The Kabir Mulchandani-promoted Baron International has told the government that it will not issue a no-objection certificate to its Chinese consumer electronics partner, TCL Electronics, for setting up a new company in India, till the legal issues between them are resolved.

In a letter written to the Foreign Investment Promotion Board, Baron chairperson Shakun Mulchandani said since the company's joint venture agreement with TCL had not been terminated, there was no question of issuing a no-objection certificate.

Baron and TCL have not conducted business for the past 18 months, though their joint venture has not been "officially" terminated.

According to TCL, Baron did not respond to its letter of termination. Therefore, it requested the government to allow it to set up a separate wholly owned arm.

TCL had also written to the government that the no-objection certificate clause in Press Note 18 could be exempted in its case since the joint venture company, TCL Baron, had not conducted business for over a year now.

Under the existing guidelines on foreign direct investment, a foreign firm has to procure a no-objection certificate from its local partner if it wants to set up a new company in India.

Baron and TCL had set up a 51:49 joint venture for manufacturing and marketing colour televisions and consumer electronics products, but they fell out over allegations of mismanagement and financial irregularities.

When contacted, Shakun Mulchandani told Business Standard from Hong Kong that she did not wish to comment on the issue without seeking legal advice. But she admitted to having written to the FIPB.

Mulchandani wrote in response to a letter sent to her by the FIPB Secretariat seeking a meeting between the two parties and government officials on August 28. Baron did not turn up for the meeting.

Mulchandani said the company wanted to attend the meeting, but the letter reached Baron's office on September 1.

Making serious charges, she wrote: "In fact, the documents were not mailed on time. There has been some tampering. We are extremely concerned about this. We wanted to be at the meeting and had serious representations to make.

"Our agreement is currently sub judice. We wish to operate the agreement. The agreement states that there has to be an 18-month cooling period before any party enter the market, which has not been completed since the agreement is not terminated. Baron believes that its losses on the agreement are in excess of Rs 50 crore (Rs 500 million)."

Baron's allegations

• TCL MD Tomy Lam siphoned off funds from the joint venture.
• The JV did not make payments to Viacom, Baron's contract manufacturer, due to which Viacom had to be referred to the BIFR.

TCL's counter

• Allegations are baseless, all cheques were signed jointly.
• 95% of Viacom's sales tax dues were due to Baron's Aiwa business. We have made claims of Rs 25 crore (Rs 250 million) on Viacom and Rs 1.3 crore (Rs 13 million) on Baron.