HC admits pleas to wind up India franchise

HC admits pleas to wind up India franchise

New Delhi: The Bombay high court has admitted two petitions for winding up Sankalp Retail Value Stores Pvt. Ltd, the India franchisee for US-based chain MyDollarStore, filed by vendors to recover dues for goods supplied.

Sankalp Retail is the second chain after Subhiksha Trading Services Ltd to be threatened by court-ordered closure after it failed to pay vendors for supplies.

MyDollarStore and Subhiksha are among the casualties of an economic slowdown that has seen Indian consumers cut down on spending, making it difficult for retailers to raise cash to repay vendors, let alone make any fresh investments in expansion.

The court admitted petitions filed by a supplier of perfumes and deodorants, Imran Sheikh, and Mumbai-based Rising Klas Impex Pvt. Ltd. The suits were filed after the master franchisee of MyDollarStore failed to make payments for several months. The court said it had given time to the parties to reach settlements and that Sankalp Retail had failed to clear its dues in the given time.

Sankalp Retail said it’s having “difficulties in making payment", according to the court order.

In a reply to the court in April, Sankalp Retail said it’s “trying its level best to prioritize" Sheikh’s claim of about Rs49 lakh.

“In view of the tight financial cash flow situation faced by the entire retail industry, the respondent company is unable to clear the outstanding immediately," according to the court documents. The court order says Sankalp Retail had made no payments as of August end.

The Bombay high court move comes days after two similar cases were admitted by the Madras high court against troubled retailer Subhiksha. Lender Kotak Mahindra Bank Ltd sought about Rs40 crore. HCL Infosystems Ltd wanted payments of Rs9 crore for Nokia mobile phones supplied to Subhiksha before a cash crunch prompted the Chennai retailer to halt nationwide operations.

MyDollarStore, founded by Rex Mehta, an Indian-American based in California, had plans of opening 400 outlets across India in three years, offering products including Doritos chips and Kellogg’s Pop-Tarts, according to the chain’s website.

Meanwhile, the company has closed almost all its 50 stores, according to several employees who also said they have not been paid their salaries for several months.

MyDollarStore’s head office in California did not respond to an emailed questionnaire on the current status of its India franchisee. Soumitra Ghatak, chief executive of Sankalp Retail, was not reachable for comments, while Mehernaaz J. Wadia of Hariani and Co., the law firm representing the franchisee, declined to comment.