Karnataka High Court clears decks for sale of Elior India to Compass Group

  • The Court directed the Elior India to deposit Rs. 7 crores in Escrow account as interim protection against Rs. 50 crores claim of the former Elior India CEO, Sanjay Kumar against Elior Group.

Bengaluru,:Karnataka High Court inan order has allowed the sale of Elior India, the largest corporate catering company in India, to Compass Group, another global foodservice company. In an order passed on November 10, the Court directedtheElior India to deposit Rs.7 crores in Escrow account as interim protection against Rs.50 crores claim of the former Elior India CEO,Sanjay Kumar against Elior Group.Theorder was passed on thepetition filed by former Elior India CEOseeking a stay on the sale of the company’s assets to the Compass Group pending arbitration.

The court also set aside the stay on the arbitration proceedings and directed the former Elior India CEO to approach the arbitral tribunal for any additional reliefs that he may wish to seek. The court observed that this interim relief will be only for period of 10 weeks since the arbitration has been stayed and there was no alternate route available for interim protection during this period.

The court in its order said: “This Court can only opine that the second respondent must hold a sum of Rs.7 [Seven] Crores [which is approximately about 15% of the first respondent’s claim] in an escrow account for a period of 10 weeks if there is closure of the transaction for the sale of its assets as against mere finalization.”

The court will now separately hear a petition filed by Elior France challenging the interim award granted by the arbitral tribunal making Elior France a party to the dispute on the claim filed by the former Elior India CEO and will adjudicate on the matter in the weeks ahead.The ongoing legal battlebetween the former CEO of Elior India and the Elior Group involves a claim of over Rs.50 crores made by him against the group. The current litigation has been ongoing for over 18 months now with both sides incurring significant legal costs and failing to come to a settlement between them.

Elior India will now be able to proceed and conclude the sale with the Compass Group even as these legal battles and arbitrationwith its former CEO carries on.

Compass India which employs more than 10,000 people in India, is a subsidiary of $22 bn Compass Grouplisted on the London Stock Exchange. The Compass Group is amongst the world’s largest food services company with a No.1/No.2 position in most markets that it operates.With the court order now clearing the sale of Elior India assets to the CompassGroup, Compass India will now also emerge as the undisputed leader in the corporate catering segment in India.

Elior India is a subsidiary of $4 bn Elior Group listed on the Paris Stock Exchange andis the largest premium corporate catering company in India, producing over 28,000 meals per day with operations in Delhi, Mumbai and Bangalore. The sale of Elior India by the Elior Group is a part of its strategic decision to exit India market and concentrate on its other markets in Europe and North America. Elior India employs nearly 1000 people on its payroll with food services in both the corporate segment and also offers premium banqueting services.

It appears, the deal with Compass is a slump sale and will involve only a transfer of the contracts.Elior India had earlier made a similar attempt to sell its business to Foodlinks and later to Sodexo.However, it is unclear whether those talks did not progress because of valuation gaps, or the inherent legal risks associated with this transaction given the ongoing litigation with its former India CEO.

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