Supreme Court upholds Measures adopted by RBI to implement a Ban imposed by Govt on Export of PPE Kits in view of COVID-19 pandemic [Read Order]

The Supreme Court upheld the measures adopted by RBI to implement a ban imposed by the Government on export of PPE kits in view of COVID-19 pandemic.

The appellant, Akshay N Patel 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 ventilators5. 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.

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 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 appellant’s right to carry on business under Article 19(1)(g) and the right to life and livelihood under Article 21 of the Constitution.

The three judge bench of Justice Dr Dhananjaya Y Chandrachud, Justice Vikram Nath and Justice B V Nagarathna 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 appears to have 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 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.

“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 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,” the court said.

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