Nafed wins legal battle worth Rs 600 cr; leaders vie for credit

In a major relief announced by the Supreme Court on Wednesday, the agri co-operative Nafed won an international legal battle and saved crores of rupees of a fine imposed on it by an international arbitral award of 1989 of the Federation of Oil, Seeds and Fats Associations Ltd (FOSFA) for the breach of a contract.

The matter related to supply of 5000 metric tonnes of groundnut to foreign firm Alimenta of South Africa in 1979-80. Due to Cyclone in Gujarat Nafed could only supply 1900 metric tonnes and the remaining 3,100 metric tonnes led to arbitral proceedings and court cases between parties. FOSFA claimed Rs 600 cr as compensation.

Rejecting the international award against Nafed, the Supreme Court of India observed that Nafed’s attempt to ship groundnut the next year (in the given year it could not be done due to the Cyclone in Saurashtra, Gujarat) depended on Central govt permission. Since the govt of the day did not permit it to ship the groundnut, Nafed only followed the govt regulation and thus is not guilty.

The apex court also went into the details of contract between Nafed and Alimenta and noted that the provision allowed therein also finds Nafed innocent of any wrong-doing.

The PTI take on the issue reads-The court said, “the Clause 14 of the FOSFA Agreement made clear that during the contract shipment period in the event of the prohibition of export by an executive or legislative act
by any of the Government of origin, such restriction shall be deemed by both the parties to apply to the contract. Thus, if the shipment becomes impossible by reasons mentioned in the clause, the agreement shall be cancelled.”

The Supreme Court observed that the international award was “unenforceable”, leading to jubilations in the Nafed camp, where leaders vied with each other for taking credit for the legal victory.

“It was Nafed’s Vice-Chairman Sunil Kumar Singh and his senior colleague Dr Chandra Pal Singh Yadav who were determined not to buckle under any pressure and held their ground” said one of Sunil’s loyalists.

They had requested the Chairman to wait for the outcome of the case; Nafed’s appeal was accepted and see how these saved hundreds of crores of rupees, he added.

Other loyalists mentioned the name of Sunil Kumar Singh(official not the cooperator), Additional Managing Director to whom they credited the victory. “Additional MD was personally handling the case assisted by his legal team and reputed senior lawyers”, they argued.