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Akshay N. Patel v. Reserve Bank of India

Civil Appeal · 2021 INSC 828Decided 6 Dec 2021
Civil Appeal No. 6522 of 2021
Dr. Justice D.Y. Chandrachud · Justice Vikram Nath · Justice B.V. Nagarathna

Background

The appellant, a trader dealing in pharmaceutical, herbal and PPE products, had arranged an international "merchanting trade transaction" to supply PPE equipment from a Chinese seller to a US buyer during the COVID-19 pandemic. His bank refused to process the required letter of credit because RBI's 2020 Merchanting Trade Transaction Guidelines barred such trades in restricted/prohibited goods like PPE. The Madhya Pradesh High Court upheld RBI's guideline, and the trader appealed to the Supreme Court arguing it violated his fundamental rights to carry on business.

Decision Breakdown

The Supreme Court dismissed the appeal, upholding Clause 2(iii) of RBI's 2020 MTT Guidelines as a valid and proportionate restriction under the Foreign Exchange Management Act. Applying a four-part proportionality test (legitimate aim, suitability, necessity, and balancing), the Court held that restricting trade in PPE and pharmaceutical products during a public health emergency served the legitimate state interest of ensuring adequate domestic stock of essential medical supplies. The Court clarified that judicial review of executive measures does not go into "cold storage" during a pandemic, but on the facts the restriction was a reasonable and necessary measure rather than an excessive one, and did not violate Articles 14, 19(1)(g) or 21.

Lesson Learnt

Even during a public-health emergency, the government's regulatory measures remain subject to judicial scrutiny for proportionality, but a restriction that is narrowly tailored to protect public health (such as curbing export-driven trade in essential medical goods) can validly limit an individual's right to conduct business.

Official source (sci.gov.in)View Judgment (PDF)

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