The Singhanias feared past mistakes would be repeated after the death of Piaggio's owner Giovanni Agnelli in December last and therefore, sought to exercise a clause in the 1994 joint venture agreement (JVA), highly placed sources revealed. The 1994 clause gives the Indian promoters total managerial control of the company and the right to acquire Agnelli's stake in the event of his death.

After failing to acquire Piaggio's stake, the Indian promoters of the country's second largest scooter maker, D K Singhania, L K Singhania, Sanjiv Shriya and others, last week filed a suit at the Kanpur civil judge's court for implementation of the JVA.

Terming the interpretation of Singhanias to buy them out this way as "erroneous", Piaggio's India representative, Mario Emprin said theItalian firm "will oppose such interpretation of the JVA in all the necessary forums in order to safeguard its position".

Earlier this month, Singhanias had written to Piaggio asking for the 23.6 per cent shares stating it was merely exercising its rights as per the JVA. After Piaggio's replied stating that this interpretation was erroneous, the Indian partner decide to move court, the sources said.

Sources said the `buy out' clause was inserted in the new JVA because the Indian promoters envisaged problems, particularly since Piaggio had made an unsuccessful bid to buy out the Singhanias in 1994.

The earlier JVA did not work as both partners had diverse management policies and could not work together. The problem was compounded as both partners had equal stakes in the JV.

Since the joint management concept failed, Singhanias and Agnelli, who in 1994 returned to the top post in Piaggio after a brief stint in a Spanish subsidiary, decided to change the management structure by including the clause, theysaid.

Accordingly the Indian promoter got four directors in the company board as against three of Piaggio, with none of them holding any executive position, after the revised JVA.

The revised JVA, for a period of 10 years, gave effective management control to the Singhanias who also succeeded in inserting a safety clause allowing them to sign up technology providers other than Piaggio, the sources said.

Meanwhile, LML is also negotiating with two firms, one of which is South Korea's Daelim, for getting technology for the bikes it proposes to launch next year.

A final decision on this is expected to be taken by the month-end, the sources said.