Critically Analysing The Interpretation And Application Of The Definition Of Pre-Packaged Commodity

Anusha G. Rao & Divya Joseph

31 March 2023 8:30 AM GMT

  • Critically Analysing The Interpretation And Application Of The Definition Of Pre-Packaged Commodity

    The Origin of modern legal metrology can be traced back to 18th century France with the introduction of decimal metric system for trade. In 1875, Treaty of Meter was enacted to bring international uniformity and precision of standards of weights and measures. This also resulted in establishment of International Committee of Weights and Measures and the National Measurement Initiatives in...

    The Origin of modern legal metrology can be traced back to 18th century France with the introduction of decimal metric system for trade. In 1875, Treaty of Meter was enacted to bring international uniformity and precision of standards of weights and measures. This also resulted in establishment of International Committee of Weights and Measures and the National Measurement Initiatives in the developed nations. Subsequently, in 1955, the International Organisation of Legal Metrology was established.

    Consequently, India enacted the Standards of Weights and Measures Act, 1976 which was then replaced by the Legal Metrology Act, 2009 with the intent to establish and enforce standards of weights and measures, regulate trade and commerce. The Act requires the manufacturers and retailers to make certain mandatory declarations on the pre-packaged commodity. The intent of this legislation is to protect the interest of the customers from fraudulent actions. This article critically analyses the interpretation and the application of definition of Pre-Packaged Commodity under the erstwhile Act, which has been a subject matter of litigation over the years.

    Rule 2(l) of the Standards of Weights and Measures (Packaged Commodities) Rules 1977, defines Pre-Packaged commodity as;

    Pre-packaged commodity with its grammatical variations and cognate expressions, means a commodity or article or articles which, without the purchaser being present, is placed in a package of whatever nature, so that the quantity of the product contained therein has a pre-determined value and such value cannot be altered without the package or its lid or cap, as the case may be, being opened or undergoing a perceptible modification, and the expression 'package,' wherever it occurs, shall be construed as a package containing a pre-packed commodity.

    Explanation (1) Where, by reason merely of the opening of a package, no alteration is caused to the name, quantity, nature or characteristics of the commodity contained therein, such commodity shall be deemed, for the purposes of these rules, to be a prepacked commodity, for example, an electric bulb or fluorescent tube is a pre-packed commodity, even though the package containing it is required to be opened for testing the commodity.

    On examination of Rule 2(l) and its explanation, two parameters to classify a commodity as Pre-Packaged Commodity emerges:

    1. The quantity of the product contained in the packaging has a pre-determined value.

    2. Such value cannot be altered without the package being opened or undergoing a perceptible change.

    Further, the Explanation to Rule 2(l) provides that, merely on the ground that a product is opened for testing does not exclude it from the ambit of the rules. Provided there is no alteration caused to the quality, nature or characteristics of the commodity.

    Critical Analysis of Judgments

    The subject matter of the precedents dealing with the definition of pre-packaged commodity falls under the purview of the erstwhile Act. Hence, for the purpose of critical analysis of the judgments, the definition of pre-packaged commodity as under the erstwhile Act is referred. However, it is also pertinent to note that Rule 2(l) of the erstwhile Rules corresponds to the Section 2(l) of the Legal Metrology Act[2].

    The Bombay High Court in Titan Industries Ltd v. UOI & Ors[3]. while examining whether a watch can be considered as a pre-packaged commodity laid down a twin test “Firstly, whether by the very nature of the commodity it requires to be packed before it can be sold. Secondly, in the event a package is opened, does it undergo any perceptible change or reduction in value.”

    The court while applying the twin test held that watches do not under go any perceptible change when removed from the packaging and therefore it is not a pre-packaged commodity.

    Here, the test is not whether the product’s intrinsic nature requires it to be pre-packaged, rather it is whether the packaged commodity has a predetermined value, which is unable to be altered without the packaging being removed. Further, it is also pertinent to observe that the court failed to adequately apply the Explanation to Rule 2(l), which states that no product shall be excluded from the ambit of the Rule, merely on the ground of removal from the packaging so long as it does not result in an alteration of the predetermined value.

    By contrast in the case of Whirlpool of India Ltd v. UOI & Ors[4], the full bench of the Supreme Court considered the question as to whether a refrigerator is a pre-packaged commodity. The Hon’ble court in this context clarified that the Rule read with the explanation clearly indicates that a product is considered pre-packaged commodity as long it is packed by the manufacturer without the customer being present, irrespective of the reason for such packaging. The court further stated that on perusal of Explanation 1 to Rule 2(l), it is clear that removal of the packaging for the purpose of examination does not exempt it from the ambit of the Act. Provided, there is no change in the predetermined value of the product by removal of the packaging.

    Subsequently, in the case of Reebok India Company v. Union of India & Ors[5], the Delhi High Court rightfully placing reliance on the Whirlpool Judgment (Supra) rejected the contention of the Petitioners that footwear and garments cannot be considered as pre-packaged since it comes in an openable packaging. The court observed that the legislative intent in this regard, is clear from the inclusion of electric bulbs in Explanation 1 to Rule 2 (l). The court also noted that the test here is whether the goods were packaged without the consumer being present and whether there is any change in the value of the goods by virtue of such packaging being removed.

