With recent promulgations of business-friendly legislations in fields such as banking, commerce, and arbitration and mass weeding out of over 1,100 obsolete laws in the last 30 months, the present government looks set to make India a pro-investor jurisdiction and a hub for international commercial arbitration. However, amidst its pursuit, the government seems to be overlooking a very important cog in the wheels of smooth business.
Law of Metrology in India
Metrology is the science of measurements. In legal parlance, metrology laws comprise certain statutory requirements pertaining to weighing, measuring, and declaring such other information about a product as may be required for the protection of health, environment, and consumers as well as for taxation/duty, public safety, and fair trade. In simpler terms, these laws lay down technical and legal requirements, which have the object of ensuring public guarantee from the viewpoints of security and accuracy of weight, measure, or other information of the product to be consumed by them. These requirements include permissible units of measurement (centimeters, kilograms, and so on), sizing of fonts, contrasting of font color with the background color, date of manufacture/expiry/import, declaration of maximum retail price, and so on. Therefore, a manufacturer, importer, or packer of goods must ensure compliance with these requirements because any deviation from the same, however trivial or insignificant, often attracts pecuniary and penal liabilities not only for the company but also for its management, including Directors. The law regulating the abovementioned requirements in India is contained in The Legal Metrology Act, 2009 ("Act"), which came into force on April 1, 2011. The Act was enacted to replace and consolidate provisions enumerated under erstwhile Standards of Weights and Measures Act, 1976 and Standards of Weights and Measures (Enforcement) Act, 1985.
Section 52 of the Act empowers the central government to make rules in order to effectively carry out provisions of the Act. One such set of rules is The Legal Metrology (Packaged Commodities) Rules, 2011 ("LM Rules"). As the name suggests, these LM Rules aim to regulate and lay down the declarations, which are to be made on "pre-packaged" commodities. A pre-packaged commodity as defined under Section 2(l) of the Act is one which is placed in a package of whatever nature so that the product therein has a predetermined quantity. Products ranging from a packet of chips to a brand new laptop fall under pre-packaged commodities.
Although the Act has been introduced to enlighten the consumer about the product he/she seeks to consume, the numerous and complex requirements for manufacturers, packers, and especially importers have made compliance highly challenging and impractical. This is creating serious barriers in the functioning of the manufacturing and packaging sectors operating in or importing into India.
Section 18 of the Act provides that no person shall manufacture, pack, or import for sale any pre-packaged commodity unless such package is in such standard quantities and bears the declarations prescribed in the LM Rules. It is pertinent to mention here that there are more than a dozen mandatory compliances in Rule 6 alone, apart from the various other compliances mentioned in other rules such as Rule 9 (manner of declaration) and Rule 27 (registration of manufacturers/importers). In addition to these requirements, there are many product specific legislations that have their own set of labeling and packaging rules, i.e., The Drugs and Cosmetics Act, 1940, The Seeds Act, 1960, The Food Safety and Standards Act, 2006, and The Cigarette and Other Tobacco Products Act, 2003.
What is more baffling is that despite having such an elaborate list of compliances, there is no provision for rectification in case of inadvertent omissions/errors/violations. Sub-Rule 6(3) of the LM Rules does not permit the affixing of labels or stickers on the package for altering or making a declaration required to be made under the LM Rules (thankfully, this requirement has been dispensed qua imported goods by way of a recent amendment). For instance, a consignment comprising 1,00,000 packages containing mobile phones is ready to be distributed for sale; however, the packers (since packaging/labeling is very often outsourced by manufacturers) for measuring the screen size inadvertently use "cms" as a symbol for the standard unit of measurement, i.e., centimeter instead of "cm," which is provided in the Act. It is common to think that such inadvertence would not mislead a consumer, but due to the lacunae in law, a manufacturer/packer would have to again undertake the exercise of re-labeling or re-packaging the product, leading to much financial strain and discontent. Very often, the only way out for companies in such scenarios is to plead for discretion by way of relaxation of certain rules (Rule 33) before the central government, who sparingly accede to such pleas.
The current metrology laws
in India have not been able
to successfully address the
objectives for which they have
been enacted and there seems
to be palpable disregard towards
genuine business sentiments
Another major cause for concern is the stringent and disproportionate penalties meted out to violators of LM Rules. The penalties range between fines of '5,000/- onwards to imprisonment of up to a year. It has been surveyed that most violations under the Act and Rules have little or no impact on a consumer. Minor inadvertencies such as the illustration explained above (even in a one-off package in a larger consignment) can lead to the issuance of a show cause notice by the Legal Metrology Inspector, which inevitably leads to the commencement of prosecution against all Directors of a company as per Section 49(1)(a) (ii) of the Act unless the company opts to compound the offense(s) (Section 48). Notably, only the first offense under the Act is compoundable, and for every similar subsequent offense (unless committed after three years of the first offense), the option of compounding is not available to the company. This often becomes a harrowing experience for arraigned Directors who are usually summoned by Magistrates situated in remotest areas. The looming sword of a quasi-criminal trial before Indian courts leaves the company with little option but to compound (in case of first time violation) the offense by admitting liability, despite having a good case. Although, under Section 49(2) of the Act, a company can nominate one Director to represent it before the concerned authorities/court, these seem to be glaring shortcomings that do not yield well for our country whether internally or before the international community and must be revisited.
The Foreign Trade Policy of India (2009-2014) provided that all packaged products when imported into India shall be compliant with the provisions of LM Rules (even at the port of import before goods are cleared for consumption in India). This rationale should have been a little more sympathetic and encouraging towards the bonafide exporters of goods into India as they may be unaware of the intricacies of our elaborate Metrology Laws and therefore become susceptible to error. Recently, the introduction of Sub-Rule 6(9) by way of amendment, which permits affixing labels of imported packages to make them compliant with the Act and Rules, seems to be a step in the right direction. However, its effective implementation depends largely on regulatory bodies, and therefore, the ground impact of the amendment on the import sector remains to be seen.
Mechanical Regulatory Bodies
Legal Metrology Officers appointed under Sections 13 and 14 of the Act are often mechanical with their assessments on the compliances made under the Act. The Karnataka High Court in "Cadbury India Pvt. Ltd. vs. Controller of Legal Metrology [ILR 2013 KAR 879]" held that the provisions of the Act have to be construed pragmatically, which would benefit the consumer, and at the same time, keep the industry free from undue interference. However, the Officers have often been seen abusing their position by taking cognizance of purported violations without even conducting a proper verification against the same. The Act does not prescribe any qualifications or eligibility criteria for appointment as a Legal Metrology Inspector/Controller and delegates those powers to the respective state governments, leading to lack of uniformity and consistency. As a result, the Officers, due to lack of practical experience, very often fail to show any empathy for the bonafide difficulties faced by the manufacturing/packaging sector.
The current regime stipulates around 40 to 45 compliances on an average qua the labeling and packaging of goods alone and that too under multiple laws, thereby making its implementation a challenge for the industry. If the law is itself so complex that it constantly runs the risk of being violated, then it must be revisited.
The government must understand that the current metrology laws in India have not been able to successfully address the objectives for which they have been enacted and there seems to be palpable disregard towards genuine business sentiments. Even if we assume that they have fulfilled one objective by empowering consumers, they have, on the other hand, also left the industry grappling with many superfluous and unwanted impediments, which seriously affect the "ease of doing business in India."
Disclaimer – The views expressed in this article are the personal views of the author and are purely informative in nature.