Case: Akshay N Patel Vs. Reserve Bank of India &amp; Anr

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 India as on the date of shipment. All rules, regulations and directions applicable to exports (except Export Declaration Form) and imports (except Bill of Entry) shall be complied with for the export leg and import leg respectively.At the relevant time, the export of PPE products had been banned by the second respondent, the Union Ministry of Commerce and Industry and the Directorate General of Foreign Trade (Ministry of Commerce and DGFT), through successive notifications dated 8 February 2020, 25 February 2020 and 19 March 2020, due to the ongoing COVID-19 pandemic. Therefore, MTT contracts concerning PPE products were considered impermissible under Clause 2(iii) of the 2020 MTT Guidelines.3. Upon receiving the communication from his bank, the appellant wrote an email to the Ministry of Commerce and DGFT on 12 May 2020, stating that under his MTT contract, there was no actual export of PPE products from India. The appellant claimed that he was only serving as an intermediary in a trade between two other nations. Hence, he requested the Ministry of Commerce and DGFT to issue a notification/clarification/circular exempting MTT contracts in relation to PPE products from the requirements of Clause 2(iii). However, the appellant received no response. The appellant then filed a writ petition (Writ Petition No 7902/2020) under Article 226 before the Madhya Pradesh High Court. The writ petition set up a case that Clause 2(iii) of the 2020 MTT Guidelines is unconstitutional since it violates the appellants right to carry on business under Article 19(1)(g) and the right to life and livelihood under Article 21 of the Constitution.4. In its reply before the Madhya Pradesh High Court, the RBI stated that the Union of India (UOI) had prohibited the export of PPE products from India by issuing multiple notifications under Section 3 of the Foreign Trade (Development & Regulation) Act 1992 (Foreign Trade Act), through which it amended the Foreign Trade Policy 2015- 2020 (FTP). Hence, in accordance with Clause 2(iii) of the 2020 MTT Guidelines, MTT transactions concerning PPE products were also prohibited since they allowed Indian individuals to assist others in diverting PPE products away from India in the global market. Further, it was clarified that Clause 2(iii) was of a general nature, and the RBI had no jurisdiction to exempt products from its application, since only the UOI determined the nations 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 Indias foreign exchange. Hence, its regulation needs to be in conformity with the FTP set by the UOI.

Reasoning: 10. The appellant is a citizen of India. He is also the Managing Director of Anzalp Herbal Products Private Limited, a corporate body which inter alia, engages in MTTs. In State Trading Corporation v. Commercial Tax Officer AIR 1963 SC 1811 , a nine-judge Bench of this Court has settled the question that corporations are not considered as citizens under the Constitution. A corporation cannot claim an infringement of rights under Article 19(1)(g), as this fundamental right is only available to citizens and not to juristic persons. Over the years, shareholders and business 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)].In Chintaman Rao v. State of Madhya Pradesh AIR 1951 SC 118 , a Constitution Bench noted the importance of striking the right balance between social control and individual freedom. Justice K C Das Gupta articulated the limitation under Article 19(6) in the following terms:6. The phrase reasonable restriction connotes that the limitation imposed on a person in enjoyment of the right should not be arbitrary or of an excessive nature, beyond what is required in the interests 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):(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 same will vary from case to case as also with regard to changing conditions, values of human life, social philosophy of the Constitution, prevailing conditions and the surrounding circumstances.(4) A just balance has to be struck between the restrictions imposed and the social control envisaged by clause (6) of Article 19.(5) Prevailing social values as also social needs which are intended to be satisfied by restrictions have to be borne in mind. (See: State of U.P. v. Kaushailiya [AIR 1964 SC 416  : (1964) 4 SCR 1002 ] .)(6) There must be a direct and proximate nexus or a reasonable connection between the restrictions imposed and the object sought to be achieved. If there is a direct nexus between the restrictions and the object of the Act, then a strong presumption in favour of the constitutionality of the Act will naturally arise. (See: Kavalappara Kottarathil Kochuni v. States of Madras and Kerala [AIR 1960 SC 1080  : (1960) 3 SCR 887 ] ; O.K. Ghosh v. E.X. Joseph [AIR 1963 SC 812  : 1963 Supp (1) SCR 789 : (1962) 2 LLJ 615 ] .)The decision of a nine-judge Bench of this Court in K S Puttaswamy v. Union of India (2017) 10 SCC 1,  para 325 (K S Puttaswamy (9J)) prescribed a proportionality analysis for determining violations of fundamental rights under Part III. A proportionality analysis can adequately consider the constitutionality of prohibitive measures on commercial activities. Therefore, we will structure the judgment on an analysis of the proportionality of RBIs decision to prohibit MTTs in PPE products, in order to determine its constitutionality.17. A Constitution Bench, in Modern Dental College and Research Centre v. State of Madhya Pradesh (2016) 7 SCC 