A Texas state court awarded Formosa Plastics Corp. U.S.A. of Livingston, N.J., more than $21 million in a summary judgment against international resin broker Kunstoplast of America Inc. of Houston, and its owner, Ashok K. Chauhan. District Court Judge Sharolyn Wood in Harris County granted Formosa's summary judgment motion, awarding the firm $19.9 million, representing the total amount of a promissory note, plus $1.45 million in interest.
According to the suit, Kunstoplast entered into an agreement with Formosa to order and pay for shipments of PVC resin between October 1993 and September 1994. Kunstoplast signed a promissory note, with Chauhan, owner of AKC Group Cos. and Kunstoplast, personally guaranteeing it. In February 1995, Formosa filed suit against Chauhan and Kunstoplast after declining to accept bills of exchange to pay the account.
Mark F. Elvig, Formosa's Houston-based attorney, said it was a simple matter of Kunstoplast not paying the bill for goods delivered. He said Kunstoplast raised some defenses in court as to why it hadn't paid for the resin and argued that it had paid some of the bill, ``but obviously the judge didn't see it that way.''
Chauhan, who resides in India, was unavailable for comment.
Matthew Benson of the Houston law offices of Evans & Kosut, which represented Kunstoplast in the suit, declined to comment on the case. However, Justin Seth, vice president of Kunstoplast, in a faxed comment said Kunstoplast's dispute over payment with Formosa came about as a result of quality problems with the PVC material it supplied to Kunstoplast.
Seth claimed that some of the material was ``substandard, contaminated, wet, [had] color problems'' and that the bags were underweight and there were fewer bags in the containers than on the packing list.
He said the agreement called for Formosa to supply Kunstoplast a minimum of 79.4 million pounds each of PVC, high density polyethylene and polypropylene for a total of 238 million pounds of material. The contract was worth about $130 million.
Seth claimed that as a result of the problems with the PVC, the company ``sustained heavy losses'' and the open invoices from Formosa were adjusted to reflect the bad material. Those losses exceed the claims of Formosa, said Seth, and are now ``being filed as counterclaims'' in the amount of $100 million. Chauhan earlier filed a countersuit against Formosa, which the judge severed on Nov. 21 from the resin-debt suit.
In that suit, Chauhan alleges that Formosa is attempting to ``terrorize Chauhan and his family'' and destroy his reputation. He charges that Formosa officials have threatened him with physical harm, an assertion Formosa's attorney denies.
``He claims we've been intimidating and defaming him, and he's personally suing Formosa for harassment, which isn't true,'' Elvig said. ``Formosa is just trying to collect money it is owed.''