Gujarat Farmers Vs Pepsi Co.

Background
The Pepsi Co. had patented 2 varieties of potato FL1867 AND FL2027 (commercially known as
FC-5) in Feb 2016 for 15 years (for which it applied in Feb 2011).

From these 2 varieties FC-5 is used to make lays chips, for which the company has the buyback
agreement with farmers of West Bengal, Maharashtra, Punjab, Gujarat, UP, Bihar, Haryana, and
Chhattisgarh.

So, the company blamed that farmers of Gujarat (those who were not in any contract with the
company) were illegally sowing, buying and selling their registered variety of FC-5 potato seeds.

Facts:
 Company sued 11 farmers, for illegally using their registered seeds varieties without the
permission of the company.
 Company filed law suit against farmers and claimed damages of around Rs. 1.05 crores
from alleged farmers.
 Pepsi Co. claim to be known of the fact in Jan, 2019. After which samples were collected
and tested. The DNA samples got matched with that of farmers proving it to be
infringement, restraining farmers from using these varieties of seeds via orders from 8th
April, 2019.

The Fact of the Matter:

Pepsi Co. introduced these varieties so seeds in 2011 and filed for registration of variety of
seeds in 2012 but got it registered in 2016 and it was obvious that these seeds got spread in
India amongst the farmers by that time.

Farmers claimed that they bought seeds from the local markets (known as grey markets) as
they were readily available and that they are growing this variety of potato for last 4 years
without entering into any contract and without any legal constraints and that they were
growing the FC-5 variety of potatoes from past many years, but got to know that it is a
registered variety only after the Pepsi Co came into the picture.
Sections of Law:
 Article 39(1)(iv) of PPVFRA, states that farmers are “entitled to save, use, sow, resow,
exchange, share or sell his farm produce including seed of a variety protected under this
Act in the same manner as he was entitled before the coming into force of this Act.”
The act allows farmers to use the registered varieties of seeds if the following two
conditions are fulfilled:
1. Farmers cannot sell them packed in a manner of branded seeds.
2. FC-5 was an ‘Extant Variety’ (which means variety of common knowledge) not a
‘New Variety’ (that’s not commonly known) that the knowledge of seeds was
already spread amongst the farmers of the country before the company got it
registered.

 Company was taking into consideration Section 64 of the act. This section of the act
states that if anyone who is not breeder uses the registered variety of seeds without the
permission of the breeder leads to infringement of rights under this act as it creates
confusion in the minds of people.

Conclusion
Pepsi Co on 10 May, 2019 withdrew all cases against farmers (which it earlier filed in April,
2019) due to high pressure from public, political parties and headquarters of the company as
reputation of company was at stake.

The company gave two options to the farmers:

1. They can enter into Buy-back agreement with the company i.e. they can grow the FC-5
variety of potatoes for the company itself.
2. But if they don’t wish to grow for the company, they can sign an agreement with the
company stating that they cannot grow FC-5 varieties. They can grow other available
varieties available.

The farmers demanded apology and compensation from the company.

Observation:
In my opinion, the above case of Pepsi Co. Vs Farmers is a peculiar case in itself as it took many
turns and in the end Pepsi Co. withdrew the case without any proper judgment. However, it
cannot be taken as a case of victory or defeat of any particular party as both the parties had their
own interpretations as per the provisions of PPVFRA. It would have been more relevant if the
case continued and a proper judgment would have been passed in the case. Also, this case raises
the issue of ambiguity in the clauses of PPVFRA act that are still required to be worked upon.
If there was a contract act between Pepsi Co and Farmers:
1. Offer: Pepsi Co.’s offer to farmer will include:
 Supply of high quality varieties of potato seeds and other planting material.
 Knowledge of advanced farming techniques.
 Facilitation of loan.
 Buy-back agreement with pre-fixed prices (yield not to be sold to anyone else).
2. Now farmers after reading the terms and conditions of the offer, signifies their assent
leads to creation of the agreement between farmers and the company.
3. As this agreement is related to regulating business transactions, the parties intend to
create legal regulation. So, it leads to formation of a contract between the parties.

Consideration

1. For Farmers: Assured price of their crops, advanced techniques, facilitation of loan
2. For Pepsi Co.: Good yields of FC-5 variety of potato for Frito Lays Chips.

Possible reasons of breach of contract:

1. On part of Farmers: If the market prices are good, the farmers were getting the higher
prices for their produce; they did not honor the contract and sold their produce in the
market at higher prices. This leads to actual breach of contract on part of farmers.
2. On the part of the Company: If the market prices are low and the company buys the
produce from the market.

In both the cases it leads to Actual breach of Contract during performance that means if
during the performance of the event, any of the party refuses to perform their particular
obligation.

Actual breach of contract gives the aggrieved party the right to sue the other party for the
non-performance of obligation and demand for the damages suffered due to breach of
contract.

Case of Breach by Farmers:

Suppose there is an Actual breach of contract on the part of the farmers. Instead of selling
their produce to the company as per the contract, they started selling it to other parties at
higher prices. They were doing this without the knowledge of the company and they are
doing it for many years.
Now following are the remedies available to the Pepsi Company:

1. Suit For Damages:

Section 73 of Indian Contract Act deals with the loss suffered by the aggrieved party due
the breach of the agreement.
It is given in the contract that the aggrieved party is entitled to receive the compensation
of loss or damage suffered by him thereby:
 That naturally arose in the course of breach
 Which the parties knew at the time of entering into contract is likely to arise resulting
from the breach of contract.

In this case, Pepsi Co. can sue the farmers as there is a breach of contract in order to
claim the damages caused to the company.
The company is entitled to compensation for the following damages suffered:
 The farmers sold the crop to other parties instead of Pepsi Co. which could have
resulted in leakage of trade secrets of the company to their competitors.
 Also, the company did not get the specified amount of crops they were entitled to
or that was agreed at the time of contract.

2. Suit for Injunction:

Injunction is an order of the court directing a part to refrain from doing something.
Thus, if the party does something that he promised not to do at the time of signing
contract, the court may restrain the person from doing so by issuing an injunction.
In this case, Pepsi co will not continue with the contract with the farmers from now and
will claim an injunction from the court to refrain farmers from growing or selling Pepsi
registered seeds variety of potato.