An Indian merchant exporter wants to export from China to USA ( third country shipment ) of an item declared “Restricted” by DGFT in India. For example, refer recent past prohibition/restrictions on N95 masks etc. He has approached his banker to issue LC in favour of Chinese shipper but banker refused to issue LC saying that said item restricted by DGFT. The shipper has filed writ petition in High court stating that Constitution of India guarantees fundamental right in respect of freedom of trade and commerce.Let us see important observations of Hon’ble High Court in this case as follows ;
The RBI circular
RBI/2019-20/152 dated 23.01.2020 Clause 2 ( iii) says ;
“ The Merchanting Trade
Transactions 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”
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 neither specific either to petitioner's business, nor to a
particular products
The Merchanting Trade
Transactions involves foreign exchange and issuance of a Letter of Credit in
India from a banker as well as Reserve Bank of India through its authorised
dealer in foreign exchange. The banker as well as Reserve Bank of India are
located in India and therefore, there is a clear nexus between the transactions
and the involvement of foreign exchange reserves of Reserve Bank of India.
The Foreign Trade Policy is
in existence framed by Government of India in exercise of powers conferred
under the Foreign Trade (Development & Regulation) Act, 1992 and
notifications have been issued by Government of India keeping in view the
powers conferred by Section 3 of the Act of 1992. Its purely a policy decision
taken by Government of India in larger public interest as there is an acute
shortage of the goods which are the subject matter of the present writ
petition.
Thus, in short the statutory
provisions, rules, circulars and notifications issued from time to time permits
Merchanting Trade Transactions only in respect of goods that are permitted for
export and import under the prevailing Foreign Trade Policy of India and the
question of complete ban in respect of freedom of trade and commerce as argued
by exporter does not arise.
The Government of India is
the best judge either to ban export of the aforesaid items or to place the
aforesaid items under the restricted categories. It is true that the
Constitution of India guarantees fundamental right in respect of freedom of
trade and commerce, however, the same can be subjected to reasonable
restrictions as the same has been done in the present case.
The restriction imposed by
Government of India and Reserve Bank of India amounts to reasonable restriction
and in no way violating the freedom of trade and commerce.
MR. AKSHAY N. PATEL VERSUS
RESERVE BANK OF INDIA AND ANOTHER, MADHYA PRADESH HIGH COURT, order pronounced
on 08.10.2020
Take away for readers :
Import and export restrictions imposed by Central Govt through DGFT is
applicable to third country shipments also. No one can argue that goods are not
touching the land mass of India and Shipper is bringing Forex into India by way
of profit etc.,
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