In Central India AYUSH Drugs Manufacturers Association Vs. State of Maharashtra (Writ Petition No. 6360 of 2015, decided on 28 September 2016), the Nagpur Bench of the Bombay High Court held that Indian entities commercially utilizing biological resources are subject to fair and equitable benefit sharing under the Biological Diversity Act, 2002 and the 2014 Benefit Sharing Regulations.
Case Overview and Judicial Coram
The judgment was delivered by a Division Bench comprising Justice B.P. Dharmadhikari and Justice A.S. Chandurkar at the Nagpur Bench of the High Court of Judicature at Bombay. The primary petitioner, Central India AYUSH Drugs Manufacturers Association, represented manufacturers of Ayurvedic, Siddha, and Unani drugs operating across Central India, challenging regulatory demands made by the Maharashtra State Biodiversity Board.
The litigation arose when the State Biodiversity Board issued notices directing domestic AYUSH manufacturers to submit prior intimation under Section 7 of the Biological Diversity Act, 2002, and to pay fair and equitable benefit sharing fees pursuant to the Guidelines on Access to Biological Resources and Associated Knowledge and Benefits Sharing Regulations, 2014.
Statutory Framework Under the Biological Diversity Act 2002
The Biological Diversity Act, 2002 was enacted to fulfill India's commitments under the United Nations Convention on Biological Diversity (CBD) 1992. The legislation focuses on three primary objectives: the conservation of biological diversity, the sustainable use of its components, and the fair and equitable sharing of benefits arising from the utilization of genetic and biological resources.
The Act creates a three-tiered institutional architecture to govern biological wealth across the nation:
- National Biodiversity Authority (NBA): Operating at the central level to deal with requests from foreign individuals, foreign entities, and intellectual property protection.
- State Biodiversity Boards (SBB): Established at the state level to regulate commercial utilization, bio-survey, and bio-utilization by Indian citizens and domestic corporate entities.
- Biodiversity Management Committees (BMCs): Formed at the local panchayat and municipal levels to preserve local biodiversity, document traditional knowledge, and maintain People's Biodiversity Registers.
The Core Controversy and Petitioner Contentions
The Central India AYUSH Drugs Manufacturers Association raised a fundamental jurisdictional objection. The petitioners contended that the requirement of fair and equitable benefit sharing applied exclusively to foreign entities governed under Section 3 of the Act. They argued that domestic Indian companies utilizing local herbs, roots, and biological substances for indigenous medicine manufacturing were only subject to Section 7, which specifies a requirement of prior intimation to the State Biodiversity Board.
According to the petitioners, Section 7 does not explicitly empower the State Biodiversity Board to levy financial charges or impose benefit-sharing percentages on the turnover or purchase value of biological materials. They further argued that the 2014 Regulations exceeded the statutory mandate of the principal Act by extending financial benefit-sharing obligations to domestic Ayurvedic drug manufacturers who had been operating for decades without such regulatory encumbrances.
The petitioners emphasized that traditional Indian medicine systems should be encouraged rather than burdened with recurring statutory fees. In support of their arguments, the manufacturers cited broader principles of corporate regulatory compliance and statutory interpretation, asserting that fiscal liabilities cannot be imposed through subordinate regulations in the absence of explicit statutory authority.
Defense of the State Biodiversity Board and Government Policy
The State of Maharashtra and the Maharashtra State Biodiversity Board defended the regulatory notices by interpreting the scheme of the Biological Diversity Act as an integrated mechanism for resource conservation. The respondents maintained that the definition of commercial utilization under Section 2(f) encompasses the extraction, processing, and manufacturing of drugs and commercial preparations using biological resources.
The State Board highlighted that while Section 3 regulates access by non-citizens and foreign bodies requiring approval from the National Biodiversity Authority, Section 7 empowers the State Board to regulate commercial utilization by Indian citizens. Under Section 23 and Section 24 of the Act, the State Biodiversity Board is expressly authorized to advise the state government and regulate activities relating to the commercial use of biological components.
The respondents argued that exempting Indian commercial entities from fair and equitable benefit sharing would defeat the core objective of the Convention on Biological Diversity. The funds collected through benefit sharing are channeled back to local communities and Biodiversity Management Committees responsible for conserving the ecosystems from which biological raw materials are harvested.
Judicial Interpretation and High Court Findings
The Division Bench of the Bombay High Court rejected the narrow interpretation proposed by the petitioners. The court examined the legislative purpose of the Act and held that commercial utilization by domestic entities cannot be isolated from benefit-sharing obligations.
The High Court established the following key findings in its judgment:
- Applicability to Indian Entities: The court held that the 2014 Benefit Sharing Regulations and Rule 17 of the Biological Diversity Rules, 2004 are valid and apply to Indian manufacturers utilizing biological resources for commercial purposes.
- Harmonious Construction of Sections 7, 23, and 24: Section 7 cannot be read as a mere formal notification requirement. When read alongside Section 24, the State Biodiversity Board has explicit authority to regulate, restrict, or prohibit activities related to commercial utilization, which includes determining fair benefit-sharing conditions.
- Equitable Distribution of Environmental Obligations: The conservation of biodiversity and equitable compensation to local cultivators and tribal communities cannot be achieved if massive domestic commercial extractors are exempted from benefit-sharing duties.
- Subordinate Legislation Within Statutory Bounds: The Central Government possessed adequate rule-making powers under Section 62 and the National Biodiversity Authority under Section 64 to frame the 2014 Benefit Sharing Regulations.
The court reaffirmed that judicial oversight in environmental matters supports statutory regulatory bodies, aligning with established precedents on administrative regulations and state board powers.
Key Distinctions Between Section 3 and Section 7 Entities
| Feature | Section 3 (Foreign Entities) | Section 7 (Indian Entities) |
|---|---|---|
| Governing Regulatory Authority | National Biodiversity Authority (NBA) | State Biodiversity Board (SBB) |
| Approval Requirement | Mandatory prior approval before access | Mandatory prior intimation before commercial use |
| Benefit Sharing Obligation | Direct agreement with NBA under 2014 Regulations | Compliance with SBB determination and 2014 Regulations |
| Exemptions Available | Collaborative research projects under Section 5 | Local people, vaids, and hakims practicing indigenous medicine |
Impact on AYUSH Manufacturers and Biodiversity Governance
The decision in Central India AYUSH Drugs Manufacturers Association Vs. State of Maharashtra settled a vital legal issue in Indian environmental and pharmaceutical law. By confirming that domestic drug companies must share economic benefits with biodiversity custodians, the Bombay High Court closed an interpretation loophole that threatened to starve local Biodiversity Management Committees of statutory conservation revenue.
For AYUSH drug manufacturers, the ruling confirmed that commercial production requires rigorous compliance audits, timely submission of prior intimation forms, and structured payment of benefit-sharing fees based on annual purchase turnover of biological ingredients. The ruling remains a foundational precedent on the territorial reach and economic mechanisms of the Biological Diversity Act, 2002.