NEW DELHI: Automobile dealers' body FADA on Wednesday said it has initiated legal action against bike maker UM Lohia Two Wheelers on behalf of its members.
UM Lohia, a joint venture (JV) between the Lohia Group and US-based UM Motorcycles, stopped operations in India abruptly last October, leaving around 80 dealers in the lurch.
These dealers have invested around Rs 150 crore in establishing requisite infrastructure alone. The JV entity came into existence in 2015 and retail sales began in 2016.
The Federation of Automobile Dealers Association (FADA) said it has served legal notice to the US and Indian directors of the entity.
"This is a fit case of forgery and fraud. These dealers have lost their business, credibility and credentials for no fault of theirs. These people who invested in the company are now left with huge debts," member and ex-president of FADA Nikunj Sanghi told PTI.
For some time now, it is becoming a trend for multinationals to come to the country, make tall claims about investment and then make a sudden exit, leaving investors in the lurch, he said, demanding fair compensation for the company's dealers who collectively sold around 10,000 units.
"How will the servicing happen, who will provide spare parts? Already, 2,500 jobs have been lost at the dealerships. The government needs to take a close look at the situation," he added.
The legal action has been initiated as the dealers were aggrieved by the "dishonesty and fraud on part of the management and promoters of UM Lohia, including founders Ayush Kumar Lohia and Jose Miguel Villegas, FADA said in a statement.
The company has caused huge losses to dealers and exposed them to unwarranted litigation from customers of UM Motorcycles, it added.
"To make matters worse, UM Lohia has now surreptitiously folded up its operations and shut down its warehouse for spare parts, making it impossible for dealers to service the warranty claims on the defective UM motorcycles," FADA said.
In all this, UM Lohia, its promoters and its management have shown no inclination or interest in resolving the dealers' grievances, despite several attempts made by the dealers, first themselves, and then through FADA, it added.
The promoters of UM Lohia have now started new ventures. The Lohia group is now investing in the e-vehicles segment and once again finding dealers for this new venture, it alleged.
"Accordingly, to protect the interests of the customers and the dealers, FADA, through its counsel Khaitan & Co, has issued a legal notice to UM Lohia and its management, calling upon them to redress all grievances of dealers relating to the losses suffered by dealers due to actions of UM Lohia and to take steps to ensure the maintenance and servicing of motorcycles already sold in accordance with the warranty terms and law," FADA said.
If UM Lohia and its management does not respond to our legal notice, FADA will have no other option but to take appropriate legal measures against the company, its management and all others concerned with this matter, it added.
Simultaneously, FADA will also update and involve government authorities in this matter. Elaborating on the matter, the dealers' body said the problems of UM Lohia dealers began as soon as the company entered the market with its motorcycles.
"It soon came to light that the so-called American motorcycles were actually being assembled from Chinese parts at UM Lohia's manufacturing plant in Kashipur, Uttar Pradesh," FADA said.
Consumer interest immediately dipped as no one wanted to purchase cheap Chinese replicas of American motorcycles.
The brand lost its value, and with it the investments of dealers, who were now holding a product few desired, it added.
FADA said that at the time when the entire automobile industry in the country was moving towards BS-IV emission standards, UM Lohia chose to enter the market by introducing BS-III motorcycles in the second half of 2016, even though, the ban on sale of BS-III vehicles was to take effect in a few months, from April 2017.
As soon as the ban vehicles came into effect, the dealers of UM Lohia were left with a huge inventory of BS-III motorcycles which was not only undesired by customers, but now also legally unsaleable, it noted.
"UM Lohia, however, refused to compensate dealers for this unsaleable stock and also refused to return the advance payments given by many dealers. It is only after much cajoling that UM Lohia even acknowledged the problem," it added.
Even then, instead of buying back the BS-III motorcycles from the dealers and returning their advances, UM Lohia came up with the scheme to sell BS-IV motorcycles to dealers in lieu of their stock of BS-III motorcycles and advances, FADA said.
"However, the BS-IV motorcycles supplied by UM Lohia were entirely unfit to ply on roads with several basic components such as EFI Module controller and gear breaking down within few days of use of the motorcycles by the customers," it added.