Freedom of Trade and Commerce: Explained

By | June 12, 2020
Freedom of Trade and Commerce: Explained

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Freedom of Trade and Commerce | Overview

The Freedom of Trade and Commerce stated as a Fundamental Right under the constitution of India provides an impetus to the economy by encouraging citizens to engage in professions of their choice. This article discusses in detail, the essential characteristics of Article 19(1)(g) and all its forms and interpretations.

Introduction: Freedom of Trade and Commerce

Article 19(1)(g) guarantees to every citizen the right “to practice any profession, or to carry on any occupation, trade or business”. The right is subject to provisions of clause (6) of Article 19.

The right is also not absolute and the State can impose reasonable restrictions “in the interest of general public”. The expression “in the interest of general public” is of wide importance comprehending public order, public health, public security, morality, economic welfare of the community, and the objects mentioned in Part IV of the Constitution.

Under Article 19(6), the State has also been empowered to prescribe professional or technical qualifications necessary for practising any profession or carrying on any occupation, trade or business, as well as for enabling the State to carry on any trade or business to the exclusion of citizens wholly or partially. In fact, the State is competent to nationalize any trade or to monopolize trade.

I. Profession, Occupation, Trade and Business

Article 19(1)(g) uses four expressions which have similar connotation; however, they are not identical. The expressions are “profession, occupation, trade, and business”. The object is to make the right as comprehensive and wide as possible. It covers all the avenues and methods by which a person earns his livelihood.

The term “occupation” means some activity by which a person is occupied or engaged. It would be an activity of a person undertaken as a means of livelihood or a mission of life. The word “occupation” has a wide meaning such as any regular work, job, principal activity, employment, business or a calling in which an individual is engaged. (Both of these definitions and understandings come from Supreme Court’s interpretation of the Right in the judgement of TMA Pai Foundation v. State of Karnataka[1]).

For instance, a journalist has a fundamental right to carry on her occupation under Article 19(1)(g) (Saroj Iyer v. Maharashtra M.C.I.M[2]). The term “profession” has been interpreted to mean an occupation requiring the exercise of intellectual skill, often coupled with manual skill.

“Trade” is an activity concerning the sale and purchase of goods. It is an exchange of any article either by barter or for money or for service rendered. The party paying consideration in any trade is aware of why he is paying the consideration.

“Business” means any activity involving the production, distribution, and consumption of wealth and the production and availability of material services. “Business” is a very wide term and would include anything which occupies the time, attention, and labour of a person.

It is a more comprehensive term than the word “trade”. “Business” may be of varying activities, may or may not for profit, but it necessarily includes within its ambit trade and commerce, so sometimes it may be synonymous, but its fold stretches beyond trade and commerce. It is wider than the word “trade”. While” trade” includes an activity involving sale and purchase of goods, the word “business” also includes manufacture, production or distribution of goods.

In Sodan Singh v. New Delhi Municipal Corporation Committee[3], Justice Kuldeep Singh, concurring with the majority of the Supreme Court, explained and distinguished between the terms used in Article 19(1)(g) as follows: “The guarantee under Article 19(1)(g) extends to practice any profession, or to carry on any occupation, trade or business.

Profession means an occupation carried on by a person by virtue of his personal and specialised qualifications, training, or skill. The word occupation has a wide meaning such as any regular work, profession, job, principal activity, employment, business, or a calling in which an individual is engaged. Trade, in its wider sense, includes any bargain or sale, any occupation or business carried on for subsistence or profit, it is an act of buying and selling of goods and services, it may include any business carried on with a view of profit, whether manual or mercantile.

Business is a very wide term and would include anything which occupies the time, attention and labour of a man for the purpose of profit. It may include in its form trade, profession, industrial and commercial occupations, purchase and sale of goods, and would include anything which is an occupation as distinguished from pleasure.”

The object of using four analogues and overlapping words in Article 19(1)(g) is to make the guaranteed Right as comprehensive as possible, to include all the avenues and modes, through which a man earns his livelihood.

II. Scope of Article 19(1)(g)

The right to carry on a business includes the right not to start any business. If a person chooses to start a business, they have the right to close it down at any time they like. Thus, the State cannot compel a citizen to carry on business against their will. Also, a citizen cannot insist upon the government or any other individual for doing business with them.

However, like other rights, the right to close down a business is not an absolute right and can be restricted, regulated or controlled by the state in the interests of the general public, for example, a requirement to pay compensation to workers. Thus, the right to close down a business cannot be equated or placed at par as high as a right not to start and carry on business. If a person does not start a business at all, they cannot be compelled to start it. But if they have started a business and have been carrying on a business, their right to close it down may be restricted by imposing reasonable restrictions.

The Industrial Disputes Act, 1947 requires the employer to obtain the permission of the State Government before closure; such a requirement is not unreasonable. However, refusal to give permission even where the employer is not able to pay minimum wages is not a reasonable restriction.

In Excel Wear v. Union of India[4], the validity of Sections 25-O and 25-R of the Industrial Disputes Act was challenged. Section 25-O required an employer to take prior permission from the Government for the closure of his industrial undertaking. The Government could refuse the permission to close down the business if it was satisfied that the reasons given by the employer were not adequate and sufficient or that such closure was prejudicial to the public interest.

