Diageo challenges India's rum ban in court, says FSSAI was still consulting on labelling rules

FSSAI, India's food safety regulator, banned one of Diageo's top-selling rum products for mislabelling, and days later, began consulting the industry on the very labelling rules it had used to justify the ban. That sequence of events is now at the centre of a court challenge by the British drinks giant.

In what is being described as the biggest food safety crackdown on India's liquor industry in years, the Food Safety and Standards Authority of India shocked a sector worth $40 billion by banning multiple whisky and rum brands made by Diageo and India's Inbrew across several states. The grounds cited were mislabelling and improper use of artificial flavours.

What Diageo is arguing

Diageo's Indian unit, United Spirits, has mounted a legal challenge in the Mumbai High Court specifically over the prohibition placed on "McDowell's No. 1 Celebration Matured XXX Rum," a product the company publicly identifies as one of its best-selling brands.

In its August 1 court filing, seen by Reuters, United Spirits argued that the food safety officer who issued the prohibition order was not legally empowered to do so, and had bypassed the required adjudicatory process by relying on a food analyst's report to impose the stop-sale order directly.

The company also argued that the timing of FSSAI's own industry consultations, which began on flavour labelling rules after the prohibition order had already been issued, undermined the ban's legitimacy. The "continued operation of the prohibition order, while the issues remained under active consideration by the FSSAI itself, was premature, disproportionate and commercially prejudicial," Diageo said in the filing.

The government's position

A government source told Reuters it disagreed with Diageo's interpretation, saying FSSAI had begun the industry consultation only at the request of alcohol companies, not because the regulatory position was unclear.

The FSSAI's prohibition order, contained in court papers, laid out its objection to the McDowell's product: the bottle listed artificial flavour (rum) as an ingredient, but the regulator argued that "flavour of rum should be characteristic based on the natural ingredients, fermentation processes, and maturation techniques."

What happened in court

The challenge was heard briefly in the Mumbai High Court on Monday. The judge declined to grant any immediate relief to Diageo and asked the federal government to respond by August 19.

Separately, Indian inspectors last week seized around 18,000 boxes of Diageo liquor bottles for allegedly lacking markings to confirm they were made using safe recycled plastic, widening the regulatory scrutiny the company now faces. Diageo, which has described India as its "consumer market of the decade," has said it complies with the law.

(With inputs from PTI)