Shikhar Sharma

In this piece, the author analyses the judicially-created distinction between hobby and profit motive seen in the Indian Supreme Court’s Article 19(1)(g) jurisprudence. The author argues that relaxing this distinction and instead adopting a more rights-based approach will be beneficial to individuals. It will also be truer to the spirit of Article 19(1)(g).

Introduction

The landmark IAMAI v. Reserve Bank of India case (“Crypto Case”) has been widely hailed as a laud-worthy judgement, specifically credited for being one of the few judgements wherein the Supreme Court has actually applied the proportionality principle under Article 19 to the facts of the case. The Crypto Case has long-standing implications on a lot of blockchain/cryptocurrency issues (for instance, whether cryptocurrency is a security, foreign exchange, currency, etc.). However, it carries wider constitutional law implications of continuing relevance too, with one implication being the exclusion of hobbyists from the ambit of Article 19(1)(g), which grants citizens the freedom to engage in trade, occupation, or profession of their choice as a matter of right.

This article critically examines the impact and implications of the on the development of Article 19(g) jurisprudence insofar as it first, establishes a false dichotomy between hobby and profit motive, and second, seems to limit the scope of ‘trade, occupation, and profession’ to those activities that serve as the primary source of income for an individual. It criticizes the move on consequentialist reasoning grounds, as well as for not being in line with the jurisprudence developed on Article 19(1)(g)

What The Cryptocurrency Judgement says

The case concerned the validity of the RBI circular dated April 6, 2018 through which the RBI prohibited banks and other entities regulated by it (for instance, NBFCs/Payment System Providers) from providing services to individuals and exchanges dealing with Virtual Currencies (‘VCs’). This move was challenged on multiple counts – excessive delegation, disproportionate measure, lack of competence, etc. However, for the purposes of this article, I shall be analysing the contention raised by the petitioners as to their infringement of the right to freedom of trade and profession under Article 19(1)(g), and the Court’s response to it.

The contention raised was fairly simple – the measure has an indirect, yet disastrous effect, on VC exchanges, because of which they have had to stop operating. This stoppage of their work, the argument goes, does not effectively allow an individual to transact in cryptocurrency. While, admittedly, individuals may still be able to buy and sell cryptocurrencies without the existence of VC exchanges, they will not be able to convert them into fiat currency. This conversion facility and the ease that Indian VC exchanges had provided allowed for a large share of Indians to engage in Cryptocurrency Transactions. Therefore, Article 19(1)(g) has been infringed insofar as there has been a huge effective barrier to individuals because of the circular.

The Court’s response to this was interesting. It demarcated the petitioners into three sets- hobbyists, individual traders, and owners of VC exchanges. The Court held that individuals who are transacting in Cryptocurrency merely out of hobby are not included within the ambit of Article 19(1)(g). The Court went on to hold a test to delineate a hobbyist from other individuals. The test was whether there exists a ‘profit motive’ behind an individual undertaking an act.^[1] Therefore, the Court held that only those who have made the purchase and sale of VCs as their ‘occupation’ or ‘trade’ can be protected under Article 19(1)(g). The Court doesn’t delve into any further explanation or definition of the second class of individual traders and why they (and not the hobbyists) do possess the requisite profit motive.

The Court’s stance conveys that the ‘profit motive’ is irreconcilable and cannot co-exist with a hobby. This is intuitively not true. There may at any moment exist a set of individuals who are buying and selling VCs as a hobby as well as with a profit motive in mind. In fact, they may have VC as a hobby because there’s a profit motive attached to it. Clearly, if ‘profit motive’ is to be the test in determining whether an individual is protected within Article 19(1)(g), then hobbyists also should count in it. To be sure, this article’s analysis does not apply to all hobbyists. Rather, it applies to those hobbyists who pursue their hobby with a profit motive attached to it.

