FREEDOM OF TRADE, COMMERCE & INERCOURSE UNDER ARTICLE 301 R/W Article 19(1) g OF THE INDIAN CONSTITUTION

FREEDOM OF TRADE, COMMERCE & INERCOURSE UNDER ARTICLE 301 R/W Article 19(1) g OF THE INDIAN CONSTITUTION

Author: Rimin Cherian Reji, New Law College, Bvdu

Edited by : Naveena K , Chettinad School of Law

INTRODUCTION

Article 301, read with Article 19(1)(g) of the Indian Constitution, encompasses the concepts of “freedom of trade, commerce, and intercourse” and is critical in ensuring the free movement and exchange of goods throughout the country. Article 301 prioritizes territoriality over individual rights by ensuring unrestricted trade, commerce, and intercourse inside India’s territory. Article 19(1)(g) of the Constitution, which emphasizes individual liberty by ensuring citizens’ fundamental right to practice any profession, business, trade, or occupation, supplements this constitutional right. The aforementioned rules are critical to developing economic integration and ensuring the free flow of products and services throughout the country, ultimately cultivating a unified national market. In order to sustain the smooth flow of people, products, and services—which is essential for both economic progress and national unity—territorial freedom under Article 301 is very important. In order to promote a coherent economic environment, Article 301 tries to prohibit states from enacting limitations that can obstruct interstate commerce by concentrating on territorial issues. Article 301 deals with the territorial and structural aspects of economic integration, whereas Article 19(1)(g) focuses on personal freedom and the right of individuals to pursue economic opportunities. The interaction between these two articles illustrates a dual approach to economic freedom.

 

KEYWORDS: Article 301, Article 19(1) g, free trade, reasonable restrictions, economic unity.

Meaning, Definition & Explanation

Trade It is a very old word and the meaning of it varies accordingly. In general, it can be defined as the engagement in the business of exchange, sale, or purchase of goods.[1] It is not only the exchange of goods but something valuable in return for some other thing. The idea of value differs from person to person.

Commerce  It is the transportation of things that are meant to trade from one place to another. The commodities are of large scale.[2]

Intercourse The word has almost the same meaning and is supposed to be read along with commerce[3].

 Historical Background

The concept of freedom of trade, commerce, and intercourse was borrowed from Section 92 of the Constitution of Australia which states that trade within the Commonwealth is free.[4] When the concept comes to the Indian scenario, free trade is defined as trade within inter-state and intra-state should be without any restrictions but the parliament or any state legislature can impose reasonable restrictions on public interest.

The concept was first introduced in the drafting constitution in draft Article 274A proposed by Dr. B.R. Ambedkar, the chairman of the drafting committee. His idea was to include a new part X-A, focusing on trade, commerce, and intercourse within the territory of India, consisting of Articles 274A, 274B, 274C, 274D, and 274E. He propounded the idea of free trade with reasonable restrictions and the restrictions could be made by the parliament or any state legislature.[5] The additional restrictions introduced in Part X-A weakened the draft Article 16[6] which states the freedom of trade, commerce, and intercourse as a fundamental right.[7] A member proposed to amend the draft Article 274A but it was rejected. After various discussions and corrections, the draft Article 274 A was accepted on September 8, 1949, as the present Article 301.[8]

Comparison with other Countries

The makers of the Constitution referred to many laws that existed in different countries to codify the concept of freedom to trade, commerce, and intercourse, and the idea is adopted in a way more similar to that of the Australian Constitution. Section 92 in Chapter IV of the Australian Constitution states that trade within the Commonwealth shall be free.[9] In Atiabari Tea Co. vs. State of Assam (1961), the Court, by referring to the Australian Constitution, held that the scope of Article 301 is not limited to inter-state but extends to intra-state trade.[10]

Article 302 gives Parliament to impose restrictions related to trade, commerce, and intercourse.[11] Comparably, Australia’s Parliament has the authority to enact rules governing commerce between the States and foreign nations under Section 51(1) of the Australian Constitution.[12] The US Constitution’s Article 1, Section 8(3) gives Congress the authority to control interstate and international trade.[13]

Freedom of Trade, Commerce, and Intercourse as a Constitutional and Fundamental Right 

