``In response to an appeal made by PPL to assist in relieving its present Financial difficulties, Peugeot has agreed to withdraw all its claims for payment aggregating to about Rs 85 crore (french francs 132 million),'' a statement by Premier Automobiles Ltd (PAL) said.

The move comes as a breather for PPL, the ill fated joint venture with Premier Automobiles, which is facing liquidation proceedings from banks and financial institutions.

The amount was due to the French company on account of licence and technical fees, engineering services and supply of tools and dies and completely knocked down (CKD) kits.

The French firm has recently transferred its 32 per cent equity holding in the joint venture to its Indian partner, which entered into a five-year licensing agreement with the French company for the TUD5 diesel engine. PAL, thestatement adds, is in dialogue with financial institutions to work out a rehabilitation plan for the erstwhile joint venture company.

"Peugeot's decision to withdraw the claims in toto will result in a reduction of liability in PPL's balance sheet. After financial institutions and banks, who are the company's first secured creditors, Peugeot's claims would legally come next. As a result, this amount being written off benefits other unsecured creditors and equity holders," PAL has said.

The TUD5, which is now manufactured by PAL under the licensing arrangement, is rated by auto experts as among the best diesel engines in the world. Maruti Udyog has fitted it in the Zen-D and Hyundai Motor India is planning to use it for the Indian version of the Accent scheduled to hit the roads in October this year.

PAL and Peugeot had formed their joint venture, PAL-Peugeot, in 1994 to manufacture the 309. The car just did not take off though it was possibly the best offer in the mid-size segment with its competitivepricing. However, financial difficulties paralysed operations and Peugeot withdrew from its Indian operations in November 1997.