Delhi HC Imposes Interim Stay On Dubai Court’s Order To Honasa Over Compensation

In a respite to Mamaearth’s parent entity Honasa Consumer Ltd, the Delhi High Court has imposed an interim stay on an UAE court’s order, which directed the company to pay damages worth INR 56.6 Cr to its former distributor RSM General Trading for improper contract termination.

In an order passed on July 5, the Delhi HC granted Honasa ad-interim injunction and anti-enforcement protection which restrains its former distributor RSM General Trading to execute the decree against Honasa within the territorial jurisdiction of courts at Delhi, or elsewhere. 

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

“This is to inform that the company is in receipt of a judgment dated July 05, 2024 passed by the High Court at Delhi where it has ordered granting an ad interim injunction and anti-enforcement protection to the Petitioner (Honasa Consumer Limited) restraining the Respondent (RSM General Trading LLC) to execute the Decree against the Petitioner within the territorial jurisdiction of courts at Delhi, or elsewhere (“Order”),” Honasa said an exchange filing. 

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

The United Arab Emirates’ Court of full Commercial Jurisdiction had ordered Honasa to pay a compensation of AED 25.07 (around INR 56.6 Cr) Mn as damages to RSM General Trading Agency. Besides this, the court asked the company to pay legal interest at a rate of 5% (from the date the judgement becomes final until full payment is made) and AED 1,000 (INR 22,665) as attorney fees. 

Back then, Honasa termed the court’s decision as baseless and immaterial to its business. 

It is pertinent to note that Honasa also filed a petition in the Dubai Court challenging the previous erroneous decree. The statement in BSE read that the appeal shall remain in force and will be heard accordingly.

At the heart of this fiasco is Honasa severing its ties with RSM General Trading, its distributor in the Middle East and African markets a few months before its listing in the Indian market. 

The company was on the lookout for international expansion into countries like Bangladesh, Malaysia, Vietnam, and Thailand ahead of its IPO in October last year. 

Meanwhile, it was also eyeing increasing its geographical penetration in the UAE through strategic acquisitions or organic growth. With the Dubai Court’s ruling these plans were also put on hold given that the company terminated its contract with RSM General Trading.

Founded in 2016 by the husband-wife duo Varun and Ghazal Alagh, Honasa’s product portfolio comprises six beauty and personal care brands which include Mamaearth, The Derma Co., Aqualogica, Ayuga, BBlunt and Dr. Sheth’s.

Honasa posted a consolidated net profit of INR 30.47 Cr in the fourth quarter of the fiscal year 2023-24 (FY24). Its operating revenue zoomed 21% YoY to INR 471.09 Cr in Q4 FY24 from INR 387.8 Cr in the year-ago quarter. But this marked a 3% decline from Q3 FY24’s operating revenue of INR 488.2 Cr.

Earlier in May, Honasa bought the assets of Thane-based skincare company CosmoGenesis Labs to strengthen its research and development as well as manufacturing capabilities. 

Shares of Honasa closed Friday’s trading session at INR 473.6 on the BSE.