Multinational Corporations and Biological Resources

In one line

A foreign company that wants an Indian biological resource must ask before it takes, ask again before it patents, and pay what the Authority determines.

In exam wording: the utilisation of biomedical resources by multinational corporations is regulated by the Biological Diversity Act 2002: section 3(1) forbids a person referred to in section 3(2), which includes a body corporate not incorporated in India or incorporated in India and controlled by a foreigner within the meaning of section 2(27) of the Companies Act 2013, from obtaining any biological resource occurring in India or knowledge associated with it for research, commercial utilisation or bio-survey and bio-utilisation without the previous approval of the National Biodiversity Authority; section 4 forbids sharing or transferring research results to such a person without the prior written approval of the Authority; section 6(1) requires prior approval before the grant of an intellectual property right based on an Indian biological resource including material in repositories outside India; section 19 prescribes the application and the order; and section 21 determines fair and equitable benefit sharing in six forms.

Why the Act singles them out

The three episodes of the 1990s all involved foreign applicants, and the whole design of Chapter II follows from that. Section 3 is the strictest control in the Act and it applies only to the three classes in section 3(2).

The identity test, not the size test. The Act does not use the words multinational corporation. Section 3(2)(c) covers a body corporate, association or organisation not incorporated or registered in India, or incorporated or registered in India and controlled by a foreigner within the meaning of section 2(27) of the Companies Act 2013, which includes the right to appoint a majority of the directors or to control the management or policy decisions. A very large Indian company that no foreigner controls is a section 7 person, even if it has foreign shareholders or a foreign director; a small Indian subsidiary whose foreign parent can appoint a majority of its directors is a section 3 person. Before 1 April 2024 the clause caught any non-Indian participation in share capital or management, so a single foreign director was enough; the amendment narrowed it.

The sequence a foreign company must follow

One: the application. Section 19(1), in Form 1 for research or bio-survey and Form 2 for commercial utilisation, on the Authority's web portal, with the fee paid electronically to the National Biodiversity Fund. Rule 13(1) and (3) of the Rules of 2024.

Two: material already held. Rule 13(2): a section 3(2) person who was in possession of a biological resource before the Amendment Act of 2023 came into force must still seek approval. Prior possession is not a defence.