Regulations
Withdraw 'unsafe, hazardous' Maggi, stop exports: Food safety watchdog

The Nestle team was led by its global chief executive Paul Bulcke and Etienne Benet, managing director and chief executive of India operations

 

India's food safety watchdog on Friday ordered all the nine Maggi noodle variants to be "withdrawn and recalled" by Nestle and stop its further production and exports as some samples were found to be "unsafe and hazardous" for human consumption.
 
It has also asked the company to show-cause within 15 days as to why the approval to the firm for these nine variants of "instant noodles with tastemaker" given on July 4, 2013 should not be withdrawn.
 
Nestle was also ordered to recall another product "Maggi oats masala noodles with tastemaker" for which the watchdog said neither had a safety-cum-risk assessment been undertaken nor had the authority granted product approval. 
 
The order was issued after the company representatives were given a hearing on Thursday at the office of the authority to seek their responses on what steps Nestle had taken to comply with the safety norms prescribed by the food safety authority.
 
The Nestle team was led by its global chief executive Paul Bulcke and Etienne Benet, managing director and chief executive of India operations. Earlier on Thursday, Nestle had said it had withdrawn Maggi noodles from shelves all over the country.
 
Nestle contended before the authorities that since their product contained two parts -- noodle and the tastemaker -- the samples ought to have been tested together and not separately. The authority rejected the contention.
 
According to the watchdog, the samples taken in Uttar Pradesh and tested in Kolkata had found lead at 17.2 parts per million (ppm), against the permissible level of 2.5 ppm. Similarly, in Delhi, Gujarat and Tamil Nadu, too, the tests had confirmed excess levels of the hazardous metal.
 
"Detection of lead in a food product as a heavy metal contaminant beyond permissible levels renders the food product unsafe and hazardous," it said. It also quoted the food safety watchdog of Ireland as saying it can trigger brain damage, paralysis, anemia and gastrointestinal symptoms.
 
The Indian food safety authority also made a comment regarding mono-sodium glutamate (MSG) in Maggi noodles.
 
"It has been noted with concern that the label of the said product specifically mentions thereon 'no added MSG' whereas the product is found to be containing mono-sodium glutamate," it said. "It defies common understanding as to why the company has to make this assertion when it is not required to do so.
 
"The apparent reason for using information on the label is driven by an undue commercial advantage or benefit to create an erroneous impression in the minds of consumers regarding the character of the product," the authority said.
 
In their representation, Nestle said this was done due to "lack of clarity" in the regulations and that it had followed the general industry practice.
 
On the issue of "Maggi oats masala noodles with tastemaker", the authority said while Nestle had applied for its product approval on August 17, 2014, some clarifications were sought for safety and risk assessment.
 
"The company did not respond to the clarifications within the prescribed time, and as such the application already stands ordered to be closed being non-responsive." It said if the firm had resorted to this practice in other products, it must withdra them and intimate the watchdog in 24 hours.
 
The company said the product was launched at a time when the advisory dated May 11, 2013 was under stay granted a court.

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COMMENTS

bhaskar

2 years ago

"Nestle contended before the authorities that since their product contained two parts -- noodle and the tastemaker -- the samples ought to have been tested together and not separately. The authority rejected the contention."

And rightly so. I don't understand why mixing the two will lead to lower detection of lead. Is it that the strong masala will mask the detection of lead.

I was watching this fiasco intently and looking to buy Nestle India if it fell some more but not so confident after reading this article. Will wait and watch now.

We're off shelves but Maggi noodles are safe: Nestle CEO
Announcing the withdrawal of Maggi noodles across India after charges of more-than-permissible levels of some substances, Nestle's global chief executive Paul Bulcke on Friday asserted the popular snack was safe, passing every independent test ordered by the company.
 
"The product, Maggi noodles, are safe for consumption," Bulcke told press conference here. "Our priority now is to engage all stakeholders to clarify the confusion. We felt that consumer trust was shaken, that's why we took the product off the shelves."
 
Conceding that the trust the brand has enjoyed in India for over 30 years had been "temporarily shaken", the top official said there was no difference in quality standards which Nestle adopts across the globe -- and that tests on the very same norms had proved the product's safety.
 
"The tests we have done found no lead. So we are trying to engage with the authorities regarding the test methods they have used," he said, adding: "Our safety measures and standards are same all over the world."
 
