Karnataka High Court clears decks for sale of Elior India to Compass

by Priya J

The Karnataka High Court on its order dated 10^th November 2022, allowed the sale of Elior India to Compass India with direction to Elior India to deposit Rs.7 crores in Escrow account as interim protection against Rs.50 crores claim of the former Elior India CEO, Mr. Sanjay Kumar against Elior Group. The Court passed this order on the petition filed by the former CEO of Elior India seeking a stay on the sale of Elior India assets to the Compass Group pending arbitration.

The court also set aside the stay on the arbitration proceedings and directed the former Elior India CEO to approach the arbitral tribunal for any additional reliefs that he may wish to seek. The court observed that this interim relief will be only for period of 10 weeks since the arbitration has been stayed and there was no alternate route available for interim protection during this period. In its order the court said: “this Court can only opine that the second respondent must hold a sum of Rs.7 [Seven] Crores [which is approximately about 15% of the first respondent’s claim] in an escrow account for a period of 10 weeks if there is closure of the transaction for the sale of its assets as against mere finalization.”

The court will now separately hear a petition filed by Elior France challenging the interim award granted by the arbitral tribunal making Elior France a party to the dispute on the claim filed by the former Elior India CEO and will adjudicate on the matter in the weeks ahead. The ongoing legal battle between the former CEO of Elior India and the Elior Group involves a claim of over Rs.50 crores made by him against the group. The current litigation has been ongoing for over 18 months now with both sides incurring significant legal costs and failing to come to a settlement between them.

Elior India will now be able to proceed and conclude the sale with the Compass Group even as these legal battles and arbitration with its former CEO carries on.

Compass India which employees more than 10,000 people in India, is a subsidiary of the $22Bn Compass Group listed on the London Stock Exchange. The Compass Group is amongst the world’s largest food services company with a No.1/No.2 position in most markets that it operates. With the court order now clearing the sale of Elior India assets to the Compass group, Compass India will now also emerge as the undisputed leader in the corporate catering segment in India.

Elior India is a subsidiary of the $4Bn Elior Group listed on the Paris Stock Exchange and is the largest premium corporate catering company in India, producing over 28,000 meals per day with operations in Delhi, Mumbai and Bangalore. The sale of Elior India by the Elior Group is a part of its strategic decision to exit India market and concentrate on its other markets in Europe and North America.  Elior India employs nearly 1000 people on its payroll with food services in both the corporate segment and also offers premium banqueting services. It appears, the deal with Compass is a slump sale and will involve only a transfer of the contracts. Elior India had earlier made a similar attempt to sell its business to Foodlinks and later to Sodexo. However, it is unclear whether those talks did not progress because of valuation gaps, or the inherent legal risks associated with this transaction given the ongoing litigation with its former India CEO.