Freedom of Trade and Commerce under the Indian Constitution

Introduction
The fundamental freedom of trade and commerce has been enshrined under Article 19(1) (g) of
the Constitution of India. It guarantees all the citizens the right to freedom of trade and
commerce. But the guaranteed right is not absolute. The Constitution allows the appropriate
government, to put reasonable restrictions on the exercise of this right in the interest of the
general public. 1 The Freedom under Article 19(l) (g) is granted only to the citizen of India, and it
cannot be claimed by non-citizen. A company registered under Indian Companies Act, 1956 was
not a citizen for purpose of Article 19(l) (g).2 Restriction on trade may amount even to
prohibition in certain circumstances. State has the power to prohibit the trades which are
immoral or illegal or injurious to public health and welfare of the public 3

The freedom of trade and commerce guaranteed in Article 19(l) (g) differs from that under
Article 301of the Constitution. Article 19(1) (g) is a fundamental right and enforceable directly
in the Supreme Court under Article 32, while Article 301 is Constitutional Right. Article 19(6) of
the Constitution allows reasonable restrictions on the exercise of the right in the interest of the
general public.

The power of the state to regulate private enterprises and business in the public interest is
significant. The public policy has been the measuring rod in this matter, e.g., according to
Gambling Act, gambling is not to be business or profession. 4

1
Indian Constitution (First Amendment) Act, 1951.
2
The Freedom under Article 19(l)(g) is granted only to the citizen of India, and it can not be claimed by non-citizen.
A company registered under Indian Companies Act, 1956 was not a citizen for purpose of Article 19(l)(g).
3
Cooverjee v. Excise Commr. Ajmer, AIR 1954 SC 220; (1954) SCJ 246; Bharat Sevashram Sangh v. State
ofGujarat, (1986) 4 SCC 51
4
0 State ofBombay v. R.M.D. Chamar Baugwala, AIR 1957 SC 699.

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Freedom of Trade and Commerce and Constitutional provisions

Article 19(l) (g) of the Constitution guarantees to all citizens the right to practice any profession
or to carry on any occupation, trade or business. Under Article 19(6), however the state is not
prevented from making a law imposing, in the interests of the general public, reasonable
restrictions on the exercise of the fundamental right.5 Or

(i) A law relating to professional or technical qualifications necessary for practicing a

profession.
(ii) (ii) A law relating to the carrying on by the State, or by any corporation owned or
controlled by it, of any trade, business, industry or service, whether to the exclusion,
complete or partial, of citizens or otherwise.

The reasonableness of a restriction has to be determined in an objective manner and the

standpoint of the interest of the general public and not from the point of view of the person
upon whom the restrictions are imposed or upon abstract consideration. 6

The freedom under Article 19(1) (g) is available only to citizens of India, and it cannot be
claimed by non-citizens. Doubts were raised as to whether a corporation doing business can
claim protection of Article 19(l) (g) of the Constitution. There was however, a conflict of
opinion among the High Courts of India. Punjab and Allahabad 7 High Courts held that the
corporations are citizens for the purpose of every article of the constitution including Article
19(l) (g). A contrary view was taken by Rajasthan8 and Calcutta9 High Courts. The Supreme
Court held that a company registered under the Indian Companies Act, 1956 was not a citizen
for purpose of Article 19(1) (g) of the Constitution.10

5
Fundamental Right guaranteed under Article 19(l)(g) and (6).
6
Pathumma v. State of Kerala, AIR 1978 SC 771 (Para 14
7
Amrit Bazar Partika Ltd., v. Board of High School and Intermediate Education, AIR 1955 All. 595
8
Krishangarh Mills v. State ofRajasthan, AIR 1963 Raj. 363
9
T.D. Mumar & Bros. v. Iron and Steel Controller, AIR 1961 Col. 258.
10
State Trading Corporation oflndia v. CTO, AIR 1963 SC 1811; (1963) 3 SCR 792.

