Legal Metrology Decriminalization and Nomination -Most Awaited

The Legal Metrology Act, 2009, which establishes and enforces the standard of weights and measures used in the commercial sector, has long been subjected to censure owning to its harsh punitive measures. In recent past, Department of Consumer affairs released Stakeholder consultation on proposal of decriminalization of Legal Metrology Act, 2009. It seems that the long awaited respite looked forward to by Directors working under duress and trying to dodge the noose of ‘criminality’, is a step closer to realisation.

A brief history of the Legal Metrology Act

The trade of goods is and has been the basis of every economy. When people bartered goods, they felt the need for uniformity which led to the usage of coins. As coins became the standardised mode of payment, the twin concepts of price and quantity began crystallising. That was the time of localised markets, limited communication and technologically restricted advertising. Traditional modes for measuring quantity, like using pebbles in balances soon proved inefficient as they provided a wide ambit for trade malpractices and affected customer welfare. The need for a standardisation of units of weights and measurement was thus felt throughout history. As the world grew smaller, economies interconnected, and international bodies like International Organisations for Legal Metrology came into being, the government enacted the Standards of Weights and Measures Act as early as 1956. To keep up with the latest standard of units, the government regularised these Acts in 1977 and in 1985, recognising the need for flexibility and a dynamic approach to keep up with the rapid changes in the economy. Globalisation brought forth its own list of challenges as the industrialists became shrewder and customers remained naive lambs. The Legal Metrology Act of 2009, with all its draconian measures as enacted to protect the vulnerable party, the customer. However, since the Act has been enacted, social media platforms have boomed, and information creation and reception has become effortless. One post is all it takes for bad advertising to infect businesses. The availability of innumerable substitutes screams that compromising with quality can result in a sudden death. It is the era of multinational corporations and outsourcing. The iron fist of the Act, by maligning just of one name, can now affect the livelihoods of millions across the globe. Therefore, the time for change has come again.

Challenges posed by the current Legislation

The Act as it exists today includes both criminal and civil measures of tackling malpractices within its gambit. The criminal ramifications arise mostly in cases of non-compounding of offences. This has dual repercussions. Firstly, it raises the standard of proof for proving the offence, hence creating an escape route for wrongdoers. Inability to prove the commission ‘beyond reasonable doubt’- especially with the essential ingredient of mens rea or criminal intention- hinders the compliance of laws.This on a micro level is harmful to the rights of consumers and on a macro level, to the Indian market by creating a general distrust on the authenticity of the goods sold (suspicion on the printed date of manufacturing, date of import, weight claimed, marketed by, etc). Interestingly, along with being too high a standard for affixing liability, mens rea also leads to prosecution in cases where the deference need not necessarily be intentional. Secondly, the Act directly affects ease of doing business in India,which has been evidenced by the oscillations in its definition of the meaning of ‘person(s) in charge of the business’, that is, from including the board of directors from reducing it to a single nominated director, for making them criminally liable for most of the offences under the Act.

Proposed Amendments

Penalties and Preventive Measures

Recognising these challenges, the proposal aims at decriminalising the provisions where there need not be any mens reanecessarily involved and the larger public need not be adversely affected. Thus, the proposal includes review of the penalties in the current legislation, between sections 26 and 53 of the Act,which govern the manufacturing or sale of non standard weights, tampering with licenses, quoting non standard units, using unverified weight measures, non production of required documents, selling non standard packaging in declaration and quantity, etc. A hiked penalty fee has been suggested as an alternative in the range ofOne lakh to Ten lakhs but with the caveat of cancelling licenses. Thus, the proposal seems to be mindful about the effectiveness of the penalties as a mode of prevention, especially as imprisonment is suggested to be done away with.Furthermore, to reach the same end of de-criminalisation, certain offences such as tampering with or altering weights and measures, giving false returns and maintaining false particulars, have been suggested to be made ‘compoundable’.