353  (Modern Dental College), validated the test of proportionality for determining the reasonableness of a restriction under Article 19(6). Justice A K Sikri accepted the Canadian Supreme Courts analysis of the doctrine of proportionality and held it to be applicable to constitutional rights in India. The Court noted:63. In this direction, the next question that arises is as to what criteria is to be adopted for a proper balance between the two facets viz. the rights and limitations imposed upon it by a statute. Here comes the concept of proportionality, which is a proper criterion. To put it pithily, when a law limits a constitutional right, such a limitation is constitutional if it is proportional. The law imposing restrictions will be treated as proportional if it is meant to achieve a proper purpose, and if the measures taken to achieve such a purpose are rationally connected to the purpose, and such measures are necessary. This essence of doctrine of proportionality is beautifully captured by Dickson, C.J. of Canada in R. v. Oakes [R.v. Oakes, (1986) 1 SCR 103 (Can SC)] , in the following words (at p. 138):To establish that a limit is reasonable and demonstrably justified in a free and democratic society, two central criteria must be satisfied. First, the objective, which the measures, responsible for a limit on a Charter right or freedom are designed to serve, must be of sufficient importance to warrant overriding a constitutional protected right or freedom … Second … the party invoking Section 1 must show that the means chosen are reasonable and demonstrably justified. This involves a form of proportionality test… Although the nature of the proportionality test will vary depending on the circumstances, in each case courts will be required to balance the interests of society with those of individuals and groups. There are, in my view, three important components of a proportionality test. First, the measures adopted must be … rationally connected to the objective. Second, the means … should impair as little as possible the right 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.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 the contours of a proportionality analysis and applied it to determine the constitutionality of the Aadhar Scheme and the Aadhar Act 2016. Justice A K Sikri conducted a comparative analysis of the types of proportionality analysis globally and elucidated a four-pronged approach that could be suitable for the Indian Constitution. This test was laid down in the following terms:319. …This discussion brings out that following four sub- components of proportionality need to be satisfied:319.1. A measure restricting a right must have a legitimate goal (legitimate goal stage).319.2. It must be a suitable means of furthering this goal (suitability or rational connection stage).319.3. There must not be any less restrictive but equally effective alternative (necessity stage).319.4. The measure must not have a disproportionate impact on the right holder (balancing stage).19. This Court has thus propounded a four-pronged test of proportionality. This can now be utilised to determine the constitutionality of Clause 2(iii) of the 2020 MTT Guidelines.As noted in Aadhar (5J) (supra), the use of proportionality analysis reflects the shift from a culture of authority to a culture of justification (Para 1276) where State action is best held accountable for its violation of fundamental rights. Justice Albie Sachs, a judge of the Constitutional Court of South Africa, in his memoir The Strange Alchemy of Life and Law [Albie Sachs, The Strange Alchemy of Life and Law (Oxford University Press, 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 from preoccupation with classification and strict adherence to formal rules to focussing on principled modes of weighing up the competing interests as triggered by the facts of the case and assessed in the light of the values of an open and democratic society…Therefore, this Court must unhesitatingly use the proportionality analysis while assessing the violation of the appellants rights under Articles 14, 19(1)(g) and 21.It is a settled principle that fundamental rights in Part III are not understood in silos, but as an inter-related enunciation of rights and freedoms that uphold the basic rubric of human rights. An eleven-judge Bench of this Court in Rustom Cavasji Cooper v. Union of India (1970) 1 SCC 248,  speaking through Justice J C Shah, had observed:52…it is necessary to bear in mind the enunciation of the guarantee of fundamental rights which has taken different forms. In some cases it is an express declaration of a guaranteed right: Articles 29(1), 30(1), 26, 25 and 32; in others to ensure protection of individual rights they take specific forms of restrictions on State action — legislative or executive — Articles 14, 15, 16, 20, 21, 22(1), 27 and 28; in some others, it takes the form of a positive declaration and simultaneously enunciates the restriction thereon: Articles 19(1) and 19(2) to (6); in some cases, it arises as an implication from the delimitation of the authority of the State, e.g. Articles 31(1) and 31(2); in still others, it takes the form of a general prohibition against the State as well as others: Articles 17, 23 and 24. The enunciation of rights either express or by implication does not follow a uniform pattern. But one thread runs through them: they seek to protect the rights of the individual or groups of individuals against infringement of those rights within specific limits. Part III of the Constitution weaves a pattern of guarantees