Maruti Suzuki mulling over shutting Manesar plant to escape compensation

Maruti Suzuki mulling over shutting Manesar plant to escape compensation New Maruti Suzuki
author image CarTrade Editorial Team
Wednesday 24 July 2013, 11:45 AM

At the time when Maruti Suzuki is all set to have a new manufacturing plant in Gujrat, there are rumours regarding its plans to shut the Manesar unit, based in Haryana. Sources close to the development process revealed that if the auto maker did not closed its Manesar facility, it will face the brunt of paying enormous additional compensation, with figures exceeding Rs. 500 crore, for the 600 odd acres of plant area. It must be noted that the Manesar plant consists assembly of some of its star models like the Swift Hatchback and DZire sedan, along with being the main site for making diesel engines. Therefore, the repercussion on shut down of a plant of this magnitude is expected to be enormous.

Maruti Suzuki mulling over shutting Manesar plant to escape compensation

“...If further enhancement is granted, the (Maruti) management may have to take a decision to discontinue the plant at Manesar,” said counsels P S Patwalia and Abhishek Manu Singhvi while reporting on behalf of the company, before the Supreme Court.

A thing to note here is that there was a higher amount offered by the Punjab and Haryana High Court in 2011, which was supported by the land owners. However, the landowners demanded the enhanced compensation value, which was granted by the High Court in 2011. The apex court sprung into the action and has asked both the parties to concern the High Court again with their respective appeals, while commanding HSIIDC to pay compensation to the landowners and legal representatives, along with all associated benefits, within duration of four months.

At the same time, the auto maker is free to take up this matter when it will come up for a fresh hearing at the High Court. “Maruti shall be free to file an appropriate application before the high court for its impleadment or grant of leave to act as intervenor in the appeals filed by the parties. If such an application is filed, the same shall be decided on its own merits.” What could be the down point for Maruti is that the Supreme Court found “merit” in the landowners' appeal that they should be paid an amount of compensation even higher than the Rs. 37.40 lakh released by the High Court in 2011.

The landowner's lawyer had pointed out that the High Court judge had made a “serious mistake” by not incorporating a number of facts that could have took the relief amount to more than double, to the Rs. 37.40 lakh granted. “By making deduction of 50 per cent towards development cost and granting annual increase of 12/15 per cent (cumulative), market value of the land will be much higher than Rs. 37.40 lakh per acre.”

The Manesar facility by all means is among the more crucial plants not only for localite Maruti, but even for the global operations of its parent company Suzuki. The plant currently rolls out around 5 lakh cars per year and had a growth scenario to touch 7.5 lakh units annually.

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