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Oct. 8 (NBD) -- Evergrande Health Industry Group Limited (Evergrande Health, 0708.HK) released an announcement Sunday saying that FF Top Holding Ltd. (FF Top), whose ultimate controlling shareholder is Jia Yueting, has commenced arbitration in Hong Kong in an attempt to break an agreement with Evergrande Health's subsidiary Season Smart Limited.

Season Smart has engaged a team of international lawyers to deal with the issue, a person-in-charge of the company told NBD. 

Trading in shares of Evergrande Health was halted last Thursday, and resumed on Monday, slumping 16.38 percent to HK$8.78 (1.1 U.S. dollars).

On June 25 this year, Evergrande Health agreed to acquire Hong Kong-based Season Smart for HK$6.746 billion (862.9 million U.S. dollars) and indirectly obtained a 45 percent stake in Smart King Limited, parent company of U.S. electric vehicle (EV) maker Faraday Future.

It is noted that FF Top, as the other shareholder of Smart King, only has a 33 percent equity interest, but occupies majority seats in the board of directors. 

According to the new statement, Season Smart and FF Top entered into a merger and subscription agreement on November 30 of last year, pursuant to which Season Smart shall invest a total of 2 billion U.S. dollars within three years for 45 percent of the shares in Smart King. 

The agreement specified that Season Smart should pay 800 million U.S. dollars by the end of 2018, with additional installments of 600 million U.S. dollars in both 2019 and 2020. 

In May, Season Smart paid the 800 million U.S. dollars which was due by the end of this year. 

FF Top now accuses Season Smart of having not fulfilled its payment conditions, seeking to deprive Season Smart of its right to approve Smart King's future financing plans and terminate all agreements. 

Evergrande Health said Season Smart was informed in July 2018 that the 800 million U.S. dollars it offered to Smart King had already been run out. FF Top then requested Season Smart to provide another 700 million U.S. dollars. As a result, Season Smart inked a supplemental agreement with FF Top and Smart King to advance the 700 million U.S. dollars in the condition of fulfilling payment conditions. 

But Faraday Future claimed that Evergrande Health agreed in July to make further payments in 2018, but the investor didn't make any other additional investment beyond the initial 800-million-U.S. dollar injection.

In addition, the EV company said Evergrande Health prevented it from accepting financing from other parties.

Faraday Future hasn't responded to a request for comment as of press time.

The arbitration will cast a shadow on the volume production of the FF91. The EV startup aimed to start delivering the first batch of FF91 from December this year. 

To make things worse, the first and only pre-production FF91 caught fire hours after the company exhibited the car at a "Futurist Day" event held in late September, according to The Verge. The company is reported to have requested employees to sign non-disclosure agreements specifically related to the fire.

Email: zhanglingxiao@nbd.com.cn