Wheat export ban leads to litigation between traders and exporters

Disputes between traders and multinational company trade houses has now spilled into the courts. MNCs point towards the export ban order and contracts which carry force majeure clauses, while the traders say they sold wheat to the MNCs and not for exports.

Tridev Traders, a grains trading firm from Uttar Pradesh, has sent legal notice to KN Agro Resources, a listed Mumba-headquartered company dealing with commodities apart from other interests, about sudden cancellation of the wheat purchase order. Tridev has asked KN Agro Resources to compensate for losses it met. A copy of the notice is with ET.

"We had confirmed the contract on May 11 and started loading containers of the railway rake and suddenly when the loading was about to be completed, we get a message asking us to not load as the contract stands cancelled. I have incurred huge losses for loading, unloading and having to sell that stock at lower prices than what I had contracted for," said Manish Agarwal, proprietor, Tridev Traders.


In an emailed response, KN Agro Resources said, "We have not received any legal notice as on date."
Raju Khandelwal, a broker from Madhya Pradesh said that almost all the MNCs have cancelled their purchase contracts with the traders. "Almost every MNC has cancelled its wheat purchase contracts with the traders. Many such traders are still at Kandla, trying to find a way out. Some are considering the legal option."

Many brokers and small traders told ET that they do not have the courage to start litigation because it will an unequal battle.

A Gujarat-based wheat exporter, who requested to not be identified, said, "The export ban decision has spoiled the good relations between traders and exporters established over the years. There is now a strange feeling of animosity."

The companies are saying that their hands are tied. A big trade house, which did not want to be identified, said, "The customs refused to allow loading our goods just because it was not inside the port area. As there are many instances of back dated Letters of Credit, the government is taking very long to scrutinize even the genuine LCs."