Freedom of Trade under the Constitution of India
In Indian federations an attempt is made through constitutional provisions to create and preserve a national economic fabric by removing and preventing barriers to create hindrances to economic activities. It becomes very necessary to unify trade and commerce across the country to maintain the flow of the economy and to ensure optimum utilization of resources available in a utilitarian manner. For this purpose, integration of the economy in India is desired.
The Constitution of India, which is the supreme law of land, contains provisions that ensure free flow of trade and commerce in Indian territory. Article 19 (1)(g) contained in Part III and Articles 301-307 contained in Part XIII of the Constitution deal with the freedom of an individual to carry on any trade, business or occupation and intercourse within the territory of India. Although these provisions are not absolute and are under some restrictions imposed by the state.
Fundamental Right to Freedom of trade, commerce and business
The Indian Constitution through Article 19 (1)(g) under Part III gives the Fundamental Right to Citizens to carry on any profession, trade, commerce or business while being in the territory of India. Article 19 (1)(g) reads as- “All citizens shall have the right to practise any profession, trade or business”.
This Article guarantees that all citizens shall have the right to practise any profession, or carry on any occupation of their choice and do any trade or business. However, this fundamental right is not absolute and is subject to some reasonable restrictions which can be imposed by the state.
Through Article 19 (6), restrictions on the aforesaid provision can be made. Article 19 (6) provides that- “Nothing in sub clause (g) of the said clause shall affect the operation of any existing law in so far as it imposes, or prevent the State from making any law imposing, in the interests of the general public, reasonable restrictions on the exercise
of the right conferred by the said sub clause, and, in particular, nothing in the said sub clause shall affect the operation of any existing law in so far as it relates to, or prevent the State from making any law relating to-
i). the professional or technical qualifications necessary for practising any profession or carrying on any occupation, trade or business, or
ii). the carrying on by the State, or by a corporation owned or controlled by the State, of any trade, business, industry or service, whether to the exclusion, complete or partial, of citizens or otherwise”.
Restrictions made under Article 19 (6) are required to be reasonable restrictions imposed in the public interest. The words public interest used here have a wide scope ranging from public health, security, dignity of human labour and economic welfare. It says that law can lay down professional or technical qualification for practicing any profession, trade, or business. Furthermore it contains that a law can be passed for carrying on by the state or by a corporation owned or controlled by the state of any trade, business, industry or service.
Freedom of Trade, Commerce, and Intercourse under Article 301
Article 301 Freedom of trade, commerce and intercourse throughout the territory of the country. It states that subject to the other provision under Part XIII, the freedom to carry on these activities shall be granted. Article 301 states that-
“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”.
For the purpose of this section the terms freedom, trade, commerce and intercourse mean-
Freedom- For the purpose of this article freedom means the right to freedom of movement of persons, property, things that may be tangible or intangible, unobstructed by barriers within the state (intra-scale) or across the states (inter-scale).
Trade- Trade under this Article means buying and selling of goods for profit making purposes.
Commerce- For the purpose of this section, commerce means transmission or transportation or movement by air, water, telephone, telegraph, or any other medium throughout the territory of India.
Intercourse- Here means the movement of goods from one place to another. It includes both travel and transport.
The essence of aforesaid Article has been borrowed from the Constitution of Australia. The main objective behind this Article is to allow free flow of trade, commerce and intercourse to establish economic unity and equality in all parts of India which is the backbone of political freedom. It is necessary to break down the barriers between the states to create one unit and to encourage economic activities. Also, it is important for improving the standard of living of the people.
However like other provisions of Constitution Article 302 is also not subject to absolute and unqualified freedom because giving unrestrained liberty has chances to be misused.
Restrictions so implied are listed under Article 302, 303, 304, 305 and 307 which are as follows-
- Power of parliament to impose restrictions on trade, commerce and intercourse- Article 302
- Restrictions on the legislative powers of the Union and of the states with regard to trade and commerce- Article 303
- Restrictions on trade, commerce and intercourse among states- Article 304
- Saving for existing laws and and laws providing for state monopolies- Article 305
- Appointment of authority for carrying on the purpose of article 301 to 304- Article 307
Power of parliament to impose restrictions on trade, commerce and intercourse- Article 302
Article 302 of the Constitution gives power to the Parliament of India to impose restrictions on trade, commerce, and intercourse in territory of India provided that the restrictions there imposed should be reasonable and in public interest[i].
