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US dealers sue Mahindra for fraud

June 07, 2012 10:28 IST

Automobile dealers from across the US filed a lawsuit on Monday, accusing India's Mahindra & Mahindra (M&M) of 'fraud, misrepresentation and conspiracy'.

The lawsuit alleged the Mumbai-based company duped hundreds of dealers and walked away with more than $60 million in cash and trade secrets, a release posted on PR Newswire website stated.

Less than three months ago, M&M announced its victory in an arbitration case when the International Arbitration Panel rejected the claims of its former dealer partner Global Vehicles, USA, which had accused M&M of violating a distribution agreement for selling vehicles in the US.

According to attorney Michael Diaz, managing partner of the Miami-based Diaz Reus & Targ, "Mahindra told dealers its light trucks and SUVs were ready for delivery to the US market. However, Mahindra intentionally delayed certification of its vehicles after obtaining the dealership fees and trade secrets, and began pursuing other partners in the US and elsewhere in clear violation of commitments."

Diaz leads the plaintiffs' legal team of Gary Davidson, Brant Hadaway, Carlos Gonzalez and Sumeet Chugani, according to the release. The mass tort lawsuit was filed in a US district court in Atlanta against Mahindra & Mahindra and Mahindra USA Inc by dealerships in New Hampshire, Florida, California, New Jersey and Washington.

Dealers paid initial dealership fees, undertook marketing on M&M's behalf, built M&M showrooms, display platforms and showcases, and hired additional personnel, all at the company's urging, according to the suit.

"We cannot comment on this as the matter is in the courts but we would like to state that some dealers had earlier filed a suit against Mahindra and Global Vehicles in the US district court in Missouri. The Missouri court had dismissed all claims against Mahindra in that suit. Significantly, the Missouri court also ruled that Mahindra could not be held liable for any action of Global Vehicles with respect to its dealers," stated an M&M spokesperson.

Mahindra executives, during the announcement of fourth-quarter results, had refused to speak on the company's US plans. The company has been trying to enter the US market since 2008 with a range of pick-up trucks and SUVs but was hit by delayed regulatory approvals.

"In a separate related development, an international arbitral tribunal had in February 2012 dismissed similar allegations and claims against Mahindra made by Global Vehicles. Mahindra is in the process of enforcing that arbitration award. Mahindra unequivocally denies all allegations of fraud, misrepresentation and conspiracy," the M&M spokesperson added.

BS Reporter in Mumbai
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