Open Access Research Article
“FREEDOM TO DO BUSINESS AND TRADE IN INDIA: CONSTITUTIONAL PREROGATIVES AND JUDICIAL DYNAMISM”
Published Paper
Article Details
JUDICIAL
DYNAMISM”
AUTHORED BY - DHILAN SARMA
ABSTRACT
The research paper examines India's
laws pertaining to the freedom of commerce and business, as well as the part
that judicial dynamism plays in them. All Indian citizens are free to practice
any profession and to conduct any form of trade, business, or occupation,
according to Article 19 (1) (g) of the Indian Constitution. With a few notable
exceptions, Article 301 of the Indian Constitution guarantees the unimpeded
movement of trade and commerce across the nation. It limits the legislative
authority of the Union and the state in order to preserve the uninterrupted
flow of these activities. In this paper we will be discussing about this two
important provision relating to trade and business and other related
provisions. Also we will be discussing some landmark judgements relating to
trade and business laws. Also in this paper I discussed what are commercial
laws? How they govern businesses.Keywords: Constitution, trade, freedom,
business, commercial law, judiciary.
TABLE OF
CASES
M.C. Mehta v. Kamal Nath, (1997) 1
SCC 388.
State of Bombay v. R.M.D.
Chamarbaugwala, 1957 AIR 699 1957 SCR 874.
Khoday Distilleries Ltd. v. State of
Karnataka, 1995 (1) SCC 574.
Alagaapuram R. Mohanraj v. Tamil Nadu
Legislative Assembly, AIR 2016 SC 867.
Sodan Singh v. NDMC, 1989 SCR
(3)1038.
State of Gujarat v. Mirzapur Moti
Kureshi Kassab, (2005) 8 SCC 534.
Kailash Nath v. State of U.P, AIR
1957 SC 790.
Atiabari Tea Co., Ltd. vs The State
of Assam And Ors, AIR 1961 SC 232: 1961 1 SCR 809
Automobile Transport Ltd. vs State of
Rajasthan, 1962 AIR 1406.
State of Mysore vs Sanjeeviah, 1967
SCR (2) 361.
G.K. Krishna vs State of Tamil Nadu,
1975 AIR 583.
STATUTES
Constitution of India
The Indian Contract Act of 1872
The Sale of Goods Act, 1930
The Indian Partnership Act, 1932
The Limited Liability Partnership Act, 2008
Companies Act, 2013
Arbitration and Conciliation Act, 1996
TABLE OF
ABBREVIATION
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1
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&
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And
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2
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AIR
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All India Report
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3
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ORS
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Others
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4
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v.
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Versus
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5
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Vol
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Volume
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6
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SC
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Supreme Court
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7
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SCC
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Supreme Court Cases
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1. INTRODUCTION
Unrestricted movement of people, products, and
services both inside and across interstate borders is essential for preserving
economic stability, prosperity, and cohesion in a country with a two-tier
political structure. There are provisions in the Indian constitution that
safeguard the liberty of commerce and interstate trade throughout Indian
Territory. Federations must seek to eliminate as many obstacles as possible
between the states, including tariffs, non-tariff barriers, quotas, and the
like, in order to give residents the sense that they are all part of the same
nation even though they live in different regions of the nation.
Assume, for instance, that Mr. A, a citizen of
Gujarat, wishes to grow his company and market his goods in other states.
Assume for the moment that he want to work in Punjab in order to benefit from
the freedom of trade, commerce, and intercourse guaranteed by article 301 of
the constitution.
Trade has always been essential since no country or
state can provide all the goods needed. Therefore, in order to regulate,
oversee, and promote trade, laws and rules are needed. Part XIII of the Indian
Constitution provides guarantees for the freedom of trade, commerce, and
intercourse in Articles 301 through 307. Article 301 lays out the principles of
trade and commerce, whereas Articles 302 through 305 describe the trade
prohibitions. These clauses were adopted using the Australian Constitution as a
model. Article 19(1) of the Constitution guarantees some fundamental rights,
subject to the State's power to restrict how such rights may be exercised.
