Corporate Law Newsletter Volume I, Issue 03

 

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India: FSSAI issues draft norms for e-commerce food operators

The Food Safety and Standards Authority of India (hereby referred to as FSSAI) has recently on September 20, 2016, released a draft consideration, numbered 1(80)2016/Enf-II Info/FSSAI(Pt) on the need for regulations regarding e-commerce sites that provide services regarding food delivery. The unfettered existence of such sites without any regulations poses a challenge to the existing legal paradigm.

The Indian government established the FSSAI under the Food and Safety Standards Act, 2006. The rationale behind the establishment of such a regulatory authority was to supervise and look after matters related to the quality of food products, consumer related issues, and distribution of food products.

The recent upsurge in the number of e-commerce sites, which act as Food Business Operators (FBOs), and their popularity and widespread use led to the issuance of the draft regulatory norms by the FSSAI, with respect to the obtainment of licenses.

The discontent amongst the general public with respect to the quality and the quantity of food products as provided by the aforesaid e-commerce sites led to the FSSAI stepping in. Various reports have shown that many consumers have received poor quality of products from such websites. The scope and effectiveness of e-commerce must be understood at this juncture.

With the advent of the digital age, the field of e-commerce has bloomed and found its place in many fields, such as electronics, books, and clothes, and for the purposes of this article – food products. The notion of e-commerce has developed into a reality only because of the vast consumer usage, and FBOs have quite successfully tapped into this phenomenon. Due to the convenience of viewing and placing an order online, FBOs have garnered a strata of consumers, who would rather use such websites due to the ease of use, rather than actually going to a store and buying food or food ingredients. But even with the simple idea of distributing food through an online portal, complications can arise. And complications did occur, in the form of depreciation of food quality and the service. The industry has become tainted with problems arising out of the quality and the quantity of the products sold by such e-commerce websites.

The recent draft norms that have been issued by the FSSAI will be a major step in the direction of reducing of the aforementioned problems regarding the products provided by e-commerce sites through strict implementations of rules and measures. Such a regime will be a huge step in protecting the rights of consumers’ vis-à-vis e-commerce sites with respect thereto. For the purposes of this article, section 2 and 3 of the draft have been included-

2. BUSINESS MODELS OF E-COMMERCE FBOs

E-commerce FBO includes, but is not limited to, the following:

2.1E-commerce entity providing listing services to sellers / manufacturer / restaurants on their platform, thereby providing platform for commerce to the sellers, manufacturers, restaurants, etc.

2.2 Sellers, vendors, importers, processors, packagers or manufacturers who display or offer their food products, including food services, catering services, sale of food or food ingredients for sale to the customers through either the market based model or the inventory based model of e-commerce.

2.3 Operating and providing storage and/or distribution services to the sellers, vendors, importers or manufacturers of the food products listed on their marketplace.

2.4 Providing transportation services to the sellers, vendors, importers or manufacturers of the food products and/or providing last mile delivery transportation to the end consumers.

3. REGULATORY REQUIREMENTS

3.1 REGISTRATION & LICENSING REQUIREMENT

3.1.1 E-commerce FBOs mentioned at clause 2.2, 2.3 and 2.4 above shall be covered under schedule-1 of Food Safety and Standards (Licensing and Registration of food Businesses) Regulation, 2011.These e-commerce FBOs have to obtain license from the Central Licensing Authority for the entire supply chain, i.e, Head Office/ Registered Office, Transportation, Storage, Distribution, etc.

3.1.2E-commerce entities providing listing/directory services to the sellers, restaurants, vendors, importers or manufacturers of the food products, may not require to obtain license/registration under the Act, Rules & Regulations made thereunder, subject to their not being engaged in any activities as specified in the definition of Food Business as defined in Section 3(n) of the Act. Further, even these e-commerce entities (covered under clause 2.1 above) shall ensure that no misleading information/false claims pertaining to the sellers, vendors, importers or manufacturers, or food products images are made available on their platform. The e-commerce entities shall clearly specify on their platform that liability of any violation of the FSS Act and applicable Rules and Regulations made thereunder would be with the sellers, restaurants, vendors, importers or manufacturers of the food products.

By including e-commerce sites under Schedule 1 of the Food Safety and Standards (Licensing and Registration of Food Businesses) Regulation, 2011, these sites will come under the same purview as other FBOs that operate outside the virtual world, thus ensuring a uniform standard regarding the same. Essentially, these sites will fall under the same set of regulations and restrictions that are imposed upon ordinary store owners, and thus make these e-commerce sites more accountable with respect to the products sold by them.

The FSSAI also defined FBOs under e-commerce with respect to Section 3(n) of the Food and Safety Standards, thereby enhancing the ambit of repercussions issued upon these e-commerce sites. Therefore, the draft norms issued for public comment by the FSSAI is a step toward better regulations and stricter fines imposed on these e-commerce sites will eventually help in regaining the trust in FBOs that operate through e-commerce sites in the minds of the consumers in general.

