Food Laws in India

Introduction
  • Prevention of Food Adulteration Act, 1954 was the first law that was passed by the legislation in order to promote food security in the country. It regulated the laws of the food industry along with six other laws:
    • The Fruit Product Order of 1955,
    • The Meat Food Products Order of 1973,
    • The Vegetable Oil Products (Control) Order of 1947, The Edible Oils Packaging (Regulation) Order of 1998,
    • The Solvent Extracted Oil, De-oiled Meal, and Edible Flour (Control) Order of 1967 and
    • The Milk and Milk Products Order of 1992.
  • However due to the transformation that Food Industry was going through at that time,The Food Safety and Standards Act was introduced in 2006. This law overruled  all the previous laws.
  • According to the data provided by the Department of Industrial Policy and Promotion (DIPP), the food processing sector in India has received around US$ 7.47 billion worth of Foreign Direct Investment (FDI) during the period April 2000-December 2016.
Objectives of the Food Safety and Standards Act in India
  • The objective of the food law is to provide safe, unadulterated, uncontaminated, and nutritious food to the public.
  • The food authority goes about a solitary window to give direction and issues explanation/advisory for all matters with respect to food security.
  • This Food Safety Act is an amalgamation of all the previously existing laws relating to food and to establish the Food Safety and Standards Authority of India for laying down science based standards for articles of food and to regulate their manufacturing, storage, distribution, sale and import, to ensure availability of safe and wholesome food for human consumption.
  • The Indian food safety regulations, as implemented by the FSSAI, are primarily based on the Codex Alimentarius.
  • The Codex was formed with the collaborative efforts of the World Health Organization and the Food and Agriculture Organization, two distinguished United Nations health and food bodies. The Codex Alimentarius international food standards, guidelines and codes of practice contribute to the safety and quality of the food that reaches consumers.
  • Since the FSSAI regulations are framed on the guidelines of the Codex Alimentarius, they adhere to international standards.
Regulations for Licensing and Registration of Food Businesses in India
  • There are two types of licenses:
    • A central license, issued by the central government, and
    • A state license, issued by any of the state governments.
  • The central license is issued on the basis of manufacturing capacity, as well as turnover. Those operating food businesses within an Indian state need a state license that is also based on capacity or turnover.
  • Those that operate businesses in two or more states require an additional central license for head office/registered office and separate license/registration for other locations they operate in. Only transporters need a singular license/registration for all vehicles an individual transporter runs.
  • Those food business operators that deal with non-standardized products have to first apply for the product approval and only then they can obtain a license under the licensing and registration regulations. All importers and exporters have to obtain a central license from FSSAI.
FSSAI Compliance Criterion for Import of Food Products to Indiaa
  • Food articles imported to India from foreign countries and distributed in India need to conform to the FSSAI regulations or suffer restrictions on import. The FSSAI also has stringent regulations for packaging and labeling under Food Safety and Standards (Packaging and Labeling) Regulation, 2011.
  • For example, all chocolates, as defined in the Food Safety and Standards (Food Product Standards and Food Additives) Regulation, 2011are to be prepared from milk. They cannot contain any vegetable oil or fats. Labels need to mention artificial flavors used to comply with FSSAI regulations. If these guidelines are not adhered to then chocolates are not permitted to enter Indian markets.
  • For alcoholic beverages, FSSAI stipulates that all ingredients, including additives need to be mentioned on labels in descending order of their composition by weight and volume.

FSSAI compliance criteria for labeling of imported food include:

  • Language on labels must be in English as per FSSAI Regulations, 2011;
  • “Vegetarian” or “Non-Vegetarian” must be declared by affixing the symbol for “Vegetarian” or “Non-Vegetarian” on packages;
  • Mention name and complete address of the importer in India;
  • Mention net weight or number or measure of volume of contents;
  • Mention batch number or lot number or code number, and FSSAI license number;
  • Mention month and year in which the commodity is manufactured or prepared;
  • Declare “Best Before” date on the package;
  • Mention nutritional information or nutritional facts per 100 grams or 100 milliliter per serving of food product on the label;
  • Name and address of the manufacturer should be mentioned on the label and FSSAI logo and license number of the importer should be available on the label.
Penalties for Food Safety and Standards Act

The FSSAI Act, prescribes the following penalties for offences by companies – Private Limited Company

