The Supreme Court on Tuesday refused to interfere with the Delhi High Court ruling that allowed US food chain McDonald’s Indian business venture to pursue arbitration against its estranged partner in India, Vikram Bakshi, before the London Court of International Arbitration.
While rejecting Bakshi’s appeal against the HC decision, a bench headed by Justice J Chelameswar said that it was upon the arbitrator to decide whether the claims put forward by McDonald’s were tenable. It also noted that the arbitration agreement was to determine rights and obligations arising out of termination of the joint venture agreement between McDonald’s and Bakshi. All claims and arguments would then have to be presented to the arbitrator.
Senior counsel Abhishek Singhvi, appearing for Bakshi, argued that allowing arbitration would lead to the multiplicity of proceedings as issues raised before the HC and the arbitral tribunal are identical.
Under the JV agreement, all the disputes were to be decided under the substantive Indian laws and before the courts in New Delhi and its only non-resolvable issues that were to go to arbitration, he said.
While allowing arbitration, the HC in July had revoked the stay Bakshi had got from a single bench judge of the court way back in December 2014.
McDonald’s had moved the London Court of International Arbitration stating that it was its contractual right. The ground on which Bakshi had moved the HC and got a stay was that the dispute between the two was being heard by the Company Law Board and McDonald’s cannot in the midst of it go for arbitration. However, McDonald’s, which had scrapped the JV agreement before moving for arbitration, maintained that it was exercising its contractual rights which were independent of the proceedings before the CLB and both can run concurrently.
According to the HC, the mere existence of the multiple proceedings (proceedings before the CLB and those before the arbitral tribunal) is not sufficient to render the arbitration agreement inoperative or incapable of being performed. In any event, the subject matter of the proceedings before CLB fell within the ambit of the alleged oppression and mismanagement whereas the subject matter of the dispute before the arbitral tribunal related to the termination of the JVA and the rights flowing therefrom.
McDonald’s and Bakshi are fighting for management control of the joint venture firm Connaught Plaza Restaurants Pvt Ltd (CPRPL), which has been running fast-food outlets in North and East India. Ever since, McDonald’s India declined to renominate Bakshi as the JV firm’s managing director upon expiry of his term on July 17, 2013, the two sides have been warring.
After his removal, Bakshi had sued McDonald’s at the CLB, accusing it of mismanagement and oppression. CLB had also directed McDonald’s andCPRPL to maintain status quo in respect of shareholding and board pattern in the company and a right of call option until its further order.
Meanwhile, McDonald’s proceeded by revoking its joint venture with Bakshi on November 29, 2013 and also invoked arbitration against Bakshi. This was challenged before the single judge of the Delhi HC.