appellant wrote to his 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 Ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the UOI determined the nation's FTP. 5 By its judgment dated 8 October 2020, the High Court dismissed the writ petition. In upholding the constitutionality of Clause 2(iii) of the 2020 MTT Guidelines, the High Court held that: (i) Clause 2(iii) only prohibits MTTs for goods that cannot be imported/exported into India. The provision is general in its application and does not specifically prohibit MTT in PPE products; (ii) the decision to modify the FTP to prohibit import/export of goods is a policy decision of the Ministry of Commerce and DGFT under the Foreign Trade Act; (iii) the Ministry of Commerce and DGFT prohibited the export of PPE products due to the COVID-19 pandemic, and consequently, MTTs are also 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/expo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T Guidelines without challenging the notifications amending the FTP to prohibit the export of PPE products. Clause 2(iii) is general in its application and was introduced on 23 January 2020, while the first notification prohibiting the export of PPE products was issued by the UOI on 8 February 2020; (ii) Clauses similar to Clause 2(iii) of the 2020 MTT Guidelines have existed in all previous circulars issued by the RBI to regulate MTTs. These clauses substantially stipulate that MTTs would only be allowed in respect of products whose import/export is allowed in India; (iii) MTTs are analogous to import/export transactions, except for the fact that the goods never physically enter India. 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iness persons have filed petitions in their individual capacity, to allege infringement of their fundamental right to carry on business or a profession of their choice M P Jain, Citizenship, in INDIAN CONSTITUTIONAL LAW (7th edn, Lexis Nexis, 2014). The appellant argues that the RBI and UOI's prohibition of MTTs in respect of PPE products infringes his fundamental rights and freedoms under Articles 14, 19(1)(g) and 21 of the Constitution. 11 The appellant has contended that this Court has been circumspect of legislative provisions or executive policies that impose a total prohibition on a citizen's right to conduct business. Since the appellant is engaged in 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 Constituti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the public. The word "reasonable" implies intelligent care and deliberation, that is, the choice of a course which reason dictates. Legislation which arbitrarily or excessively invades the right cannot be said to contain the quality of reasonableness and unless it strikes a proper balance between the freedom guaranteed in Article 19(1)(g) and the social control permitted by clause (6) of Article 19, it must be held to be wanting in that quality." 13 In M R F Ltd. v. Inspector Kerala Government, (1998) 8 SCC 227 a two judge Bench of this Court consolidated the body of precedent of this Court on Article 19(1)(g). Justice S 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 sam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al control. The freedom, however, as guaranteed under Article 19(1)(g) is valuable and cannot be violated on grounds which are not established to be in public interest or just on the basis that it is permissible to do so. For placing a complete prohibition on any professional activity, there must exist some strong reason for the same with a view to attain some legitimate object and in case of non-imposition of such prohibition, it may result in jeopardizing or seriously affecting the interest of the people in general. If it is not so, it would not be a reasonable restriction if placed on exercise of 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 w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the administrative order may have on the rights, liberties or interests of persons keeping in mind the purpose which they were intended to serve". The legislature and the administrative authority are, however, given an area of discretion or a range of choices but as to whether the choice made infringes the rights excessively or not is for the court. That is what is meant by proportionality." The test was made applicable to testing the validity of legislation as well as administrative action: "53. Now under Articles 19(2) to (6), restrictions on fundamental freedoms can be imposed 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 ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or freedom in question ... Third, there must be a proportionality between the effects of the measures which are responsible for limiting the Charter right or freedom, and the objective which has been identified as of "sufficient importance". The more severe the deleterious effects of a measure, the more important the objective must be if the measure is to be reasonable and demonstrably justified in a free and democratic society." 64. The exercise which, therefore, is to be taken is to find out as to whether the limitation of constitutional rights is for a purpose that is reasonable 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the "necessity" prong being considered missing Aparna Chandra, "Proportionality in India: A Bridge to Nowhere" (2020) 3(2) University of Oxford Human Rights Hub Journal 55. 22 Some academic commentators have suggested that the Courts can adopt the proportionality analysis, even when considering rights with different limitations. They state this for three reasons: (i) litigation of rights can often be open-ended, which risks the analysis becoming inconsistent across different cases. Hence, a formal balancing procedure, such as the proportionality analysis, 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 M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 2009), also described this shift from a culture of authority to a culture of justification in South Africa with the introduction of their Constitution: "The negotiated revolution which saw South Africa move from being an authoritarian, racist state to becoming a constitutional democracy led Professor Etienne Mureinik to make a memorable statement as far as the character of legal adjudication was concerned. He pointed out that we were crossing a bridge from a culture of authority to a culture of justification...The implications for the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court has also noticed that an underlying thread of reasonableness defines fundamental rights in Part III of the Constitution. A Constitution Bench in Shayara Bano v. Union of India (2017) 9 SCC 1 disavowed the view that challenges under every Article must