Facts of the Case

  • Monsanto owns a patent for a synthesized genetic sequence of select genes of the bacterium Bacillus thuringiensis (Bt.). The said bacterium, when inserted into cotton seeds, makes the seeds immune to bollworms which in turn increases the cotton yield.
  • The Indian seed companies had entered into license agreements with Monsanto where they paid a license fee to Monsanto for use of its technology.
  • Monsanto was accused of charging very high license fees for use of its technology, by the Indian seed companies. This lead to the government passing the Seeds Price (Control) Order 2015, in order to provide for an effective system for fixation of sale price for cotton seeds, to ensure their availability to farmers at a fair, reasonable and affordable price.
  • Section 3 of the Essential Commodities Act, 1955 empowers the Central Government to control the production, supply, distribution, etc., of essential commodities. Exercising its powers under the said provision, the Central Government passed the aforesaid order on 7th December 2015 which gave the government the power to fix the maximum sale price of cotton seeds. This Order also gave the government the power to fix license fees payable to technology providers such as Monsanto.
  • In March 2016, the government using its powers under the above said provisions passed an Order Dt. March 08, 2016. Under this Order the government reduced the maximum sale price of cotton seeds and also reduced the license fees to be paid by the seed companies to technology provider companies like Monsanto.
  • The Association of Biotechnology Led Enterprises and Namdhari Seeds Pvt. Ltd. filed a writ petition against this order before the Karnataka High Court.

Legal Issues

  • Whether the Bt. Seeds come within the ambit of Essential Commodities Act?
  • Whether the Central Government has the power to control/ fix royalty/ licence fee for genetically modified cotton seeds?

Contentions

  • The Association of Biotechnology Led Enterprises and Ors. argued that Bt. Cotton seeds are sub-components of cotton seeds and therefore the government does not have power to regulate the sub-components of an essential commodity.
  • Further it was argued that the Order fixing license fees/trait value was ultra vires Section 3(1) of the Essential Commodities Act, 1955 and that such regulation undermines the integrity and sanctity of concluded contracts between the Association of Biotechnology Led Enterprises and seed companies.
  • The Union of India and Ors., being the respondents, challenged the maintainability of the petition and also argued that maximum sale price is nothing but an aggregation of the trait value and the seed value.

Order of Single Bench (High Court of Karnataka)

The Single Judge, after hearing both the parties, granted an interim order and held that fixation of the trait value shall not be given effect to by the government. The Order dated 8th March, 2016 was later vacated. The Association of Biotechnology Led Enterprises and Ors., being the petitioners, appealed before the Division Bench [WRIT APPEAL NOS.1125 TO 1126/2016 (GM-RES)].