Legal community awaits govt order on Danone

As the Indian government evaluates whether Groupe Danone's investment in the Bangalore-based nutraceuticals company, Avesthagen, violates the Press Note 1, the legal community is awaiting the outcome. A senior lawyer said the decision by the government would become a landmark order.

Pavan Duggal, Supreme Court advocate, said though there had been cases when existing joint venture partners had used Press Note 1 to oppose investment in another company, there was no other case of this sort. "It sets the benchmark for similar cases in future," he said.

The Wadia group, which has interests in aviation, real estate and foods, had filed a complaint with the government against French dairy major Groupe Danone, saying that it violated the Press Note 1, 2005, norms by picking up a stake in Avesthagen. The Wadias and Danone hold equal stake in the holding company of biscuit maker Britannia Industries.

"When taking a decision, the government needs to ensure that it doesn't take a pedantic approach to the issue. The FDI should not be hijacked by a procedural interpretation of the existing guidelines," said Duggal. A final decision is expected before the end of the month.

Akil Hirani, managing partner, Majmudar & Co, said it was up to Danone to prove that its investment in Avesthagen was not detrimental to its existing joint venture with the Wadias."

The other alternative the partners are believed to be discussing is winding up the joint venture with one buying out the other.

The two companies formed a joint venture company, Wadia BSN, in 1995 to market and manufacture Danone brands in India.