FIPB nixes Tata objection to John Deere, Leyland JV

The Foreign Investment Promotion Board (FIPB) has overruled the objections raised by Telco Construction Equipment Company Ltd (Telcon), a Tata Motors subsidiary, to the proposed construction equipment joint venture between John Deere Construction & Forestry Company of the US and Ashok Leyland. Telcon, FIPB said, did not furnish enough proof that the joint venture could jeopardise its business interests.

This is being seen as an attempt by FIPB to put on fast track foreign investment proposals held up due to insufficient opposition from local companies.

Telcon, a 60:40 joint venture between Tata Motors and Japan’s Hitachi Construction Machinery, had a technology licence agreement with John Deere to manufacture backhoe loaders. It had refused to give a no-objection certificate, as required under India’s foreign direct investment guidelines (called Press Note 1), to the joint venture because the new company was in the same business.

Telcon said it had signed a licence agreement with John Deere to manufacture backhoe loaders in India in October 1996, which was to expire in July 2006. So, in November 2005, Telcon wrote to the US-based company to continue the association and allow it to use the John Deere trademark. Telcon said it received no reply from the company. A reminder sent in December 2007 also went unanswered.

In March 2008, John Deere wrote to Telcon, charging it with violating its trademark and threatening legal action.

In its submission to FIPB, Telcon said it was now “manufacturing similar products in India” using its own technology and “technology that was legally acquired”. So, any threat in the form of improved technology in the same product or product lines would certainly affect the company’s business adversely.

John Deere, on its part, said that the licence agreement with Telcon expired in July 2006 and was not in existence on the date it sought approval for the joint venture with Ashok Leyland, so the new proposal would not, in any way, jeopardise the interests of any existing joint venture.

An FIPB sub-committee said that Telcon had confirmed that its licence agreement with John Deere had expired. And Press note 1 is not applicable after expiry of a technology licence agreement as it cannot be applied without a time frame, especially in cases where the agreements legally provide for cessation of the agreement.