Pedigri had filed a petition with the Chennai high court over a month ago, contending that the Japanese electronics major had not informed them about the contract termination and had abruptly stopped supply of goods. It also asked the court to restrain Baron International, the new Aiwa distributor, from marketing the Aiwa brand.

Pedigri had been selling Aiwa products like cordless phones, video CD players, portable CD players and music systems since May 1, 1997. But the company received a rude shock when Baron International announced that it had bagged the sole distributor rights for Aiwa audio products in the country.

This threatened the Aiwa launch, timed to cash in on the festival season. But with Aiwa and Pedigri reaching a settlement, Baron is free to go aheadwith the Aiwa launch scheduled for October 5, 1998. If the case had not been settled, Aiwa's launch could have become a sticky issue since Aiwa Corp had already signed up with Baron.

Pedigri has grounds for feeling miffed. It bought a plot of land in Sholinganallur, in the outskirts of Chennai, in anticipation of setting up a factory for Aiwa's car stereos. Aiwa has now agreed to take back the components Pedigri had sourced for the car stereo project.

Aiwa has also agreed to compensate Pedigri for the cost of setting up and effecting a distribution network as also for the efforts it had taken for the car stereo project, Pedigri chief executive officer MP Menon said. After the settlement, Pedigri terminated its contract with Aiwa with effect from September 25, 1998.

But the association between Pedigri and Aiwa will continue for providing after-sales service to fulfil warranty obligations. It will also continue to service the dealer channels it has grown with the Aiwa range. But until a new tie-up iseffected, Pedigri will not look at any manufacturing activities, Menon said.