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

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

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

The Board confirmed Judge PT Asha’s order dated 29 September 2023 that the air conditioner purchase orders issued by ETA General and the invoices issued by Fujitsu General (Thailand) in 2019 were independent of ETA General’s agreements with parent company Fujitsu General Limited (FGL) in Japan and therefore there was no need to refer the matter to arbitration.

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

However, ETA General had to close down its manufacturing unit in Puducherry due to FGL’s inability to supply engineers. However, Fujitsu General (Thailand) continued to supply air conditioners to ETA General for its sales in India. FGL launched Fujitsu General (India) Private Limited in 2018 and in 2019 decided to terminate the agreement with ETA General and instead go into business on its own in India from 2020.

Since the 1999 Master Technical License and Distribution Agreement as well as other agreements such as ETA’s shareholders agreement with FGL and its group companies contained an arbitration clause, the Chennai-based company insisted that the suit filed by Fujitsu General (Thailand) to recover $19 million should be dismissed and the dispute referred for cancellation.

Judge Asha rejected the request to dismiss the case after deciding that these agreements had nothing to do with the purchase orders and invoices for which collection proceedings were initiated.

The judge said, “Especially when the transactions envisaged within the scope of these agreements and the purchase orders between the defendant and the plaintiff are based on two independent and separate contracts, the question of the concept of group cannot be brought to the concrete case. Therefore, the application to refer the parties to arbitration is unfounded and is therefore rejected.”