Winning Bizness Desk
Mumbai. In a significant development, a Dubai court has ordered the confiscation of properties belonging to a company in which Bollywood actress and investor Shilpa Shetty has a stake. The news led to a 5% drop in the company’s shares on Friday. The affected company, Honasa Consumer Limited, which owns popular brands like Mamaearth and The Derma Company, confirmed that the Dubai court issued the order concerning its assets in the United Arab Emirates (UAE). Honasa informed the stock exchange of the court's decision, which came after a legal dispute with RSM General Trading. On October 1, 2024, the Dubai court rejected appeals from both RSM and Honasa. However, it did not cancel Honasa Consumer General Trading’s business license, despite the ongoing dispute over distribution rights with RSM.
Legal Dispute Since June 2024
The dispute dates back to June 6, 2024, when both companies filed complaints against a precautionary attachment order issued by the Dubai Court of Merits. This order mandated the confiscation of Honasa’s Dubai-based assets. The court ruled in favor of RSM, ordering Honasa to pay compensation of 2.5 crore dirhams (approximately ₹55 crore) in relation to the loan.
Business License Intact Despite Confiscation
While the court upheld the asset attachment, it dismissed RSM's request to cancel Honasa's business license in Dubai. Honasa Consumer General Trading LLC will, therefore, retain its business license, allowing it to continue operating in the UAE.
Dispute Over Distribution Rights
The conflict between Honasa and RSM stems from an alleged illegal termination of a distribution agreement by Honasa Consumer Limited. RSM filed a case in the Dubai court against Honasa for this action. Honasa, in response, has stated that it will appeal the latest ruling, emphasizing that there would be no adverse financial consequences until the appeal process is complete. Despite Honasa’s assurance, the company's stock took a hit following the news, closing with a 4.96% decline on Friday, reflecting investor concerns over the legal issues and potential financial implications of the court's decision.