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Who can Impose Restrictions?

The authority who are competent to make law and included in the definition of state in Article 12
may impose restrictions The Amendment of 1951 exempt the State from that condition or
reasonableness, by laying down that the carrying on of any trade, business, industry or survive by
the State would not be questionable on the ground that it is an infringement of the right
guaranteed by Article 19(1 )(g) even though by law the state excludes the citizens, wholly or
partially from the trade or business entered upon by the State. 11 Hence, the state shall now be
free either to complete with any private traders or to create a monopoly in favour of itself
without being called upon to justify its action in court as „reasonable‟. 12

Restriction on freedom of trade and commerce may include Prohibition The restriction on the
freedom of trade and commerce may also include total prohibition or ban. Earlier the cases of
Supreme Court were not clear but now it is settled that the restriction may also mean total
prohibition or ban. In the Narendra Kumar‟s Case the Supreme Court reviewed all the earlier
cases and held13 that “There can be no doubt that Constitution Makers intended the word
„restriction‟ to include „prohibition‟ also. The contention that a law prohibiting the exercise of a
fundamental right is in case saved and cannot therefore be accepted. It is, however, for the Court
to decide whether in a given case, having regard to the nature of the subject matter and the
circumstances of the case, restriction may reasonably include total prohibition or ban”.

To reconcile the right of butchers to carry on their trade and restriction imposed on killing of
animals through several state laws, the Supreme Court adopted an economic approach viz.
killing of useful animals could be prohibited but not of those animals who have economically
useless to the society. The Court has emphasized that a prohibition imposed on the fundamental
right to carry on trade and commerce cannot be regarded as reasonable if it is imposed not in the

11
Shiva Rao, B., The Framing ofIndia‟s Constitution : A Study, 1969, p. 228.
12
Narayanappa v. State ofMysore, AIR 1960 SC 1073 (1078)
13
Chintaman Rao v. State ofM.P. (1950) SCR 759; Union ofIndia v. Bhanmal, (1960)2 SCR 627 Narendra Kumar
v. Union ofIndia (1960) 2 SCR 375

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interest of general public, but merely to respect the sensible and sentiments of a section of the
people. 14

Test of reasonableness

It is the effect of the law and of the action upon the rights of citizen which attract the jurisdiction
of the Court to grant relief. 15 The true test is whether the effect of the impugned action to take
away or abridge fundamental rights.16

The Constitution ofIndia does not lay down any test for reasonable restriction. It is left to the
judiciary to scrutinize the law which proposes to impose a reasonable restriction and to see
whether the restriction is really reasonable. The function of the judiciary in this field is very
important and delicate, as it has to appraise the success which the citizens have to make and the
benefit which the society is to derive by the imposition of these restrictions. In V.G. Rao‟s
Case, 17Shastri, C.J, laid down a general test of reasonableness has been repeatedly cited with
approval in subsequent cases. He pointed out that the test of reasonableness which whenever
prescribed, should be applied to each and individual statute impugned and no abstract standard
could be prescribed as applicable in all cases. He further observed that the nature of right alleged
to have been infringed, the underlying purpose of the restriction imposed, the extent and urgency
of the evil sought to be remedied thereby, the disproportion of the imposition and the prevailing
condition at the time, should all enter into the judicial verdict, moreover, the court requires that a
restriction to be reasonable should be reasonable from the substantive as well as the procedural
standpoint.18

In Katashailiya’s Case19 Subba Rao, C.J. elaborated that “the reasonableness of restriction
depends upon the values of life in society the circumstances obtaining at a particular point of
time the degree and urgency of the evil sought to be controlled.”