Public Limited Company

  • Where an offence under this Act which has been committed by a company, every person who at the time the offence was committed was in charge of, and was responsible to, the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty and shall be liable to be proceeded against and punished accordingly.
  • Provided that where a company has different establishments or branches or different units in any establishment or branch, the concerned Head or the person in-charge of such establishment, branch, unit nominated by the company as responsible for food safety shall be liable for contravention in respect of such establishment, branch or unit:
  • Notwithstanding anything in sub-section (1), where an offence under this Act has been committed by a Company and its is proved that the offence has been committed with the consent or connivance of or is attributable to any neglect on the part of any Director, Manager, Secretary or other Officer of the Company, such Director, Manager, Secretary or other Office shall also be deemed to be guilt of that offence and shall be liable to be proceeded against and punished accordingly.

Carrying out a business without FSSAI license

  • If any person or food business operator (except the persons exempted from licensing under sub-section (2) of section 31 of this Act), himself or by any person on his behalf who is required to obtain license, manufacturers, sells, stores or distributes or imports any article of food without license, shall be punishable with imprisonment for a term which may extend to six months and also with a fine which may extend to five lakh rupees.

Selling food/commodity of inferior quality

  • Any person who sells to the purchaser’s prejudice any food which is not in consent with the provisions of the Act or the regulations made there under, or of the nature or substance or quality demanded by the purchaser, shall be liable to a penalty not exceeding five lakh rupees. Provided that the persons covered under sub-section (2) of section 31, shall for such non-compliance be liable to a penalty not exceeding twenty five thousand rupees.

Sub-standard food

  • Any person who whether by himself or by any other person on his behalf manufactures for sale or stores or sells or distributes or imports any article of food for human consumption which is sub-standard, shall be liable to a penalty which may extend to five lakh rupees.

Misbranded food

  • Any person who whether by himself or by any other person on his behalf manufactures for sale or stores or sells or distributes or imports any article of food for human consumption which is misbranded, shall be liable to a penalty which may extend to three lakh rupees.
  • The Adjudicating Officer may issue a direction to the person found guilty of an offence under this section, for taking corrective action to rectify the mistake or such article of food shall be destroyed.

Food containing extraneous matter

  • Any person whether by himself or by any other person on his behalf manufactures for sale or stores or sells or distributes or imports any article of food for human consumption containing extraneous matter, shall be liable to a penalty which may extend to one lakh rupees.

Unhygienic or unsanitary processing or manufacturing of food

  • Any person who, whether by himself or by any other person on his behalf, manufactures or processes any article of food for human consumption under unhygienic or unsanitary conditions, shall be liable to a penalty which may extend to one lakh rupees.

Unsafe food

  • Any person who, whether by himself or by any other person on his behalf, manufactures for sale or stores or sells or distributes or imports any article of food for human consumption which is unsafe, shall be punishable:
    • Where such failure or contravention does not result in injury, with imprisonment for a term which may extend to six months and also with fine which may extend to one lakh rupees;
    • Where such failure or contravention results in a non-grievous injury, with imprisonment for a term which may extend to one year and also with fine which may extend to three lakh rupees;
    • Where such failure or contravention results in a grievous injury, with imprisonment for a term which may extend to six years and also with fine which may extend to five lakh rupees;
    • Where such failure or contravention results in death, with imprisonment for a term which shall not be less than seven years but which may extend to imprisonment for life and also with fine which shall not be less than ten lakh Rupees.

Deceptive Advertisement

  • Any person who publishes, or is a party to the publication of an advertisement, which–
    • Falsely describes any food; or
    • Is likely to mislead as to the nature or substance or quality of any food or gives false guarantee, shall be liable to a penalty which may extend to ten lakh rupees.
  • In any proceeding the fact that a label or advertisement relating to any article of food in respect of which the contravention is alleged to have been committed contained an accurate statement of the composition of the food shall not preclude the court from finding that the contravention was committed.
Compensation in case injury of death of consumer in India
  • If any person whether by himself or by any other person on his behalf, manufactures or distributes or sells or imports any article of food causing injury to the consumer or his death, it shall be lawful for the Adjudicating Officer or as the case may be, the court to direct him to pay compensation to the victim or the legal representative of the victim, a sum—
    • Not less than five lakh rupees in case of death;
    • Not exceeding three lakh rupees in case of grievous injury; and
    • Not exceeding one lakh rupees, in all other cases of injury.
  • Provided that the compensation shall be paid at the earliest and in no case later than six months from the date of occurrence of the incident. Provided further that in case of death, an interim relief shall be paid to the next of the kin within thirty days of the incident.
  • Where any person is held guilty of an offence leading to grievous injury or death, the Adjudicating Officer or the court may cause the name and place of residence of the person held guilty, the offence and the penalty imposed to be published at the offender’s expense in such newspapers or in such other manner as the Adjudicating Officer or the court may direct and the expenses of such publication shall be deemed to be part of the cost attending the conviction and shall be recoverable in the same manner as a fine.
  • The Adjudicating Officer or the court may also,—
    • Order for cancellation of license, re-call of food from market, forfeiture of establishment and property in case of grievous injury or death of consumer;
    • Issue prohibition orders in other cases.