The implicit rationale behind the Court’s reasoning seems to be that only those who have made VCs their primary avenue of earning money or profit should be considered within the ambit of Article 19(1)(g). In other words, the Court is making a distinction between people who are trading in cryptocurrencies passively (or part-time) and people who trade to derive a substantial chunk of their income. When extrapolated, this means that people who engage in any activity (which has an element of profit) passively or (part-time) would be excluded. What makes this rationale problematic is that the Court has not set up any threshold of ‘profit motive’ or ‘profit’ to clearly lay down when an individual is a hobbyist and when they are not. This uncertainty muddles the ambit of Article 19(1)(g). In the next section, I will examine the feasibility of such a distinction by looking at case law on Article 19(1)(g).

Article 19(1)(g): Are part-time activities included in its scope?

At the outset, the Court erred in taking ‘profit motive’ as the only consideration while evaluating the ambit of Article 19(1)(g). As per T.M.A. Pai Foundation v. State of Karnataka, (2002) 8 SCC 481 (”Pai”), the four words in Article 19(1)(g) (’occupation, trade, profession, or business’) have been given a more expansive meaning. Occupation, for instance, would mean any calling or means of livelihood or mission in life, irrespective of profit. Pai was in the context of the right to freedom of occupation of educational institutions, for whom profit was not considered to be the primary aim.

There have been no cases that have clearly explained or expounded on what the ‘profit motive’ means. In Pai, the Court had also affirmed Sodan Singh v. New Delhi Municipal Committee (“Sodan Singh’), which had clarified the scope of the words under Article 19(1)(g). As per the case, while ‘profession’ means any occupation carried on by a citizen on account of his personal qualifications, training or skill, the term ‘occupation’ would have a wider meaning as encompassing any regular work, activity, or calling in which a citizen is engaged. However, the term with the widest ambit remains ‘trade’, as it 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’.[2] Similarly, even the term ‘businesses’ has been held to include anything ‘which occupies the time, attention and labour of a man for the purpose of profit’. The Court went to hold that the object behind choosing these four analogous words was to include all avenues and modes through which a man may earn his livelihood. Hence, it can include any activity except the illegitimate ones (for instance gambling, etc.)

Sodan Singh remains good law, with no further developments on jurisprudence. Clearly, the Courts have sent an inclusive and expansive definition of the ambit of Article 19(1)(g). Individuals selling and buying cryptocurrency would be counted within this ambit. While the term ‘occupation’ according to the Court has a requirement of regular work, and hence may not apply to hobbyists, the term ‘trader’ applies to them squarely- they do engage in the bargain or sale of VCs, seemingly for profit. It must be noted that the Apex Court had held for VCs to be intangible commodities in the Crypto Case, and on that basis, a fair claim can be made for them being goods.[3] Nowhere has the Court brought in a requirement of regularity or primacy of income as a consideration for an activity being a trade. Even intuitively, the consequence of excluding part-time/passive avenues of earning money/profit from the ambit of Article 19(1)(g) is stifling. To illustrate, take into consideration someone who moonlights as a gig delivery worker for an added avenue of income. The Court’s reasoning would mean denying that person has a right to do his secondary gig and the State can, at any moment, stop him from doing so. The sheer harm that such an act could cause to the autonomy of the person to indulge in a trade of his choice would mean that this could not have been the intent of the framers. An individual must, after all, be allowed to choose how and where to work.

Hence, as per existing case law, hobbyists should enjoy protection within Article 19(1)(g), irrespective of whether the profits are meagre or not. The same flows from the expansive and beneficial interpretation provided by Sodan Singh.

Conclusion

This article has showcased how ‘profit-motive’ could and should be read co-extensively with hobby and why a beneficial, rights-respecting interpretation should be given to even part-time profit-making activities of individuals. While the cryptocurrency judgement has been widely-applauded, the Court’s treatment of Article 19(1)(g) does deserve criticism. Issues of Article 19(1)(g) become muddled with the rising presence of activities like online real-money skill gaming, which attempt to combine recreation and profit.

The author is an undergraduate student at the National Law School of India University, Bengaluru and Editor, LSPR.

The author would like to thank Mr. Jaideep Reddy for discussing this aspect of the IAMAI Judgement in his elective course on ‘Cryptocurrency and Blockchain: Law and Policy’.

^[1] [6.147-6.149].

[2] [34]

[3] [6.62]