FADA serves legal notice to UM Lohia, cautions against legal action

by Autocar Pro News Desk , 23 Oct 2019

The Federation of Automobile Dealers Association (FADA), the apex automobile dealers body in India today announced that it has taken up the cause of the dealers of ‘UM Motorcycles’, The motorcycles are manufactured and sold in India by UM Lohia Two Wheelers (UM Lohia), a joint venture between the Lohia Group and UM Motorcycles, an American motorcycle company.

The joint venture which was set up in 2016 to manufacture and sell in India ‘American’ style motorcycles under the brand of UM Motorcycles. While the JV was going through several hiccups and many dealerships closing down, on October 10 Autocar Professional had reported that UM Motorcycles had stopped his operations in the country and its partnership with Lohia Auto strained.

In a media release FADA says the dealers are aggrieved by the dishonesty and fraud on part of the management and promoters of UM Lohia, including founders Mr. Ayush Kumar Lohia and Mr. Jose Miguel Villegas, which has plagued the relationship between them since beginning and has caused huge losses to dealers as well as exposed them to unwarranted litigation from customers of UM Motorcycles.

FADA says at the time when the entire automobile industry in India 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 on BS III 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 unsellable. UM Lohia, however, refused to compensate dealers for this unsellable stock and also refused to return the advance payments given by many dealers, said FADA.

The dealer body says it is only after much cajoling that UM Lohia even acknowledged the problem. 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. 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.

The apex dealer body says UM Lohia stopped production in October 2018, and had over 80 dealers who had invested around Rs 150 crore. 

The dealer body says 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. As a result, many dealers have been exposed to litigation from customers of UM motorcycles.

FADA says UM Lohia including 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.  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.

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.

In an earlier interaction Ayush Lohia had explained that the 50-50 JV with UM Motorcycles was facing issues as UM Motorcycles currently was not able to invest any money in India and thus the Kashipur plant in Uttarakhand was not manufacturing any of the UM motorcycles.

FADA has cautioned that if UM Lohia and its management does not respond to the legal notice, it will have no other option but to take appropriate legal measures against the company, its management and all others concerned with this matter. Simultaneously, FADA will also update and involve government authorities in the matter.