Shubh Dixit

1245

Health Law Assignment

Recently, the Uttrakhand High Court decided whether there is an obligation on Patanjali
Industries to share benefits of the traditional knowledge the matter of Divya Pharmacy vs.
Union of India1. Court held that all Indian companies which are extracting biological
resources are liable to seek prior approval as well as share part of their revenue with the local
communities that are responsible for conserving and protecting such resources. The final
judgment was an outcome of a litigation spanning multiple hearings over two years in which
Divya Pharmacy vehemently opposed either seeking prior approval from the State
Biodiversity Board or sharing a part of its revenue with the local communities as ‘fees’ under
what is termed as ‘fair and equitable sharing of benefit’.

The Biological Diversity Act, 2002 regulates the extraction of biological resources through
the State Biodiversity Boards and the National Biodiversity Authority. Biological resources
include plants, animals and micro-organisms but exclude those which are normally traded as
commodities. The powers and functions are divided between the State Biodiversity Boards
(State Board) and the NBA. Broadly, all foreign entities (companies, institutions, individuals)
are within the jurisdiction of the NBA while all Indian entities are the subject matter of the
State Board. The law contemplates that before a commercial entity extracts biological
resources, it must take prior approval of the State Board or the NBA and also undertake to
share the benefits arising out of the use of such biological entities with the local community,
which has conserved and protected these biological resources. The benefits can be in the form
of monetary compensation as well as ‘joint ownership of intellectual property rights’ and/or
‘transfer of technology’. The central idea behind this provision is that the biological diversity
in the form of plants and animals that exists in certain regions is because of the traditional
knowledge and practices of local communities. Thus, when a company extracts herbs, roots,
seeds and other biological resources and sells them commercially, it is, in fact, benefiting
from the traditional knowledge and practices of the local community. It, therefore, has to not
only pay for the product but also for the traditional knowledge and practices without which
the biodiversity would not have existed. This is the central idea behind fair and equitable
benefit sharing, which became a law in 2014 as a result of Access and Benefit Sharing
Guidelines.

Divya Pharmacy’s contention was simple: a swadeshi company was not required under the
law to share its revenue with desi people and only a videshi company should share its revenue
with Indian people. It is pertinent to point out that all that Divya Pharmacy was required to
pay by way of fees is 0.5 per cent of its gross revenue minus taxes. According to Divya

1
Divya Pharmacy vs. Union of India Writ Petition (M/S) No. 3437 of 2016
Pharmacy, for an Indian entity, all that is required is “prior intimation” to be given to the
State Biodiversity Board.

The judgment, delivered by Justice Sudhanshu Dhulia, rejected every contention of Divya
Pharmacy. In a precedent-setting judgment, the court stated that though on “the first blush” it
may seem that an Indian entity is not required to share its revenue, however, “what seems
obvious, may not always be correct”. The court extensively relied on the Convention on
Biological Diversity, 1992 and the Nagoya Protocol on Access and Benefit Sharing of 2010
to hold that “Indigenous and local communities, who either grow ‘biological resources’, or
have a traditional knowledge of these resources, are the beneficiaries under the Act.” In
return for their parting with this traditional knowledge, certain benefits accrue to them as fair
and equitable benefit sharing. This benefit the indigenous and local communities get under
the law is over and above the market price of their biological resources. Unlike most
judgments that attribute international conventions to the efforts of the government, Justice
Dhulia credits the Convention on Biological Diversity and the fair and equitable sharing of
benefits to the “long history of the movement for conservation” and the “long struggle, by
and on behalf of the local and indigenous communities”. The court emphasized that the rights
of indigenous and local communities “have to be protected, equally from outside as well as
from within”. The court finally held that the State Biodiversity Board does have the
jurisdiction to demand “fair and equitable sharing of benefits” from Divya Pharmacy and, by
implication, from all Indian companies.

