Divya Pharmacy: Benefit Sharing from an Indian Company

In one line

The only substantial judgment on the Biological Diversity Act holds that an Indian company using Indian biological resources for profit must share the benefits, even though the sections about approval are addressed to foreigners.

In exam wording: in Divya Pharmacy v. Union of India, High Court of Uttarakhand at Nainital, Writ Petition (M/S) No. 3437 of 2016, judgment of 21 December 2018, Sudhanshu Dhulia J. held that the State Biodiversity Board has power to demand fair and equitable benefit sharing from an Indian entity commercially utilising biological resources, under section 7 read with section 23(b) of the Biological Diversity Act 2002, and that the National Biodiversity Authority has power under section 21(2) and (4) to frame regulations providing for it.

The facts

Divya Yog Mandir is a trust registered under the Registration Act 1908. Divya Pharmacy, the sole petitioner, is a business undertaking of that trust. It manufactures Ayurvedic medicines and nutraceutical products at Haridwar in Uttarakhand. The trust and the pharmacy were founded by Swami Ramdev and Acharya Balkrishna.

It was admitted that biological resources are the main ingredient and raw material in the manufacture of Ayurvedic and nutraceutical products.

The Uttarakhand Biodiversity Board raised a demand on the pharmacy under the head fair and equitable benefit sharing, relying on the Biological Diversity Act 2002 and the Regulations of 2014 framed under it.

The petitioner's argument

The case was simple and textual. The Board could not raise a demand under that head because it had neither the power nor the jurisdiction to do so, and in any event the pharmacy was not liable to pay anything under it.

The argument rested on the structure of the Act as it stood in 2018. Sections 3 and 4 then spoke of foreigners, non-resident Indians and bodies with non-Indian participation. Section 21, which is the benefit sharing section, sits in the chapter dealing with the functions and powers of the National Biodiversity Authority and speaks of determining benefit sharing "for the approval granted". An Indian company needs no approval under section 3; it gives an intimation under section 7. So, the pharmacy said, there was no approval, and therefore nothing to which section 21 could attach.

The clause has since changed. The argument relied on section 3(2)(c)(ii) as it stood before 1 April 2024, which reached a body incorporated or registered in India "which has any non-Indian participation in its share capital or management". The Biological Diversity (Amendment) Act 2023 substituted that sub-clause, and it now reaches such a body only if it "is controlled by a foreigner within the meaning of clause (27) of section 2 of the Companies Act, 2013". So an Indian company with some foreign shareholding but no foreign control, which would then have needed approval under section 3, is now a section 7 person, on the same side of the line as the pharmacy.