AKSHAY N PATEL v. RESERVE BANK OF INDIA & ANR.

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A 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 any deference. (emphasis supplied) B In further analysing the wide-ranging powers entrusted with the RBI, the Court noted that its regulatory powers would be tested against the cornerstone of proportionality: “224. It is no doubt true that RBI has very wide powers not only in view of the statutory scheme of the three enactments C indicated earlier, but also in view of the special place and role that it has in the economy of the country. These powers can be exercised both in the form of preventive as well as curative measures. But the availability of power is different from the manner and extent to which it can be exercised. D While we have recognised elsewhere in this order, the power of RBI to take a pre-emptive action, we are testing in this part of the order the proportionality of such measure, for the determination of which RBI needs to show at least some semblance of any damage suffered by its regulated entities. But there is none. When the consistent stand of RBI is that they have E not banned VCs and when the Government of India is unable to take a call despite several committees coming up with several proposals including two draft Bills, both of which advocated exactly opposite positions, it is not possible for us to hold that the impugned measure is proportionate.” F (emphasis supplied)

54Copy pinpoint54. Thus, it is settled that the RBI is a special, expert regulatory body that is insulated from the political arena. Its decisions are reflective of its expertise in guiding the economic policy and financial stability of the nation. Adverting to the facts of this case, the RBI is empowered by G FEMA to manage, regulate, and supervise the foreign exchange of India. It is trite law that courts do not interfere with the economic 59 or regulatory60 policy adopted by the government. This lack of interference 59 R K Garg v. Union of India, (1981) 4 SCC 675; Balco Employees Union v. Union of India, (2002) 2 SCC 333 60 Swiss Ribbons (P) Ltd. v. Union of India, (2019) 4 SCC 17; Ebix Singapore v. H Committee of Creditors of Educomp Solutions (P) Ltd., 2021 SCC OnLine SC 313

AKSHAY N PATEL v. RESERVE BANK OF INDIA & ANR. 277 [DR. DHANANJAYA Y CHANDRACHUD, J.]

is in deference to the democratically elected government’s wisdom, A reflecting the 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. B

55Copy pinpoint55. 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 C 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 D 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 public sector and some of the key industries like aviation, insurance, railways, electricity/power, telecommunication, etc. were monopolised by the State. Licence/ permit raj prevailed during this period with strict control of the Government even in respect of those industries where private sectors were allowed to operate. However, Indian economy experienced major policy changes in early 90s on LPG Model i.e. liberalisation, privatisation and globalisation. With the onset of reforms to liberalise the Indian economy, in July 1991, a new chapter has dawned for India. This period of economic transition has had a tremendous impact on the overall economic development of almost all major sectors of the economy.

88. When we have a liberal economy which is regulated by the market forces (that is why it is also termed as market economy), prices of goods and services in such an economy are determined H

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A in a free price system set up by supply and demand. This is often contrasted with a planned economy in which a Central Government determines the price of goods and services using a fixed price system. Market economies are also contrasted with mixed economy where the price system is not entirely free, but under some government control or heavily regulated, which is sometimes combined with State led economic planning that is not extensive enough to constitute a planned economy.

89. With the advent of globalisation and liberalisation, though the market economy is restored, at the same time, it is also felt that market economies should not exist in pure form. Some regulation of the various industries is required rather than allowing self- regulation by market forces. This intervention through regulatory bodies, particularly in pricing, is considered necessary for the welfare of the society and the economists point out that such regulatory economy does not rob the character of a market economy which still remains a market economy. Justification for regulatory bodies even in such industries managed by private sector lies in the welfare of people. Regulatory measures are felt necessary to promote basic well being for individuals in need. It is because of this reason that we find regulatory bodies in all vital industries like, insurance, electricity and power, telecommunications, etc.”

56Copy pinpoint56. 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 marketplace61. 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 61 Robert Post & Amanda Shanor, Adam Smith’s First Amendment, 128 HARVARD LAW REVIEW F ORUM 165, 167 (2015), available at <https://harvardlawreview.org/2015/03/ H adam-smiths-first-amendment/>

AKSHAY N PATEL v. RESERVE BANK OF INDIA & ANR. 279 [DR. DHANANJAYA Y CHANDRACHUD, J.]

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.

57Copy pinpoint57. 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. However, the RBI has carefully established the connection between the use of Indian foreign exchange reserves, MTTs and the availability of domestic stocks (as noted in Sections C.2 and C.3). As a developing country with a sizeable population, RBI’s policy to align MTT permissibility with the FTP restrictions on import and export of PPE products cannot be questioned. Thus, this Court is constrained to defer to the regulations imposed by D RBI and the UOI, in the interests of preserving public health in a pandemic. This deference is by no means uncritical. In fact, one of us (Justice D Y Chandrachud), in a three-judge Bench of this Court in Gujarat Mazdoor Sabha v. State of Gujarat62 had decried the State’s tenuous claim of a public health emergency to dilute welfare conditions in labour laws. This Court had stressed that balancing individual rights E against measures adopted to combat the public health crisis must continue to satisfy the test of proportionality. Justice D Y Chandrachud noted: “30. Even if we were to accept the respondent’s argument at its highest, that the pandemic has resulted in an internal disturbance, we find that the economic slowdown created by the Covid-19 F Pandemic does not qualify as an internal disturbance threatening the security of the State. The pandemic has put a severe burden on existing, particularly public health, infrastructure and has led to a sharp decline in economic activities. The Union Government has taken recourse to the provisions of the Disaster Management G Act, 2005. [Ministry of Home Affairs, Order No. 40-3/2020-DM- I(A) dated 24-3-2020.] However, it has not affected the security of India, or of a part of its territory in a manner that disturbs the peace and integrity of the country. The economic hardships caused 62 (2020) 10 SCC 459 H

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A 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 B 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. C […]

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.” Thus, 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 F measure, with adequate consideration of the nature and purpose of the extraordinary measures that are implemented to manage the pandemic. Democratic interests that secure the well-being of the masses cannot be judicially aborted to preserve the unfettered freedom to conduct business, of the few.

G D Conclusion

58Copy pinpoint58. Therefore, we find that the judgment dated 8 October 2020 of the Madhya Pradesh High Court was correct in holding that Clause 2(iii) of the 2020 MTT Guidelines was a proportionate measure in ensuring the availability of sufficient domestic stock of PPE products. The measure

AKSHAY N PATEL v. RESERVE BANK OF INDIA & ANR. 281 [DR. DHANANJAYA Y CHANDRACHUD, J.]

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 under Articles 14, 19(1)(g) and 21. For the reasons noted in this judgment, we see no need to interfere.

59Copy pinpoint59. For the above reasons, we find no merit in the appeal. The appeal accordingly stands dismissed. B

60Copy pinpoint60. Pending application(s), if any, shall stand disposed of.

Ankit Gyan Appeal dismissed.