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Baron group may sue TCL for JV collapse

Reeba Zachariah

The Baron group is planning to sue Chinese television manufacturer TCL group for defamation, damages towards losses suffered in the TCL-Baron India joint venture, as well as recovering money in lieu of the goodwill created by Baron for the TCL brand in India.

Confirming the development, Shakun Mulchandani, chairperson of the Baron group, said, "We are taking action against TCL because they failed to abide by the terms and conditions of the joint venture agreement . Also, as per the memorandum of understanding, TCL cannot enter the market for 18 months."

The 51:49 joint venture between the $1.8 billion Chinese television manufacturer TCL and the Baron group, with a stated objective of capturing India's audio visual and white goods market by offering competitive prices, floundered within a year of its launch.

In December last year, both the parties had stuck a $4 million deal where TCL would acquire Baron's stake thereby converting the JV into a wholly owned subsidiary, including the value of the brand but TCL backed out of the proposed deal.

TCL-Baron made losses of around Rs 250 million crore in the first year. During its peak time, TCL had a market share of 7 per cent of the Rs 60-billion colour television market.

Mulchandani said, "The blame has most times fallen on Baron, especially as people found it easy to cite our previous relationships with Akai and Aiwa, which ran into difficulty."

"The truth is that we walked out on Akai, because they prevented us from bringing in Aiwa to the market. Later, Aiwa put us under the same pressure with Hitachi. But it would be inappropriate to speak about Aiwa as the matter is currently subjudice not because we are without merit but because it would seem that we are trying to influence the court," she said.

This is not a problem between TCL and Baron. The problem was with TCL and their own joint venture, she said.

Under the joint venture agreement, TCL was to procure electronic components from China while Baron was to procure cabinets, picture tubes besides handling marketing and advertising needs for the venture.

Mulchandani said, "Both the partners would work at cost and the JV would get healthy returns. As per the agreement, both the partners would place their costs on table and it was during this process that trouble started."

"Despite repeated reminders and explicit assurances made to Baron, TCL failed to provide the cost estimate of even a single component by way of the invoice through which the goods were purchased. This was in violation of the agreement and thus the JV started deteriorating," she explained.

'The JV became unfeasible as the cost of landed goods was way above expectations resulting in the joint venture facing difficulties in consolidating the market share. The Baron group's image of being a price warrior was also adversely impacted, "she said.

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