Lakhs of patent orders by ‘outsourced’ staff null and void, says Law Ministry

The decisions by “outsourced employees appointed through any agency (and not by the Central Government) in any statutory proceeding can very well be challenged as null and void as these orders are passed by legally incompetent persons”, the Department of Legal Affairs said in a legal opinion April 25, 2024, sought by the Department for Promotion of Industry and Internal Trade (DPIIT) earlier that month. In her opinion on June 17, 2024, ASG Aishwarya Bhati suggested “annulment of decisions” made by the “unauthorised outsourced employees”.

The CGPDTM had decided to “outsource” 790 employees through QCI at an annual cost of Rs 50.26 crore from October 10, 2022. These hirings, it claimed, were made after a report by the Economic Advisory Council to the Prime Minister (EAC-PM) that manpower shortage was resulting in delays in approving patents and trademarks.

Between March 2023 and March 2024, the CGPDTM granted as many as 1 lakh patents, according to the Ministry of Commerce and Industry. Much of the patents approved belong to global IT majors such as Qualcomm Inc., Samsung Electronic, Huawei Technologies and Apple as the patents approved for non-resident Indians and entities stood at 74.46 per cent in 2022, as per World Intellectual Property Organization (WIPO).

In fact, the DPIIT decision to seek a legal opinion followed a letter by then Leader of Opposition Adhir Ranjan Chowdhury to the Central Vigilance Commission in February 2024, in which he cited a whistleblower to allege that intellectual property (IP) cases are handled by “compromised officials” for monetary gains. The DPIIT had also received a complaint from a lawyer on February 12 highlighting the alleged irregularities.

A week ago, the Calcutta High Court had also ruled that hiring contractual employees for “quasi-judicial functions” in the patents and trademark office was not legal.

Officials in DPIIT said the government has since “revoked” the decision to let CGPDTM outsource officers.

Showcause notice to CGPDTM

On March 29, 2024, DPIIT issued a showcause notice to Unnat Pandit , Controller General of Patents, Designs and Trade Marks, asking why action should not be initiated for violating GFR 2017 and for delegating quasi-judicial powers to contractual staff without its consent.

The CGPDTM responded that “the DPIIT delegated full financial powers to the CGPDTM in his capacity as Head of Department under Revenue Expenditure heads”.

On the hiring from QCI, Pandit said the Council “operating under DPIIT, has been managing projects for several Central Government offices. To ensure smooth hiring processes, a Project Management Unit (PMU) was established… DPIIT approved the hiring of 790 contractual manpower (210 for Patents and 580 for TMR), with QCI selected as the Research Management Organization. Despite not being explicitly recorded, QCI emerged as the preferred RMO during discussions. CGPDTM was directed to oversee the recruitment process through QCI.”

He also pointed out that DPIIT was periodically updated about the hiring process and that the Department also “approved the renewal of the MoU between CGPDTM and QCI for one year, indicating approval of the original MoU”.

Explaining why the Department’s consent was not taken for the delegation, Pandit said, “The authority to delegate powers under the Trade Marks Act, 1999, lies with the Registrar. Under Section 3(2) of the Act, officers act as TM Registrars under delegation of powers. DPIIT’s consent for delegating quasi-judicial powers to contractual staff isn’t required per the Act’s scheme. Previous sanctions for contractual posts didn’t obligate seeking DPIIT’s consent, as it would contradict the Act.”

Orders inherently flawed, legally unenforceable: Additional SG

In her legal opinion, ASG Bhati said, “…decisions made by outsourced employees appointed through any agency rather than directly by the Central government in adherence to the prescribed recruitment rules are without any basis in authority of law and competence to engage in quasi-judicial functions. Such decisions suffer from fundamental flaws and can be successfully challenged as null and void in any statutory proceeding.”

In her opinion, she said the future course of action is “extremely limited” and that the “primary course of action” for DPIIT is to officially declare these decisions “invalid” and ensure that properly authorised officials make fresh, lawful decisions.

“In case DPIIT proposes to save some of the decisions from invalidation, then it will be imperative for the ministry to constitute a committee of officials who are statutorily authorised to make quasi judicial decisions. This committee should thoroughly review and scrutinise all the decisions made by outsourced employees, and a well considered and reasoned decision ought to be made on the merit of each case, which is validated by the committee,” the ASG said.

“To hire outsourced employees from any agency, compliance with the General Financial Rules (GFRs) 2017 is indispensable, typically involving the issuance of a tender through the appropriate channel. In exceptional cases, Single Source Selection or Consultancy by nomination may be considered permissible. Notably, the GFR 2017 does not encompass the engagement of agencies for performing quasi-judicial or judicial functions or outsourcing such functions,” Bhati said.

After consulting with DPIIT, ASG concluded that CGPDTM headed by Unnat P Pandit had no authority to “unilaterally hire outsourced employees” from any agency without obtaining specific and “categoric consent” from the Ministry of Commerce and Industry.