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Centre set to seek Rs 426 cr in damages from Nestle

To move NCDRC on behalf of consumers over alleged unfair trade practices by the firm

Nestle Maggi Controversy

Sanjeeb Mukherjee  |  New Delhi 

Image via Shutterstock

The Centre looks set to seek a compensation of around Rs 426 crore from Swiss food major Nestle over the alleged damages caused by Maggi noodles to Indian consumers.

At a time when Nestle India is awaiting a verdict from the Bombay High Court in its case against the Food Safety and Standards Authority of India (FSSAI), it might now have to fight another legal battle.

The consumer affairs ministry is ready to file a complaint with the National Consumer Disputes Redressal Commission (NCDRC) in the next few days. The complaint, to be filed on behalf of Indian consumers, is against "unfair trade practices" and "misleading consumers" in the Maggi case. A senior ministry official confirmed to Business Standard: "The file has been formally cleared."

The development comes within days of Consumer Affairs Minister Ram Vilas Paswan telling the media that Prime Minister Narendra Modi had asked his Cabinet colleagues to "maintain decorum" on the Maggi issue. Also, some ministers in the government have been critical of FSSAI's Maggi recall order. While some have cited international investors' nervousness in the matter - without wanting to be named - Food Processing Minister Harsimrat Kaur Badal has been more open. She had earlier said the Maggi incident had led to an environment of fear.

FSSAI Chief Executive Yudhvir Singh Malik had, however, told this newspaper last week that he was more concerned that children should not be consuming contaminated products than anything else. Industry, according to him, should be more proactive and sensitive in these matters.

Nestle India estimates indicate that the company destroyed products worth Rs 360 crore after FSSAI's recall order, based on testing of Maggi samples by Food and Drugs Administrations (FDAs) of around half a dozen states. The regulator, on June 5, also stopped the company from manufacturing the noodles in India. Subsequently, Nestle India moved court against the FSSAI order; a verdict is pending.

Though the consumer affairs ministry had started the process of filing a complaint with NCDRC two months ago - around the time FSSAI ordered a countrywide recall of Maggi noodles from retail shelves - it had to go through layers of legal opinion to make it a water-tight case, an official pointed out.

The compensation that the government is seeking from Nestle India has been calculated on the basis of Maggi sales' share in Nestle India's total revenue in the country in 2014-15. The company's Maggi noodles revenue was pegged at around Rs 2,500 crore - this was 25 per cent of the company's total India revenue.

"In the interest of millions of consumers, the department of consumer affairs took suo motu action against the company," the official explained.

When contacted, a Nestle India spokesperson said the company had not received any intimation on this from the government.

Usually, NCDRC comes into the picture when a consumer files a complaint. But a section of the Consumer Protection Act, 1986, also empowers the Centre and state governments to register complaints on behalf of consumers. The consumer affairs ministry is expected to file the complaint under this provision of law.

The recall of Maggi noodles followed sample tests which showed presence of monosodium glutamate (MSG) and an excessive level of lead in the sample tested. In its order of June 5, FSSAI had said the product was "hazardous" for human consumption. According to Nestle India, its own tests showed compliance with the norms, though the company announced withdrawal of Maggi noodles from the Indian market minutes before the FSSAI order on June 5.

(Additional reporting by Arnab Dutta in New Delhi)


Rs 360 cr
The hit Nestle India took as it disposed of packets of Maggi noodles after recall from the market

Rs 2,500 cr
Nestle India's FY15 revenue from Maggi noodles (25% of total)

Rs 64.4 cr
Nestle India's net loss in the April-June quarter, mainly on account of the ban on Maggi noodles

Rs 426 cr
The amount the consumer affairs ministry might be seeking in damages from Nestle India for misleading consumers

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First Published: Tue, August 11 2015. 00:59 IST