Govt faces questions in Maggi case - Damages suit accepted

TT, New Delhi, Aug. 17: The national consumer court today admitted a "class action" suit by the Centre that sought compensation from Nestle for selling allegedly unsafe and mislabelled noodles but it repeatedly questioned the government's failure to follow protocols while testing the snack.

"As of today, what fresh material do you have to show as the earlier (material) has been rejected by the high court?" a bench of the National Consumer Disputes Redressal Commission asked the Centre.

The Union government had pressed ahead with the suit demanding around Rs 640 crore in damages in spite of Bombay High Court ruling that the national food regulator violated principles of natural justice when it banned Maggi noodles. The high court had also said Maggi could be made and sold if the samples passed two rounds of tests in three prescribed labs.

Today, the consumer court bench, with Justice V.K. Jain as presiding member, repeatedly referred to the high court ruling and asked the Centre's counsel whether the government had followed appropriate testing procedures.

"Did you follow testing procedures? What procedures did you follow for drawing samples of the noodles?... Did you send sealed packets to the laboratories for analysis?" he asked.

THE CLAUSE

The Centre has invoked a 1986 clause to file the damages suit. Section 12(d) of the Consumer Protection Act says “the central or the state government, as the case may be, either in its individual capacity or as a representative of interests of the consumers in general” can file complaints on goods or services sold or agreed to be sold

When additional solicitor-general Sanjay Jain referred to the high levels of lead reported by the laboratories, Justice Jain said: "All these reports have been rejected - we can't rely on these reports."

The department of consumer affairs in the Union government had dug up a clause from a 29-year-old law for the first time to file what it has been describing as a "class action" suit.

Two provisions in Indian law allow suits that deal with a collective cause or a menace that affects more than one individual: Section 91 of the Civil Procedure Code of 1908 and Section 12(d) of the Consumer Protection Act, 1986.

The use of Section 91 is likely to be more difficult because the complainant needs to prove harm or damage done.

However, under the Consumer Protection Act, senior Supreme Court lawyer K.V. Dhananjay said, the government can file a class action suit on behalf of general consumers without needing to establish harm done to anybody.

The consumer affairs department has invoked Section 12(d) of the Consumer Protection Act that empowers the government to file a complaint. But it is not clear whether the objective of the clause is to take remedial measures to address a problem or to seek damages.

Class action suits, widely used in the US, usually involve four criteria abroad. Numerosity or the number of people affected (generally hundreds are deemed to be sufficient); commonality, which means there must be a common question of law whose answer will resolve a central issue; typicality, which means the claims of the plaintiff are typical of everyone else in the class; and adequacy, which states the named plaintiff must fairly and adequately represent the interests of the absent class members.

It could not be clarified whether such rigorous yardsticks were applied before the consumer affairs department decided to file the suit against Nestle.

The Centre's suit claims that Nestle sold noodles containing lead beyond permissible limits, and with labels falsely saying the product had no added monosodium glutamate (MSG), a taste enhancer.

The Union department of consumer affairs wants Nestle to pay Rs 284 crore as compensation and an additional Rs 355 crore as damages for "gross negligence, apathy, and callousness".

A consumer affairs department official explained that Rs 284 crore was 10 per cent of the company's annual sales, and Rs 355 crore was 30 per cent of Nestle's profits after taxation.

The consumer bench issued a notice to Nestle and set September 30 as the date for the next hearing.

The Centre's suit has left many food safety analysts and lawyers bewildered because they believe India's food safety regulators decided to ban the noodles without adequate groundwork to justify the move.

The Food Safety and Standards Authority of India (FSSAI) banned the noodles on June 5 after six government laboratories reported finding lead beyond permissible levels in samples of the noodles and because the noodles' packets carried the label: "No added MSG."

Bombay High Court rejected the test results and had set aside the blanket ban on Thursday because the laboratories lacked the appropriate accreditation - a stamp of quality - to scrutinise noodles samples for the presence of lead.

Today, the additional solicitor-general pointed out that the suit also accuses Nestle of selling its noodles with the "No added MSG" label, and selling Maggi oats noodles without product approval.

The high court had said the maximum penalty for such mislabelling was a fine of Rs 3 lakh and that Nestle had agreed to change the label.

The FSSAI claims that laboratories in Gorakhpur and Calcutta have found "MSG" in Nestle's noodles but has not given details. It's unclear whether these labs had the necessary accreditation.

Food safety analysts say the presence of glutamate in the noodles can be easily explained through its occurrence in natural ingredients.

But FSSAI and consumer affairs department officials contend the company should not have labelled the product with "No added MSG" if it had natural glutamate-containing compounds.

Senior consumer affairs department officials said they were "not aware" of the testing procedures and decision-making processes of the FSSAI.

"It is unfortunate that the Bombay High Court ruling coincided with our filing the case in the consumer court," one official said, speaking on condition of anonymity.

He added that it was embarrassing to learn that the FSSAI had not followed the prescribed testing procedures.

Dhananjay, the Supreme Court lawyer, feels that the government's "class action suit" portends a trend of similar action against other companies. "This may just be the beginning," he said.

"There are other more important areas where either the central government or state governments could file class action suits. They could, for example, file suits against the manufacturers of polluting vehicles or irrational combinations of medicines," Dhananjay said.

In the Bhopal gas leak disaster case, American class action lawyers had filed a lawsuit within a few days after the incident in US courts - as it was the US that was the home country of Union Carbide, the defendant. These American lawyers had said that they were representing the victims whose signatures they showed to the US courts. But the Indian Parliament had passed a special law that said the Government of India alone would be the sole plaintiff in any claim for damages and individual victims were thereby prevented from filing any action on their own in US courts.