strictly be considered in a disjoint, water-tight fashion. Justice Kurian Joseph had observed: 84. The second reason given is that a challenge under Article 14 has to be viewed separately from a challenge under Article 19, which is a reiteration of the point of view of 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 Ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtionality analysis has been adopted for assessing the limitation on rights (under Articles 14, 19(1)(g) and 21) in this case, it may not be true for all cases where such limitations occur because the alleged violation of rights may be characteristically different or the alleged limitation may affect the rights in different ways. 28 The appellant has submitted that the precedents of this Court indicate that once the citizen can demonstrate that the restriction directly or proximately interferes with the exercise 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 ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in relation to PPE products. This would entail an analysis of whether the proposed measure can further the stated objective. To understand whether the prohibition of MTTs in relation to PPE products was suitable, we must first analyse the framework under which the RBI regulates MTTs in India. 31 MTTs are regulated by the RBI under FEMA, which came into force on 1 June 2000. Under FEMA, it is the duty of the RBI to manage, regulate and supervise the foreign exchange in India. Section 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 Ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... direction in regard to making of payment or the doing or desist from doing any act relating to foreign exchange or foreign security." 32 It is in the exercise of its powers under Section 10(4) read with Section 11(1), that the RBI issued a circular A.P. (DIR Series) Circular No 9 dated 24 August 2000, which provided guidance to authorized dealers in relation to FEMA. The relevant part of the circular in relation to MTTs is extracted below: "Part 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, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applicable to exports (except Export Declaration Form) and imports (except Bill of Entry), are complied with for the export leg and import leg respectively;" 35 Subsequently, this circular was modified by the 2020 MTT Guidelines which introduced the impugned Clause 2(iii). On an analysis of the above circulars, it is clear that the RBI has never attempted to permit/prohibit MTTs into specific goods. Rather, from 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the Indian entity acts as an intermediary in an exchange between two foreign countries. 40 In its affidavit, the RBI has explained the genesis of MTTs in the following terms: "7. It is submitted that under the Merchanting Trade Transactions (hereinafter referred to as "MTT") an Indian Citizen facilitates the export of good or material from a Company or individual of an exporting country (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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... own under goods sold under merchanting as a positive export of the economy of the merchant; (c) The difference between sales over purchases of goods for merchanting is shown as the item "net exports of goods under merchanting." This item includes merchants' margins, holding gains and losses, and changes in inventories of goods under merchanting. As a result of losses 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 combin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat has often been used by this Court in evaluating claims of infringement of fundamental rights under Part III. 46 The appellant has contended that a prohibition of exports in PPE products was sufficient to achieve the objective of ensuring adequate supplies, and it was not necessary to also prohibit MTTs. Further, it is argued 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 no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctions 45Z to 45Zo of the RBI Act. 51 A Constitution Bench in Joseph Kuruvilla Vellukunnel v. Reserve Bank of India AIR 1962 SC 1371 considered a challenge to certain statutory provisions introduced in the Banking Companies Act 1949 which vested the RBI with the powers to file an application for winding-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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s maintain certain balances and the Reserve Bank can lend assistance to those banks "as a lender of the last resort". The Reserve Bank has also been given certain advisory and regulatory functions. By its position as a central bank, it acts as an agency for collecting financial information 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 Kasliw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss of the banks operating in the country and the interest of the depositors. In underdeveloped country like ours, where majority population are illiterate and poor and are not conversant with banking operations and in underdeveloped money and capital market with mixed economy, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion") recently considered a challenge to the RBI's ban of trading in cryptocurrencies. In examining this challenge, the Court detailed the regulatory importance of the RBI through a historical and textual analysis of the RBI Act. Justice V Ramasubramanian, speaking 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be greater than the source. The RBI Act, 1934 is a pre-constitutional legislation, which survived the Constitution by virtue of Article 372(1) of the Constitution. The difference between other statutory creatures and RBI is that what the statutory 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 countr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e will of the people. As held by a three-judge Bench of this Court in Internet & Mobile Association (supra), the regulations introduced by RBI are in the nature of statutory regulation and demand a similar level of deference that 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eason that we find regulatory bodies in all vital industries like, insurance, electricity and power, telecommunications, etc." 56 Regulating the economy is reflective of the compromise between the interests of private 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nner that disturbs the peace and integrity of the country. The economic hardships caused by Covid-19 certainly pose unprecedented challenges to governance. However, such challenges are to be resolved by the State 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 dig ..... X X X X Extracts X X X X X X X X Extracts X X X X
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