The Companies (Amendment) Bill, 2016 – Key Features

Ravi Singhania


22/08/2017  

With a focus to ease doing business in India, the Government of India through this Bill addresses inconsistencies and procedural restrictions in the present Companies Act, 2013. Considering the changes the Bill propose to bring about, it can be clearly said that there will be a sea change in the present Act which will boost economic growth and upheave foreign investment in India.

INTRODUCTION

In order to facilitate ease of doing business in India, the Lok Sabha on 27th July, 2017 passed The Companies (Amendment) Bill, 2016 (“Bill”) thereby bringing change to the present Companies Act, 2013 (“Act”) with respect to structuring, disclosure and compliance requirements for the companies.

Some of the focal points of the Bill are discussed hereinbelow:

  1. Associate Company: In order to align the definition with the Accounting Standards, the Bill propose to change the definition of “significant influence” in section 2(6) of the Act and accordingly, it shall mean control of twenty percent of the total voting power, or control of or participation in business decisions under an agreement.

The Bill propose to include the definition of “joint venture” which shall mean a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement.

  1. Key Managerial Personnel (KMP): The definition of KMP as given in section 2(51) has been extended to include any other officer of the company (i) who is not more than one level below the directors; (ii) who is in whole time employment; and (iii) has been designated by the Board as a KMP.
  2. Related Party: The term “company” under section 2(76) (viii) is proposed to be substituted with “body corporate” so as to include the companies incorporated outside India related to the Indian company under the related party definition.

Additionally, a body corporate which is an investing company or the venturer of a company would also be a related party.

  1. Small Company: Paid-up Capital is proposed to be increased from INR 5 Million to INR 100 Million in section 2(85). Turnover from minimum of INR 20 Million and maximum of INR 200 million is proposed to be revised to a maximum of INR 1000 Million in the said section.
  2. Liability of Members: Insertion of new clause 3A providing for liability of members when the minimum number of members falls below the statutory limit i.e. seven in case of a public company or two in case of a private company and such a situation continues for a period exceeding six months or more. The persons continuing to be involved with the company as members shall be severally liable for the payment of the debts contracted during the above period and they shall also be liable to be sued severally for such debts.
  3. Business Objects: The company would not be required to have main objects in its Memorandum of Association as required under section 4(1) (c) and 4 (5) (i) and is permitted to engage in any lawful act or activity or business, or any act or activity or business to pursue any specific object or objects, as per the law for the time being in force.

However, where the company propose to carry out any specific object or activity, it has to mention the same in the Memorandum and the company shall not pursue any other activity than mentioned in the Memorandum.

The time limit for reservation of name of the company by the Registrar of Companies has been proposed to be reduced to twenty days from the existing period of sixty days.

  1. Registered Office: It is proposed that the company shall within 30 of its incorporation have registered office instead of present requirement of 15 days as provided under section 12 (1). Also, in case of change of registered office of the company, it shall intimate such change to the Registrar of Companies within 30 days from the date of change instead of 15 days.
  2. Beneficial Interest: The Bill propose to define “beneficial interest” under section 89 in a share shall now include holding directly or indirectly, through any contract, arrangement or otherwise, the right or entitlement of a person alone or together with another person to either exercise the rights attached to the shares or to receive or participate in respect of the dividend on the said shares.
  3. Annual Return: The Bill propose to exclude the extract of Annual Return forming part of the Board’s Report as provided under section 92.
  4. Place of Annual General Meeting: The Bill Propose to amend section 96 whereafter Annual General Meeting (AGM) of unlisted company may be held at any place in India if consent is given in writing or by electronic mode by all the members in advance.
  5. Global Extra-Ordinary General Meeting: Extra-Ordinary General Meeting (EGM), as provided under section 100, of wholly owned subsidiary of a company incorporated outside India can be held outside India.

