NEW DELHI: An Indian court has ruled that goods sold at duty-free shops are not immune from domestic laws, dealing a blow to the Adani Group's airport ⁠sales of nicotine pouches, which New Delhi calls illegal and regards as drugs.

In a case widely seen as setting a precedent on duty-free sales, Adani in April challenged Indian authorities who said its Mumbai international ‌airport shops illegally stocked and sold nicotine pouches, one of the world's fastest-growing nicotine products, which remain unapproved in India.

Billionaire Gautam Adani's group manages eight ‌airports in India and has an ambitious $11 billion expansion plan, ‌including for duty-free shops, to capitalise on the growing demand for ‌air travel.

While Indian authorities told the ‌court that stocking nicotine pouches was a "substantive violation" of drug laws and a "serious public health risk", Adani denied any wrongdoing.

Adani ‌argued in court that shops in international departure areas are ⁠outside the reach of domestic regulations as they sit beyond India's territorial jurisdiction.

The High Court in Mumbai disagreed in an order issued late Tuesday.

"Such goods would be ⁠subject to the ⁠law of the land and would be governed by the regulatory regime in force even if the transaction takes place in the DFS (duty free shops), ⁠beyond the customs barrier," the order said.

"The domestic regulatory regime will apply in full force to such goods brought into the DFS within the Indian territorial jurisdiction," it added.

Adani Group did not immediately respond to Reuters requests for comment.

In its court submissions, Adani also argued that ‌nicotine pouches are "not a drug" and a "recent innovation", and attract no scrutiny under Indian laws - a position New Delhi disagreed with.

The court said it could not answer that question at this stage and instead said Adani was free to make representations before Indian drug regulators, with supporting material, and the regulator can decide that on its merits.

Indian court rejects Adani plea on duty-free shops