Article 19 (1) (g) states that every citizen of the
country is free to engage in any sort of activity, trade, or business and to
practice any profession. As stated in Article 19(6) (2), however, this right is
subject to a number of limitations. Stated otherwise, it forbids engagement in
any unlawful commerce, enterprise, job, or occupation. It also forbids the freedom
to select a job or career[1].
It is not permissible to use the fundamental right to
carry out business in an illegally occupied space to defend unlawful behaviour
or to stop a statutory authority from carrying out its mandated duties in a
legal manner.
According to Article 19 (1) (g), every person is
entitled to the freedom specified in this section, which includes the freedom
to select their own job, engage in any trade, or pursue any vocation, subject
only to any restrictions that the government may apply. Four terms are used in
Art. 19(1) (g): trade, business, vocation, and profession. Even though their
fields may overlap, each of them has unique content. They encompass all citizen
actions that result in revenue or profit and can, therefore, be subject to
regulation under Article 19 (1) (6).
1.1 AIM AND OBJECTIVE
The aim of this research paper is to analyse the
constitutional prerogatives regarding business and trade in India. The
objectives are:
1.
To study the Article 19 (1) (g).
2.
To study the Article 301.
3.
To discuss some landmark judgements.
4.
To discuss about commercial laws.
1.2 SCOPE AND LIMITATION
The scope of this research paper is limited to the
analysis of the constitutional prerogatives regarding trade and business in
India. It doesn’t go deeply with the commercial laws but rather, will just be
introducing the topic.
1.3 RESEARCH QUESTIONS
1.
Discuss broadly the constitutional prerogatives for
trade and business in India?
2.
Discuss some landmark judgements on business and trade
in India?
3.
What are commercial laws?
1.4 RESEARCH METHODOLOGY
This paper follows the analytical method of research in which I took
reference to articles, research papers, books, online data sources like Jstor,
manupatra, Hein online, SCC online etc. This paper follows the 20th Edition of
Harvard Bluebook citation style.
1.5 LITERATURE REVIEW
"Indian Constitutional Law"
by MP Jain, A trustworthy, enduring classic on
Indian constitutional law is M P Jain's Indian Constitutional Law. The eighth
edition of this book provides a thorough, rational, and approachable thematic
presentation of the intricate and multifaceted topic of constitutional law.
Students, researchers, judges, attorneys, legal academics, policy makers, and
interested parties seeking up-to-date information on constitutional
jurisprudence will find the book's in-depth viewpoints to be beneficial.
"Introduction to the
Constitution of India" by Durga Das Basu, Anyone interested in learning about the origins and development of the
Indian Constitution should read DD Basu's groundbreaking work, An Introduction
to the Constitution of India. The Constitution is introduced in this book for
general readers, legislators, journalists, statesmen, and administrative
authorities.
B. CHAPTER 2
2. FREEDOM OF TRADE AND BUSINESS
The two principal articles of the constitution
pertaining to commerce and business are Article 301 and 19 (1) (g).
Article 301. Freedom of trade,
commerce and intercourse.—Subject to the other provisions of this Part, trade, commerce and intercourse throughout
the territory of India shall be free[2].
Article 19 (1) (g). To practise any
profession, or to carry on any occupation, trade or business[3].
Since the framers of the Constitution felt that a nation should function
as a single economic entity free from barriers and limits on internal trade,
they intended to promote free trade and commerce within India. They believed
that the nation's economic integration and unification would be the primary
elements maintaining the stability and cultural cohesion of the federal polity.
To give citizens the impression that they are all a part of the same
country even though they dwell in various parts of the country, federations
must work to remove as many hurdles as they can between the states, such as
quotas, tariffs, and non-tariff barriers[4].
