Pal, Peugeot Seek To Settle Row Out Of Court

Amid a flurry of petitions and counter-appeals, Premier Automobiles Ltd (PAL) and its estranged French partner, Automobiles Peugeot, are holding talks to reach an out-of-court settlement. Premier and Peugeot have fallen out over PALs move to set up a new joint venture with Fiat of Italy to manufacture the Uno in India.

The outcome of the talks will be known today. The negotiations come amid the continued washing of dirty linen in public by the two partners, who had come together amidst much bonhomie barely three years ago.

Yesterday, the Vinod Doshi-controlled PAL charged Peugeot of malafide intentions in seeking to scuttle its proposed venture with Fiat. In an appeal filed in the Bombay High Court against last weeks adverse verdict, PAL charged that Peugeots sole intention is to pressurise it into selling its 31.76 per cent stake in PAL-Peugeot at a below-par price.

 

The appeal, seeking the courts clearance for PALs proposed extraordinary general meeting today, will be heard at 11 a m. The EGM is crucial as it is supposed to consider PALs proposed joint venture with Fiat, in which the Mumbai-based carmaker will hold 49 per cent, to make Uno cars.

Last Friday, an interim order by the Bombay High Court restrained Premier from seeking its shareholders consent for the proposed joint venture with Fiat. The order followed a petition by Peugeot, which alleged that the proposed Fiat-Premier venture would violate the non-compete agreement between Premier and Peugeot.

In its appeal, PAL disclosed that Peugeot had rejected PALs offer to purchase PALs Kurla plant, which it is now transferring to its joint venture with Fiat, saying it was unviable and obsolete.

Besides, in the prospectus for PAL-Peugeots public issue in 1995, Automobiles Peugeot had stated that Fiats Uno did not provide a competitive threat, since it caters to a different market segment.

Basing its arguments on these two points, PAL accused Peugeot of malafide intentions in deliberately filing its petition one month after it was informed of PALs proposed joint venture with Fiat.

The petition said Peugeot had offered to buy out PALs stake in PAL-Peugeot. However, the French company withdrew its offer after PAL agreed to Peugeots offer price of Rs 10 per share.

The conduct of the first respondent (Peugeot) in withdrawing the offer for the purchase of the appellants (PALs) shares clearly establishes that the first respondent had acted (in a) malafide (manner) and was not entitled to any equitable relief, said the appeal.

The appeal added that in view of Peugeots refusal to buy the Kurla plant, PAL had approached Fiat to save the Kurla outfit and its 4,000-strong work force.

The appeal also pointed out that PALs proposed joint venture with Fiat will manufacture only the Uno model, which is not in competition with PAL-Peugeot products.

PAL faced a crippling labour problem last year, which led to losses of 50 crore as on March 31 1997 and eroded 55 per cent of its networth. PAL was hence unable to provide funds to PAL-Peugeot, which too has been faring badly, with losses of over 90 crore in 1996-97. PAL had then offered to sell its holding in PAL-Peugeot for Rs 10 per share as stipulated by Peugeot, says the appeal.

Thereafter, Peugeot declined to purchase PALs holding. In May 1997, it withdrew its offer. The French company then entered into an arrangement with Maruti Udyogto supply diesel engines. This impinged on the competitiveness of the diesel version of the Peugeot 309, which is being manufactured by PAL-Peugeot, the appeal said.