Mamaearth parent Honasa Consumer shares fall nearly 5% as Dubai court upholds asset attachment order in UAE

Honasa Consumer shares fall nearly 5% as Dubai court upholds asset attachment order in UAE

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Honasa Consumer share price declined nearly 5 percent on October 4 after a Dubai court upheld its previous order to attach its assets in the UAE.

Shares of the Mamaearth parent declined 4.94 percent to its day's low of Rs 425.10 per share on the NSE on Friday, tracking developments after the Dubai Court rejected the grievances filed by the company & RSM General Trading LLC 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 has refused to revoke the trading license of Honasa Consumer General Trading LLC, clarifying that the entity is a separate legal and financial body, unrelated to its parent company Honasa.

However, the court has directed the attachment of Honasa’s assets in Dubai in connection with the Rs 57 crore compensation it was ordered to pay. This follows a ruling in favour of RSM General Trading, a former distributor of Mamaearth products in the Middle East and Africa, which had sued Honasa over the sudden termination of its distribution rights.

Meanwhile, Honasa has clarified that there shall be no attachment of the company assets as the it has no assets located in UAE. "Honasa Consumer General Trading LLC (subsidiary of Honasa Consumer Limited) has been exempted from this order," it said.

Honasa Consumer, in a statement to stock exchanges, assured that this order holds no financial impact for the company. "The Delhi High Court has already directed RSM to withdraw any execution proceedings in Dubai and to deposit around Rs 57 crore with the court registry," the company stated. It added that if RSM’s proceedings in Dubai are successful, the deposited amount would be released to Honasa.

The company also disclosed that RSM has yet to withdraw the execution proceedings in Dubai or deposit the required sum with the Delhi High Court. As a result, Honasa is preparing to initiate contempt proceedings against RSM in the Delhi High Court for failing to comply with the earlier judgement.

The dispute stems from RSM General Trading’s role as the distributor of Mamaearth products between July 2020 and January 2023. In May, the UAE’s Court of Full Commercial Jurisdiction ordered Honasa to pay about Rs 57 crore in damages for abruptly ending the distribution agreement.

In response to the UAE court’s decision, Honasa filed a petition under Section 9 of the Arbitration & Conciliation Act, 1996, before the Delhi High Court, seeking relief from the compensation claim.

At the time of publishing, the shares of the company were trading at Rs 429.95 per share on the NSE, down 3.86 percent.