$19 million air conditioners sale dispute: Madras High Court rejects plea against Fujitsu General

The Madras High Court has refused to dismiss a civil suit filed by Fujitsu General (Thailand) Company Limited, represented by is director Noriaki Terashima, seeking a direction to Chennai-based ETA (Emirates Trading Agency) General Private Limited to pay $19 million with interest at the rate of 6% per annum from April 6, 2022 till the date of realisation.

A Division Bench of Justices P. Velmurugan and K. Govindarajan Thilakavadi dismissed an original side appeal preferred by ETA General in 2024 against a single judge’s 2023 order rejecting the Chennai based company’s application to dismiss the suit for recovery of money and instead refer the financial dispute between the two companies for arbitration.

The Bench confirmed Justice P.T. Asha’s September 29, 2023 order that the purchase orders of air-conditioners placed by ETA General and the invoices raised by Fujitsu General (Thailand) in 2019 were independent of the agreements that ETA General had entered into with the parent company Fujitsu General Limited (FGL) of Japan and hence the matter need not be referred for arbitration.

Opposing the suit before the single judge, ETA General had said, FGL and its subsidiary Fujistu General (Asia) Pte Limited, based in Singapore, had entered into a Master Technical Licence and Distribution Agreement with the Chennai-based company on December 22, 1999. Pursuant to this agreement, ETA General had been manufacturing and marketing General brand of air conditioners in India.

However, ETA General had to close down its manufacturing unit in Puducherry since FGL was unable to supply the engineers. However, Fujitsu General (Thailand) continued to supply the air conditioners to ETA General for their sale in India. In 2018, FGL floated Fujitsu General (India) Private Limited and in 2019, it decided to terminate the agreement with ETA General and instead do business in India on its own from 2020.

Since the 1999 Master Technical Licence and Distribution Agreement as well as the other agreements such as the shareholders agreeement that ETA had entered into with FGL and its group companies contained an arbitration clause, the Chennai based company insisted that the suit filed by Fujitsu General (Thailand) for recovery of $19 million should be dismissed and the dispute must be referred for abitration.

Justice Asha had rejected the plea for dismissal of the suit after holding that those agreements had nothing to do with the purchase orders and the invoices for which the recovery proceedings had been initiated.

“The question of group concept cannot be brought into the instant case, particularly when transactions that are contemplated under these agreements and the purchase orders between the defendant and the plaintiff stand on two independent and distinct contracts. Therefore, the application filed for referring the parties to arbitration is without merit and is therefore dismissed,” the judge had written.