Why did the Indian government sue Nestle for Rs 640 crores?

Let’s understand this chronologically.

In August 2015, the Union Consumer Affairs Ministry filed a case against Nestle before the National Consumer Disputes Redressal Commission (NCDRC). The case was filed under the provisions of the Consumer Protection Act, 1986, demanding compensation from the company, on behalf of consumers, of Rs. 640 crores.

The ministry leveled a host of charges against the company, including unfair trade practices and misleading advertisements for its product ‘Maggi’, which is its single largest revenue earner in India.

This lawsuit came on the backdrop of FSSAI’s order on June 5, 2015. FSSAI or Food Safety and Standards Authority of India (FSSAI) asked Nestle, on the said date, to withdraw all the variants of Maggi noodles from the market because of high presence of lead in them and misleading information on the label in regard to the presence of monosodium glutamate (MSG). FSSAI called Maggi “unsafe and hazardous” and pressed a ban of 5 months.

(Courtesy: firstpost.com)

Following that order, in June 2015, Nestle recalled and destroyed 38,000 tonnes of Maggi noodles from 3.5 retailers spread across the country. The move cost the company a whopping Rs 500 crore.

On December 16, 2015, the Supreme Court put a stay on NCDRC proceedings and asked to get its Maggi Noodles tested by Central Food Technological Research Institute (CFTRI). A range of tests was done—and Nestle cleared all. Now declared safe for consumption, it was back in the market by April 2016.

Now, in the latest development, the Supreme Court has lifted the stay that it put on NCDRC proceeding back in December 2015. So, the complaints leveled by the Indian government against Nestle – seeking compensation of Rs 640 crores – will proceed in front of National Consumer Disputes Redressal Commission.

The bench of Justice D Y Chandrachud and Justice Hemant Gupta directed that CFTRI report is presented before NCDRC for further proceedings.

Abhishek Manu Singhvi, appearing for Nestle, told the bench that the lead amount found in Maggi Noodle is well within the permissible limit. In response, the bench said, “why should we be eating Maggi with lead in it?”

In the proceeding before NCDRC, the bench has said, the report of CFTRI will be considered. And the decision will be made accordingly. “We are of the view that CFTRI report be evaluated by the NCDRC in the complaint before it.”

In this whole Maggi Noodles Supreme Court saga, Good news for Nestle is that the report of CFTRI is already in its favor, highlighting the lead presence in Maggi is in a safe amount. This is why Nestle, in its release, said that it welcomes this decision of Supreme court.

Abneesh Roy, Senior Vice-President at Edelweiss Securities (parent to Nestle), said, “Nestle had seen favorable outcomes from international and national labs for its Maggi samples before it hit the market. I do not see any major issue hitting the company in this regard.”

However, there’s a good chance though that Nestle might be forced to make changes in the labels of Maggi noodles to be more transparent and less vague and misleading.

All being said though, this whole controversy, since 2015, has hit the company is a bad way. From slowed sales to negative brand exposure—Nestle has sustained big loss out of it. The issue is back in the mainstream news, which will likely hit its sale again.

Let’s see what marketing campaign Nestle runs this time to get out of this Maggi Noodles Supreme Court controversy.