 

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India: Cabinet nod to bring Uber, Ola under Motor Vehicles Act

The amendment to the Motor Vehicles Act is not a trivial matter. The amendment bill brings along with it, major changes, that enhances the scope of applicability of the Act in terms of the regulations and penalties. The Motor Vehicle (Amendment) Bill that was introduced in the Parliament by the Minister of Road Transport and Highways, Shri Nitin Gadkari in the month of August, 2016 essentially aims at changing the structure of the old Act. The main objective behind the creation of this bill is to reduce the number of accidents that takes place on the roads. The insertion of Section 110A, is also a significant move by the Central Government in ensuring the accountability of defective vehicles that can compromise the safety of drivers, pedestrians and the environment. The other important change the Act brings about is the addition of “aggregator” to the terms “agents and canvassers” which brings cab services such as Ola, Uber, Meru, etc., under the ambit of the definition of service providers, thus allowing the Central Government to establish a regulatory authority to keep these aggregator services in check. But the Act was held up in Parliament for a while due to some mishap where some members of the Parliament claimed that they did not receive a copy of the bill because of which the discussion for the bill has been postponed to the winter session of Parliament in the month of November.

According to a government report provided by the Hindu, there is a loss of about 3 per cent of the GDP during the financial year 1999-2000, due to road mishaps, compared to 1.5 per cent for other middle income countries. This is a rather sizeable dent in the economic stability of our country and this is why the Act holds significance to the general populace. More than that, due to the increase in the rate of penalties, the Act will ensure conformity amongst drivers due to the fear of being caught and as a necessary corollary, spike in the usage of public transportation for day-to-day commute. This also solves the chronic problem of large traffic jams in major metropolitan cities. Another important point to be noted is that the Act has enhanced the scope of digital usage for matters regarding licenses, document verification and other tasks that till date could only be fulfilled by waiting in huge queues at government offices.

The Act differs from the old Act in the following ways-

(i) In the existing Motor Vehicle Act, there are 223 Sections, out of which, the Bill aims to amend 68 sections. Further, Chapter 10 has been deleted and Chapter 11 is being replaced with new provisions to simplify third party insurance claims and settlement process.

(ii) The Bill seeks to amend the Motor Vehicles Act, 1988 and seeks to insert Section 110A which provides for recall of vehicles in case certain criteria are met. This essentially gives power to the government to implement the recall policy of vehicles if they are detrimental to the environment or to the safety of drivers and others on the road, regardless of the type or variant of the motor vehicle. PRS India reports that the manufacturer will have to (i) reimburse the buyers for the full cost of the vehicle, or (ii) replace the defective vehicle with another vehicle with similar or better specifications. One of the clauses of the Act talks about a procedure where the Central Government has the authority to appoint an officer who shall have all the powers of a civil court, while trying a suit under the Code of Civil Procedure, 1908 in respect of the following matters, namely:— (a) summoning and enforcing the attendance of any person and examining him on oath; (b) requiring the discovery and production of any document; (c) receiving evidence on affidavit; and (d) any other matter as may be prescribed.

(iii) There is a new policy provided in the Bill that comes under the title of “Aggregator services”. According to the Bill, an aggregator means a digital intermediary or market place for a passenger to connect with a driver for the purpose of transportation. Simply put, this means any digital platform that enables a person to establish connection with a driver for transportation purposes, for e.g., – Uber, Ola, etc. According to a report published in the Financial Express , the Bill would like to restrict these aggregators to the definition of ‘service providers’ and regulate their functioning by ensuring that the cabs have city permits and to set a statutory rate for the services as opposed to the concept of “surge pricing” that works on the concept of increase in price with the increase in demand. The bill also states that these aggregator services must comply with the Information Technology Act, 2000.

iv) Earlier, the compensation fine paid by the defendant or the perpetrator of a “hit and run” case was INR 25,000. But, the new bill has increased the statutory limit to INR 200,000.

(v) Speaking of increase in fines, the new Act has spiked the penalty prices of offences by a rather large margin as recorded in the table provided on the official website of the Prime Minister’s Office.

It can be seen that even the simplest offence such as not wearing a helmet can cost the rider a penalty of INR 1000, which is a huge rise from the earlier INR 100 fine that was imposed.

(vi) Another important feature of the proposed bill is regarding Limited Insurance. It essentially talks about the fact that the injured person can only claim INR 500,000 as the maximum statutory limit and INR 10,000,000 in case of death. As opposed to the earlier Act that allowed for unlimited compensation claims on the part of the insurer. Therefore, this Act puts a cap on the premium insured to victims of road accidents.

In conclusion, the new amendment bill to the existing Motor Vehicles Act brings dynamic changes which entails scope for proper regulations of traffic on the road, stringent penalties and restructuring of certain policies. While there are a number of members in the Parliament who have expressed disapproval regarding the bill in terms of its potential for arbitrary usage of penalties. But all in all, the said changes will go a long way to instill a sense of safety amongst daily commuters and pedestrians.