On Thursday , the Bombay High Court delivered a crucial judgment, and one that could well be considered a first of its kind in recent times. The verdict will certainly provide some relief to Nestlé India for its erstwhile flagship product, Maggi noodles.
Yes, a critical question remains unanswered: how will Nestlé recoup its losses and damages already suffered on the cost of the recall of Maggi? Or even gauge the loss in financial performance due to Maggi's withdrawal from shelves? For the time being, though, the high court judgment is not only favourable to Nestlé, but more importantly , it will send very positive sentiments and bring credibility to the application of the rule of law.
The verdict should also enhance the confidence of corporate India and MNCs. While the stock price of Nestlé India rallied strongly on the basis of the judgment, the real im plication of the interim order transcends market forces.
The Bombay High Court emphasised the “principles of natural justice“ and observed that the conduct of the government in this case lacked them. At least on this account, the court agreed with Nestlé's contentions that the process of emergency prohibition notices and orders under the Food Safety and Standards Act (FSSA) was not duly followed.
Thus, Nestlé was deprived of the rule of natural justice and an opportunity to present its case before the Food Safety and Standards Authority of India (FSSAI). While a closer scrutiny of the judgment will reveal in detail the orders passed, it is a conditional judgment requiring the retesting of Maggi samples by three independent laboratories accredited by the National Accreditation Board for Testing and Calibration Laboratories (NABL).
The verdict is well-balanced, providing adequate opportunity also to the government, as it emphasised the need to provide due process to both sides, not just to Nestlé. It is, in short, a level and regulated playing field for both parties, providing each an equal and impartial opportunity to present its case on the merits of Maggi being tested under the court's direction and accredited labs.
For a corporate entity like Nestlé, which would argue that it has been operating with integrity in India and selling Maggi for over three decades, the FSSAI had not followed the process of inquiry and investigation as laid down by the law. The varying results of the tests conducted in India and abroad proved this point.The irony is that a majority of the tests have given a clean chit to Maggi, and yet, the FSSAI is determined to pursue its case, perhaps even appealing this order to the apex court.
It isn't good news for doing business in India, if this becomes a long-drawn legal battle. The Bombay High Court order is far more meaningful than any temporary reprieve, which is not only appealable, but also likely to be overturned if ordered without a factual and tenable basis. It will surely send a strong message to any inspector raj hoping to raise its head.
The verdict should also set a precedent for deterring frivolous lawsuits being filed, corporate entities in India being harassed at multiple fora simultaneously . The government has already filed a class action against Nestlé in the National Consumer Disputes Redressal Commission (NCDRC) seeking damages for unfair trade practices by the company .
While the two fora are different -as are the two statutes invoked by the government -the cause of action is the same. The fate of Nestlé at the NCDRC is yet to be decided. But the Bombay High Court order is sure to add some teeth to Nestlé's case in the class action filed.
The order has showcased the progressive nature of the court's focus on equal opportunity and due process. While the eventual outcome is still uncertain, this order will at least deter regulators from acting impulsively and, perhaps, without substantive facts.
The writer is a corporate lawyer
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