The press conference was called following some state governments banning Maggi for 15-30 days and many calling for tests on the popular noodles. This was after a batch in a small town in Uttar Pradesh was allegedly found to contain higher-than-permissible levels of lead.
 
There were also charges of high levels of monosodium glutamate.
 
The Nestle chief executive also maintained that the authorites in India had not shared with the company the methodology that they had adopted to test the batches of noodles. He had on Thursday given a representation to the watchdog, Food Safety and Standards Authority of India.
 
"Maggi noodles are completely safe and have been trusted in India for over 30 years. The trust of our consumers and the safety of our products is our first priority," he said.

User

COMMENTS

Soundararajan Srinivasa

2 years ago

I regret my inability to comment unless the authorities, all of them, place the test reports, verbatim in the public domain. No fan of Maggi Noodles, I wish that the authorities should categorically and to our satisfaction, comment on the role of business rivalry.
Innamburan

Soundararajan Srinivasa

2 years ago

I regret my inability to comment unless the authorities, all of them, place the test reports, verbatim in the public domain. No fan of Maggi Noodles, I wish that the authorities should categorically and to our satisfaction, comment on the role of business rivalry.
Innamburan

Soundararajan Srinivasa

2 years ago

I regret my inability to comment unless the authorities, all of them, place the test reports, verbatim in the public domain. No fan of Maggi Noodles, I wish that the authorities should categorically and to our satisfaction, comment on the role of business rivalry.
Innamburan

Soundararajan Srinivasa

2 years ago

I regret my inability to comment unless the authorities, all of them, place the test reports, verbatim in the public domain. No fan of Maggi Noodles, I wish that the authorities should categorically and to our satisfaction, comment on the role of business rivalry.
Innamburan

Soundararajan Srinivasa

2 years ago

I regret my inability to comment unless the authorities, all of them, place the test reports, verbatim in the public domain. No fan of Maggi Noodles, I wish that the authorities should categorically and to our satisfaction, comment on the role of business rivalry.
Innamburan

Soundararajan Srinivasa

2 years ago

I regret my inability to comment unless the authorities, all of them, place the test reports, verbatim in the public domain. No fan of Maggi Noodles, I wish that the authorities should categorically and to our satisfaction, comment on the role of business rivalry.
Innamburan

Soundararajan Srinivasa

2 years ago

I regret my inability to comment unless the authorities, all of them, place the test reports, verbatim in the public domain. No fan of Maggi Noodles, I wish that the authorities should categorically and to our satisfaction, comment on the role of business rivalry.
Innamburan

SEBI imposes Rs2 crore penalty on NDTV for late disclosures

A company (NDTV) that was posting losses for past five years and receives a tax demand of Rs450 crore, which is higher than its net worth of Rs365 crore, should have made prompt, voluntary disclosures to exchanges, the SEBI order says

 

The Securities and Exchange Board of India (SEBI) has levied a penalty of Rs2 crore on New Delhi Television Ltd (NDTV) for the company's failure to disclose information about the Income Tax demand notice to the Exchanges.
 
In an order issued on 4 June 2015, Prasad Jagadale, adjudicating officer, SEBI said, "I hereby impose a penalty of Rs25 lakh upon the Noticee (NDTV) for violation of Section 23 A and Rs1.75 crore for the violation of Section 23 E of the SCRA. Therefore, a total penalty of Rs2 crore is imposed upon the Noticee New Delhi Television Limited which will be commensurate with the violations committed by the Noticee." 
 
The case relates to non-disclosure of the Rs450 demand notice served by the Income Tax department on 21 February 2014 to the stock exchanges as is mandated by Clause 36 of the listing agreement. NDTV’s failure to disclose the notice, for wider dissemination to shareholders was taken up by the regulator for action. When BSE and NSE asked NDTV about this, the company argued that the demand notice was "without any basis or justification and contrary to provisions of Income Tax Act, 1961 and had resulted only due to erroneous and incorrect view taken by the tax department". Moneylife has been the first to report this non-disclosure when it happened. (Please read Why NDTV did not disclose Rs450 crore tax notice to exchanges)
 
At that time NDTV had said, "It was felt that the disclosure of these events in isolation, without any reference to the steps proposed to be taken by the Company, was not desirable. In the event of ongoing proceedings before Income Tax Appellate Tribunal (ITAT), where a stay has been granted by ITAT, the claim made by the tax department cannot be deemed as an enforceable tax demand against NDTV due and payable by it. The demand has resulted only due to erroneous and incorrect view taken by the tax department."
 
