The Supreme Court will take up on Monday the case of Korean multinational LG Household and Health Care to determine whether an arbitration clause exists between LG and its Indian business partner India Household and Healthcare Ltd (IHHL).The genesis of this case is LG’s unilateral declaration that its contract with IHHL ‘‘is illegal’’. LG entered into a memorandum of understanding (MoU) with its Indian partner IHHL on November 1, 2003, for the sale of FMCG products in India for five years. For 2004-2006, a purchase agreement of $4.5 million was also signed.LG had notified this contract in its website, and its plans for business expansion in India, in May 2004. It also held press conferences in Chennai to announce the agreement.Subsequently, IHHL, on its part, appointed carrying-and-forwarding agents (CFA) in almost all states and over 500 distributors. The CFAs and distributors invested about Rs 25 crore as security and cost of the goods.STC advanced a loan of Rs 140 crore to IHHL and Union Bank of India Rs 20 crore, which were paid to LG in turn as per the terms of the contract. In six month period, LG supplied FMCGs worth Rs 22 crore. STC managing director incharge of marketing RP Goel also visited Korea in November 2004 for inspection.But in January 2005 LG had declared that the entire contract was illegal as it was signed by its ‘‘working level officers’’.
