Kohinoor Foods and McCormick dispute heads for arbitration in London

Kohinoor Foods Ltd and American spices and cooking herb major McCormick & Co have decided to settle their dispute over their Indian joint venture through arbitration at the London Court of International Arbitration.

The dispute pertains to their local JV in which Maryland-headquartered McCormick holds majority stake. McCormick had invested $115 million to buy 85% stake in Kohinoor Speciality Foods India Pvt. Ltd in 2011 to market and sell Kohinoor’s basmati rice and food products in India.

The two got locked in a dispute as the JV firm terminated the contract to source rice exclusively from Kohinoor Foods, before the end of five-year lock-in period. While the Indian partner alleged that the US company is breaching the contract of exclusivity, McCormick claims Kohinoor has violated the pact as it is selling rice directly in India.

The development related to the arbitration was first reported by The Economic Times, citing Amit Mehta, managing director of the joint venture company.

Gurnam Arora, joint managing director of Kohinoor Foods, said, “We expect outcome (or arbitration) in the next five to six months, but I can’t talk much on the issue since the matter is still sub judice.”

McCormick did not reply to an email query sent by VCCircle.

“We came to know through reliable sources that KSF had started taking supplies of rice in complete violation of Rice Supply Agreement (RSA) from an alternate supplier since year 2013-14, without any bona fide cause or notice to KFL,” Kohinoor Foods had said in a stock market disclosure on September 28, 2015.

“To pre-empt the charges levelled by us of continuous violation/breach of RSA, KSF unilaterally sent us a notice of termination of RSA alleging that the termination is with cause. There is no substance in the allegation made by KSF and a suitable reply based on facts has already been sent to KSF and their attorney,” it had added. 

Kohinoor Speciality Foods India said in an emailed response, “Pursuant to its rights, Kohinoor Speciality Foods India terminated its rice sourcing contract with Kohinoor Foods Limited (KFL) effective 30 September 2015.

“This action was taken to protect its business and ensure a continuous supply of high quality rice to its customers and consumers in India. KFL was informed of this move before implementation,” it said.

In the same exchange notice, KFL further mentioned, “In our reply, we have established that the agreement has been breached by the KSF by souring supplies from an alternative supplier, during the lock-in period. We have also stated that since KSF has violated the RSA without cause and without giving due notice as provided in the agreement, KFL may also be treated free from the provisions of various agreements.”

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