Daelim, however, has brushed aside Piaggio's threats and is going ahead with the alliance. LML is expected to hit the market with 100cc, 135cc and 160cc motorcycles manufactured in collaboration with Daelim by this year-end.

It all began when Piaggio wrote a letter to Daelim a few months ago stating that the agreement between LML and the Korean company was a major breach by LML of its contractual obligations towards Piaggio.

LML reacted swiftly and slapped a notice on Piaggio stating that Piaggio's allegations were totally unfounded and baseless as also defamatory and libelous. LML stated that these allegations were aimed at intimidating Daelim, interfering in LML's contractual rights with Daelim and thereby trying to harm LML's legitimate business interest.

Interestingly, Piaggio did not seem to have any problem with LML forging an alliance with Daelim until last year. Minutes of the LML and Piaggio meeting in February 1998 reveal that Piaggio had agreed that "LML may finalise arrangement with Daelim in due course in view of excellent engine performance and full back-up for industrialisation assistances, parts for prototype, CKD supplies etc".

LML has made the Piaggio-Daelim issue a part of its reply to the Company Law Board, which is hearing a petition by Piaggio against its estranged joint venture partner.

"As part of its ongoing plan to raze the respondent company (LML) to the ground, Piaggio with an aim to intimidate Daelim so as to interfere tortuously with LML's business relationship with Daelim, wrote defamatory letters making allegations which to Piaggio's full knowledge were false and vexatious," LML has stated in its reply to CLB.

LML has stated that Piaggio repeatedly failed in fulfilling its obligations towards the Indian venture. Citing an example, LML has stated that Piaggio submitted a proposal in March 1993 to financial institutions seeking waivers and concessions which they rejected. Piaggio set a unilateral deadline of April 30, 1993, for the FIs for acceptance of its proposal. It wrote a letter to FIs on May 1, 1993, stating that as its proposal was not approved, it was withdrawing from its commitments. Piaggio then proposed to place LML into liquidation by referring it to the BIFR.

Another instance cited by LML over Piaggio reneging on its commitment was the second JV pact signed in February 1995. The business plan appended to the agreement envisaged manufacture of five new vehicles. LML said Piaggio defaulted in supply of technology despite a defined business plan which detailed the technology transfer of five vehicles on time-bound schedule.

In August 1996, LML managing director Deepak Singhania met G Agnelli of Piaggio and sought termination of the collaboration. Agnelli requested that they should give one more chance to the joint venture to continue. However, LML has alleged that things did not improve and Piaggio began to press for waiver of any liability on account of all its earlier delays in supply of technology. In addition, Piaggio also demanded a payment of Italian lira 50 billion between 1997 and 2005.

Piaggio insisted that LML source the motorcycle technology from it. LML's objections that Piaggio manufactured only 8,000 motorcycles per annum and that too of only the two-stroke 50cc variety were turned down.

In September 1997, Piaggio informed LML that it would not be able to meet its technology obligations and asked it to look for an alternative solution for motorcycles. However, Piaggio continued its demand for waiver from any liability arising out of delays in technology supply. It also turned down an offer to subscribe to the preference capital issue of LML in December 1998 until a waiver was granted, LML stated in its reply to CLB.