Dubai Court Orders To Attach Honasa’s Assets, D2C Brand To File Contempt Plea Against Distributor

The ongoing dispute between Mamaearth parent Honasa Consumer and its former distributor RSM General Trading has taken another turn as a Dubai court has upheld its previous order directing attaching assets of the D2C brand’s parent.

In an exchange filing, Honasa said that the Court of Merits at Dubai on October 1 rejected the grievance filed by both the parties, including RSM General Trading’s demand to cancel the trading licence of Honasa’s subsidiary, Honasa Consumer General Trading LLC in Dubai.

The Dubai court’s initial ruling came on June 6 and both the parties filed their appeals against the order.

“The Company is now in receipt of judgment dated October 01st 2024 passed by the Court of Merits at Dubai wherein the Dubai Court has rejected the grievances filed by both the Parties and ordered to attach assets of Honasa Consumer Limited in UAE along with refusal to cancel the trading license of Honasa Consumer General Trading LLC,” Honasa said in an exchange filing. 

However, the D2C major said in the filing that it will appeal against the Dubai court’s latest ruling in Dubai. 

Following this, shares of Honasa tanked as much as 4.6% to reach an intraday low of INR 425.00. 

However, underlining an order of the Delhi HC, Honasa said that the latest order will have no financial implications on the company. 

Notably, the Delhi HC’s order in August not only asked RSM General Trading to revoke its execution proceedings in Dubai against Honasa but also deposit INR 57.17 Cr along with added interest in the registry of Delhi HC until the withdrawal of execution proceedings in Dubai against Honasa. 

The order then pointed out that if the Dubai court still enforces the order against Honasa, the Delhi High Court will release the money to the D2C brand. 

Honasa in its latest filing also pointed out that it is in the process of initiating contempt proceedings against RSM General Trading in the Delhi HC for failing to comply with the court’s ruling.  

At the heart of this fiasco is Honasa severing its ties with RSM General Trading, with the latter alleging Honasa of abruptly terminating the distributorship agreement.

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

Earlier, in May UAE’s Court of full Commercial Jurisdiction ordered Honasa to pay a compensation of AED 25.07 (around INR 57 Cr) Mn as damages to RSM General Trading. 

Apart from this, it also directed 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. 

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.

On the financial front, the D2C major posted a 62.9% jump in its profit after tax (PAT) to INR 40.2 Cr in the June quarter (Q1) of the financial year 2024-25 (FY25) from INR 24.7 Cr in the year-ago quarter on the back of an increase in the sales of its beauty products.

Operating revenue grew 19.3% on a year-on-year (YoY) basis and 17.3% sequentially to INR 554 Cr in the reported quarter.

Shares of Honasa ended Friday’s trading session at INR 427.95 on the BSE, down 4.04% from the previous close.  

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