on the texture of basic human rights. The guarantees delimit the protection of those rights in their allotted fields: they do not attempt to enunciate distinct rights.26. Conceptualising constitutional rights is incomplete without analysing their corresponding limitations. This 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 India, (2001) 2 SCC 386  : 2001 SCC (L&S) 1039] and, therefore, there is no reason why arbitrariness cannot be used in the aforesaid sense to strike down legislation under Article 14 as well.87. The thread of reasonableness runs through the entire fundamental rights chapter. What is manifestly arbitrary is obviously unreasonable and being contrary to the rule of law, would violate Article 14. Further, there is an apparent contradiction in the three-Judge Bench decision in McDowell [State of A.P. v. McDowell and Co., (1996) 3 SCC 709]  when it is said that a constitutional challenge can succeed on the ground that a law is disproportionate, excessive or unreasonable, yet such challenge would fail on the very ground of the law being unreasonable, unnecessary or unwarranted. The arbitrariness doctrine when applied to legislation obviously would not involve the latter challenge but would only involve a law being disproportionate, excessive or otherwise being manifestly unreasonable. All the aforesaid grounds, therefore, do not seek to differentiate between State action in its various forms, all of which are interdicted if they fall foul of the fundamental rights guaranteed to persons and citizens in Part III of the Constitution.27. The Constitution Bench in Aadhar (5J) (supra) also undertook an integrated proportionality analysis to determine the proportionality of the States interference in the rights to privacy, dignity, choice and access to basic entitlements (Para 1277). Hence, the Court can adopt an integrated proportionality analysis where the limitation on each of the rights is common and affects them in a similar way. In the present case, the limitation (i.e., Clause 2(iii) of the 2020 MTT Guidelines) is what affects the appellants rights under Articles 14, 19(1)(g) and 21. Further, the appellant has submitted that the limitation is arbitrary, not a reasonable restriction and violative of his liberty because the RBI has, without application of mind, linked the prohibition on import/export of a product to the prohibition of MTTs in relation to that product. It is thus clear that the appellants submissions for challenging the constitutionality of Clause 2(iii) rest on similar grounds, and hence an integrated proportionality analysis can be adopted. However, this Court must issue a note of caution – while an integrated proportionality 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.29. This prong of the test entails an evaluation of the legitimacy of an aim that purportedly violates a fundamental right. The measure must be designated for a proper purpose, i.e., a legitimate goal. Five of the judges in the nine-judge Bench decision in K S Puttaswamy (9J) (supra) adopted the threshold of a legitimate state interest as the first prong for assessing proportionality. This state interest must also be of sufficient importance to override a constitutional right or freedom (Aadhar (5J) (supra), paras 321-322). In this case, the ban on exports, imports and MTTs of PPE products is to ensure the availability of adequate domestic supplies during a global health pandemic. Adequate stocks of PPE products are critical for the healthcare system to combat the COVID-19 pandemic. The States aim of ensuring supplies is in furtherance of the right to life under Article 21 and the Directive Principles of State Policy mandating the States improvement of public health as a primary duty under Article 47. The appellant has not challenged the legitimacy of this aim of ensuring adequate PPE in India. The RBI, at the time of filing its affidavit on 30 January 2021, had elaborated on the state of the pandemic in the country and the necessity of ensuring adequate stock of PPE products. The executives aim to ensure sufficient availability of PPE products, considering the ongoing pandemic, is legitimate. Accordingly, we hold that the impugned measure is enacted in furtherance of a legitimate aim that is of sufficient importance to override a constitutional right of freedom to conduct business.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 Indias 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.From the above extract, the following salient features of MTTs emerge: (i) the original supplier and ultimate buyer of the goods are foreign entities, with the Indian entity acting as an intermediary between them; (ii) the goods do not enter the territory of India while shifting hands between the supplier and the buyer; (iii) Indian foreign reserves are implicated when payment is remitted outside India when the Indian entity initially pays the supplier for the goods; and (iv) foreign exchange is remitted to India when the Indian entity receives the payment from the buyer of the goods.It is evident that the role of an intermediary in MTTs was earlier only considered as providing a service. However, this has now evolved, where the intermediary is considered to be the owner of the goods during their transit from the supplier to the buyer. Hence, goods under MTTs are recorded as negative and positive exports from the intermediarys resident country, even when they never physically enter their territory.44. Therefore, the international opinion favours the position taken by the respondents that MTTs are analogous to traditional imports and exports. Therefore, it was suitable for the RBI to link the permissibility of MTT in goods to the permissibility of their import/export under the FTP. As noted earlier, the appellant has not challenged notifications prohibiting the export of PPE products under the FTP. Hence, the prohibition of their MTT under Clause 2(iii) of the 2020 MTT Guidelines is also considered suitable.