The arguments on behalf of the Bidi manufacturers were continued.
Impossibility and Impracticability of the 2014 rules and Violation of Article 19(1)(g).
In continuation of yesterday’s argument, Mr. Raghavan sought to argue that for bidi manufacturers, it was impossible and impracticable to comply with the 2014 amendment rules and to that extent, these rules were violative of his right to trade and business guaranteed under Article 19(1)(g) of the Constitution. In this regard, the Counsel drew attention to Rule 2(c)(iii) of the 2014 amendment rules which defines ‘principal display area’ for conical or cylindrical types of packages as “covering the entire curving area of the pack that may be displayed or visible under normal or customary conditions of sale or use.” Therefore reading this rule along with Section 3(o) and Section 7 of the COTPA, the Counsel submitted that the health warning had to cover the entire curvature area. This health warning as prescribed in the schedule to the 2014 amendment rules was a rectangular label measuring 3.5 x4 cm and therefore on a conical package measuring 2.5 x 7cm it was virtually impossible to inscribe the prescribed health warning. Therefore in order to comply with the mandate of these rules the bidi manufacturers would have no other choice but to increase the size of their packs. The Counsel submitted that not only did the Central Government have no power to do this under section 3(o) read with section 7 but also that doing so would have detrimental ramifications for the business of the bidi manufacturers and would therefore constitute an unreasonable restriction on the right under Article 19(1)(g).
The Counsel thereafter sought to argue that the 2014 rules unreasonable because it was not possible for bidi manufacturers to follow the mandate of Rule 3(1)(c) which provides that “none of the elements of the specified warning are severed covered or hidden in any manner when the package is sealed or opened.” The design of the bidi package was such that it was easy to tear/sever the specified warning if one was not careful while opening the pack. At this point, B.S Patil quite sportingly undertook to open the bidi packet presented in court and managed to do so without severing the specified warning. The judge therefore dismissed this argument as not being a very sound one.
Thereafter, Mr. Raghavan argued that rule 3(1)(b) and paragraph 3(2) of schedule III of the 2014 amendment rules which prescribes the coverage of the pictorial health warning is ultra vires Section 7(1) of COTPA . This was because under Section 8 the specified warning only had to satisfy the requirements of being ‘legible, prominent and conspicuous’. This had already been satisfied by paragraph 3(1) of the Schedule to the 2014 rules which specified that the health warnings measure 3.5x 4cm. Health warnings were legible, prominent and conspicuous when they fulfilled this requirement and therefore the proportionate increase under paragraph 3(2) of the Schedule to the rules was not required and was neither incidental nor ancillary to the power under Section 7(1). Further, the power/right under Section 7(1) is exhausted by paragraph 3(1) of the Schedule and there is no residuary power under section 31(1).
Another argument raised by the learned senior Counsel was with regard to the arbitrary nature of Rule 5 of the 2014 amendment rules. These rules provide for the rotation of specified health warning every 24 months ‘or before 24 months on a date which may be specified by the Central Government’.
Under this rule, the Central Government is empowered to give retailers and distributors a discretionary grace period of 2 months to clear the old stock. After the expiry of the grace period, distributors, retailers and importers cannot distribute or sell packs containing the image that had been in operation for the previous 12 months. It was argued that this was an unguided, unchartered power given by the Central Government to itself since it had given itself the power to change the period of rotation by a notification. More importantly, the 2014 rules had in effect, by introducing the concept of a discretionary grace period, curtailed the freedom to continue selling a package bearing an earlier prescribed, legally accepted health warning and therefore was ultra vires Section 7 since there was nothing in the said section which suggested that this could be done. It was also argued that rule 5 imposed an unreasonable restriction on Article 19(1)(g) rights because it makes a product, otherwise legal into an unlawful, illegal product. This sort of legal uncertainty constituted an unreasonable restriction and was thus ultra vires Article 19(1)(g). The rules could have instead referred to the grace period as being ‘before the stock finishes’ which they did not do and was therefore an unreasonable restriction.
In this regard, the Counsel referred to Chintaman Rao vs State of Madhya Pradesh (AIR 1951 SC 118) which had established the principle that there needed to be a proper balance between the rights guaranteed under 19(1)(g) and societal interest. The Counsel submitted that the requirement to change the pictorial warning once every 12 months compulsorily is an unreasonable restraint on the manufacturer’s right to carry on business when there is no deficiency in the existing warning. The Counsel also relied on Mohammed Faruk vs State of MP (AIR 1970 SC 93) wherein the Hon’ble Supreme court had laid down that when the rights under Article 19(1)(g) were affected, it was essential to ensure that the least restrictive measure was adopted by the government. Another case cited by the Counsel was Saghir Ahmed vs State of UP (AIR 1954 SC 728) which had, muck like the Deen Dayal case, established that the entire burden of proving constitutionality of a rule/statute lies on the State whenever there has been a prima facie violation of a fundamental right.