Article 19(1) g identifies the freedom of trade as a fundamental right, while Article 301 lists it as a constitutional right.[14] Article 19(6) and Articles 302-305 of the Constitution, respectively, grant the government the power to impose reasonable restrictions in the public interest in both situations, indicating that the right is not unqualified. Only Indian citizens are eligible to profit from Article 19(1) g, however, anyone conducting trade, commerce, and intercourse within India’s borders is entitled to rights under Article 301.[15]

Article 301 states that trade, commerce, and intercourse throughout the territory of India shall be free. It focuses mainly on the place rather than the individual interest and it sees the whole country as an economic unit.[16] The Supreme Court in Atiabari Tea Co. vs. State of Assam interpreted the Article and held that both inter-state and intra-state trade should be free in India. The “free trade” does not mean the right is absolute. The government can impose regulations and reasonable restrictions in the public interest. Regulations and restrictions imposed are not the same. Regulations do not create a burden on the free flow of trade but are imposed for the smooth functioning of trade and commerce activities. It includes compensatory taxes, like road tax, collected for building trade infrastructure.[17] Restrictions create a burden in the free flow of trade and unreasonable restrictions imposed on trade are unconstitutional. Both Parliament and State Legislature can impose restrictions in the public interest but the latter requires the previous sanction of the President for introducing such a bill in the House.[18] The imposed restrictions shall not discriminate the interests of any state or shall not favor any one state over the other.

Article 19(1) g, which guarantees the right to trade, is a fundamental right and this makes clear that the right is guaranteed by the Constitution of India only to the citizens of India. The Article focuses on individual interest rather than the place. A citizen can take part in any kind of trade of his choice but it should be legal in nature. The Article guarantees a citizen the right to choose the kind of trade that he wants to engage with. Similar to Article 301 this is also not an absolute right and the State has the power to impose reasonable restrictions under Article 19(6) in public interest.[19]

 “Free Trade”- not an absolute right

The concept of freedom of trade, commerce, and intercourse was borrowed from the Constitution of Australia.[20] Section 92 of the Constitution guarantees that the trade within the commonwealth is free but at the same time, it gives the Parliament of Australia to make laws on trade-related matters.[21] This implies that there is no such thing as absolute freedom of trade. There shall be regulations for the smooth and efficient functioning of trade without implying any burden on the flow of trade. In Atiabari Tea Co. vs. State of Assam (1961) the court held by interpreting Article 301 that trade and commerce activities shall be free from tax burdens and other impediments.[22] The interpretation was later modified in Automobile Transport (Rajasthan) Ltd vs. State of Rajasthan (1962) [23]which held that freedom under Article 301 does not imply that it is free from regulations which is for the smooth functioning of trade activities. Regulations include compensatory taxes which are in the nature of compensation for the service provided such as road taxes.[24]

The State of Mysore vs. H. Sanjeeviah (1967) decision distinguished between prohibitory and regulatory rules. Prohibitory laws stymie the free flow of trade, whereas regulatory norms help those engaged in trade, commerce, and intercourse. Restrictions that directly limit the freedom of trade, commerce, and intercourse are unconstitutional.[25] 

LEGAL PROVISIONS

Article 19(1)g

“to practice any profession, or to carry on any occupation, trade or business.”

Article 19(6)

“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, 1[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 practicing 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.]”

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.”

Article 302

“Power of Parliament to impose restrictions on trade, commerce, and intercourse.—Parliament may by law impose such restrictions on the freedom of trade, commerce or intercourse between one State and another or within any part of the territory of India as may be required in the public interest.”

Article 303

“Restrictions on the legislative powers of the Union and of the States with regard to trade and commerce.—(1) Notwithstanding anything in article 302, neither Parliament nor the Legislature of a State shall have the power to make any law giving, or authorizing the giving of, any preference to one State over another, or making, or authorizing the making of, any discrimination between one State and another, by virtue of any entry relating to trade and commerce in any of the Lists in the Seventh Schedule.

(2) Nothing in clause (1) shall prevent Parliament from making any law giving, or authorizing the giving of, any preference or making, or authorizing the making of, any discrimination if it is declared by such law that it is necessary to do so for the purpose of dealing with a situation arising from scarcity of goods in any part of the territory of India.”