Finally, on 26 May 2014, NDTV shared the information with NSE and on 29th May with BSE. 
 
Soon after the disclosures, NDTV informed the bourses about resignation of its company secretary and compliance officer. In a regulatory filing, NDTV said, "Anoop Singh Juneja has resigned from the services of the Company. The Company has accepted his resignation and relieved him of his responsibilities w.e.f. 31 May 2014."
 
On 12 February 2015, the market regulator issued a show cause notice to NDTV under Rule 4(1) of SCR Adjudication Rules for alleged violation of Clause 36 of the Listing Agreement.
 
In its reply on 4 March 2015, NDTV denied that it violated any reporting requirements under Clause 36 of the Listing Agreement. "The Company was under the bona fide understanding that the same need not be reported / informed to the Exchanges under clause 36 of the Listing Agreement.  The Company had submitted that the said Tax Demand has resulted due to an erroneous view taken by the Assessing officer. Hence, the alleged Tax Demand was untenable in law," NDTV said in its reply to SEBI's show cause notice.
 
Mr Jagadale, the Adjudicating Officer of SEBI, further said, "I note that from bare and combined perusal of aforesaid Clause 36 of the Listing Agreement and Para 6 of Guidance Note, it is very much clear that in case of litigation or dispute with a material impact, the disclosure is warranted on a prompt and immediate basis, which may also include not only the details of the event but also the impact of the event as envisaged by the management of the company. The said disclosure is aimed at enabling the shareholders and the public to appraise the position of the company."
 
"...it is noted that at the time when the  disclosure obligation arose, i.e. immediately upon the receipt of the Assessment Order, in terms of the Clause 36 of the Listing Agreement, the Noticee did not furnish sufficient evidence that the opinion of the tax adviser existed at the time when the disclosure obligation arose. It also did not furnish the record of discussions / decisions by the relevant authority within the Company, as regards the materiality." 
 
"The disputed amount of Rs450 crores in the tax demand is noted to be significant when compared with Rs349.77 crores of revenue of Noticee for the year ended 31 March 2014 as also the net worth of Rs365 crores as on 31 March 2014. The company has consistently posted a net loss for the past five years. The net loss in FY 2014 amounts to Rs.53.56crores. In view above, Noticee should have made voluntary disclosures to stock exchanges on an immediate and prompt basis. Although it is the prerogative of companies to decide on materiality, in this case, the amount is material particularly considering the financials of the Company and information ought to have been disclosed. It is noted that the amount involved in the income tax demand was larger than the revenue of the company and significantly larger than its net profit i.e. net loss in the recent financial year as also greater than its net worth," the SEBI order says.
 
In its submission, NDTV also mentioned that it has approached the ITAT as well as Delhi High Court and obtained a stay on tax demand notice. In its order, the High Court, while disposing the company's writ petition, decided to continue the stay of recovery operating in favour of NDTV until the final disposal of its appeal by the ITAT. 
 
NDTV, in its submission during the adjudicating proceedings said, the decision by the High Court prima-facie agree with the case of the company in granting a stay on the alleged tax demand.
 
SEBI's Adjudicating Officer, however, said, "...the company has filed an appeal before the ITAT. It is pertinent to note that the operation of the order has been stayed by the High Court. The order has not been set aside. This is subsequent development not existing at the time when the disclosure obligation arose."
 
"...the noticee (NDTV) has failed to furnish the evidence in support of the existence of legal advice at the time when the disclosure obligation arose as also the decision making regarding the materiality of the information which would have formed the basis of the honest and genuine belief of the company that it was acting in compliance of Clause 36."
 
The SEBI order, said, "...the noticee (NDTV) was under obligation to disclose the information pertaining to the tax demand of Rs450 crore raised vide the Assessment Order dated 21 February 2014 issued by Assessing Officer for the Assessment Year 2009-10 (Financial Year 2008-09).  The above information was to be disclosed by the noticee immediately to the Stock Exchanges."
 
The Adjudicating Officer, the levied a total penalty of Rs2 crore on NDTV for the company's failure to immediately disclose information about tax demand of Rs450 crore to bourses.
 

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