Govt Damage Claim From Nestle India Can Go Beyond Rs 640 Crores

12/08/2015 4:19 PM IST | Updated 15/07/2016 8:25 AM IST
Bloomberg via Getty Images
Packets of Maggi 2-Minute Noodles, manufactured by Nestle India Ltd., which were located behind the counter at a store are displayed for a photograph in New Delhi, India, on Monday, June 15, 2015. Nestle SA said the U.S. Food and Drug Administration is testing samples of imported Maggi noodles after the worlds largest food company halted sales in India when regulators said they contained unhealthy levels of lead. Photographer: Kuni Takahashi/Bloomber

NEW DELHI -- The damage claim from first of its kind class action suit against Nestle India is likely to go beyond Rs 640 crore as the government is "tabulating further damages" for selling "defective and hazardous" Maggi noodles.

The Consumer Affairs Ministry on Tuesday had flied a case before the consumer forum NCDRC seeking Rs 284.45 crore in basic damages and another Rs 355.50 crore in punitive damages totalling Rs 639.95 crore from the Swiss giant.

Nestle India is also liable to pay interest at a rate of 18 per cent per annum until the date of actual payment.

In the petition, the ministry said it is in the process of "tabulating further damages" and will seek additional damages when further facts and data emerges.

The amount claimed will be deposited in the consumer welfare fund in the interest of consumers, the ministry said.

The claim is based on Nestle India's total revenue in 2014, which stood at Rs 9,485.32 crore, of which Maggi and its variants accounted for 30 per cent share at Rs 2,845.59 crore.

The Consumer Affairs Ministry had filed a complaint against Nestle India before the National Consumer Disputes Redressal Commission (NCDRC) using a provision for the first time in the nearly three-decade-old Consumer Protection Act.

The first hearing of the case is expected on August 14.

The ministry in a statement on Wednesday said: "The Department has filed this class action suit on behalf of the large number of consumers of Maggi against Nestle India on grounds of unfair trade practices, sale of defective goods and sale of Maggi Oats Noodles to the public without product approval."

Meanwhile, in the petition, the department said, "The complaint is being filed to safeguard and protect the interest of millions of consumers who have been victims of defective, misbranded and hazardous goods/products..."

The ministry has claimed damages to the tune of Rs 639.95 crore as the loss and injury has been suffered by a large number of consumers who are not identifiable conveniently.

"The complainant has sought a sum of Rs 284.55 crore that the Opponent Company is liable to pay a sum of Rs 355.40 as punitive damages on account of the gross negligence, apathy and callousness on the part of the Opponent Company. Thus, the total claim is Rs 639.95 crore," Wednesday's statement said.

While the Consumer Protection Act provides for an individual to seek a minimum 5 per cent of the total sales of the company as damages, but the department has doubled it for Nestle India, sources said.

The department has claimed 10 per cent of the total domestic sale of Maggi noodles in 2014, which comes to Rs 284.45 crore, for causing damages to consumers by selling "defective and hazardous goods" and unfair trade practice.

Since Maggi masala noodles accounts for 30 per cent of the company's total profit in 2014, the punitive damages of Rs 355.40 crore has been calculated accordingly.

"The punitive/exemplary damages are significant in the present case and are intended to reform and deter the Opponent and other food companies from engaging in conduct similar to that of the Opponent company, so that the common public does not suffer and is not helpless to protect its health and wellbeing," it said in the petition.

Besides damages, the Department has also sought recall of all defective and hazardous goods with respect to Maggi noodles with tastemaker in all its variants and Maggi oats masal noodles with tastemaker.

It has demanded that Nestle India should issue "corrective advertisements" to neutralise the effect of the misleading advertisements and remove "No added MSG" from the packets and lables of all variants of Maggi noodles.

The Deparment has also sought that the company should ensure strict compliance with labelling regulations for its entire range of products.

Usually, NCDRC comes into the picture following complaints filed by a consumer, but a section of this Act of 1986 also provides for the government to register a complaint.

For the first time, the government is taking action under Section 12-1-D of the Consumer Protection Act, under which both the Centre and states have powers to file complaints.

This particular section deals in the manner in which a complaint can be made before NCDRC.

In June, food safety regulator FSSAI had banned Maggi noodles after it found excess level of lead in samples, terming it as "unsafe and hazardous" for human consumption.

FSSAI had also said Nestle violated labelling regulations on taste enhancer 'MSG' and ordered the company to submit a compliance report on its orders.

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