New Delhi: Compass Group which has been in the process of acquiring the Elior India business hadsigned the business transfer agreement for the slump sale on 7th December 2022 with the last date for the closing of the acquisition as 31st January 2023. However, in a surprising turn of events, that closing date was missed, even though offer letters were issued to employees and consent letters from Clients has also been obtained. The closing however could not be completed because of an arbitral order stemming from the litigation between Elior India and its former CEO that prevents Elior India from selling the assets till such time it furnishes a bank guarantee of Rs.9 crores. Whilst the employees and many clients were somewhat apprehensive of the transaction the interim Order of the Arbitral Tribunal comes as a setback for the Completion of the Sale unless Elior India furnishes the amount Ordered by the Arbitral Tribunal.
Sources say that the slump sale agreement apparently stated that there is no arbitration claim or award against Elior group preventing it from selling its assets, however with the arbitral Order of 15th December 2022, it has become difficult for Elior to execute this transaction as it rushes to seek a stay on the arbitration order through the commercial courts of Bengaluru. Industry sources inform that the Sale would be complete the moment the Order of the Arbitral Tribunal is stayed.
The Tribunal’s order probably comes as a relief to the former Elior India CEO as in an application filed before the Karnataka High Court, he had contended that should Elior India be allowed to go through with a sale then it will be impossible for him to secure his dues of nearly Rs.50 crores from Elior India as no entity will be existing. Sources also say that the slump sale agreement between Compass and Elior India expressly prohibits Elior India from continuing its business after the closing of the transaction.This is in line with the apprehensions raised by the former CEO of Elior India in his applications before the Karnataka High court.
What is interesting to note that even on 7th December 2022, the purported date of signing of the business transfer agreement, the matter of disposal of assets of Elior India was subjudice and Elior France was a party to the dispute.
Sources say that the Compass Group is acquiring the business of Elior India at a price of less than Rs. 30 crores. Five years ago this was purchased for about Rs. 54 crores and since then the revenue has doubled, and profits have grown. Industry sources therefore speculate that the valuation dip could be on account of the matter related to sale of Elior India assets being sub-judice and given that Compass has deep pockets it would probably not worry too much about the on-going litigation.
The former CEO has since filed a writ petition with the Karnataka High Court challenging the jurisdiction of the Bengaluru city commercial court stating that the arbitration pertains to an employment dispute matter and not a commercial dispute and therefore this Bengaluru city commercial court has no authority to adjudicate on the said subject.
The Karnataka High Court has since granted a stay on the matter and scheduled the next round of hearing for 10th February 2023 to hear the dispute regarding the jurisdiction of the Bengaluru city commercial court in this matter.
Elior India will be hoping that the Bengaluru city commercial court stays the arbitral Order for the time being so as to help it conclude the sale at the earliest.