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 appellants arguments for two reasons. First, while MTTs in PPE products may not directly reduce the stock of these products in India, it still does contribute to their trade between two foreign nations. In doing so, it directly reduces the available quantity of PPE products in the international market, which may have been bought by India, if so required. As such, MTTs contribute to reducing the available stock of PPE products in the international market that India could have acquired. Second, the UOIs policy to ban the export of PPE products reflects their stance on the products non-tradability during the COVID-19 pandemic. It highlights a clear policy choice under which Indian entities shall not be allowed to export these products outside of India, in all probability to the highest buyers across the globe who may end up hoarding the global supply. Hence, banning MTTs in PPE products was critical in ensuring that Indian foreign exchange reserves are not utilized to facilitate the hoarding of PPE products with wealthier nations. A mere ban on exports would not regulate the utilisation of Indian foreign exchange. Hence, in order to keep Indias policy position consistent across the board, the prohibition of MTTs in respect of PPE products was necessary and the only alternative of ensuring the realisation of legitimate State interest.48. The fourth and final prong of the proportionality analysis involves the crucial task of conducting a balancing exercise. The Court is called upon to legitimise the social importance of the limitation on a constitutional right (Aadhar (5J) (supra), paras 335 and 369). A measure that fails to justify its existence on this prong is considered to have a disproportionate impact on the right-holder (Ibid).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 detre 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 firm foundation, if a central bank was established. The first Bill introduced in 1927 by Sir Basil Blackett was dropped. The Indian Central Banking Inquiry Committee, however, reported in 1931 that there was a need for a central banking institution in India for securing the development of the Indian banking and credit system on a sound and proper basis. The Committee pointed out that some of the Provincial Committees had also suggested the establishment of the Reserve Bank. The Committee ended by saying:We accordingly consider it to be a matter of supreme importance from the point of view of the development of banking facilities in India, and of her economic advancement generally, that a Central or Reserve Bank should be created at the earliest possible date. The establishment of such a bank would by mobilization of the banking and currency reserves of India in one hand tend to increase the Vol. of credit available for trade, industry and agriculture and to mitigate the evils of fluctuating and high charges for the use of such credit caused by seasonal stringency. (Vol. I, Part I. Chap. XXII, para 605)The White Paper on Indian Constitutional Reforms also recommended the establishment of a Reserve Bank free from political influence. As a result of these findings, when a fresh Bill was introduced by Sir George Schuster on September 8, 1933 it was accepted and received the assent of the Governor-General on March 6, 1934.17. The functions of the Reserve Bank were generally indicated in the preamble as the regulation of the issue of the Bank notes and the keeping of the reserves with a view to securing monetary stability in India and generally to operate the currency and credit system of the country to its advantage. But to enable the Reserve Bank to function in this manner, it had to be given other powers, so that it may function effectively as a central bank. To this end, the Reserve Bank was given the right to hold the cash balances of important commercial banks, a right to transact Government business in India which was also its obligation, and to enter into agreements with State Governments to transact their business.18. But the most important function of the Reserve Bank is to regulate the banking system generally. The Reserve Bank has been described as a Bankers Bank. Under the Reserve Bank of India Act, the scheduled banks 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. […..]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 RBIs 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 Kasliwal elaborated on the role of the Courts with specific reference to the regulatory powers of the RBI. The decision highlighted the importance of judicial abstinence from matters of economic policy requiring expertise:30. Before examining the scope and effect of the impugned paragraphs (6) and (12) of the directions of 1987, it is also important to note that Reserve Bank of India which is bankers bank is a creature of statute. It has large contingent of expert advice relating to matters affecting the economy of the entire country and nobody can doubt the bona fides of the Reserve Bank in issuing the impugned directions of 1987. The Reserve Bank plays an important role in the economy and financial affairs of India and one of its important functions