Jurisdictions that have legalized medical marijuana, decriminalized possession of marijuana and / or other drugs, or tolerated limited, retail sales…have not experienced significant, if any, increases in marijuana or other drug use.” - American Public Health Association

Introduction

Cannabis in India has been known to be used since as early as 2000 BCE. In India, common terms for cannabis preparations include charas (resin), ganja (flower) and bhang (seeds and leaves), with Indian drinks such as bhang lassi (curd based drink) and bhang thandai (also a drink) made from bhang being one of the most common legal uses.

Cannabis has long been used as a recreational and entheogenic drug, as well as in numerous traditional remedies. The main psychoactive component of cannabis is tetrahydrocannabinol (THC), which is one of the recognised chemical compounds in the plant, including certain additional cannabinoids. It also contains cannabidiol (CBD). Cannabis can be used in a variety of ways, including for medicinal purposes. 

Regulatory and legal regime of Cannabis in India

In India, the applicable law that is the Narcotic Drugs and Psychotropic Substances Act, 1985 (“Act”) and the rules made thereunder governing the control and regulation of cannabis.

Before moving further, it is interesting to analyse the definition of “Cannabis”. In terms of the Act, Cannabis (hemp) is defined as:

(a) charas, that is, the separated resin, in whatever form, whether crude or purified, obtained from the cannabis plant and also includes concentrated preparation and resin known as hashish oil or liquid hashish;

(b) ganja, that is, the flowering or fruiting tops of the cannabis plant (excluding the seeds and leaves when not accompanied by the tops), by whatever name they may be known or designated; and

(c) any mixture, with or without any neutral material, of any of the above forms of cannabis or any drink prepared therefrom.

Further, “cannabis plant” means any plant of the genus cannabis.

Accordingly, in terms of the definition of “Cannabis” and as per the Act, the sale and consumption of the resin and the fruit / flower of the cannabis plant is prohibited and punishable whereas the sale and consumption of the leaves and seeds is not.

The Act inter-alia provides that no person shall—

(a) cultivate any coca plant or gather any portion of coca plant; or

(b) cultivate the opium poppy or any cannabis plant; or

(c) produce, manufacture, possess, sell, purchase, transport, warehouse, use, consume, import inter-State, export inter-State, import into India, export from India or tranship any narcotic drug or psychotropic substance,

except for medical or scientific purposes and in the manner and to the extent provided by the provisions of the Act or the rules or orders made thereunder and in a case where any such provision, imposes any requirement by way of licence, permit or authorisation also in accordance with the terms and conditions of such licence, permit or authorisation.

Further, vide the Act, the Central Government has empowered the State governments to –

(a) permit and regulate, by way of rules to be formulated by the State Governments, —

(i) the possession, transport, import inter-State, export inter-State, warehousing, sale, purchase, consumption and use of poppy straw except poppy straw produced from plants from which no juice has been extracted through lancing;

(ii) the possession, transport, import inter-State, export inter-State, sale, purchase, consumption and use of opium;

(iii) the cultivation of any cannabis plant, production, manufacture, possession, transport, import inter-State, export inter-State, sale, purchase, consumption or use of cannabis (excluding charas);

(iv) the manufacture of medicinal opium or any preparation containing any manufactured drug from materials which the maker is lawfully entitled to possess;

(v) the possession, transport, purchase, sale, import inter-State, export inter-State, use or consumption of manufactured drugs (other than prepared opium and essential narcotic drugs) and of coca leaf and any preparation containing any manufactured drug;

(vi) the manufacture and possession of prepared opium from opium lawfully possessed by an addict registered with the State Government on medical advice for his personal consumption:

Provided that save in so far as may be expressly provided in the rules made under sub-clauses (iv) and (v) above, nothing in section 8 of the Act (which provides for prohibition for certain operations) shall apply to the import inter-State, export inter-State, transport, possession, purchase, sale, use or consumption of manufactured drugs which are the property and in the possession of the Government: Provided further that such drugs as are referred to in the preceding proviso shall not be sold or otherwise delivered to any person who, under the rules made by the State Government under the aforesaid sub-clauses, is not entitled to their possession;

(b) prescribe any other matter requisite to render effective the control of the State Government over any of the matters specified above.