The high court’s decision has brought clarity to the interpretation as well as implementation
of the Access and Benefit Sharing regime. However, the real test will be in ensuring that the
amount collected by way of fees goes to the communities which have conserved biodiversity,
and is used for the purpose of conservation of biodiversity. Only then will the purpose of the
fair and equitable sharing of benefit be achieved. Otherwise, the fees will only end up as a
licence to plunder the resources.

His is not the first company to have baulked at sharing the benefits that have accrued from
access to the country’s rich and manifold biological resources. Dozens of small and medium
companies have also challenged the demand from state biodiversity authorities that they pay
a fraction of their revenues for the benefit of local communities who have conserved these
biological resources over time, sometimes, for aeons. However, the decision by yoga teacher
Ramdev’s behemoth Patanjali Yog Peeth to reject the demand that it give a tiny percentage of
its humongous revenues to the local community since it is a domestic enterprise and not a
foreign company means the issue has been joined in a serious manner.

There are political overtones to the issue since the BJP is determined to promote indigenous
systems of medicine and has made AYUSH a full-fledged ministry from a department in the
Ministry of Health & Family Welfare earlier. Besides, Ramdev is close to the ruling BJP’s
power centre and is one of its star campaigners and enjoys a clear leeway in most matters.

For several years now claims of state biodiversity boards (SBBs) for benefit-sharing have
landed in the high courts of several states where dynamic—critics would term them
overenthusiastic—boards have been issuing notices to a range of commercial enterprises to
pay a kind of royalty on the biological resources they have been using to turn a neat profit.
The prime beneficiaries, in their view, are pharmaceutical and food companies which have
been making a killing by offering ayurvedic and herbal products in the market. No company
has been as much in the spotlight as Ramdev’s Patanjali Ayurved for its explosive growth. A
Bloomberg report of May 4 said the revival of traditional ayurvedic products is eating into
revenues of multinational consumer giants, Colgate-Palmolive and Unilever. Patanjali
Ayurved’s sales of $1 billion in 2017-18, it claimed, had surpassed the revenues of Colgate-
Palmolive’s local unit.

Legal experts say Patanjali and Dabur, another major player in this segment, along with a
host of smaller companies are shielding themselves from benefit-sharing because of the
ambiguity in the law. For domestic companies, the critical law is Section 7 of the Biological
Diversity Act which states that “prior intimation” to SBBs is mandatory for obtaining
biological resource for certain purposes. Only local people and communities and traditional
doctors who have been practising indigenous medicine are exempt from this requirement.

Anyone who flouts the law or abets its contravention faces a jail term and/or fine. However,
companies are arguing that prior intimation does not imply prior permission, and as such the
requirement of benefit-sharing is only for foreign entities as clearly stated in Section 3.

The logic for benefit-sharing is simple. Since corporate entities are using biological resources
for commercial gain, it was deemed only fair that some of the money should flow back to the
people who safeguard them. This is a core principle of the Convention on Biological
Diversity, the 1993 global treaty which was an attempt to preserve the world’s dwindling and
endangered biodiversity. This principle was brought into sharper focus in a subsequent
protocol signed in Nagoya as the access and benefit-sharing or ABS agreement.

In a study of such cases in 2016, legal researchers and policy analysts Shalini Bhutani and
Kanchi Kohli found ABS topped the list of contested issue under the Biodiversity Act. It also
goes “to show that those with the resources are able to pursue litigation to safeguard their
interests”. If companies such as Patanjali and Dabur can convince the courts that Indian
companies are exempt from ABS, it will call for a relook at the Biodiversity Act. But whether
this government would want to tighten the rules for domestic players seems rather unlikely.
 References

https://blog.scconline.com/post/2018/12/29/biological-resources-are-property-of-nation-
divya-pharmacys-challenge-to-fair-and-equitable-benefit-sharing-dismissed/

Dr. Meda Srinivasa Rao, “Traditional Wisdom in Indian Entrepreneurship - A Case Study on
Patanjali” International Journal of Engineering and Management Research, Volume-6, Issue-
5, pg 332.