Diageo India unit tells court rum ban lacked due process: Report

Global spirits major Diageo's India unit United Spirits has argued in court that the government prohibited its popular rum for alleged misbranding without following due process, just as India's food safety regulator began consulting the industry on the labelling rules at the centre of the dispute, Reuters reported on Tuesday.

United Spirits has challenged the prohibition on McDowell's No. 1 Celebration Matured XXX Rum in Maharashtra, arguing that the food safety officer who issued the order was not empowered under the law to do so and had bypassed the adjudicatory process by relying on a food analyst's report to impose the stop-sale order.

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The company has also questioned the timing of the regulatory action, saying the Food Safety and Standards Authority of India (FSSAI) began consultations with the industry on regulatory aspects of flavour labelling days after the prohibition order was issued.

The Reuters report, citing a August 1 court filing, showed that United Spirits said that continuing the prohibition order while the labelling issues remained under active consideration by FSSAI was "premature, disproportionate and commercially prejudicial".

The dispute centres on the labelling of McDowell's No. 1 Celebration Matured XXX Rum. The bottle states that the product contains artificial flavour (rum), while FSSAI argued in its prohibition order that the "flavor of rum should be characteristic based on the natural ingredients, fermentation processes, and maturation techniques".

The case comes amid a wider regulatory crackdown that has unsettled India's alcoholic beverages industry, estimated at around $40 billion. FSSAI has banned a number of whisky and rum brands made by Diageo and Indian liquor maker Inbrew in some states, alleging mislabelling and improper addition of artificial flavours, according to the news agency.

Reuters, citing a government source, said the government disputed United Spirits' position, saying FSSAI's discussions with the industry on flavour labelling were initiated at the request of alcohol companies.

Also Read: India warned Diageo that its whisky's 'matured in American oak casks' claim was misleading

The United Spirits challenge was briefly heard by the Bombay High Court on Monday, according to online court records. The court did not grant immediate relief and sought the federal government's response by August 19.

United Spirits has disclosed the court challenge to Indian stock exchanges. McDowell's No. 1 Celebration Matured XXX Rum is among the company's top-selling products.

Separately, Indian inspectors last week seized around 18,000 boxes of Diageo liquor bottles over alleged failure to carry markings indicating they were made using safe recycled plastic, Reuters reported on Monday.

Diageo and FSSAI did not immediately respond to Reuters' requests for comment, according to the news agency.