In particular and without prejudice to the generality of the foregoing power, such rules may—

(a) empower the State Government to declare any place to be a warehouse wherein it shall be the duty of the owners to deposit all such poppy straw as is legally imported inter-State and is intended for export inter-State or export from India; to regulate the safe custody of such poppy straw warehoused and the removal of such poppy straw for sale or export inter-State or export from India; to levy fees for such warehousing and to prescribe the manner in which and the period after which the poppy straw warehoused shall be disposed of in default of payment of fees;

(b) provide that the limits within which licences may be given for the cultivation of any cannabis plant shall be fixed from time to time by or under the orders of the State Government;

(c) provide that only the cultivators licenced by the prescribed authority of the State Government shall be authorised to engage in cultivation of any cannabis plant;

(d) require that all cannabis, the produce of land cultivated with cannabis plant, shall be delivered by the cultivators to the officers of the State Government authorised in this behalf;

(e) empower the State Government to fix from time to time, the price to be paid to the cultivators for the cannabis delivered;

(f) prescribe the forms and conditions of licences or permits for the purposes specified in sub-clauses (i) to (vi) above and the authorities by which such licences or permits may be granted and the fees that may be charged therefor.

Additionally, in order to manufacture / cultivate cannabis, licenses are required to be obtained under the Drugs & Cosmetics Act, 1940 as well as under the AYUSH laws and guidelines. The Ministry of Ayush, is a ministry of the Government of India, that is responsible for developing education, research and propagation of indigenous and alternative medicine systems in India.

Judicial Precedents and jurisprudence

There have been some petitions which have been filed in the various High Courts of India for legalising the cultivation of cannabis as mentioned below.

A petition was filed before the Delhi High Court in 2019 by the “Great Legalisation Movement India Trust”, a non-profit organisation working to legalise the use of cannabis for medical and industrial purposes in India. The petitioner claimed that cannabis has several positive effects on health and can be used in several medical treatments. Further, the petition states that while enacting the Act, the Parliament did not take into consideration the positive effects of cannabis on human health and the history of use of cannabis in India. On these grounds and others, the petitioners challenged various sections of the Act as being violative of Articles 14, 19, 21, 25 and 29 of the Indian Constitution. The matter is listed for further hearing on 30 August 2022.

In another instance, there was a petition filed before the Himachal Pradesh High Court in 2018 for the removal of restrictions on cultivation, processing and use of industrial and medical hemp. The Court requested the Centre and the State Government to provide their opinion on the legalisation of industrial hemp in the state. However, as of 2022, there is still no notification from the State Government related to the cultivation of cannabis for medical or industrial purposes.

There was a similar plea before the Bombay High Court in 2015. The public interest litigation (PIL) mentioned various studies pointing out the palliative effects of cannabis, particularly for terminally ill patients. The Court insisted that without being experts in the field, it could not examine the technical data regarding useful effects of Ganja etc. Therefore, the Court advised the petitioner to raise the issue in Parliament.

In the case of Arjun Singh vs. State of Haryana 2005 Cri LJ 253, 2004 (4) RCR (Criminal) 506, the Court held that the seeds and leaves (Bhang) is not included in the definition of “Cannabis” as per the Act, hence, the sale and possession of the same is not illegal.

India’s International Position

At the 63rd Session of the United Nations Convention on Narcotic Drugs held from 2-4 December 2020, India voted to remove cannabis and its resin from Schedule IV of the 1961 Single Convention on Narcotic Drugs which placed cannabis along with other dangerous drugs such as Heroin. The majority vote in favour of reclassifying cannabis opened the door globally to recognizing the medicinal and therapeutic potential of the drug. However, the vote does not impact domestic laws until an amendment to the Act is brought into force.

Foreign investment in entities engaged in Cannabis in India

Foreign direct investment (“FDI”) in India is inter-alia governed by the Foreign Direct Investment Policy as amended from time to time. FDI is permitted under the ‘automatic route’, the ‘government or approval route’, or both in all sectors except prohibited sectors or activities. Prohibited sectors or activities include lottery business, gambling and betting, manufacturing of cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco substitutes, real estate business (other than development of townships, construction of residential or commercial premises, roads or bridges, educational institutions, recreational facilities, city and regional level infrastructure, townships and real estate investment trusts), chit funds and Nidhi companies.