Freedom to trade, business, and intercourse in Article 301. It declares
that the freedom to engage in these activities should be unrestricted, subject
to certain rules under Part XIII.
Here, "freedom" refers to the unrestricted ability to transport
people, property, and other things—both tangible and intangible—across state
borders and within a state (intra-scale)[5].
2.1 WHAT DOES THIS THREE TERMS MEAN: TRADE, COMMERCE,
INTERCOURSE
Trading is the act of purchasing and selling goods with the goal of
turning a profit. Article 301 defines "trade" as an authentic,
methodical, and structured activity having a specific aim or target. For the
purposes of Article 301, "business" and "trade" are
synonymous.
Commerce, defined as the movement of products by air, sea, land,
telephone, telegraph, or any other means, requires transit or transmission, not
gain or profit, according to Article 301.
Intercourse is the movement of things from one location to another. It
covers both business-related and non-business-related transactions and
activities. It would cover travel as well as all kinds of interpersonal
interactions. Some contend, however, that Article 301's protection of free
speech does not extend to the broad meaning of sexual relations. This is due to
two factors. Firstly, when the term "intercourse" is employed in
opposition to the terms "trade and commerce," it refers to
"commercial-intercourse," not meaningless motion."[6]
The second reason is that, unlike the terms "trade" and
"commerce," "intercourse" is not listed as a subject of
legislation under the Seventh Schedule, so it cannot be taken to have the
broadest meaning when used in this context, even though Article 301 restricts
the powers assigned to the Legislature and Parliament by Articles 245 and 246.
Article 19 (1) (g) limits the right to do commerce to Indian citizens
solely. Citizens for the purposes of this Section comprise:
A legal person, a religious sect, or a company established in line with
the Companies Act. The Court has argued repeatedly that any state or group that
qualifies as a state is entitled to the fundamental rights accorded to Indian
people under Article 19 (1) (g). Any claim that someone's rights have been
infringed upon cannot be filed under this article; instead, it must be filed
under a different tort or civil law.
2.2 RESTRICTION IMPOSED UNDER ARTICLE 19 (1) (G)
The rights mentioned in Article 19 (1) (g) are subject to specific
limitations and are not unqualified. The following is an overview of the
limitations outlined in Article 19 (6):
Restrictions in the interest of the
general public:
The Article gives the State the authority to impose restrictions that
would be detrimental to the public interest. The Court may read this in several
ways.
Prescribe any professional or
technical qualifications: To practice a career, one must be
compliant with laws pertaining to professional or technical credentials.
Article 19(6) provides protection for a statute that establishes professional
qualifications. For instance, a lawyer needs to pass the Bar Council Exam and
earn a degree in order to practice law in a court of law. However, this restriction
must also pass the reasonability and objectivity tests[7].
State Monopoly: The 1951 First Constitutional Amendment inserted Article 19(6) (ii).
Article 19(6) (ii) gives the state the authority to enact laws that exclude
private citizens entirely or in part in order to establish governmental
monopolies in any trade, company, industry, or service. The state may engage in
any kind of commerce for administrative purposes, to lessen the negative
effects of the industry, or even just to increase revenue for the government
coffers.
2.3 ARTICLE 19 (1) (g): ENVIRONMENTAL CONCERNS
One of the circumstances under which the rights to enterprise protected
by Article 19 (1) (g) may be limited is the threat to the environment. However,
courts have typically ruled that the need to protect the environment must
coexist with the freedom to pursue any kind of commerce, company, or job.
Tanneries, distilleries, firms that manufacture acid, and tie and dye companies
make up the bulk of industrial sectors that cause environmental pollution. Therefore,
in the name of fundamental rights, it is forbidden to practice any profession,
trade, or company that harms the environment or people. The Supreme Court ruled
in M.C. Mehta v. Kamal Nath[8] that any disruption of the fundamental environmental components—soil,
water, and air—that are required for "life" would be dangerous to
human life and that such restrictions would be protected under Article 19(1)
(g).
