Financial Daily from THE HINDU group of publications
Thursday, Mar 17, 2005
Financial Daily from THE HINDU group of publications Thursday, Mar 17, 2005 |
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Marketing
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Courts/Legal Issues Move to end agreement with Indian co — HC order restrains LG Our Legal Correspondent
Mr Vijay Singh, Managing Director, India Household and Healthcare Ltd, and Ms Nalini Chidambaram, Senior Counsel to India Household and Healthcare Ltd, at a press conference at the Madras High Court on Wednesday. — Bijoy Ghosh
Chennai , March 16 THE Madras High Court has ordered an interim injunction against the Korean consumer major, LG Household & Health Care Ltd, restraining them from manufacturing in India a host of consumer products with LG logo and market the same. The order of Mr Justice N.V. Balasubramanian dated February 25, 2005, came following an application filed by the Indian associate - India Household & Health Care Ltd, Chennai - questioning the legality of the LG Group's action in winding up arbitrarily the agreement dated May 8, 2004 reached with the Indian company. The judge, who heard the application of India Household & Health Care Ltd (IHHL), and the arguments advanced by the senior counsel, Ms Nalini Chidambaram, also granted an injunction forbidding the LG Group from interfering with the Indian partner (IHHL) to manufacture fast-moving consumer goods (FMCG) products in small packs with the LG logo in India, pending arbitration. According to the applicant, the licence agreement dated May 8, 2004, envisaged import/manufacture and marketing of various consumer products such as soaps, shampoos, toothpaste, detergents, diapers, home cleaners, hair styling products, oral care , hair care , laundry , home care , kids products and other related items, with LG logo. According to Ms Chidambaram, the order granting interim injunction came following the IHHL's application charging the Korean major with trying to "dump" the Indian partner, after "exploiting the huge investments and expertise" by IHHL. She alleged that after riding "piggy-back" on the Indian partner to enter and create a market for its range of FMCG products, the LG group decided "arbitrarily" to dissociate from the Indian partner, citing various "untenable" reasons. The Korean company should be aware that the Indian Arbitration Act was applicable, she said. The court had come to the rescue of the Indian Company by protecting the contractual rights of all the partners concerned. They should also know that the press note No 18 had been scrapped, she said. The judge ordered notice to the respondent (LG Household & Health Care) returnable on or before April 8, 2005. Asked what would be the likely outcome of the application before the court, the senior counsel said that perhaps some compensation might be awarded to IHHL following the LG Group's decision to revoke the agreement. The IHHL might have suffered a financial loss of about Rs 500 crore due to the sudden decision of the LG group. The claim for compensation had not yet been lodged with the Korean partner. In answer to another query, she said that just because press note 18 had been withdrawn, all existing joint ventures between Indian and foreign MNCs could not be terminated. The IHHL would pursue further action under the Indian Arbitration Act. As a result of the court's interim injunction, the Indian company was free to manufacture FMCGs with the LG logo, she said.
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