Cultivation or sale / purchase of Cannabis does not explicitly form a part of the prohibited sectors list in terms of the FDI policy, thus, implying that there is no embargo on investment in cannabis related entities from the FDI policy standpoint.

Recently, India’s first fully integrated research to retail venture in the Ayurvedic Cannabis (Bhang) sector, “HempStreet”, has secured $1 million in Pre-Series A Funding round. As per news reports, this Pre-Series A funding was led by Pharmacon Holdings, a US based Pharma Tech company and Romain Barberis, a long-time private investor in the Cannabis space in the US and Canada. The report further states that the company has plans to utilise the funds for technology development, category disruption and research.

In another feather in HempStreet’s cap - the Biotechnology Industry Research Assistance Council (BIRAC) issued a Biotechnology Ignition Grant (BIG) to HempStreet in 2021. The grant is for work on medicinal cannabis solution - a first in India!

Further, Cannabis start-up “Hemp Horizons”, a seed-processing company registered with the US Food and Drug Administration (FDA) and certified for Good Manufacturing Practices (GMP) raised INR 20 million in February 2021 as a part of its seed funding round led by Mumbai Angels Network with participation from renowned national and international angel investors like TradeIndia CEO Bikky Khosla.

Separately, while this is not an illustration of inbound investment, it is pertinent to mention that, in a bid to strengthen its position in the global medical cannabis industry, Indian pharmaceutical major “Dr. Reddy’s Laboratories” has entered into a definitive agreement to acquire German firm Nimbus Health GmbH. Nimbus has been a major player in the field of cannabis-based medicines. The company said that the acquisition will allow it to build on Nimbus Health’s offerings and introduce cannabis-based medicines as a promising treatment option for patients. The company will be operating as a wholly-owned subsidiary of Dr Reddy’s.

States which have legalised the cultivation of Cannabis in India

The Government of Uttarakhand has authorised cultivation of cannabis for medicinal and scientific purposes due to abundant availability of the hemp plant and favourable weather conditions. Towards this end, the Government of Uttarakhand authorized Centre for Aromatic Plants, Selaqui, Dehradun, and National Botanical Research Institute, Lucknow as a technical testing lab of testing crop sample for delta-9-tetrahydrocannabinol concentration in Industrial Hemp as described in the state government order to Excise Commissioner on 05 Dec 2016. Centre for Aromatic Plants, Selaqui, Dehradun is nominated as a nodal agency for the cultivation of Industrial Hemp through order dated 30 December 2019.

While the Government of Uttarakhand has legalised cultivation of Cannabis and was the first State in India to do so, the Government of Uttar Pradesh has framed out the policy for issuing licence only for research and development (R&D) purposes. CSIR-National Botanical Research Institute (NBRI), has initiated preliminary research activities under public private partnerships (PPP) model with Bombay Hemp Company Pvt. Ltd. (BOHECO). CSIR-NBRI is also involved in initiating R&D programs with the collaboration of Manipur Government for streamlining the cultivation of Cannabis crop in Manipur for the rational and socio-economical upliftment.

The state of Madhya Pradesh and Himachal Pradesh also appear to have legalised the cultivation of Cannabis.

Moreover, in February 2020, CSIR-IIIM, Jammu and InsdusScan, a Canada based company signed a major scientific agreement on Cannabis Research. The Government granted a legal license for cultivation and medical research on this plant and product development.

On the legislation front, in a recent amendment to the Food Safety and Standards (Food Products Standards and Food Additives) Regulations, 2011, the Food Safety and Standards Authority of India (FSSAI) announced the recognition of Hemp Seeds and Seed Products as a Food Source. This is a significant victory for the entire hemp industry, as the FSSAI’s recognition of hemp nutritional products will not only help introduce a plethora of new products but will also help introduce a plethora of new inventions.

Conclusion

Odisha (state situated in the east of India) based “HempCann Solutions” decided to take its online business offline and opened a wellness clinic in Bangalore (city situated in the south of India) in February 2020 which has been doing well as per news reports.

There are certain online platforms which are retailing CBD oil and other cannabis based medicines in India such as Boheco which is licensed in Madhya Pradesh under the state AYUSH department. All in all the market for cannabis for medicinal use in India is growing and the applicable law does not prohibit the same at the outset. While a lot is being done, both in the legal and investment front, however, various aspects will need to be considered for such projects as it is still a controversial subject and in some parts of India a taboo / social stigma too.