Excise regulations and Licenses –
Production of liquor and alcoholic products requires to pass through strict regulations in the forms of licenses and permits, without which one cannot initiate production. Further, interstate transfers are very difficult due to stricter regulations and permits and higher excise duty levies. Hence, the manufacturer is forced to enter into an agreement for “tie-up”/ lease arrangement with different manufacturing units in different parts of the Country, since establishing a new manufactory in every state would not be practical and cost-effective solution. In such kind of tie-ups, difficulties arise because though the brands and products belong to the manufacturing units, the license is in the name of the Lessor. Hence, all the licenses and compliances are to be complied by the Lessor. The sales proceeds are also deposited in his name.

Hence, in view of such arrangements, many a times the manufacturing company has to bear the brunt of non-compliances on the part of the Lessor. The deposit amounts and the sales proceeds of the manufacturing units also get held up with the Lessor when there arises dispute between both the parties. Hence, avoidable loss is sustained by the manufacturing units when their working capital gets blocked in such a manner, and remains blocked at the mercy of the seemingly endless litigations.

Dispute with Distributors –
In many cases, promotion and distribution responsibilities are given to the distributors by the manufacturing Companies who by abrogation of the understanding in the agreement resort to raising debit notes on the basis of false or inflated claims which ultimately leads to litigation.

Statutory and Labour Disputes –
Due to bad management practices followed by the Lessor units, there will be strike “go slow” by the workers or due to non-compliance of some statutory requirements and