'Purely Policy Matter', MP HC Rules That Export Ban On N95 Masks/PPE Kits Doesn't Amount To Violation Of Fundamental Right Of Trade/Business [Read Order]

The Madhya Pradesh High Court on Thursday (08th October) ruled that ban of export in respect of KN95 Masks, Personal Protective Equipment Kits and other products does not amount to violation of fundamental right guaranteed under Article 19(1)(g) of the Constitution of India.The Bench of Justice S. C. Sharma and Justice Shailendra Shukla further ruled that its a purely policy matter and the Government of India does have the power to frame Trade Policy in exercise of powers conferred under the Foreign Trade (Development & Regulation) Act, 1992.The Bench also ruled that the Circular issued by Reserve Bank of India dated 23/01/2020 in respect of Merchanting Trade Transactions is not at all violative of Article 19(1)(g) of the Constitution of India and the Government does have the power to regulate import / export and to regulate Merchanting Trade Transaction Contracts.Facts of the caseThe petitioner before this Court stated that he is a businessman engaged in the business of manufacturing and trading of Pharmaceutical, Herbal, Skin Care and Personal Protective Equipment (PPE) products.The petitioner under the Merchanting Trade Transactions (MTT) wishes to supply KN95 masks manufactured in China to a buyer in United States of America.[NOTE: The Reserve Bank of India in exercise of powers conferred under Section 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 has framed guidelines on Merchanting Trade Transactions]The petitioner further stated that he had negotiated the supply of PPE Kits and other goods with a buyer of United States of America and he had placed an order for purchase of KN95 Masks from a manufacturing Company based in China, meaning thereby, the petitioner wanted to purchase the goods from China and to supply them to United States of America (the goods wouldn't have touched Indian Soil) by exploiting the system of Merchanting Trade Transactions which involves an Indian Bank as well as Reserve Bank of India.Importantly, the petitioner stated that under the Merchanting Trade Transactions, an Indian Citizen facilitates the export of any goods or material from a Company or individual of an export country (other than India) and then import / supply of the said goods to a Company in another country, which is also other than India.Thus, in short the petitioner's contention was that the goods are neither manufactured in India nor imported to India at any point of time, however, the profit comes to India in various currencies.Further, it was the case of the petitioner that he was aggrieved by Clause 2(iii) of Circular No.20 of revised guidelines dated 23/01/2020.This clause restricts the trading of goods which are not permitted to be imported / exported under the prevailing Foreign Trade Policy.A similar policy is in force on account of various circulars issued by Reserve Bank of India dated 24/08/2000, 19/06/2003, 17/01/2014 and 28/03/2014.Court's AnalysisThe Court observed that the import and export and framing of a policy on the subject of import and export is purely within the domain of Central Government and the Central Government in exercise of its power conferred under Section 3 of the Foreign Trade (Development & Regulation) Act, 1992 read with paragraph No.1.02 and 2.01 of the Foreign Trade Policy 2015-2020 has issued various amendments from time to time and its a purely policy decision to allow import / export or of particular goods keeping in view the policy framed by Central Government.The Government of India issued a notification dated 28/07/2020 and later on 25/08/2020 and that N-95 / FFP2 Mask or its equivalent have been kept under the "restricted" category.The Court noted that, since, the Reserve Bank of India has to adhere to the policy decision taken by the Government of India, so in that backdrop, the Reserve Bank of India issued executive instructions / circular dated 23/01/2020.The Court noted that once import of a particular product is barred or export of a particular product is barred, the question of permitting the Merchanting Trade Transactions in respect of those particular products does not arise.The Court also remarked,"The conditions imposed by Government of India as well as Reserve Bank of India are of general application to every Indian entity wishing to carry on Merchanting Trade Transactions. The conditions are not specific either to petitioner's business, or to particular products such as Ventilators or Medical Personal Protective Equipment."The Court, while citing the Apex Court ruling in the case of Kasinka Trading v. Union of India (1995) 1 SCC 274, concluded that the Courts normally do not interfere with the State policy particularly in financial matters unless fraud or lack of bona-fides is alleged and established.In this regard, the Court further cited the case of P.T.R. Exports (Madras) (P) Ltd. v. Union of India (1996) 5 SCC 268 and State of Haryana v. Mahabir Vegetable Oils (P) Ltd. (2011) 3 SCC 778.Further, the Court said,"Thus, in short the...

'Purely Policy Matter', MP HC Rules That Export Ban On N95 Masks/PPE Kits Doesn't Amount To Violation Of Fundamental Right Of Trade/Business [Read Order]

Sparsh Upadhyay

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