14
M.H. Quareshi v. Bihar, AIR 1958 SC 731; Abdut Hakim v. Bihar AIR 1961 SC 448; Md. Faruk v. M.P. AIR
1970 SC 93 , Agarwal S.K., Standard ofReasonableness in Article 19 ofthe Constitution, SCJ, Vol. xviii, 1955, p.
196.
15
R.C. Cooper v. Union ofIndia, AIR 1970 SC 564
16
Benett Colemans Co. v. Union ofIndia, AIR 1973 SC 106; Maneka Gandhi v. Union ofIndia, AIR 1978 SC 597 at
635.
17
State ofMadras v. V.G. Rao, AIR 1952 SC 196, 200.
18
Dwarka Parsad v. State ofU.P., AIR 1954 SC 224
19
State of U.P. v. Katashiliya, AIR 1964 AC 416

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Relationship of Article 19(l) (g) and Article 301

Article 19(l) (g) and Art. 301 are equally granted right and operate in different and separate
fields. Some of the High Courts20 and Supreme Court have tried to answer these questions.
Article 19(1) (g) is a fundamental right, and enforceable directly in the Supreme Court under
Article 32,21 while Article 301 is constitutional right;22 secondly, during the operation of
proclamation of emergency Article 19 (l)(g) stands suspended while Article 301 remains
unaffected.512 Thirdly, while Article 19(1 )(g) is confined to a citizen, as distinct from an Allen
or even corporation; the language of Article 301 is quite general; fourthly, while restriction of the
right under Article 19(l)(g) must be reasonable whether imposed by Parliament or by a State
Legislature, it need not be so as regards freedom under Article 301 if the restriction is imposed
by a State law passes through the procedure laid down in the provision of the Article 304(b).

Conclusion

The courts judgements have justified and rationalized the state regulation of private trade. The
operation of the judicial process in this area has been considerably affected by the concept of
welfare state. It would seem to be clear that private economic interest do not enjoy much of a
substantive protection under the Constitution. The Court also, as we have seen, has been
reluctant to interfere with the legislative and administrative action in this area except to insist on
some procedural safeguards to aggrieved party. Thus judicial review is only marginal. 23

In modern State, it has been realized that freedoms cannot be guaranteed in absolute terms and
cannot be uncontrolled. For an organised society it is a pre-condition for civil liberties. While
absolute power results in tyranny, absolute freedoms lead to ruin and anarchy. Justice Patanjali
Shastri observed that:

20
State ofBombay v. R.M.D.C., AIR 1957 SC 699.
21
Phool Chand Gupta v. Regional Transport Authority (1985) 4 SCC 190
22
Ram Chandra v. Orissa, AIR 1956 SC; 298, 305; Manik Chand Pal v. Union ofIndia (1984) 3 SCC 65; AIR 1984
SC 1249
23

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“Man as a rational being desires to do many things, but in a civil society his desires have to be
controlled, regulated and reconciled with the exercise of similar desires by other
individuals.”24

The limitations imposed by Articles 19(2) to 19(6) on the freedoms guaranteed by Articles 19(1)
(a) to (g) of the Constitution serve two fold purposes, viz.,

i) They specify that these freedoms are not absolute but are subject to regulations;
ii) ii) They put a limitation on the power of a legislature to restrict these freedoms. A
legislature cannot restrict these freedoms beyond the requirements of Articles 19(2) to
19(6).25

The Court had already enunciated the important principle, holding that with regard to the
equality clause the presumption may be general but its application to art 19(l) (g) is very limited,
limited in the sense that once the invasion of right is ex-facie proved, the state must prove that its
case comes under some exception to Article 19(l) (g).26 The restriction must be harmonious to
public need, a legitimate balance between the guaranteed freedoms and the permissible social
control must be there. While formulating standard of reasonableness should be there at the same
time the beliefs of life in society and current political ethics should be taken in account.

24
A.K. Gopalan v. State of Madras, AIR 1950 SC 27
25
https://shodhganga.inflibnet.ac.in/bitstream/10603/102441/13/13_chapter-6.pdf
26
Khyerbari tea Co. v. State ofAssam, AIR 1963 SC 925

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