New Delhi: UK-based maker of electric two- and three-wheelers Ultra Motor Co. and its former collaborator Hero Electric, part of the Ludhiana-based Hero Group, have slapped arbitration notices—for out-of-court settlements—on each other to wriggle out of binding purchase and sale agreements based on a previously signed accord.
This comes after the Delhi high court enforced a 180-day notice clause in the agreement, which restrains Ultra Motors from selling certain categories of bikes and Hero from procuring motor kits from any other manufacturer during this period.
However, Hero has indicated that it was procuring motor kits from other manufacturers and Ultra has said it intended to sell some categories of electric vehicles—mainly higher powered and higher speed scooters—which it says are not covered in the agreement.
“We are talking with our lawyers and there is no problem” in procuring motor kits, said Naveen Munjal, chief executive officer of Hero Electric.
On its part, Ultra Motors said its higher power electric vehicles were not covered in the initial agreement and that Hero wasn’t free to procure parts from others. “Since April we have stopped supplying products (Hero),” said Ganesh Mahalingam, chief executive and managing director of Ultra Motors’ Indian unit. “If they buy parts from others, I will enforce the 180-day clause,” which kicked in on 23 April.
Hero and Ultra have been collaborating from September 2006, but it was only a year later that they said they intended to form a joint venture. Under the collaboration the companies had sale and purchase agreements and would have had a common dealership network, whereas under the joint venture the activities would be carried out by a single company formed as a partnership.
Ultra Motor supplied the motor kits for the two-wheelers that Hero Electric manufactured. Under the terms of the deal, Hero was to buy 35,000 kits in the first year and 125,000 units in the subsequent year leading up to September 2008. It could not be ascertained how many units changed hands between the two companies till April.
They are also wrangling over who would manage the 175 dealerships set up as part of the deal. Hero failed to get a restraining order against an Ultra meeting?with dealers last week. Ultra said 139 dealers have signed “on stamp paper that they will exclusively distribute Ultra Motor products.”