Person in charge of the conduct of business

Targeting section 49 of the Act, which requires a director to be nominated as a ‘person in-charge of conduct of business’, the proposals suggest that nominations be made on the managerial level instead.The rationale behind this is that it is Managers not Directors who are in-charge of day to day business operations. Section 49 of the 2009 Act had corrected the fallacy in the 1976 Act, by providing for the nomination of one Director or Partner (as opposed to all in the latter) against whom criminal proceedings can be initiated. The proposal wants to go a step further and absolve the directors of liability by putting managers in the line of fire.

Selling above MRP – Section 36 (1) A

Finally, the proposal suggests the addition of section 36 (1) A to target the sale of commodities above MRP.As yet, it is only under section 32(3) of theLegal Metrology (Packaged Commodities) Rules, 2011, as amended in 2013, that selling above MRP is governed, which deems it a compoundable offence punishable with a fine of Rs. Two Thousand in case of a wholesaler or a retailer, and Rs. Five Thousand in case of a manufacturer or an importer. This has been strengthened by the 2018 amendment whichholds the declaration of dual MRPs as a contravention to law. If section 36 (1) A is introduced, the penalty will increase such that it will between Rs. Five Thousand and Twenty Five for first time offenders but shall hike up to a minimum of Fifty Thousand and One Lakh for respective repetitions.

Analysis and Conclusion

Hiked fines

The proposals tackle challenges posed by the Act without ignoring the aims sought to be fulfilled by it. Given that many wrongdoers get away with their malpractices because of a higher standard of proof, strictly enforced monetary penalties and cancellation of license as measures of compliance would be, at least, equally efficient as imprisonment and would also help punish them through hefty fines, preventing them from escaping using the stringent mens rea requirement. Incorporation of such proposals would also reduce burden on courts because with a subsequent increase in compoundable offences, offenders may plead guilty and agree to pay fine, thereby eliminating the need for application of a judicial mind.

Cancellation of Licenses

Cancellation of licensesas a penalty for most of the provisions may not be right approach and must be considered carefully. With an incentive for decriminalisation being reduction on the burden on courts, it seems absurd to introduce such a penalty as it would actually reverse this benefit by increasing litigation. Moreover, it would have a major impact on stakeholders tied to the business, who, though innocent, would end up paying for another’s wrongs. A good example of this is that of businesses having multi-location presence, where default at once place could lead to cancellationof thelicenses for all the units. This would certainly be against the spirit of law and equity and ease of doing business would also worsen.

Nomination of Managers

Regarding the second focal-point of the proposal, while directors do not look into day to day workings of a company, they should bear consequences for non performance as they get a share in profit as compared to managers who merely get a salary. Today, since the Board is involved, the industry takes these compliances seriously. However if the onus of the charge is entirely dropped on the Manger, the purpose of this amendment may really get defeated.While the entire board of directors should not be affected, there must be some mechanism to ensure liability on their part.

Introduction of Section 36(1)A

While decriminalisation is desirable in some aspects, it is not a ‘one size fits all’ mantra for improvement. Some offences are of such a nature that they require a harsher form of atonement, namely, imprisonment. Sale of commodities above the MRP is a gross infringement of consumer rights and a blight in transparency and clean business operations. It is the Coronavirus of day-to-day business malpractices, that is, highly communicable across sectors and business structures. Paying puny lakhs would not be taken seriously in swindles of crores. The Government must ponder and strategise to introduce necessary stringent punishments to prohibit such practises.

In Sum

The digitalization scrutiny under the Act is also much awaited and its ignorance in the proposal has left many issues unaddressed. The government must consider digitalization of the entire process under the Act. To this regard, the future already seems bright. With a recent notificationdated October 13, 2020, notifying the development of an online system of nomination of directors and mandating online request for the same, the government is alreadydisplaying eagerness to improve efficiency and transparency through digitalisation.

Thus, while there are some loose ends left to be tied, the proposal seems like a light at the end of the tunnel.

Nitin Jain, Partner (with assistance from Vanshika Dubey – Intern, MNLUMUMBAI)

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