Article 304

“Restrictions on trade, commerce, and intercourse among States.—Notwithstanding anything in article 301 or article 303, the Legislature of a State may by law—

(a) impose on goods imported from other States 1[or the Union territories] any tax to which similar goods manufactured or produced in that State are subject, so, however, as not to discriminate between goods so imported and goods so manufactured or produced; and

(b) impose such reasonable restrictions on the freedom of trade, commerce, or intercourse with or within that State as may be required in the public interest:

Provided that no Bill or amendment for the purposes of clause (b) shall be introduced or moved in the Legislature of a State without the previous sanction of the President.”

Section 92 of the Australian Constitution

“Trade within the Commonwealth to be free:

On the imposition of uniform duties of customs, trade, commerce, and intercourse among the States, whether by means of internal carriage or ocean navigation, shall be absolutely free.

But notwithstanding anything in this Constitution, goods imported before the imposition of uniform duties of customs into any State, or into any Colony which, whilst the goods remain therein, becomes a State, shall, on thence passing into another State within two years after the imposition of such duties, be liable to any duty chargeable on the importation of such goods into the Commonwealth, less any duty paid in respect of the goods on their importation.”

Section 51(1) of the Australian Constitution

“The Parliament shall, subject to this Constitution, have power12 to make laws for the peace, order, and good government of the Commonwealth with respect to:

trade and commerce with other countries, and among the States;”

Article 1 Section 8(3) of US Constitution

“The Congress shall have the Power To lay and collect Taxes, Duties, Imposts, and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts, and Excises shall be uniform throughout the United States;

To regulate Commerce with foreign Nations, among the several States, and with the Indian Tribes”

Important Case Laws

Atiabari Tea Co. vs. State of Assam (1961)

The Judgment highlights the scope of Article 301 of the Indian Constitution. The Court held that “freedom” in the Article also means free from taxes and other burdens but is not an absolute freedom.[26] Article 302 states that the Legislative body has the authority to make reasonable restrictions on public interest and such restrictions must have previous sanction of the President especially if it is made by any state legislature. The main point is the restrictions should be reasonable and in the public interest. The court referred to the Australian and the U.S. Constitutions and highlighted the scope of Article 301 of the Indian Constitution which is not limited to inter-state trade but extends to intra-state trade.[27] Automobile Transport (Rajasthan) Ltd vs. The State of Rajasthan (1962) modified the concept of free commerce that was initially defined in this case.[28]

Automobile Transport (Rajasthan) Ltd vs. State of Rajasthan

The decision centered on interpreting Article 301 of the Indian Constitution and changed the notion of “free trade” established in Atiabari Tea Co. vs the State of Assam (1961). Article 301 states, “Trade, commerce, and intercourse throughout the territory of India shall be free.” “Freedom” does not imply that there will be no regulations. Regulatory measures are for the smooth functioning of trade and it is for the benefit of those who engage in legal trade activities like compensatory taxes in the nature of compensation for the service provided. Restrictions imply direct barriers to taking part in trade which are unconstitutional.[29]

State of Mysore vs. H. Sanjeeviah (1967)

The Court distinguished “Prohibitory” and “Regulatory” rules. Prohibitory rules restrict or prohibit trade and commerce activities and thus put a barrier to the freedom of trade, commerce, and intercourse but Regulatory rules are for the benefit of the public. The Court ruled that the prohibitory rules are not permissible but the regulatory rules are permissible only if they are reasonable.[30]

G.K. Krishna vs. State of Tamil Nadu (1975)

The Judgment defined compensatory taxes which come under the regulatory rules of trade, commerce, and intercourse activities. It is a tax that is compensatory and cannot function as a restriction to the freedom of trade, commerce, and intercourse. The tax should be for providing service to the people, from whom the tax is collected, like for the betterment of infrastructure. It should be fair and reasonable. The Court ruled that since a compensatory tax does not restrict trade activities previous sanction of the President is not required as per Article 304b.[31]

Khyerbari Tea Co. Ltd. & Anr vs. The State of Assam (1964):

The Judgment gives a clear idea about “freedom to trade, commerce and intercourse” which is not freedom from regulations that support trade but freedom from restrictions that directly hinder the flow of trade. If it is proven that any restrictions imposed by a statute invade the fundamental right under Article 19(1) g then the burden of proving the reasonability of the statute lies with the State.[32]

CONCLUSION

The concept of freedom of trade, commerce, and intercourse was borrowed from the Constitution of Australia and the purpose of enactment was to ensure trade in a free and liberal way throughout the territory of India. It is introduced in the Constitution in two ways: first, as a fundamental right under Article 19(1) g, and second in Article 301 as a constitutional right. The fundamental right focuses on the right of a citizen to engage in trade activities of his choice. The constitutional right sees the whole country as an economic unit and enables inter-state trade as well as intra-state trade. In a “National Emergency” like situation a citizen cannot enjoy the benefits of freedom of trade as a fundamental right but as a constitutional right. The Government has the authority to impose restrictions on these rights but they should be reasonable and in the public interest.

