NEW DELHI, Aug 20: Warring erstwhile partners, ModiLuft and Lufthansa, have reached an out-of-court settlement.

The terms of the settlement include immediate return of three Boeing 737 aircraft to Lufthansa. The German carrier will also get immediate monetary compensation of Rs 1.49 crore from ModiLuft.

In addition, ModiLuft will pay $5 million (Rs 16 crore approximately) to Lufthansa. This amount will be paid to Lufthansa in instalments from the year 2000, provided ModiLuft fulfills all the other conditions of the agreement. If ModiLuft defaults on any condition, it will have to pay a lumpsum of Rs 16 crore immediately. Lufthansa will also get rights to sell off ModiLuft assets in that case.

Reacting to the out-of-court settelement, R Karanjawala, legal counsel for Lufthansa, said, "The agreement signifies a victory for Lufthansa. It also signifies a sttlement which is fair to both parties."

The agreement is expected to lead to an early re-launch of ModiLuft. The private air carrier has been grounded for more than a year.

The SK Modi-owned ModiLuft and the German airline, Lufthansa, terminated their partnership in May last year. The two airlines have since been involved in a protracted and bitter legal battle over the owenership of three Boeing 737 aircraft.

The terms of the out-of-court settlement, which were reached in London, have been filed in the Supreme Court on August 14. A joint statement issued by the two airlines on Wednesday said that the `terms of consent' of the settlement have been accepted by the court.

The agreement was reached between SK Modi, chairman, ModiLuft and Dieter Heinan, senior vice-president, Lufthansa.

Expressing his satisfaction over the out-of-court agreement, SK Modi, chairman, ModiLuft, said: "We are thankful to Lufthansa for helping to make ModiLuft a success during our association with the German airline. I am happy to announce today that ModiLuft is poised for an early re-launch."

Lufthansa spokesman Kavin Sethi said: "An early resolution of the dispute, addressing the needs of both parties, was an urgent imperative. Lufthansa and ModiLuft have, therefore, agreed to a comprehensive settlement plan that resolves all outstanding issues that have been the subject of litigation between the two organisations."

The Lufthansa-ModiLuft battle had raised a lot of dust in the country's corporate circles. Joint ventures between Indian companies and the weightier multinationals have not always run smooth, with cracks appearing in several joint ventures over issues of owenership and control.

The Lufthansa-ModiLuft break-up was taken as a case in point by the pro-Swadeshi section of Indian industry. While Lufthansa had alleged that ModiLuft had defaulted in payments for various services rendered by the German airline, the latter had hit back with several charges of its own.

SK Modi had alleged that Lufthansa's officials had run the show, with several of them being nominated to the board of ModiLuft. Modi had said that he was not appraised on the day-to-day working of the airline. He had also attacked Lufthansa for leasing "obsolete and fuel inefficient" aircraft to ModiLuft.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.