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Adidas turns heat on former India MD

Petitions law enforcement authorities to probe commercial irregularities at Reebok India

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Stepping up its battle with its former India managing director Subhinder Singh Prem, German sportswear major today petitioned Indian law enforcement authorities to initiate a criminal investigation into at Reebok India.

The development comes two days after Prem moved the challenging his “termination” as well as seeking damages and contractual dues from Adidas. A few days before that, he had also served a defamation notice on his former employers.

People in the know say the German company filed a criminal complaint against Prem at the Economic Offences Wing attached to the Police Commissionerate, Gurgaon. An Adidas spokesperson said: “Based on the commercial irregularities we have uncovered at Reebok India, we have now filed a criminal complaint with the Indian law enforcement authorities in order to start formal investigations. We cannot provide any further details since the matter now rests with the Indian law enforcement authorities.”

ADIDAS VS PREM
* Adidas petitions law enforcement authorities to probe commercial irregularities at Reebok India
* The move comes two days after former MD moves Delhi High Court
* The company is learnt to have filed a criminal complaint against Prem at the Economic Offences Wing attached to the Police Commissionerate, Gurgaon
* Prem says he was sacked in March by cause to deny him his severance package and other dues
* A month after Prem’s exit, Adidas admitted to commercial irregularities at on April 30

Prem, however, said: “I have learnt that Adidas has petitioned law enforcement agencies. I am happy that now a third party will investigate and the truth will emerge. I have full faith in the Indian legal system. They have reacted to our suit filed in the high court.”

Adidas had admitted to commercial irregularities at Reebok India on April 30, saying it would result in a pre-tax impact of up to euro 125 million (Rs 871 crore) and further restructuring could cost up to euro 70 million (Rs 488 crore) in 2012.

The announcement was made a month after Prem, as part of his legal document, said he was terminated from his services by cause to deny him his severance package.

The German giant had also announced it would close a third of its nearly 1,000 stores in India to get a better handle of its business here.

It had replaced Prem with Claus Dieter Heckerott, whose appointment as India head of Adidas was challenged by the former MD on the grounds that it violated provisions of the Companies Act.

Prem’s legal notice to Adidas, a copy of which is with Business Standard, had described Heckerott’s appointment as MD as “illegal” and of no effect since the procedures under Section 284 of the Companies Act had not been followed.

Simply put, Prem had said that under Section 284 of the Companies Act, a director had to be given a showcause notice and the right to defend himself before the board of the company, before a final decision was taken. These were not followed in his case.

Prem had demanded immediate clearance of all his contractual dues, along with adequate damages to compensate for the illegal and the consequential loss to the tune of Rs 12.7 crore suffered by him.

He also demanded Rs 7.7 crore as his entitlement, including all benefits like bonuses, gratuity, EPF, severance bonus, etc. That apart, he had also demanded another Rs 5 crore as compensation for the harm done to him personally and professionally on account of the illegal purported termination and its fallout. This was over and above a defamation notice for Rs 15 crore that he had filed against Adidas.

“The situation in India, although unfortunate, will allow us to now accelerate our plans to improve a specific underperforming part of our business,” Herbert Hainer, global chief executive of Adidas, had said in a statement when admitting to commercial irregularities on April 30. The sportswear maker had earlier said that the realignment of leadership was intended to help achieve its ‘Route 2015’ objective. It had added that Adidas had in 2010 laid down a strategic business plan to drive profitable growth across the group. As part of the plan, India was identified as one of the key markets across the globe. “The change in leadership is a step in that direction,” it had said.

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