Danone rebuts Wadia claim on Press Note 1

Avesthagen's promoters also refute violation of non-compete clause.

The legal tussle between the Wadia group and French dairy giant Group Danone has taken a new turn with the latter rebutting the Wadia group's claim that its 5 per cent investment in Bangalore-based bio-nutritional firm Avesthagen violates Press Note 1.

Sources close to Groupe Danone told Business Standard that the question of getting a no-objection certificate for the investment by its subsidiary in Avesthagen did not arise as its products did not compete with any of the businesses of Britannia, its joint venture with the Wadias.

Avesthagen makes bio-actives for food products, which, sources said, did not compete with Britannia's food product range.

"For example, Avesthagen makes speciality curd for sensitive stomachs, whereas Britannia does not have any product in this segment," they said.

Meanwhile, Avesthagen's promoters have also denied that the stake buy by Groupe Danone was a violation of norms. Villoo Morawala Patell, vice-chairperson and managing director, Avestha Gengraine Technologies said, "We are a nutraceuticals company and there is no way that we are competing with Britannia on any front."

The government said on Friday that it had received a complaint from industrialist Nusli Wadia alleging that Danone had violated Press Note 1, 2005, which specifies that new proposals for foreign investment require the government's prior approval in cases where the foreign investor has an existing joint venture agreement with an Indian company in the same field.

Patell added that the Danone investment was for co-development, under a well-established global model in which large companies invest in research companies and collaborate on products.

She added that Avesthagen had had similar deals with pharma major Cipla and Limagren.

Danone executives claim that the company had approached the Wadias in October 2006 for investing in Avesthagen but had been turned down.

However, the Wadia group's petition in the Mumbai High Court says that it had approved the deal through another joint venture with Danone, but that the French company went ahead with its investment without its knowledge. The high court had initially stayed the transfer of Avesthagen shares.

Another hearing is scheduled in the Mumbai High Court on Tuesday.

The Wadias and Danone hold an equal stake in Associated Biscuits International Holdings (ABIH), through which they control Britannia. Danone has three directors on the 14-member board, the rest being Wadia nominees.