Delhi HC orders thorough probe by Delhi Police into fake Hershey's chocolates racket in Delhi [Read Order]

NEW DELHI: The Delhi High Court has ordered a thorough probe by the Crime Branch, Delhi Police into a matter relating to several lots of fake expired chocolates - allegedly counterfeit products of famous international brands including The Hershey Company (popularly called Hershey's) being found hoarded with a local trader in Delhi.

The same were meant for and some had already been sold in Delhi markets after using chemicals to re-do the labels on them. The traders had been repackaging and selling the expired chocolates to the public, according to the Delhi High Court's observations in the matter.

Importantly, the Court noted in its order, that as the Food Safety and Standards Authority of India (FSSAI) had not sealed the traders premises immediately after inspection, counterfeit chocolates of other brands were taken out of the premises by the trader and likely sold in the market, before the premises were finally sealed 2 weeks later.

A single-judge bench of Justice Prathiba Singh of the Delhi High Court has directed Delhi Police to conduct a thorough investigation in the matter and submit a status report in this regard, while also seeking for the matter to be taken up in the writ jurisdiction of the Court by the Acting Chief Justice Manmohan.

Justice Singh said in this regard, "The matter requires urgent consideration and is beyond the scope of the present commercial suit. Accordingly, the present order may be placed before Honble the Acting Chief Justice for being taken up on the judicial side in the manner as deemed appropriate."

Importantly, the Court noted, From the events which have transpired, there appears to be a coordinated and a systematic manner in which expired products are being re-packaged or rebranded with new expiry dates, and are being introduced into the markets. From the statements made by the Defendants representatives before the Court, it appears that a large quantity of goods especially on e-commerce platforms, which achieve expiry dates, are somehow purchased by unscrupulous persons, the manufacturing and expiry dates are changed and re-introduced into the stream of commerce. Moreover, it appears that the FSSAI is not fully able to file complaints and take action on an urgent basis in such cases.

Facts of the case

The Court was hearing a suit filed by The Hershey Company seeking an injunction before the Diwali period against one Atul Jalan, trading as Akshat Online Traders, from selling expired chocolates by re-packaging the same.

Hershey's had argued that Akshat Online Traders was a rank counterfeiter, causing harm to both Hershey's and the public. It was submitted that the trader had knowledge of and access to the Hershey's marks and packaging, and had blatantly copied them, misrepresenting their expired and counterfeit chocolates as Hershey's products. 

Until now

The Court had passed a detailed interim order giving directions and appointing Local Commissioners (LCs) for seizure of all the expired products. Further, due to the urgent and serious nature of the allegations, the Court had instructed two FSSAI Inspectors to accompany the LCs to conduct a thorough inspection and testing of all products sold by Jalan. 

"Additionally, the FSSAI was given specific directions to ensure that perishable and food products, which are either expired and repackaged or counterfeit, are not sold, particularly during the festive season," the Court noted in its order.

Thereafter, the LCs filed their respective reports, after perusing which the Court stated that it was an "extremely sorry state of affairs at the Defendants premises." 

Various products including the Plaintiffs Hershey's chocolates were found in the premises.

Key conclusions the Court arrived at from the LCs report:

The condition of the Defendants units were poor, with various food, beverage, and cosmetic products present, including large stocks of counterfeit Hersheys chocolates in ripped cartons and marked as expired products not for sale.

Expired products were stored due to disputes with the supplier and were not returned. 

FSSAI License: The Defendant did not have an FSSAI license to sell or resell the Plaintiffs products, and he did not respond to inquiries about violating the provisions of the FSSAI Act, 2006. 

Lack of Transparency and Cooperation: The Defendant displayed reluctance to fully disclose information about their business operations, including details about other units they run and their involvement in the sale of Hershey's products. There were several contradictions in their statements regarding the history and scope of their business, particularly in relation to selling food items. 

Unclear Source of Products: The Defendant was unable to provide clear and verifiable details about the source of their Hersheys products, including supplier information and purchase invoices. 

Hesitance in Providing Financial Records: They showed reluctance in sharing crucial financial documents like sales invoices, bank account statements, and were evasive about their financial transactions.

Other observations:

• Packaging was worn, torn, and damaged.
• Manufacture and expiry dates were covered or altered.
• Some packs showed conflicting manufacture and expiry dates.
• Discrepancies in MRP on packages.
• Some packs lacked MRP and expiry dates, only showing manufacture dates.
• Re-taped packaging and interchanged products within sets.
• Identical lot numbers on different variations of Hersheys chocolates.
• Many packs had no labels, showing blank sheets.
• Considerable stock of visibly expired products

The Court further recorded what it called Glaring Observations" and noted that - Chemicals were used to wipe off product details, experiments showed that cleaning solutions could easily remove product details, scratching of labels revealed underlying original labels with past expiry dates.

Cause Title: The Hershey Company v Atul Jalan Trading as Akshat Online Traders

[Read Order]