2.4 ACTIVITIES WHICH ARE NOT CONSIDERED TRADE
Even though they may entail transactions, some activities are not
classified as trade under Article 301. This covers illicit pursuits such as
gaming, lotteries, and other criminal activities. In State of Bombay v. R.M.D. Chamarbaugwala (1957)[9], the Supreme Court affirmed the prohibition on these illicit practices.
It was decided in this case that no activity that is criminal in character or
that is unpleasant would be protected under Article 301.
Such acts include, but are not limited to, employing terrorists or
goondas, trafficking in women and children, and taking pornographic photos in
exchange for money. Article 301 does not encompass extra-commercial activities,
even though they may employ trade forms, techniques, and procedures.
2.5 DOCTRINE OF RES EXTRA COMMERCIUM
The court initially presented the concept of Res Extra Commercium in Khoday Distilleries v. State of Karnataka [10]. The theory spares the State from ever having to pass the reasonableness
test, allowing it to violate citizens' civil rights and maintain a stagnant
moral standard. It gave the States the authority to control citizens' private
liberties for the greater good.
The Court went on to say that trading or conducting business in alcoholic
liquors may be completely outlawed and that doing so does not constitute a
fundamental right. The selling of alcoholic liquors is thought to be outside
the bounds of rights because alcohol is so destructive and corrosive. But the
State must strike a balance between the parties' civil rights and its welfare
responsibilities.
3. ARTICLE 301 AND ARTICLE 19(1) (G):
INTERRELATIONSHIP
The term "trade" refers to the purchasing or selling of things,
whereas "commerce" refers to any modes of land, air, or sea
transportation. The transfer of products from one location to another is
referred to as intercourse. All acts that might not fall under the purview of
trade and commerce will be covered by discourse[11].
Article 19 (1) (g) of the Constitution grants citizens the right to
labour in any industry or trade. The relationship between Art.19 and 301 is not
evident. According to one reading, Article 19(1) (g) addresses individual
rights whereas Article 301 protects trade activities as a whole, independent of
an individual's right to do so. However, it is hard to stick to this opinion.
It has been decided that the Australian Constitution's Section 92, which forms
the foundation of Article 301, violates people's rights. This should also be
the situation in India. According to the Supreme Court, Article 301 only
protects freedom "in abstract and not on the individuals."
According to Article 19(1) (g), a person's right to trade is only one
aspect of freedom of trade, commerce, and intercourse. Art. 19(1) (g) is
suspended in an emergency, thus courts may apply Art. 301 to decide whether a
trade and commerce limitation is legal. In contrast, a corporation or even the
State may claim discrimination under the freedom of trade, commerce, and
intercourse granted by Art. 301. There doesn't seem to be a good explanation
for the relationship between the two articles.
In conclusion, we can say that in order to guarantee trade and commerce
freedom, both clauses are essential. Article 19(1) (g) gives people the freedom
to engage in any kind of employment, commerce, or business, whereas Article 301
concentrates on the unrestricted movement of goods across the nation. Art. 19 (1)
(g) is a fundamental right and Art 301 is a constitutional right[12].
3.1 JUDICIAL INTERPRETATION UNDER ARTICLE 19 (1) (G)
Article 19(1) (g) prohibits the term
"occupation" to apply to the office of MLA: In the matter of Tamil Nadu
Legislative Assembly v. R. Mohanraj of Alagaapuram [13], The court found that running for office in the constitutionally
established legislative bodies is not a fundamental right. Consequently, it
would be difficult to accept the argument that participation in legislative
body proceedings is guaranteed under Article 19(1) (g).
Street hawking under Article 19(1)
(g): In the case of Sodan Singh v. NDMC[14], because pavements as specified by Article 19(1) (g) of the Constitution
are principally intended for passing or re-passing, the court held that it is
unconstitutional to restrict the ability to engage in a trade or business on
such pavements. Unrestrained commercial freedom will almost certainly result in
unfavourable competition, fights between merchants and the general public, and
sometimes even within traders, which could end in chaos.