Restrictions on the legislative powers of the Union and of the states with regard to trade and commerce- Article 303
Article 303 of the Constitution keeps a check on Article 302 of the Constitution. Clause 1 of Article 303 says that neither Parliament nor Legislature of any of the states have the power to make any law that gives preference to one state over the other or does any discrimination taking Schedule 7 into consideration. Clause 2 of Article 303 says that parliament may however discriminate among states if it is declared by the law that it is necessary to do so for the purpose of dealing with a situation dealing with a situation arising from scarcity of goods in any part of India.
Restrictions on trade, commerce and intercourse among states- Article 304
Article 304 is about the state’s power to regulate trade commerce. Article 304 (a) permits the state to impose tax on goods imported from other states same as imposed on goods produced or manufactured in the respective state so as to make no discrimination among them. Article 304 (b) allows states to impose reasonable restrictions on the freedom of trade, commerce and intercourse as may be required but with prior sanction of the President.
Saving for existing laws and and laws providing for state monopolies- Article 305
Article 305 saves laws already in force and laws that provide state monopolies so far as the president may by an order direct.
Appointment of authority for carrying on the purpose of article 301 to 304- Article 307
Article 307 gives power to the Parliament to appoint such authority as it considers necessary for carrying out the purposes of Article 301 to 304. Also, the Parliament can confer such duties and power to the authority appointed thereunder as it deems f
Atiabari Tea Co. v. State of Assam[ii]
In this case Assam Taxation Act levied a tax on goods transmitted through Inland waterways and roadways. The petitioner carried on the business of transporting tea to Calcutta via Assam. According to the aforesaid Act, while passing through Assam for the purpose of transportation to Calcutta, the tea was liable to tax. The rationality of The Assam Taxation Act of 1954 was questioned on the grounds that:
- whether it is violative of Article 301 or not?
- whether it could be protected by making it fall under the ambit of Article 304 (b) or not?
The Supreme Court held that the impugned law undeniably levied a tax that is directly and immediately infringing the movement of goods and therefore it comes under the purview of Article 301. The Supreme Court further said that these taxes can only be levied after fulfilling the conditions of Article 304 (b) which states that the sanction by the President is required before any state enacts such a law. In the present case, the requirements of Article 304(b) were not fulfilled. Freedom assured under Article 301 would become non-existent or imaginary if transmission of goods is obstructed without meeting the criteria set out by Article 302 to Article 304 of the Constitution.
Automobile Transport Ltd. v. State of Rajasthan[iii]
In this case the State of Rajasthan imposed an yearly tax on motor vehicles (Rs 60 for a motor vehicle and Rs 2000 for a goods vehicle). The appellant challenged the validity of the tax imposed under Article 301 questioning whether the tax imposed was constitutionally valid .
It was held by the court that in this case the tax imposed is valid as it is just a regulatory measure or a compensatory tax for the facilitation of the smooth running of trade, commerce, and intercourse. The Court said that the taxes are the sole key for a state in order to preserve the financial health of the state at large.
The state of Mysore v. Sanjeeviah[iv]
In this case the government under the Mysore Forest Act, 1900, made a law banning the movement of forest produce between sunrise and sunset. The petitioner challenged it on the ground that it was violative of the freedom guaranteed Article 301 of the Constitution.
The Supreme Court declared the law void. It remarked that such a law was restrictive and not regulatory thus violative of the freedom provided under Article 301.
G. K. Krishnan v. State of Tamil Nadu[v]
In this case a government notification under Madras Motor Vehicles Act was issued notifying the increase in the motor vehicle tax on omnibuses from Rs 30 to Rs 100. The government while imposing this tax contended that this was done to stop the unhealthy competition between omnibuses and regular stage carriage buses and to reduce the misuse of omnibuses.Issue was that whether it was a barrier to the freedom of trade, commerce, and intercourse or not?
The Supreme Court held that the tax on carriage charges was of compensatory or regulatory nature and was not therefore violative of the freedom guaranteed under Article 301.
- Parag ice and oil mills v. Union of India, 1978 AIR 1296, 1978 SCR (3) 293
Surajmal Roopchand and Co v. State of Rajasthan, AIR 1967 Raj 104, 1967 CriLJ 809
2. AIR 1961 SC 232, 1961 1 SCR 809
3. 1962 AIR 1406, 1963 SCR (1) 491
4. 1967 AIR 1189, 1967 SCR (2) 361
5. 1975 AIR 583, 1975 SCR (2) 715
Author: Poorva G Chaturvedi,
Modi Law College, Kota