Cement and engineering major Larsen & Toubro (L&T) is fighting a legal battle with three hoarding agencies -- Prime Displays Pvt Ltd, Everest Media Pvt Ltd and Abiz Business Pvt Ltd -- even after the company has terminated an 8-year contract, of worth Rs 240 crore, with these agencies in August 2001. The contract did not have any cancellation clause.
Meanwhile, Everest Media has served winding-up notice to the company over non-payment of dues.
The public relations agency for L&T confirmed the development and said that the legal department of the company is looking into the matter. "The contract was signed at a higher price. Since then, the hoarding rates have come down drastically. The contract did not have any cancellation clause," the agency said.
According to and internal management note of the company, the three contracts were finalised as per appropriate commercial procedures and even the company's internal audit had not raised objections on this.
In his note to Y M Deosthalee, director (finance) of the company, Arun Vakil, general manager, said: "We have no valid grounds on which we can get out of these contracts, and our legal department has also pointed out this fact. The department has also warned about the risk of a huge financial and reputation loss by taking a unilateral step like termination of the contracts."
"Some have also pointed that the suppliers have legal options against such terminations that are capable of incurring huge damage to us, not only financial but also in terms of image and reputation," Vakil's note added.
In a reply to the note, Girish Gokhale, head of the company's legal department, said: "I feel that no compromise, without use of some strong methodology, may be possible. On rethinking, I feel that termination notice may help negotiation process to the advantage of L&T."
Financial institutions, such as Unit Trust of India, Industrial Development Bank of India, Life Insurance Corporation of India and General Insurance Corporation of India hold a majority stake in the company.