EGM can be called at a shorter notice where consent is given by members holding not less than 95% of paid-up share capital in case the company is having share capital.

  1. Consolidated Financial Statements: The company shall prepare a consolidated financial statement of the company and of all the subsidiaries and associate companies in the same form and manner as that of its own and in accordance with applicable accounting standards, which shall then be laid before the AGM of the company. Presently, as per section 129 (3) the company is required to file consolidated financial statement of only its subsidiaries.
  2. Board’s Report: Few of the proposed changes in section 134 are as follows:
  • The Board Report shall be signed by the Chief Executive Officer, whether he is a director in the company or not.
  • Disclosures which have been provided in the financial statement shall not be required to be reproduced in the report again.
  • The extract of the Annual Return is not required to be annexed with the board’s Report. Only the of the web address where the Return can be accessed needs to be furnished;
  • The company need not mention the exact text of the policies, key feature of policies along with its web link shall be disclosed in Board’s Report.
  1. Corporate Social Responsibility (CSR): Eligibility criteria for constituting the corporate social responsibility committee and incurring expenditure towards CSR as provided under section 135 is proposed to be calculated based on immediately preceding financial year instead of preceding three financial years.

The CSR committee can be constituted with two or more directors in case the company is not required to appoint independent director.

  1. Ratification of Auditors: The requirement of ratification of appointment of auditors under section 139 at every AGM shall not be necessary.
  2. Qualifications of Directors: Few of the proposed changes in chapter XI are as follows:
  • The computation of 182 days for determining whether a director is resident in India shall be done in reference to previous financial year instead of calendar year;
  • The Central Government should be empowered to recognize any other identification number in place of Director Identification Number;
  • Directorships in dormant company shall be counted for the purpose of calculating the ceiling limit of number of directorships;
  • Any director who has been disqualified under section 167(2) shall cease to his directorship in other companies except the company in which he has defaulted;
  • It is optional to file form DIR-11 by the director upon resignation; and
  • The directors shall be allowed to participate on restricted items at board meetings through video conferencing or other audio-visual means if there is quorum through physical presence of directors.
  1. Loans to Director: The entire section 185 has been substituted. Some important changes are:
  • The Bill propose to impose complete restriction on providing loan, guarantee or security in connection with loan to any director, director of the holding company or any partner or relative of any such director or any firm in which any such director or relative in a partner;
  • Loan to any private company of which any such director is a director or member; any body corporate at a general meeting of which not less than twenty- five per cent. of the total voting power may be exercised or controlled by any such director, or by
  • two or more such directors, together; or any body corporate, the Board of directors, managing director or manager, whereof is accustomed to act in accordance with the directions or instructions of the Board, or of any director or directors, of the lending company; is allowed subject to special resolution passed by the shareholders of the company.
  1. Loan and investment by a company: The Bill propose to remove the restriction under section 186 of making investment through not more than two layers of investment companies.

CONCLUSION

With a focus to ease doing business in India, the Government of India through this Bill addresses inconsistencies and procedural restrictions in the present Companies Act, 2013. Considering the changes the Bill propose to bring about, it can be clearly said that there will be a sea change in the present Act which will boost economic growth and upheave foreign investment in India.

 

(The author would like to thank Ankita Singh, Associate of the firm for the valuable assistance in researching for this article.)

Indian Government’s Move to Encourage Private Participation in Infrastructure

Ravi Singhania


22/08/2017  

According to various studies undertaken on the infrastructure sector in India, in many cases where the award is made against government bodies, the government sector would inevitably challenge the award, and the private player would inevitably have to await not only the arbitration process, but also the entire challenge process. According to the available data, over 85% of the claims raised against the Government bodies are still pending of which 11% is pending with the Government agencies, 64% with the arbitrators and 8.5% with the Courts. An amount of nearly Rs. 3,400 crore is the awarded dues and another Rs. 4,500 is still under arbitration. No wonder the report commissioned by the CII indicates pointed out that the pending claims from government bodies are the key factor behind burgeoning debt of construction companies, accounting for about 150 % of the debt.

However, the Government of India has decided to change all this to encourage private participation in infrastructure and improve the overall condition of Infrastructure in the country.

