Ncdex in a spot over inferior chilli delivery

The National Commodity and Derivatives Exchange (Ncdex) has been caught in a controversy between two sellers and a buyer over delivery of substandard chilli from a local cold storage, with the Guntur Chillies Merchants' Association joining the tussle on behalf of the buyer.

While Ncdex representatives had descended on Guntur and tried to keep the row a low-key affair, K V Rosaiah, association president, held the exchange responsible for the incident. Ncdex sources, however, said the exchange was making all efforts to ensure that buyer got the goods specified by the exchange.

They told Business Standard that traders stored 15,000 tonne of mirchi in cold storages in Guntur, meant for delivery to buyers under the Ncdex platform. About 4,000 tonne of it, sold by two prominent merchants, was found to be substandard after delivery.

So the buyer raised a hue and cry and refused to take the delivery of the stock. At least 15-20 per cent of the crop was believed to be rotten.

Ncdex, it is said, initially tried to pacify the buyer by promising that the substandard crop delivered would be taken back and would be replaced with quality crop.

However, as the incident put the Guntur mirchi traders in a poor light, their association intervened on behalf of the losing trader, asking Ncdex to shoulder the whole responsibility. The exchange should see to it that quality commodities are delivered to buyers.

In response to their demand, K R Kamath, head, clearing & settlement group, Ncdex, gave an assurance to the association in writing: "Assayers and warehouses empanelled by the exchange are under obligation to deliver commodities as per the contract specifications of Ncdex. We will revert back to you within seven days by November 18, 2006 and try to bring out a solution to your dispute."

The exchange gave a notice to Ziccs Logistics, one of the warehouses, for the lapse in the deal. Rosaiah demanded that the erring sellers pay the buyer penalty charges apart from fresh supply of quality crop under the deal.

He said if the Ncdex failed to make the sellers pay penalty to the buyer, the association would not hesitate to move court. While Ncdex source in Mumbai said the exchange was responsible for ensuring the delivery as per contract specifications, the question of penalty did not arise.