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Thursday, August 21 1997

Modiluft, Lufthansa cease-fire

ENS ECONOMIC BUREAU

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 lump-sum Rs 16 crore immediately. Lufthansa will also get rights to sell-off ModiLuft assets in that case.

Reacting to the out-of court settlement, 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 S K 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 was 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 S K Modi, chairman, ModiLuft and Dieter Heinan, senior vice president, Lufthansa.

Expressing his satisfaction over the out-of-court agreement, S K 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".

He added that ModiLuft hoped to have a normal relationship with Lufthansa after its 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 multi-nationals have not always run smooth, with crackks appearing in sveral JVs 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.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.

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