Indian Registered Companies Exempt From Benefit Sharing Under Biodiversity Act: HP High Court Stays ₹5 Crore Demand Notices On Ayurvedic Company

A bench comprising Chief Justice M.S Ramachandra Rao and Justice Satyen Vaidya also stayed a demand notice of Rs. 5 crore issued by the Himachal Pradesh State Biodiversity Board (HPSBB) to an Ayurvedic company for alleged violation of benefit sharing provisions under the Biodiversity Act, 2002.

The case involved Hygienic Research Institute Private Limited, an Ayurvedic company based in Mumbai with a manufacturing unit in Himachal Pradesh. The SBB had demanded Rs. 5 crore from the company, claiming it had accessed biological resources without submitting prior intimation and obtaining approval.

The company challenged the SBB's demand, arguing that as a local company, they were exempt from prior NBA approval under Section 3 of the Biodiversity Act, 2002. They only needed to inform the concerned SBB, which they had done by obtaining a No Objection Certificate (NOC).

The HPSBB, however, demanded a benefit share amounting to Rs. 5 crore for financial years 2021-22 and 2022-23, alleging non-compliance with approval protocols. They cited Sections 7 and 24 of the Act, along with Rule 12 of the Himachal Pradesh Biological Diversity Rules, 2019, to justify their demand.

The respondents further submitted that an amendment to Section 23 of the Act in August 2023 empowered them to determine benefit sharing.

Court Observations:

Adjudicating upon the matter the court cited Section 3 & 7 of the Act and observed that an Indian registered company does not fall within the provisions of Section 3 of the Biological Diversity Act, 2002.

Hence, the requirement to seek approval from the National Biodiversity Authority does not apply as Indian registered companies need only provide prior information to the State Biodiversity Board, the court explained.

The bench noted that the amendment came into effect only on April 1, 2024, and the SBB's demand was made in October 2023. The Court further observed that the amendment itself did not grant retrospective powers to the SBB.

The Court also highlighted that Section 23, even in its amended form, empowers the SBB to advise the State Government and regulate activities through approvals.

“State Biodiversity Board is prima facie entitled to only advise the State Government subject to any guidelines issued by High Court of H.P. the Central Government, on matters relating to the conservation of biodiversity, sustainable use of its components and equitable share of the benefits arising out of the utilization of biological resources”, the bench underscored.

Additionally, the Court also pointed out that the power to levy taxes or fees must be expressly granted and observed,

“There has to be a specific power of imposition of a tax or a fee by the delegating authority and it is not permissible to imply such a power to a delegating authority for imposition of a tax or a fee”.

Based on these observations, the Court ruled in favor of the Ayurvedic company and stayed the demand notice issued by the SBB and another notice issued by the licensing authority seeking balance sheet information for the past three years.

Case Title: Hygienic Research Institute Private Limited vs. H.P. State Biodiversity Board and others.

Citation: 2024 LiveLaw (HP) 26

Mr. Neeraj Gupta, Sr. Advocate with Ms. Shradha Karol, Advocate, appeared for the petitioner company, Mr. Anup Rattan, Advocate General, with Ms. Priyanka Chauhan, Deputy Advocate General, represented respondents no.1, 2 and 3-State. Mr. Balram Sharma, Deputy Solicitor General of India, represented respondents no. 4 and 5.

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