Global Excess v. Union of India: Compulsory Registration for Import of Electronic Goods Not a Restriction on Parallel Imports

On 17^th January, 2014, the Gujarat High Court set aside a Writ Petition, holding that the “Electronics and Information Technology Goods (Requirement for Compulsory Registration) Order, 2012” which mandates the registration of fifteen categories of electronics items under the Compulsory Registration Scheme of Department of Consumer Affairs subject to compliance with Indian safety standards was neither violative of Arts. 14 and 19(1)(g) of the Constitution of India nor an indirect ban on parallel imports. 

The petitioner in this case was Global Excess, a firm engaged in the import of electronic goods. The firm held valid licenses for import and was a registered dealer under the Central Sales Tax Act. The petitioner was aggrieved by the Electronics and Information Technology Goods (Requirement for Compulsory Registration) Order, 2012 and the notifications issued by the respondent authorities in purported exercise of powers conferred under Section 10(1)(p) of the Bureau of Indian Standards Act, 1986 read with Rule 13(fa) of the Bureau of Indian Standards Rules, 1987.

The effect of the Rules and notifications is that electronic goods can only be imported into India if they are registered at a laboratory recognised by the Bureau of Indian Standards by providing details regarding a variety of technical specifications which only a manufacturer is likely to know about. Further, the testing is to be done either by the manufacturer or by someone authorized by the manufacturer.  It was contended that these requirements created a situation where manufacturers and MNCs get a monopoly over electronic goods, as the strict requirements have led to a “total indirect ban on the importation of the parallel import of the electronic and information technology goods”.

The petitioner also contended that these rules defeat the provisions of S.107A(b) of the Patents Act, 1970. According to this section, importation of patented products by persons who are duly authorised under the law to produce or sell or distribute the product shall not be considered as infringement of patent rights.

Further, it was contended by the petitioner that since they were not given an opportunity to be heard regarding the change in policy, and the compulsory quality testing and registration reduced the scope of products that they could sell, the impugned Orders are violative of Arts. 19(1)(g) and 14 of the Constitution of India.

Two separate replies were filed by the Union of India (First Respondent) and Bureau of Indian Standards (Second Respondent). The submissions by both were substantially similar. It was argued on Respondents’ behalf that:

1)      The Impugned Orders were passed on pursuance of the National Policy on Electronics, which is aimed at providing quality electronic goods to Indian consumers.

2)      There was adequate notice given to the petitioner and other importers as the order was notified on 7^th September, 2012 and published in the Gazette on 3^rd October, 2012. It came into force only on July 3^rd, 2013. Moreover, it was passed after due consultation of several stakeholders, and the Department of Consumer Affairs, Ministry of Commerce, etc.

3)      The plaintiff had misunderstood the effect of the Orders and notifications thereunder. The regulations require the manufacturer to get the goods registered. Thereafter, anyone can import the electronic goods. This is done through a representative of a manufacturer in India, so that the Indian Courts may have jurisdiction in case the manufacturer is to be held accountable. Once the goods are registered,, and goods are certified to be safe and conforming to notified standards any person/entity can import them.

4)      Art. 14 of the Constitution is not violated as both Indian and Foreign goods have to be registered with the BIS  for the purpose of quality control.

The High Court of Gujarat agreed with the contentions of the respondents. Further, it was held that the compulsory registration process was a policy decision taken by the Government, stressing the idea of judicial restraint when questions of government policy is involved. The policy, in this case, was to ensure that consumers had access to only high-quality electronic goods. The Court also held that even if these rules impose restrictions on parallel imports, they are reasonable restrictions which are not ultra vires of the law.

The Writ Petition was therefore set aside. This is not surprising as the Court’s hands are usually tied up in matters of administrative policy, with the judiciary only intervening when a policy is patently illegal or unconstitutional. The issues raised in this W.P. cannot, however, be ignored. The effect of these Rules is that it allows a manufacturer to choose whether parallel imports can be allowed in India. Further, if the threshold for registration is high, small manufacturers may simply choose not to undergo the hassle of getting it registered in India.

While the ultimate policy is to protect consumers, it is worth considering whether consumers really need to be ‘protected’ from low-quality electronic products. As opposed to goods such as food products, automobiles, etc where lack of quality may cause tangible harm, a large base of consumers may simply be willing to pay a lower amount for lower quality product, provided that minimum health and safety standards are met. Information regarding these minimum standards will be available with the exporters as well, as contended by the petitioner in this case. It is unjustified to require that only the manufacturer is permitted to get the electronic goods registered. The Indian policy in the import of food, for instance, allows exporters to apply for a quality-control licence under the Bureau of Indian Standards. These rules therefore appear to be divorced from the policy they aim to perpetuate.

The judgment can be downloaded from here.