The State of Gujarat v. Mirzapur Moti
Kureshi Kassab[15] case featured a petitioner who claimed that the prohibition on cow
slaughtering was unconstitutional under Article 19(1) (g). The court maintained
the restriction, ruling that in order for a complete ban to be approved, it
must also satisfy two prerequisites: it must be in the public interest and a
lesser alternative would not be sufficient.
Taxation not restriction: The government imposes taxes on people's fundamental right to pursue any
profession, trade, or business venture. According to Kailash Nath v. State of U.P[16], no citizen has the right to operate a business without paying taxes
that the government properly levies.
3.2 ROLE OF THE JUDICIARY IN UPHOLDING FREEDOM OF
TRADE
The Indian legal system has played a crucial role in understanding and
upholding the concepts related to trade freedom. Through significant decisions,
the courts have ensured that trade and commerce flourish without unjustified
restrictions and that the spirit of the Constitution is upheld.
Judicial Interpretation: The judiciary has been essential in interpreting Part XIII's provisions over
the years, maintaining the freedom of trade, commerce, and intercourse while
striking a balance with the necessity of regulations.
Public Interest vs. Freedom of Trade: The courts have frequently been left to walk the delicate line between
what might be considered an unreasonable restriction on trade and what is in
the public interest[17].
3.3 LANDMARK JUDGEMENTS
In the case of Atiabari Tea Co. vs
the State of Assam[18], The Assam Taxation Act levied a charge on products shipped by road and
inland waterways. The petitioner was subject to this Act's taxes when they shipped
tea from Assam to Calcutta. The Supreme Court decided that the tax violated
Article 301 because it directly impeded the flow of commodities. The tax was
ruled to be unlawful. A significant case that highlighted Article 301's
significance. The court determined that unless a restriction on trade or
commerce was supported by later legislation, it would be unlawful.
In the case of Automobile Transport
Ltd. vs State of Rajasthan[19], In Rajasthan, there was an annual tax on automobiles. The government
claims that this was done to prevent unhealthy rivalry between regular buses
and omnibuses. The Supreme Court decided that because the tax was regulatory
and compensatory, it did not violate Article 301. This ruling, which concluded
that compensatory taxes or regulatory measures would not be in breach of
Article 301, further clarified the boundaries.
In the case of State of Mysore vs
Sanjeeviah[20], Produce from forests could not be moved between sunrise and sunset,
according to the Mysore Forest Act, 1900. The Supreme Court declared the act
unconstitutional, citing its restrictive rather than merely regulatory nature.
Such a restriction would have been contrary to the protection of freedom found
in Article 301. The court stressed the role of the state in this ruling,
concluding that it was legal for them to regulate trade if doing so promoted
the general welfare.
In the case of G.K. Krishna vs
State of Tamil Nadu[21], The Madras Motor Vehicles Act prompted a government notification raising
the omnibus motor vehicle tax. In order to stop the unhealthy competition
between omnibuses and regular stage carriage buses, the government justified
this increase. The tax was maintained by the Supreme Court, which found that it
was a compensating and regulatory measure. The charge was not seen as a direct
impediment to commercial freedom, but rather as a way to foster organized and
fair trade operations.
A historic ruling that went further into the interpretation of Article
301's definition of "freedom," highlighting that it meant freedom
from restrictive rather than regulatory measures.
D. CHAPTER 4
4. WHAT ARE COMMERCIAL LAWS?
Trade law is the corpus of laws that regulates transactions involving the
acquisition, sale, or exchange of goods and services. It is sometimes known as
business law or commercial law. It is applicable to both individuals and
businesses engaged in these activities.
Both public and private realms are included in this topic of law. Public
commercial law, which governs matters such as consumer protection and
interstate commerce, guarantees fair trading practices. On the other hand,
contracts pertaining to mergers and acquisitions and the transfer of
securities, such stocks and bonds, between private corporations are the focus
of private commercial law.