On 31st August, 2016, the Cabinet Committee on Economic Affairs, chaired by Mr. Narendra Modi, Hon’ble Prime Minister of India, approved various measures to revive the construction sector[1]. The decision was taken in the backdrop of the constant stress that the sector has been undergoing. According to the decision, in cases where the award is made against any Government agency or a Public sector undertaking, and the agency is challenging the award, it will have to pay 75 per cent of the amount of the award in an escrow account against margin free bank guarantee. This escrow account will thereby be used to repay bank loans or to meet commitments in ongoing projects. The measures will strengthen the ailing construction sector.

The benefits of this step are manifold. There is expected to be a drastic increase in the employment opportunities, for the construction sector, which is the largest sector of direct and indirect employment. Moreover, the projects which had to be halted, for the want of funds, will be able to resume the construction. The regime will, thereby, ensure that the contractor does not suffer once the dispute is resolved by arbitration. The average time settlement of claims is estimated to be more than seven years, and a majority of arbitration awards are given against the Government agencies. Therefore, the step will ensure the loss of time and blockage of capital and material is avoided.

It is also likely to benefit the banking sector. Once the projects get restarted, the companies would begin to repay the interests and the principal dues, thereby, the books of the banks are expected to improve, however the improvement will be gradual. Currently, the exposure of financial service sector on the construction is more than of Rs. 3 lakh crore, out of which 45 % are under stress. Therefore, there is expectation of increase in liquidity of financial service sector.

Several other measures have also been introduced. One of them is that in all new contracts, there would be a provision for conciliation board, which will comprise of independent subject experts. This has been included to ensure that there will be a contractual mechanism for renegotiations without bringing projects to a standstill, when public servants are reluctant to participate in the renegotiations on changes in commercial circumstances. Moreover, it will promote a cheaper and less time-taking mechanism of dispute resolution. Further, the contractors have also been provided with an option of shifting their pending disputes with government bodies, to the new arbitration procedures, from the old Arbitration Act. This will provide them with the opportunity of utilizing the cheaper and fast track arbitral process, as introduced by the recent amendment.

The construction companies are expecting an immediate benefit out of the regime. So far the implementation seems to be a success. Government bodies seem to be already acting on these initiatives. On 23rd March, 2017, ONGC issued a Protocol for the implementation of the Niti Aayog’s initiative for the revival of construction sector, as approved by its Board on 31st January’17 in the 289th meeting[2]. It laid down comprehensive guidelines for complying with the regime. With a total of around 597 cases pending, under arbitration proceedings or pending before the court, in respect of PSUs, this step was most welcomed. With the co-operation of PSUs like ONGC, the implementation seems to be proceeding at a decent rate. The regime has received a positive response in the market and is expected to divulge outcomes within 2-3 years.

With all these measures in place, India would definitely become a much more attractive investment option for the private players as far as the infrastructure sector is concerned.

(The author would like to thank Gunjan Chhabra, Senior Associate of the firm for the valuable assistance in researching for this article.)

[1] Press note released by Press information Bureau, 31st August, 2016, available at:

[2] Available at:

Labour Law Primer for Multinational Companies in India

Ravi Singhania


22/08/2017  

With increasing trade relations between India and the World, cross-border movement of employees from and out of India has increased quite considerably. In India, employees enjoy the protection of diverse laws and regulations.

The business model of the companies is increasingly service centric and it is essential for employers to have the most efficient human resource and to grant them their legal rights and entitlements. However, in a country like India, the complex legal regime usually leave the employers facing typical issues related to interpretation of the large number of labour and employment laws governing the industry. These issues prove even more challenging when one of the parties involved is a foreign national.

Hence, this primer highlights the basic requirements of labour laws both from the perspective of Indian and foreign nationals employed in India. While throwing light on the appointment/ secondment of foreign nationals by Indian employers, the primer covers issues like taxation, working conditions, various social security benefits, issues related to termination of employees, importance and enforceability of non-solicitation clauses, retrenchment, various statutory registrations etc. With increasing concern for the security of female employees, employers have also been conferred with the duty to ensure protection against sexual harassment of women at the workplace.

Further, the primer also addresses the most common concern of all employers while entering into employment contracts, like the enforceability of clauses related to confidentiality, competition, poaching employees and soliciting clients. Keeping this in view, the primer would discuss the common controversies that arise from clauses in employment contracts and the caution that should be kept in mind in drafting an enforceable employment contract.

The key object is to enable the employers to familiarize themselves with the vast labour law regime of India.

Read More