The Supreme Court held Section 25-O as a whole and Section 25-R in so far as it related to the awarding of punishment for violation of provisions of Section 25-O as unconstitutional and invalid for violation of Article 19(1)(g). The Court said that no person had a right to carry on the business if they could not pay even the minimum wages to the workers.

Likewise, the right to discontinue one’s profession does not include any right to the advocate to abstain from appearing in the court while holding a vakalatnama.

No right to hold the particular job of one’s choice

The closure of an establishment in which a workman is for the time being employed, does not by itself infringe his fundamental right to carry on an occupation. Likewise, black-listing of contractors for entering into a contract with Government if done after proper application of mind, is not violative of Article 19(1)(g). This was held in the case of S.K Pradhan v. State of Jharkhand.[5]

III. Restriction on the right to carry on trade and business

The right to practice any profession or to carry on any business or trade guaranteed by Article 19(1)(g) may be restricted in two ways:

  1. by reasonable restrictions which might be imposed by State by law in the interests of the general public.
  2. the State may itself or through a corporation owned or controlled by it, carry on any trade or business and thus excluding, completely or partly, from carrying on such trade or business.

Reasonable Restrictions in the public interest

The restriction which may be imposed under Article 19 (6) must satisfy the following conditions:

  1. The restrictions must be imposed in the interests of the general public, and
  2. The restrictions must be reasonable.

The expression “in the interests of general public” in Article 19(6) has been held to be of wide importance comprehending public order, public health, public security, morals, economic welfare of the community and the objects mentioned in Part IV of the Constitution.

IV. Important Judgements on Freedom of Trade and Commerce

1. Mohd. Faruk v. State of Madhya Pradesh

In Mohd. Faruk v. State of Madhya Pradesh,[6] the Supreme Court observed that in considering the validity of the impugned law, imposing a prohibition on the carrying on of a business or profession, the Court must attempt an evaluation of

“its direct and immediate impact upon the Fundamental Rights of the citizens affected thereby and the larger public interest sought to be ensured in the light of the object sought to be achieved, the necessity to restrict the citizens’ freedom,

the inherent pernicious nature of the act prohibited or its capacity or tendency to be harmful to the general public, the possibility of achieving the object by imposing a less drastic restraint and in the absence of exceptional situations such as the prevalence of a state of emergency- national or local- of the necessity to maintain essential supplies or the necessity to stop activities inherently dangerous, the existence of a machinery to satisfy the administrative authority that no case for imposing the restriction is made out or that a less drastic restriction may ensure the object intended to be achieved.”

2. Narendra Kumar v. Union of India

In Narendra Kumar v. Union of India[7], it was held that restrictions may also amount to “prohibition” under certain circumstances. Thus, a law depriving a citizen of their fundamental right may be regarded as a reasonable restriction, if it prohibits him to carry out dangerous trade such as that of trade in liquor or cultivation of narcotic plants or trafficking in women.

The right of every citizen to pursue any lawful trade or business is obviously subject to such reasonable conditions as may be deemed proper by the government, essential to the safety, health, peace, decency or morals in the community. But where a restriction reaches the stage of prohibition, special care has to be taken by the court to see that that test of reasonableness is satisfied. In this case, the Non-Ferrous metal order, 1958, which completely excluded the dealers in trade of imported copper, was held valid as imposing reasonable restriction in the interest of the general public. The court said that prohibition was only a kind of restriction provided it satisfied the test of reasonableness.

The Court ruled that the reasonableness of a restriction has to be considered in the background of the facts and circumstances under which the order was made, taking into account the nature of the evil that was sought to be remedied by such law, the ratio of the harm caused to individual citizens by the proposed remedy, to the beneficial effect reasonably expected to result to the general public, and, whether the restraint caused by the law was more than what was necessary in the interests of the general public.

3. Chintaman Rao v. State of Madhya Pradesh

In Chintaman Rao v. State of Madhya Pradesh[8], the prohibition was, however, held to be unreasonable because it was in excess of the object in view and was drastic in nature. In this case, State Law prohibited the manufacture of bidis in the villages during the agricultural season. The object was to ensure an adequate supply of labour for agricultural purposes.

Even villagers who were incapable of engaging in agriculture, like old people, women and children etc. and those who supplemented their income by making bidis in their spare time, were prohibited from engaging themselves in bidi manufacture without any reason.

The court laid down the test for a “reasonable restriction” as follows:

”The phrase ‘reasonable restriction’ connotes that the limitation imposed on a person in the enjoyment of the right should not be arbitrary or of an excessive nature beyond what is required in the interest of the public. The courts are thus entitled to consider the ‘proportionality’ of these restrictions.

The word ‘reasonable’ implies intelligent care and deliberation i.e. the choice of a course which reason dictates. Legislation which arbitrarily or excessively invades the right cannot be said to contain the quality of reasonableness and unless it strikes a proper balance between the freedom guaranteed in Article 19(1)(g) and the social control permitted by Article 19(6) it must be held to be wanting in that quality.”

[1] AIR  2003 SC 355.

[2] AIR 2002 Bom.97.

[3] AIR 1989 SC 1988.

[4] AIR 1979 SC 25.

[5] 2003 NOC 15.

[6] AIR 1970 SC 93.

[7] AIR 1960 SC 430.

[8] AIR 1951 SC118.

  1. Constitutional Law; Notes, Case Laws And Study Material
  2. Constitution of India: Full text