In a letter to the industry ministry, LML has stated that the termination of the JVA was invalid as Piaggio has not gone through the proper route, elaborated in the terms of agreement between the two partners in the scooter manufacturing venture.

Sources in the industry ministry told UNI here that LML has stated that as per the terms of agreement, the JVA could be terminated only by an arbitration tribunal or a civil court. Since Piaggio has not approached either and terminated the agreement on its own, LML has alleged that it is a purported termination and is invalid in law.

It may be recalled that Italian bi-wheeler major Piaggio, which held a 23.6 per cent stake in LML, had on May 31 decided to pull out of its scooter manufacturing joint venture with the Kanpur-based Singhania family. Piaggio -- through its subsidiaries Piaggio BV and Piaggio and CSPA-- had terminated the joint venture agreement and all other related agreements with the company.

The Singhania family also controls 23.6 per cent stake in the venture while the remaining stake is in the hands of public and financial institutions.

Piaggio is firm on exiting the joint venture and is now actively looking at the next possible option for India, which is likely to be in the form of a wholly-owned subsidiary to directly take on LML products.

It may be recalled that the partners had crossed swords over controlling the joint venture company following the demise of Piaggio Group head Giovanni Agnelli in 1998. The Singhanias had then sought to buy out Piaggio's stake in LML citing Giovanni's death as a triggering event that gave Singhanias the right to purchase the stake as per the joint venture agreement.

The Italian scooter giant was earlier looking at introducing its Gilera range of bikes, including the top-end model `Eaglet' through LML Ltd. But due to the standoff between the partners, theproject was called off. LML has now joined hands with Daelim of South Korea to foray into the motorcycle segment and the first model would be rolled out in May this year.