REFERENCES

 

 

[1] (‘Trade Definition & Meaning – Merriam-Webster’, n.d.)

[2] (‘Commerce Definition & Meaning – Merriam-Webster’, n.d.)

[3] (‘Intercourse Definition & Meaning – Merriam-Webster’, n.d.)

[4] (‘Chapter IV. Finance And Trade. – Parliament of Australia’, n.d.)

[5] (‘08 Sep 1949 Archives – Constitution of India’, n.d.)

[6] (‘Draft Constitution of India 1948 Archives – Constitution of India’, n.d.)

[7] (‘Article 301: Freedom of Trade, Commerce and Intercourse. – Constitution of India’, n.d.)

[8] (‘Article 301: Freedom of Trade, Commerce and Intercourse. – Constitution of India’, n.d.)

[9] (‘Chapter IV. Finance And Trade. – Parliament of Australia’, n.d.)

[10] (‘Atiabari Tea Co., Ltd. vs The State Of Assam And Ors. on 26 September, 1960’, n.d.)

[11] (‘Article 302: Power of Parliament to Impose Restrictions on Trade, Commerce and Intercourse. – Constitution of India’, n.d.)

[12] (‘Part V – Powers of the Parliament – Parliament of Australia’, n.d.)

[13] (‘Overview of Commerce Clause | Constitution Annotated | Congress.Gov | Library of Congress’, n.d.)

[14] (‘INTER-RELATION BETWEEN ARTICLE. 301 AND ARTICLE. 19(1)(G)’, n.d.)

[15] (‘INTER-RELATION BETWEEN ARTICLE. 301 AND ARTICLE. 19(1)(G)’, n.d.)

[16] (‘Freedom of Profession, Occupation, Trade or Business under Article 19’, n.d.)

[17] (‘The Automobile Transport(Rajasthan) … vs The State Of Rajasthan And Others(And … on 9 April, 1962’, n.d.-a)

[18] (‘Freedom of Trade, Commerce and Intercourse: Articles 301 – 307 of the Indian Constitution’, n.d.-a)

[19] (‘Constitution of India: Fundamental Rights- All About Article 19 (1)’, n.d.)

[20] (‘Freedom of Trade, Commerce and Intercourse: Articles 301 – 307 of the Indian Constitution’, n.d.-b)

[21] (‘Chapter IV. Finance And Trade. – Parliament of Australia’, n.d.)

[22] (‘Atiabari Tea Co., Ltd. vs The State Of Assam And Ors. on 26 September, 1960’, n.d.)

[23] (‘Freedom of Trade, Commerce and Intercourse Article 301 – 307 | Law Column’ 2021)

[24] (‘The Automobile Transport(Rajasthan) … vs The State Of Rajasthan And Others(And … on 9 April, 1962’, n.d.-b)

[25] (‘State Of Mysore vs H. Sanjeeviah on 16 January, 1967’, n.d.)

[26] (‘Atiabari Tea Co., Ltd. vs The State Of Assam And Ors. on 26 September, 1960’, n.d.)

[27] (‘Atiabari Tea Co., Ltd. vs The State Of Assam And Ors. on 26 September, 1960’, n.d.)

[28] (‘The Automobile Transport(Rajasthan) … vs The State Of Rajasthan And Others(And … on 9 April, 1962’, n.d.-b)

[29] (‘The Automobile Transport(Rajasthan) … vs The State Of Rajasthan And Others(And … on 9 April, 1962’, n.d.-a)

[30] (‘State Of Mysore vs H. Sanjeeviah on 16 January, 1967’, n.d.)

[31] (‘G. K. Krishnan Etc. Etc vs The State Of Tamil Nadu & Anr. Etc on 12 November, 1974’, n.d.)

[32] (‘Khyerbari Tea Co. Ltd. & Anr vs The State Of Assam on 13 December, 1963’, n.d.)