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The much-awaited verdict on the June 5 ban and recall of Maggi noodles was pronounced on Thursday, with the Bombay High Court ruling in favour of Nestle India, owner of the instant noodles brand. However, Maggi noodles, considered one of India's best-known comfort foods, won't be visible on shop shelves just yet: Nestle India has been given six weeks to prove the product is safe.
In its ruling, a Bench comprising judges V M Kanade and B P Colabawala allowed Nestle to go for fresh tests by sending five samples of each variant to independent laboratories in Mohali, Hyderabad and Jaipur. These labs were accredited with the National Accreditation Board for Testing and Calibration Laboratories, the Bench said. If the lead content in the samples was found to be below the permissible limit, Nestle India would be allowed to manufacture and sell the product, the Bench added, throwing out the Food Safety & Standards Authority of India (FSSAI)'s plea for a stay on the order.
The news pushed up the Nestle stock, trading up four per cent in the BSE during the morning session. The stock closed at Rs 6,356.7, up 2.78 per cent.
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G Chokkalingam, founder, Equinomics Research & Advisory, said, "While the stock has come off proportionately, given Maggi accounts for 25-26 per cent of revenue, it is still a bit overvalued. So, there would be no gains in the near term. However, long-term investors (with a perspective of two-three years) could look at the stock, given the diversified product range, technology, resources and brands at their disposal."
Predictably, Nestle welcomed the court order. "We respect the decision by the Bombay High Court to revoke the ban order passed by FSSAI and FDA, Maharashtra, on Maggi noodles and will comply with the order to undertake fresh tests," it said in a statement.
What, however, came as a surprise was FSSAI's stand. The authority appeared to have mellowed after the verdict. Speaking to reporters in New Delhi, new chairman Ashish Bahuguna said its "doors were never shut" for Nestle India and the company could come up with new test results.
"It is only if I find that I am not in agreement with the court order and if I feel the court has not taken into account the submissions of the authority will I think of going to the Supreme Court," he said.
Health Minister J P Nadda said a decision on an appeal in the apex court would be taken after an analysis of the high court order. The government has pressed a class action suit against Nestle India in a consumer court, the first such instance in the country. Filed on behalf of consumers, the suit claimed damages of Rs 640 crore from the company. In a statement on Wednesday, Nestle expressed disappointment at the government's action, claiming it hadn't received any notice in this regard.
The samples for retesting will be taken from the 750 Maggi noodles packs preserved by the company following the ban.
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In June and July, Nestle India had undertaken the first fast-moving consumer goods recall in India. About 30,000 tonnes of the brand were recalled and the overall loss was estimated at Rs 320 crore. The Maggi brand also took a few knocks, with $200 million shaved off its value after the ban and recall on June 5.
The ban and recall also led to Nestle India recording its first quarterly loss in 17 years, prompting it to say the June quarter wasn't comparable with the year-ago period's numbers.
The high court reprieve comes as a shot in the arm for the company, which has maintained that the ban order was arbitrary and violated the principle of natural justice. The company also punctured holes in FSSAI's defence, both in court as well as outside it, that the product contained high levels of lead by pointing out the tests were conducted at labs not accredited and notified by the Food Safety & Standards Act, 2006.
What also came to Nestle's aid were a series of clean chits from foreign food regulators, the latest from the US FDA. An FSSAI-approved lab at Mysuru, considered one of the best in the segment, also said the lead content in Maggi was below the permissible limit.
"Countries such as America, Singapore and the UK have much better testing standards than some labs in India. Taking a ban and recall decision on the basis of test results from these labs was erroneous in the first place, which the court also pointed out. I am sure further tests will clarify this. This will, above all, bring confidence in the industry," said Piruz Khambatta, chairman & managing director of Rasna International. Khambatta also chairs the Confederation of Indian Industry's food processing committee.
