Dairy processor tries to recover money
Sending money to the wrong overseas bank has turned out to be a costly mistake for a dairy products company that has four Wisconsin locations.
MCT Dairies, a New Jersey firm with a cheese plant in Appleton and offices elsewhere in the state, said it has not been able to recover the $134,640 it mistakenly wired to Punjab National Bank of India as payment for dairy ingredients.
Over a period of more than two years, MCT said, there have been more than a dozen court hearings in India regarding the dispute, but little action.
The next hearing is scheduled for July 19, and company officials said it could be another five years before their lawsuit against Punjab grinds its way through the Indian legal system.
If MCT doesn't prevail, it could cost the company tens of thousands of dollars in attorney fees. Still, company officials said they're pressing on to recover their money and legal expenses.
'I am not going to give up without a fight,' said Vincent McCann, the company's chief financial officer.
The story began in 2013 when MCT purchased a dairy products ingredient called acid casein from Crown Milk Specialties of Mohali, India.
Casein is a protein found in milk. It is used in processed foods, adhesives, paints and industrial products. An acid casein is a low-fat milk protein used in cheesemaking.
The purchase terms included a 20 percent prepayment through Punjab, a bank that Crown used. The 80 percent balance was to be paid through 'cash against documents,' meaning the title for the purchased goods would be released when the bank received the money.
However, the 80 percent should have been wired to another bank in India rather than Punjab.
'It was clearly a mistake on our part,' McCann said, adding that MCT wasn't aware that Crown Milk had switched financial institutions.
Upon realizing the error, MCT asked Punjab to return the $134,640.
Punjab refused, saying the money was an asset of Crown Milk, and that Punjab was entitled to keep it because the bank was in a dispute with Crown over a nonperforming loan.
'I never in a hundred years thought this would happen. When we first found out about it, we thought the bank would send the money back,' McCann said.
Punjab National Bank, owned by the Indian government, could not be reached for comment this past week. Journal Sentinel emails to Crown Milk and India government offices were not answered.
U.S. Sen. Ron Johnson (R-WI) and Rep. Reid Ribble (R-WI) have become involved in the case, asking the U.S. State Department to help MCT get its money back from Punjab.
U.S. officials also have pleaded with the Indian government for assistance.
'It is our understanding that the bank has delayed returning the transferred funds to MCT despite repeated requests and guidance from Crown Milk,' Johnson and Ribble said in a letter to India's minister of finance.
MCT has attorneys in New York and India working on the dispute, which is now a lawsuit against Punjab, another Indian bank and Crown Milk.
The company said the legal proceedings have moved at a snail's pace, with multiple court hearings adjourned because the bank requested additional time.
One hearing was adjourned because the bank's counsel was ill, and another hearing was adjourned because the judge's mother died.
Still another hearing was adjourned because the judge was 'on leave,' according to MCT, and other hearings did not produce results for various reasons, including an attorney not showing up in court.
MCT officials said they suspect the delays are aimed at persuading the company to drop its lawsuit. Should the company lose the case, the attorney fees would be substantial.
For now, at least, MCT is willing to take the risk.
'This has hurt our business. But I will not just let them walk all over us,' McCann said.
Conducting business in India is often complicated by burdensome procedures, according to a report from the U.S. accounting firm Deloitte LLP.
On average, enforcing a commercial contract in Indian courts requires a company to go through 46 administrative procedures, taking 1,420 days and costing the company nearly 40% of its claim, according to 2013 research from the World Bank.
There's risk in doing business in developing nations such as India and China, said Abdur Chowdhury, a Marquette University economics professor.
Chowdhury, former chief economist of the United Nations Economic Commission in Europe, once worked for the Bangladesh government.
He said delays in foreign court proceedings involving businesses are very common, with many cases slowed to the point where the plaintiff gives up.
'They will drag out a case for years and years,' Chowdhury said.
The U.S. Federal Reserve Bank might be able to put some pressure on Punjab to return MCT's money, according to Chowdhury.
That, or an out-of-court settlement, could be the best chances for getting the case resolved, he said.
MCT paid for the dairy ingredients twice: once through Punjab, and the second time through another Indian bank that completed the transaction.
The company needed the ingredients that it said are difficult to source in the U.S., and at the time it fully expected Punjab to return the $134,640.
MCT said it is sharing its story publicly to put some pressure on Punjab and also to warn businesses about delays in India's court system.
'We don't want other American businesses to experience what we have been through,' McCann said.