Inter – State Trade and Commerce



  • Because no country or state can produce all of the items it requires, trade has always been crucial. As a result, we require regulations and laws to oversee, manage, and facilitate commerce. Articles 301 to 307 of Part XIII of the Indian Constitution guarantee freedom of trade, commerce, and intercourse.
  • Article 301 establishes the broad principles of trade and commerce, whereas Articles 302 through 305 enumerate the trade prohibitions.
  • The Australian Constitution was used to adopt these provisions.


  • Trade means buying and selling of goods for profit-making purposes.
    • The term “trade” is defined in Article 301 as “an actual, organised, and structured activity with a specific motive or objective.”
    • For the purposes of Article 301, the terms trade and business are interchangeable.
  • Commerce is defined as the transmission or movement of goods by air, water, telephone, telegraph, or any other means; under Article 301, what is required for commerce is transportation or transmission, not gain or profit.
  • Intercourse refers to the transportation of products from one location to another. It encompasses both commercial and non-commercial transactions and travels.
    • It would encompass travel as well as any type of interaction with others.
    • However, it is contended that Article 301’s guarantee of freedom does not extend to intercourse in its fullest sense.
    • This is due to two factors. To begin with, the word “intercourse” is used in conjunction with the words “trade and commerce,” therefore this word will refer to “commercial-intercourse” rather than “purposeless motion.”
    • The second reason is that, while Article 301 limits the power of the legislature and parliament (which they have under Articles 245 and 246), the word intercourse is not included as a subject of legislation under the Seventh Schedule (as the words trade and commerce are), and thus the word intercourse cannot be interpreted in the broadest sense when used here.
    • Article 301’s usage of the word “free” does not imply freedom from the country’s laws and rules. There is a clear distinction between laws that block freedom and laws that contain rules and restrictions for the smooth and easy conduct of trade activity.

Activities Which Are Not Trade

  • Article 301 of the Indian Constitution guarantees freedom of trade, commerce, and intercourse, yet there are some acts that may fall within the scope of trade, commerce, or intercourse but are not protected by the freedom given by Article 301 of the Indian Constitution.
  • Illegal activities such as lotteries and gambling are examples. In the case of State of Bombay v. R.M.D. Chamarbaugwala, the Supreme Court affirmed the prohibition on these criminal practices (1957). In this case, it was decided that all criminal or undesirable conduct would not be protected under Article 301. Clicking pornographic images for money, trafficking of women and children, hiring goondas or terrorists are all examples of such acts.
  • Despite the fact that trade forms, methods, and procedures may be used, these activities are extra-commercium (not subject to private ownership or acquisition) and hence are not covered by Article 301.

Inter-relation Between Inter-relation between Article 301 and Article 19(1)(g)

  • Part XIII’s Article 301 allows for the free movement of commerce across the country, while Part III’s Article 19(1)(g) allows for the freedom to engage in any occupation, trade, or business in the public good. Article 301 provides a constitutional right that can be exercised by anyone. Article 19(1)(g) is a basic right that can only be exercised by citizens. As a result, this part of Article 19’s limitation is dealt with under Article 301, which offers citizens and non-citizens the right to petition the court if their rights have been infringed.
  • Article 19(1)(g) restricts the right to engage in a profession or trade, whereas Article 301 is supplemented by Articles 302-307, which restrict the free movement of trade in the country. The limitations set forth in Articles 302-307, on the other hand, shall have an indirect effect and should not limit the freedom granted in Article 19(1). (g). Because it primarily concerns the movement of goods and services, Article 301 is regarded an explanatory provision to Article 19(1)(g). It also has a more limited scope than Article 19(1)(g).
  • It is also frequently claimed that Article 301 is the right applicable to all trade, whereas Article 19(1)(g) is the right applicable to individuals. This, however, is not the case. Because Article 301 is based on Section 92 of the Australian Constitution, this privilege is also applicable to individuals.
  • As a result, both of them can be said to be interconnected in various ways. In an emergency, they can also be understood as interconnected concepts. Article 19(1)(g) rights are suspended during times of emergency. At that point, the court examines the rights guaranteed by Article 301 to see if any violations have occurred.

Restrictions to Trade and Commerce

  • Article 302 empowers the Indian Parliament to establish restrictions on the freedom of trade, commerce, and intercourse within and across states across the country. These limits can only be enforced if the public’s interests are taken into account. The Parliament has sole authority to determine whether something is in the public interest or not. It can be observed in the case of Surajmal Roopchand and Co v The State of Rajasthan (1967), where limits on grain movement were imposed in the interest of the general public under the Defence of India Rules.
  • Article 303 checks the Parliament’s power, which is outlined in Article 302. According to Article 303(1), the Parliament does not have the ability to make any law that will keep one State in a better position than the other due to any entry in trade and commerce in any of the 7th Schedule lists. Clause (2), on the other hand, provides that the Parliament can do so if it is declared by law that such laws or restrictions are necessary, since there is actually a scarcity of products in some sections of the country. The Parliament has the authority to determine whether or not there is a scarcity of products in certain areas of the country.
  • Article 304(a) further states that if similar commodities are taxed in the state, the state should levy taxes on goods transported/imported from other states. It is done to ensure that items produced in the state and those imported from other states are treated equally. In the case of State of Madhya Pradesh vs. Bhailal Bhai (1964), the State of Madhya Pradesh placed taxes on imported tobacco that was not even taxed in its own state, Madhya Pradesh. The tax statement was disapproved by the Court because it was discriminatory in nature.
  • Article 304, clause (2), directs the states to put reasonable restrictions on the freedom of trade, commerce, and intercourse in the public good. However, no such Bill or Amendment shall be introduced in the State Legislature without the President’s prior consent. As a result, a state statute regulating interstate trade must meet the following criteria:
    • An approval from the President must be taken beforehand,
    • The restriction must be sensible and rational,
    • It must be in the interests of the public.
  • Article 305 of the Indian constitution protects already enacted legislation as well as legislation that creates state monopolies. Article 305 can only do so until the President issues an order that is contrary to it or to the law that has already been enacted. In Saghir Ahmad v The State of UP (1954), the Supreme Court considered whether an Act providing for a State monopoly in a specific trade or commerce would be declared to be in violation of Article 301 of the Indian Constitution.
  • The First Constitutional Amendment altered Article 19(1)(g), removing such acts from the scope of Article 19(1). (g). And now, according to the 4th Amendment to the Constitution, existing laws and future legislation for State monopoly in commerce are exempt from attack on the basis of violations of Articles 301 and 304.
  • Part XIII’s Article 307 allows the Parliament to appoint whatever authority it sees suitable to carry out the provisions of Articles 301, 302, 303, and 304. The Parliament can also bestow functions and powers on such authorities as it sees fit.

Landmark Judgements

  • Atiabari Tea Co. vs the State of Assam (1961)
  • Automobile Transport Ltd. vs State of Rajasthan (1963)
  • The state of Mysore vs Sanjeeviah (1967)
  • G.K.Krishna vs State of Tamil Nadu (1975)


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