Kohinoor Foods gets notice for termination of rice supply pact

Rice exporter Kohinoor Foods today said that its joint venture partner US-based McCormick has sent a notice to terminate an agreement for sourcing rice exclusively from the company.
In June 2011, Kohinoor Foods had announced a joint venture with US-based spice maker McCormick for marketing of basmati rice and other food products in India.
Kohinoor Foods alleged the joint venture firm Kohinoor Speciality Food, in which McCormick holds 85 per cent, started taking rice from other suppliers since 2013-14 in violation of its agreement with the JV firm.
Delhi-based rice exporter also said that it is taking all steps to protect the interest of the company.

McCormick had announced an investment of USD 115 million for 85 per cent stake in the JV -- Kohinoor Speciality Foods India Ltd -- and transfer of certain trademarks and non- compete undertakings from Kohinoor Foods and its promoters.
Kohinoor Foods holds the rest 15 per cent stake in JV.

In a filing to the BSE, Kohinoor Foods today informed that the company had entered into certain agreements including a Rice Supply Agreement (RSA) with Kohinoor Speciality Foods India Pvt Ltd (KSF).
"In terms of the Rice Supply Agreement, our company Kohinoor Foods Ltd is exclusive rice supplier of KSF to sell within the territory of India for a period of 7 years including a lock in period of 5 years.

"However we came to know through reliable sources that KSF had started taking supplies of rice in complete violation of RSA from an alternate supplier since year 2013-14, without any bona fide cause or notice to KFL," it added.
Stating that the company have been objecting to this violation through various communications, Kohinoor Foods said: "To pre-empt the charges leveled by us of continuous violation /breach of RSA, KSF unilaterally sent us a notice of termination of RSA alleging that the termination is with cause."
Kohinoor Foods said that there was no substance in the allegation made by KSF and a suitable reply based on facts has been sent to KSF and their attorney.

"In our reply we have established that the agreement has been breached by the KSF by sourcing supplies from an alternate supplier, during the lock in period. We have also stated that since KSF has violated the RSA without cause and without giving due notice as provided in RSA, KFL may also be treated free from the provisions of various agreements," the filing said.
As per the 2011 agreement, a modern factory for packaged food products and 275 employees were also transferred to the joint venture firm. This was the McCormick's third investment in India.