The Legal Metrology Department is wrongly penalizing companies for minor discrepancies on packaging labels and other trivial violations by shopkeepers, write Nitin Mittal and Harsh Aggarwal

The Legal Metrology (Packaged Commodities) Rules, 2011 (PC Rules), was introduced to ensure that all pre-packed products sold in retail, wholesale or through institutions bear certain mandatory declarations so that the end customer has the key information to make purchasing decisions and is not duped by unscrupulous sellers.

While the rules show the right spirit, the way they are interpreted and enforced on the ground do not always serve any added consumer interest but are instead causing harassment to genuine businesses.

There is a well-known legal maxim used in criminal jurisprudence: “actus non facit reum nisi mens sit rea”; the act does not make a person guilty unless there is a criminal intent. To be guilty of a crime under the criminal law, there are two important elements, a guilty act (actus reus) and a guilty state of mind (mens rea).

Many business entities (including manufacturers, packers, importers, retailers and wholesalers) have been penalized by the Legal Metrology Department by way of seizures and challans (a receipt for a statutory payment or fine). Even criminal cases are filed against entities and their directors or partners for purported violations of provisions of Legal Metrology Act, 2009 (LM Act), and the PC Rules.

When business entities deal with tens of millions of packages and thousands of kinds of products, each requiring a different declaration, a few errors are bound to happen in the style or manner of mandatory declarations. These errors, without any intent to defraud the consumer, neither give any wrong information to the consumer nor misrepresent, nor are inadequate. There are notices issued or prosecutions initiated even for minor deviations that do not mislead the customer. For instance:

  1. Mentioning of the size of television in inches instead of centimetres;
  2. Mentioning of the quanity in pieces, for instance, “Quanity = 1” or “Quantity = 1 pcs” instead of “Quantity = 1 N” or “1 U”;
  3. Mentioning hours as “hrs” instead of “h”.

PAIN POINTS

The offences under the LM Act for violation of the PC Rules are penal offences, although under section 48 certain offences are compoundable. However, if a business entity is found to have violated the PC Rules a second time within a period of three years, the second offence is not compoundable and the business entity and its directors or partners must face criminal trial.

At times, the trials are in magistrates courts in remote locations, which is a hassle for directors and the business entity in terms of costs, logistics and time lost. Imagine the situation of a director of a renowned fast moving consumer goods business entity, whose turnover is about ₹300 billion (US$4 billion), required to appear in a taluka in Maharastra, which is not connected by air or rail and requires six hours of travel by road.

If a retailer tears off the label of the product or simply overwrites the maximum retail price or any other declaration, it is practically impossible for any manufacturer/importer to stop such tampering. In almost all instances, such violations, alterations or tampering are carried out by the retailer or distributor at their premises, but the manufacturer or importer is also prosecuted without an investigation to identify the person responsible for such tampering.

Delhi High Court, in Johnson & Johnson Limited v Weights & Measures Department & Anr (2015), considered a circular of the Legal Metrology Department laying down several guidelines, including a direction that the legal metrology inspector should conduct a primary investigation to find who has altered the declaration by visiting shops in the vicinity to find out the alteration on the packages of the same batch number. If the retailer has smudged the price then it should be mentioned in the notice. However, these directions are seldom followed by the department on the ground.

At times, the Legal Metrology Department tries to make out offences in purely hypothetical situations.

In one such interesting case, Legal Metrology Department’s conduct was taken up by Karnataka High Court in Cadbury India Limited v Controller of Legal Metrology (2013). In this case, the Legal Metrology Department had issued a notice to Cadbury India for using the word angula in their “5 Star” chocolate television advertisement — where two brothers, Ramesh and Suresh, visit a tailor to have their father’s trousers shortened and they request the tailor to reduce the length of the trouser by one angula, until its cut to knee length. The suit claimed that angula, which means an inch, is a non-metric system of length, and Cadbury had allegedly violated the provisions contained in section 11(1)(c) of the LM Act. In deciding against the Legal Metrology Department, the court held that there was no violation of the act as the advertisement had a humorous tone.

In Mahindra & Mahindra Ltd v Director of Standards of Weights and Measures (2011), the question before Kerala High Court was whether a Mahindra & Mahindra advertisement in the India Today magazine for their vehicle Scorpio, in which the engine of the vehicle is described as having 109 BHP (brake horsepower) would constitute an offence under section 11 of the Standards of Weights and Measures (Enforcement) Act, 1985.

The LM inspector had issued a show cause notice stating that the description of the power of the engine of the vehicle in question in the old imperial system unit of BHP violated the provisions of law. In quashing the notice the court observed that 109 BHP when converted into the metric system would be 80169.36375 watts, and no customer or prospective buyer would understand the real power of the engine.