Further, it was argued that unlike an enactment which gets a presumption of constitutionality, a delegated legislation does not deserve the same treatment and no leeway must be given in interpreting rules under the parent statute.
Next, the Counsel pointed out that though the stated objective of the act was to regulate trade and commerce in production, supply and distribution of tobacco and tobacco products such as bidis, the Ministry of Health and Family Welfare had, through the 2014 amendment gone beyond the stated objective to deter persons from using tobacco and tobacco products. The purpose of a health warning, it was argued by the Counsel, was only to provide a warning to the users and to educate them as to the ill-effects of the use of tobacco and tobacco products. The 2014 rules however had deviated from this path and undertaken to deter people instead of educating them about tobacco usage.
Justice Patil asked whether the purpose of educating the public was not eventually to deter them from the consumption of tobacco. To this, the Counsel replied that purpose of education was not to dictate the action of the consumers.
The ASG Mr. Dixit at this point argued that the State as a guardian of the people had a duty to enact stringent measures for the protection of people. To this, Mr. Raghavan strongly objected and questioned the validity of having the state function as a guardian for even adults and suggested that it was a dangerous argument to make and that such arguments gave birth to totalitarian regimes. Mr Dixit reiterated that this legislation was enacted to protect the right to life enshrined in Article 21 of the Constitution.
Thereafter, the Counsel cited Laxmi Khandsari Etc. Etc vs State Of U.P. & Ors (1981 AIR SC 873) wherein it was said that whenever a fundamental right was being curtailed, the onus was on the state to prove with “acceptable evidence, inevitable consequences or sufficient materials” that the restriction was a reasonable one. In this case, the Counsel submitted that the state did not rely on any standard of ‘acceptable evidence’ before enacting the stringent measures in the 2014 amendment rules.
The Counsel also made certain submissions regarding the requirement under the rules to have health warnings on both sides of the panel. The 2014 amendment rules prescribe (Rule 3(1)(i)(b), Proviso 2) that for conical packages, the specified health warning should appear diametrically opposite to each other on two largest sides or faces of the package. Section 7(4) of COTPA, on the other hand, prescribes that the specified warning should appear on not less than one of the largest panels. Therefore, this requirement of the statute is enlarged by Rule 3 since now it is mandatory to put the health warning on both sides of the package. This requirement is unreasonable and impractical since conical packages do not have two sides or faces.
Conflict between the Legal Metrology Act and the 2014 Amendment Rules
The second broad argument raised by the Counsel was pertaining to the conflict between the 2014 rules and the Legal Metrology Act, 2009. Section 18 of this act requires all pre-packaged commodities to carry declarations and particulars as prescribed and the Rules require certain information to be printed on all pre-packaged commodities.
However, the proviso to rule 6 exempts bidis from making any declarations.
The 2014 Rules had inserted Rule 3(1)(h) which required all tobacco products including bidi manufacturers to carry certain information. Therefore, this contravened the specific exemption given to the bidi industries in the Packaged Commodities Rules, 2011. He argued while the COTPA deals with the warnings on tobacco product packages, the Legal Metrology Act pertains to providing consumers with information on all pre-packaged commodities. Further, in case of conflict, the Legal Metrology Act would prevail over the COTPA since it was enacted later. The Counsel also cited Indian Express vs Union of India (AIR) 1986 SC 515, where the Supreme Court had held that delegated legislation may be questioned on the grounds of not only being contrary to its parent statute but also if it contravenes some other statute.
Wednesbury Test of Unreasonableness
Mr. Raghavan, also challenged the 2014 amendment rules on the grounds of unreasonableness. Citing the English case of Associated Provincial Picture Houses Ltd. v Wednesbury Corporation  1 KB 223, he sought to argue that the principle of unreasonableness laid down therein could be used to challenge the 2014 rules. Mr. Raghavan argued that while enacting the 2014 rules, the rule making authority had done so in complete contradiction and in complete oblivion of Section 5(2), proviso of the COTPA act, which allowed cigarette manufacturers a limited exception to advertise on its package.
