Dubai court rejects Honasa Consumer grievance filed over fiasco with UAE distributor

The parent entity of Mamaearth, Honasa Consumer, has informed the stock exchanges in India that the Court of Merits in Dubai has rejected the grievances filed by the company and its distributor in the Middle East and African region- RSM General Trading, and ordered to attach assets of Honasa Consumer in UAE along with refusal to cancel the trading license of Honasa Consumer General Trading LLC.

Dubai Court (on October 1) refused to cancel the trading license of Honasa Consumer General Trading LLC in Dubai, UAE on the grounds that it is a separate legal and financial entity and is not related to Honasa.

Further, Dubai Court ordered to attach Honasa’s assets in Dubai, UAE because of the 25 million AED (est. Rs 57 crore) compensation ordered by the Court of First Instance, Dubai.

RSM General Trading was Honasa’s distributor in the Middle East and African region between July 30, 2020 and January 17, 2023.

It is to be noted that Honasa Consumer had severed its ties with RSM General Trading a few months before its listing in the Indian market.

In July 2023, RSM General Trading LLC had filed a lawsuit in the Dubai Court for unlawful termination of its distributorship by Honasa Consumer Limited and had filed a precautionary attachment application against Honasa before the Court of Merits at Dubai for attaching assets of Honasa in UAE and cancellation of trading license of Honasa Consumer General Trading LLC.

Later, the Dubai Court on June 6, 2024, allowed to attach Honasa Consumer Limited’s assets in UAE, however, it refused to cancel the trading license of Honasa Consumer General Trading LLC.

Honasa Consumer Limited and RSM General Trading LLC filed their respective grievances against the said precautionary order.

In Dubai, a creditor can seek an order of precautionary attachment, i.e., temporary seizure of the debtor’s assets, such as bank accounts, if the debtor doesn’t have a permanent residence in UAE.

On May 16 (2024), Honasa Consumer moved to the Delhi HC seeking a temporary injunction (a court order to prevent something from happening) and anti-enforcement protection against the Dubai court order.

Later in August then, the Delhi High Court imposed an interim stay on the UAE court’s order, which directed the company to pay damages worth Rs 56.6 Cr to RSM General Trading for improper contract termination. The Court also directed RSM General Trading to withdraw the execution proceedings in Dubai Court.

While informing the stock exchanges, Honasa noted that the latest Dubai Court order (dated October 1) has no financial implications for Honasa due to the judgement passed by Delhi High Court, which ordered RSM to withdraw any execution proceeding filed in Dubai, UAE along with depositing Rs. 57 Crores (approx.) to the Delhi High Court registry.

The Delhi High Court further ordered that if the execution proceedings filed by RSM in Dubai are successful, the deposited amount of Rs. 57 crores (approx.) shall be released to Honasa.

"Since, RSM has not either withdrawn the execution proceedings in Dubai, UAE nor it has deposited Rs. 57 crores (approx.) to the Delhi High Court registry, Honasa is in the process of filing contempt proceedings against RSM before the Delhi High Court for breach of compliance of the Delhi High Court judgment," it said.

Further, Honasa will appeal this order in Dubai, accordingly, this order will have no adverse financial impact on Honasa till the finality of this appeal proceedings, it added.