INCORRECT INTERPRETATIONS

There have been instances of the Legal Metrology Department taking contradictory stands and adopting an inconsistent approach in alleging violations of LM rules and issuing challans. In one such case, a challan was issued on an imported product for non-compliance of rule 6(1)(d) of the PC Rules as only the date of import was mentioned on the packaging and not the date of manufacturing. Accordingly, the brand starting writing the date of manufacture on the product. A couple of years later the same Legal Metrology Department, penalized the same company for mentioning the date of manufacture and not the date of import on the package.

This was despite the fact that according to rule 6(1) (d) there is the option of writing either of the three dates – date of packing, manufacture or import. These requirements are disjunctive and it cannot be construed that one was intended to be read in conjunction with the other two.

From a consumer’s perspective, the date of manufacture is the most important one to know, as a product manufactured five years ago may be imported only last year.

In Flemingo Duty Free Shops Pvt Ltd v The State of Karnataka (2009), Karnataka High Court dealt with a seizure of eight packages of cigarette by an LM inspector at the duty-free shop in the departure terminal of Bangalore International Airport for not complying with the PC Rules.

The court held that sales in duty-free shops are a distinct type of transaction and the goods sold therein are a separate class of goods from the ones sold to the general public within the country and that it was outside the ambit of the LM Act and PC Rules.

In another instance, a package that contained the following declaration “for consumer complaint contact:” followed by name of the company, its address, toll free number, website address, and email of customer care was issued a challan because the package did not have the “name of the person who can be contacted in the case of consumer complaints”.

LEGISLATIVE IMPROVEMENTS

The Legal Metrology Department and the legislature have tried to simplify the statutory regime and also relax the penal provisions to a certain extent. Before the LM Act, there were two acts that were in force — Standards of Weights and Measures Act, 1976, and Standards of Weights and Measures (Enforcement) Act, 1985. While the former was enacted to establish standards of weights and measures to regulate inter state trade or commerce in weights, measures and other goods, the latter was enacted to provide for enforcement by the state governments.

There were discrepancies in the mode of trial for parallel offences as summary and regular trials, besides discrepancies noticed in the classification of offences as compoundable and non-compoundable between the 1975 and the 1985 acts.

These incompatibilities and the incoherence in various amendments, had made those two acts even more complex and incomprehensible.

The Standing Committee on Food, Consumer Affairs and Public Distribution in 2005-2006 had recommended that the government amalgamate both acts into a single piece of legislation and that is how the 2009 act came into being.

In the 1976 act, under section 63, a second offence was punishable with imprisonment “and” fine, whereas under the 2009 act, the second offence is punishable with a fine “or” imprisonment. To prevent the prospect of all the directors of a company or all partners of a firm from being prosecuted for a violation of the LM Act, section 49 of the 2009 act provides that a director or a partner of a company or firm can be nominated against whom the criminal case can be started.

INDUSTRY EXPECTATIONS

  • Minor or non-material/inconsequential deviations should not be treated as violations in the strict sense and hence should not be categorized penal offences. The entire scheme of PC Rules should be re-examined and minor and inadvertent errors or technical deviations that do not compromise consumer interest, but are otherwise non-compliant with the rules, should be allowed to be compoundable.
  • There should be a mechanism to pre-approve packaging declarations, instead of the present scenario where, due to ambiguity and multiple interpretations of rules, business entities end up facing action under the LM Act for violations despite compliance in accordance with their understanding.
  • There is a tendency in the Legal Metrology Department to send notices regarding purported violations to even independent directors of a company in order to sensationalize a matter, though independent directors are not in charge of, and are not responsible for, the conduct of its business and ought not to be accused.
  • The interpretation of rules across various states is sometimes different and implementation varies. It would be helpful if the Legal Metrology Department conducts regular training and sensitization programmes for small businesses to help improve trust and understanding of the PC Rules.
  • Various amendments to the PC Rules have been made in a piecemeal fashion causing great difficulty to businesses. For instance, the rules relating to the size of numerals on the declaration was first amended and later the rules relating to the size of letters was amended causing a waste of packaging material. Due to these frequent amendments in the regulations, companies are bearing additional costs.
  • The Legal Metrology Department also tends to give unrealistic deadlines to implement amendments in the PC Rules and then extends them several times at the last moment, leaving the industry in a state of uncertainty and making it liable prone to completely unintended violations.

While the LM Act and PC Rules are heading in the right direction to ensure consumer protection from false, missing or wrong declarations, the interpretation and implementation of the act and the rules should not be done in a draconian manner simply to penalize and prosecute businesses for even minor typos or missing information that are not material or are unintentional. The implementation of the act and rules are an impediment to “ease of doing business” in India and a lot more needs to be done at legislative and executive levels.

NITIN MITTAL is the head of legal/compliance and company secretary at Philips Lighting India. HARSH AGGARWAL is joint general manager of legal at Havells. The views expressed in this article are personal.