4.1 INDIAN COMMERCIAL LAWS
Commercial laws govern business contracts, agreements, partnerships, and
corporate entities in India. These regulations establish guidelines for
managing many facets of corporate operations, guaranteeing protection,
transparency, and equity for all parties. The main commercial laws in India,
their objectives, and how they affect businesses are listed below.
The Indian Contract Act of 1872:
This legislation defines what constitutes a legally binding contract and
establishes the basic guidelines for contracts in India[22]. Important components including offer, acceptance, consideration,
contracting capacity, and permission are covered. The Act guarantees the
enforceability of contracts in court and offers redress for those who violate
them. In order to protect the rights of all parties concerned, it also
establishes guidelines for carrying out, terminating, and amending contracts.
The Sale of Goods Act, 1930:
The rights, obligations, and liabilities of both purchasers and sellers
are outlined in this Act, which regulates the sale of products in India. It
covers a number of topics, including delivery, payment, ownership transfer,
terms and warranties, and delivery.
It offers a structure for settling conflicts resulting from broken sales
agreements, missing deliveries, or faulty merchandise.
The Indian Partnership Act, 1932:
The relationships between partners in partnership firms and partnerships
are governed by this Act. It outlines the responsibilities, rights, and
obligations of partners as well as the processes for creating, ending, and
managing partnerships. The Act encourages responsibility, fairness, and
transparency in partnerships, which builds mutual trust and cooperation.
The Limited Liability Partnership
act, 2008:
The limited liability partnership (LLP) laws in India are outlined in
this Act, which also provides guidelines for LLP formation, dissolution, and
operation. In partnerships, it guarantees accountability, equity, and openness,
encouraging collaboration and mutual trust.
Companies Act, 2013:
LLP Act, which brought a new corporate entity, the LLP, to India. It
combines the advantages of a partnership with a firm and offers partners
limited liability. The Act governs LLP creation, administration, and operation
as well as the rights and responsibilities of partners and the conversion,
merger, and winding up procedures[23].
Arbitration and Conciliation Act,
1996:
This act creates a legal framework for using conciliation and arbitration
to settle corporate conflicts. It promotes alternative conflict resolution
procedures, which are less expensive and quicker than going to court[24]. In order to promote prompt and equitable settlement of commercial
disputes, the Act governs arbitrator selection, enforcement of arbitral
rulings, and arbitration procedures.
4.2 CONCLUSION
The Indian Constitution has created a strong foundation for commerce and
business with its vision. It strikes the perfect balance between upholding
necessary restrictions and preserving individual freedom. As India develops,
these steps will be critical in defining its future economic environment. Trade
freedom is guaranteed by the Constitution, but it cannot be unrestricted. As a
result, Articles 302 through 305 impose limitations and guarantee that trade is
allowed across all states and the nation. The freedom of trade, commerce, and
intimacy guaranteed by the Constitution is upheld by these clauses taken
together. At least now there would be no unjustifiable barriers or geographical
differences to trade and business. Unchecked power could result in arbitrary
decisions. The rights outlined in Article 19 of the Constitution are likewise
covered by this. It needs to be contained within sensible bounds. Art. 19(1) (g)
of the Constitution guarantees this fundamental right for the prosperity and
well-being of every member of society. Any trade, occupation, or business that
the law judges will result in the loss of property or human life is neither
acceptable nor permitted. Any operations that endanger the public's health and
safety shall not be allowed.
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Article Information
“FREEDOM TO DO BUSINESS AND TRADE IN INDIA: CONSTITUTIONAL PREROGATIVES AND JUDICIAL DYNAMISM”
Authors: DHILAN SARMA
- Journal IJLRA
- ISSN 2582-6433
- Published 2024/05/22
- Issue 7
About Journal
International Journal for Legal Research and Analysis
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