is to regulate the banking system in the country. It is the duty of the Reserve Bank to safeguard the economy and financial stability of the country [….]31. The function of the Court is to see that lawful authority is not abused but not to appropriate to itself the task entrusted to that authority. It is well settled that a public body invested with statutory powers must take care not to exceed or abuse its power. It must keep within the limits of the authority committed to it. It must act in good faith and it must act reasonably. Courts are not to interfere with economic policy which is the function of experts. It is not the function of the courts to sit in judgment over matters of economic policy and it must necessarily be left to the expert bodies. In such matters even experts can seriously and doubtlessly differ. Courts cannot be expected to decide them without even the aid of experts.In his concurring opinion, Justice V Ramaswamy noted the statutory importance of the RBI and held that directions validly issued by the RBI are in the nature of statutory regulations:51. This Court in Joseph Kuruvilla Vellukunnel v. Reserve Bank of India [1962 Supp 3 SCR 632 : AIR 1962 SC 1371  : (1962) 32 Comp Cas 514] held that the RBI is a bankers bank and lender of the last resort. Its objective is to ensure monetary stability in India and to operate and regulate the credit system of the country. It has, therefore, to perform a delicate balance between the need to preserve and maintain the credit structure of the country by strengthening the rule as well as apparent creditworthiness 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 regulation and the public purpose, namely, security to the depositors money and the right to repayment without any impediment, which undoubtedly is in the public interest.Justice V Ramaswamy further articulated the role of judicial review in matters of economic legislation and the democratic necessity of judicial abstinence:68. It is well settled that the court is not a tribunal from the crudities and inequities of complicated experimental economic legislation. The discretion in evolving economic measures, rests with the policy makers and not with the judiciary. Indian social order is beset with social and economic inequalities and of status, and in our socialist secular democratic Republic, inequality is an anathema to social and economic justice. The Constitution of India charges the State to reduce inequalities and ensure decent standard of life and economic equality. The Act assigns the power to the RBI to regulate monetary system and the experimentation of the economic legislation, can best be left to the executive unless it is found to be unrealistic or manifestly arbitrary. Even if a law is found wanting on trial, it is better that its defects should be demonstrated and removed than that the law should be aborted by judicial fiat. Such an assertion of judicial power deflects responsibilities from those on whom a democratic society ultimately rests. The Court has to see whether the scheme, measure or regulation adopted is relevant or appropriate to the power exercised by the authority. Prejudice to the interest of depositors is a relevant factor. Mismanagement or inability to pay the accrued liabilities are evils sought to be remedied. The directions are designed to preserve the right of the depositors and the ability of RNBC to pay back the contracted liability. It is also intended to prevent mismanagement of the deposits collected from vulnerable social segments who have no knowledge of banking operations or credit system and repose unfounded blind faith on the company with fond hope of its ability to pay back the contracted amount. Thus the directions maintain the thrift for saving and streamline and strengthen the monetary operations of RNBCs.54. 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 FEMA to manage, regulate, and supervise the foreign exchange of India. It is trite law that courts do not interfere with the economic R K Garg v. Union of India, (1981) 4 SCC 675 ; Balco Employees Union v. Union of India, (2002) 2 SCC 333  or regulatory Swiss Ribbons (P) Ltd. v. Union of India, (2019) 4 SCC 17 ; Ebix Singapore v. Committee of Creditors of Educomp Solutions (P) Ltd., 2021 SCC OnLine SC 313 policy adopted by the government. This lack of interference is in deference to the democratically elected governments wisdom, 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.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 States 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 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 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.57. 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, RBIs 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 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 Gujarat (2020) 10 SCC 459  had decried the States tenuous claim of a public health emergency to dilute welfare conditions in labour laws. This Court had stressed that balancing individual rights 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 respondents argument at its highest, that the pandemic has resulted in an internal disturbance, we find that the economic slowdown created by the Covid-19 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 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 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 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 Courts 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 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.