At this point, Mr. Dixit, learned ASG interjected and said that the Wednesbury test was only meant to apply to the actions of administrative bodies and not to test the validity of delegated legislation. Justice Nagarathna too pointed out that when there are already well established principles under article 19(1)(a) and (g), in the form of the principle of ‘reasonable restriction’ there was no need to resort to the Wednesbury test. Justice Patil too clarified that the matter of challenging an administrative action is different than that of delegated legislation and since there are already sufficient tests in law for the latter, there was no need to rely on the Wednesbury test as an additional ground. Doing so would result in an unwarranted expansion of the law.
Relevant Factors not taken into Consideration
The Counsel wanted to bring to the notice of the court that the 2014 rules had been enacted in an arbitrary fashion without being adequately consultative. In this context, he referred to the Expert Committee Report which was relied upon by the Ministry of Health and Family Welfare. It was pointed out that Committee contained representatives only from public health bodies. There were no industrial representatives. That in itself, was enough to show that the rules were made in a non-consultative fashion and this therefore, was a serious vitiating matter for the delegated legislation. This committee had recommended 80% health warning and justified it on the grounds of compliance with the Framework Convention of Tobacco Control (FCTC). No other cogent reasons were presented by the Expert Committee Report for the acceptance of 80% health warnings. Further, the report was submitted on 9/10/2014 and within a period of 6 days, the Ministry of Health and Family Welfare notified the 2014 amendment rules on 15/10/2014, which shows that there was complete non-application of mind when accepting the report of the Committee.
Justice Patil sought to clarify at this point, whether this Expert Committee Report had been constituted by the Ministry of Health and Family Welfare itself and if it indeed was so, then could it not be argued that since the Ministry wanted to know the health impact of tobacco, it was well within its rights to have only representatives from the health industry on board?
He then went on to highlight the interim report of the Parliamentary Committee on Subordinate Legislation dated 16/03/2015 which had examined the provisions of the COTPA and the rules therein. In this report the concerns of the bidi manufacturers had been highlighted. Firstly, it was pointed out that the bidis were not as harmful because it contained very little tobacco as compared to cigarettes. Secondly, the statutory requirements under the 2014 rules were excessive and given the shape and manner of packaging of bidi packets, it was significantly harder for the bidi industry to comply with the same without affecting their rights of trademark. Thirdly, a socio-economic study on the impact of the 2014 regulations on bidi manufacturers, tobacco farmers needed to be undertaken since it might involve significant loss of livelihood, among other things. In its recommendations the committee observed that given the impact of the 2014 amendment rules on the lives and livelihoods of a large number of workers associated with the tobacco industry, it was necessary for it to consult other stakeholders such as the Ministry of Labour, Agriculture and Employment. Further, it urged the government to keep the implementation of the 2014 amendment rules in abeyance till such time as the Committee could fully examine the issue from all angles.
The Counsel then referred to the Final Report of the Committee submitted in March 2016. In its recommendations, the Committee suggested that the Bidi industry was a special kind of cottage industry unique to India and given that the Bidi industry would not be able to survive if the 2014 amendment rules were enforced, the government should reconsider whether the bidi industry should be included within the ambit of the 2014 rules. It was also pointed out that there were no viable alternative to tobacco cultivation and therefore no viable alternative for the tobacco farmers who would lose their livelihood. These are factors, the Counsel argued that should have been balanced before notifying the 2014 amendment rules.
Justice Patil, at this point raised a significant argument. He argued that if the Committee had already placed its report and the same had been considered by the House, it could be said that the rules have already undergone the requisite scrutiny and therefore merely non-consideration of the recommendation of the report, cannot become a sole ground for challenging the impugned rules as arbitrary.
The final argument raised by the Counsel pertained to the loss of trademark rights of the bidi manufacturers conferred by the Trademarks Act, 1999. He raised the question of whether the right conferred by a statute could be whittled down by a subordinate legislation. Section 28 of the Trademarks Act, 1999 provides for “rights conferred by registration”. Further the proviso (a) to Section 5(2) of the 2003 Act recognizes, preserves and supports the manufacturere’s right to advertise on tobacco product packages. The 2014 amendment rules had not only taken away this exception carved out in the COTPA by mandating 85% health warnings but also contravenes the provisions of Section 28 of the Trademarks Act and therefore amount to depriving the Petitioners of their property rights of trademark.
The day ended on a theatrical note with the Counsel bringing in a bidi worker to court to show the judges how exactly a bidi packet was rolled!