    In State of Maharashtra and Ors. v. Subhash Arjundas Kataria[6] the issue in the appeal before the Division Bench was, the scope and purport of the expression, “commodity in pre-packaged form”, under Section 2(b) of the erstwhile Act. The specific question was whether the products: sunglasses, watches, electrical goods, fixed wireless phones, home appliances, consumer electronics, microwave ovens etc can be considered as pre-packaged commodity.

    The Court observed that with respect to sunglasses, since it is not sold by the retailer in a packaging it cannot be considered pre-packaged. This is because, despite removing the sunglasses from the box, it causes no alteration to its pre-determined value. The court opined that by virtue of the same, the other commodities would not fall under the category of “Pre-Packaged Commodity”.

    The Court tries to create an artificial distinction between the duties of the retailer and the manufacturer, which is not envisaged under Rule 2 (l). Therefore, the Court’s reasoning based on this distinction, that as far as the retailer is concerned, the product is not in a package and hence not a pre-packaged commodity is a flawed interpretation of both the Rules and the distribution chain of the business[7].

    The Court also observes that even if the sunglasses were to come in a packaged form, the value is not altered even by removing it for the customers. This reasoning fails to take into consideration the Explanation to Rule 2(l), which explicitly provides that even if there is no alteration to the pre-determined value of the product by merely opening it, it would fall under the definition of a pre-packaged commodity.

    The decision of the Whirlpool judgment that the refrigerator is a pre-packaged commodity, despite having been removed from the packaging, since there is no alteration to its pre-determined value, has now been referred to a larger bench. It is noteworthy to mention herein that there has been no further development in this case since then.

    Advisories under the Legal Metrology (Packaged commodity) Rules, 2011

    That being the legal position so far, the central government subsequently issued two advisories dated 16/12/2016 and 31/03/2017 respectively, excluding loose garments from the mandatory labelling requirements under the Legal Metrology (Packaged commodity) Rules, 2011. However, the advisory gave separate labelling requirements for loose garments sold to consumers once they examine the feel, fit, style and design[8].

    The following case of Kandukuri Garments & Ors v. Inspector of Legal Metrology, Bangalore[9] has to be examined in the light of the advisory. The Karnataka High Court relied upon the Oxford Dictionary to interpret the term “loose”, which indicates that the commodity is not packaged together or tethered. The court observed that since the loose garments are packaged in polythene cover, it will not be considered as pre-packaged and therefore will not fall under the ambit of the advisory. The Court in order to arrive at this conclusion, relied upon the Whirlpool judgment.

    It is to be noted that the Whirlpool judgment having interpreted Rule 2(l) and its Explanation, will not be applicable to the present case, since the Advisory clearly exempts loose garments from its ambit. The Advisory is reproduced hereunder:

    A loose garment sold after consumer sees them for style/design, tries them for fit and touches them for feel of the fabric, is not a pre-packaged commodity if the same commodity is delivered to the consumer.”

    Hence, the Court should have simply applied the Advisory to the present case, which exempts loose garments from the mandatory declaration requirements under the Legal Metrology Act, 2009.

    On a bare perusal of Rule 2(l) of the erstwhile Rules and its Explanation, it is clear that merely opening a packaging for whatever reason, does not exclude it from its ambit, since there is no alteration to the pre-determined value of the commodity. In State of Maharashtra and Ors. v. Subhash Arjundas Kataria, the court failed to apply this position as is and instead created an artificial distinction between a retailer and manufacturer. Thus, it gave immunity to the former from making the mandatory declarations. Therefore, there was no need for the court to refer this issue to a larger bench, which has now created a confusion. Further, with respect to the Advisory, it clearly exempts loose garments from the ambit of Section 2(l) of the Legal Metrology Act, 2009[10]. Therefore, it should not be read with any of the precedents interpreting the said provisions. For this reason, it becomes clear that the Karnataka High Court in Kandukari Garments, erred in its application of the Whirlpool judgment to the subject matter of loose garments, which is exempted from the Act.

    Views are personal.

    [1] John Birch A.M, Benefit of Legal Metrology for the Economy & Society, International Organization of Legal Metrology, https://www.oiml.org/en/publications/expert/en/files/pdf_e/e002-e03.pdf.

    [2] Section 2(l) – Pre-Packaged commodity means a commodity which without the purchaser being present is placed in a package of whatever nature, whether sealed or not so that the product contained therein has a pre-determined quantity.

    [3] (2006) SCC OnLine Bom 675.

    [4] (2007) 14 SCC 468.

    [5] 2009 SCC OnLine Del 2666.

    [6] [2012 3 AWC 2765 SC].

    [7] Chain of business is a business process where Manufacturer manufactures the product, distributor distributes the products to retailers and retailers sell the products directly to customers.

    [8] Ministry of Consumer Affairs, Food and Public Distribution, Legal Metrology Division, https://consumeraffairs.nic.in/sites/default/files/uploads/legal-metrology-acts-rules/LM_Advisory_for_Readymade_Garments_0.pdf.

    [9] AIR 2018 Kar 187.

    [10]This Section corresponds to Rule 2(l) and its Explanation.


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