Companies
FAME woes: Okinawa fails legal bid seeking stay in govt recovery proceedings
Summary
The Delhi High Court upheld the government's decision to initiate recovery proceedings against Okinawa Autotech for allegedly violating manufacturing criteria under the FAME-II scheme.As tensions mount for companies ousted from the FAME-II scheme, and their dealers, the Delhi High Court has refused to grant interim relief to electric two-wheeler maker Okinawa Autotech Pvt. Ltd from the government's recovery proceedings and ₹117 crore in penalties.
The penalties were imposed after the ministry of heavy industries found that Okinawa allegedly violated domestic manufacturing criteria under the FAME-II (Faster Adoption and Manufacturing of Hybrid and Electric Vehicles) scheme.
The second edition of the scheme that’s designed to promote the adoption of electric vehicles in India concluded in March.
Also read | FAME-3 is coming; and here is what changes for EVs
The court’s decision not only intensifies the challenges faced by Okinawa but also sets a precedent that could spell trouble for other electric vehicle manufacturers as they navigate similar government demands.
Mint has seen a copy of the Delhi High Court order from 5 August.
The court had earlier said that while it was dismissing Okinawa's petition for interim relief from coercive action, the case will be decided based on the outcome of Okinawa's writ petition, in which the company had also sought FAME-II dues of ₹425 crore from the government.
“The court's order dated August 5, 2024, references the partial relief granted in the earlier order dated March 13, 2024. In the March 13th order, the court determined that if the writ petition is decided ultimately in the favor of Okinawa, the government will be obligated to pay Rs. 424 crore, even if the FAME 2 scheme ended in March 2024," Okinawa said in a statement following the court's decision.
“The case is now approaching final adjudication, with the next hearing date on October 14, 2024," it said.
The FAME-II scheme imposes strict compliance requirements that several electric vehicle manufacturers have struggled to meet.
The Delhi High Court’s refusal to stay recovery proceedings against Okinawa is noteworthy because the government had highlighted that it had already collected penalties from three out of the six manufacturers found to be non-compliant with its FAME-II criteria.
These three manufacturers—Greaves’s Ampere, Amo Mobility and Revolt—had returned government subsidies under Fame II after being penalized.
The court recognized that granting relief to Okinawa could undermine the government’s enforcement of the scheme and could have broader implications for companies that have already complied.
Also read | Govt dithers on subsidy, EV makers fear losing fame
The ruling suggests that non-compliant manufacturers will face a steep uphill battle in avoiding penalties, especially as the government is keen to enforce the integrity of the upcoming FAME-III scheme.
Okinawa's financial struggles
Okinawa has seen its fortunes decline sharply since being de-registered from the FAME-II scheme.
The company had been a significant beneficiary of the scheme, which provides subsidies to EV manufacturers who meet specific localization and production criteria.
However, allegations of non-compliance led to Okinawa’s exclusion, marking the beginning of a series of financial difficulties.
In July, Okinawa approached the Delhi High Court seeking directions to prevent any coercive action by the government while the legal proceedings were still pending.
Okinawa argued that the imposition of penalties had severely hampered its financial health, to the point where it could no longer sustain production.
The company informed the court that its cash flow had come to a standstill, and it was now unable to raise funds or secure loans. Okinawa further highlighted that one of its key suppliers had already approached the bankruptcy court in Chandigarh, adding to its woes.
During the court proceedings, Okinawa warned that if it did not receive relief, it might be forced to approach the bankruptcy court itself.
Also read | Will EV charging finally get the attention it deserves in FAME-III?
