In a big setback for Vikram Bakshi, the Delhi High Court on Thursday gave the go-ahead to his estranged joint venture partner McDonald’s to pursue arbitration it had initiated against the former before the London Court of International Arbitration. In doing so, the HC revoked the stay Bakshi had got from a single-judge bench of the court way back in December 2014.
McDonald’s had moved the London arbitration court stating that it was its contractual right. Bakshi had moved the HC and got a stay on the grounds that the dispute between the two was being heard by the Company Law Board and McDonald’s cannot meanwhile go for arbitration. But McDonald’s, which had scrapped the JV agreement before moving for arbitration, maintained it was exercising its contractual rights that were independent of the CLB proceedings and both can run concurrently.
The division bench of the HC, while allowing McDonald’s to proceed for the arbitration, has backed its stand. A division bench comprising justices BD Ahmed and Sanjeev Sachdeva observed, “There is now a mandate to refer the parties to arbitration unless the court finds that prima facie no valid arbitration agreement exists.”
The judges added, “This is clearly not the case here. Therefore, in any eventuality, in the facts and circumstances of the case and applying the principles…, the single Judge could not have restrained the appellant from pursuing the arbitration proceedings before the arbitral tribunal… Courts need to remind themselves that the trend is to minimise interference with arbitration process as that is the forum of choice.”
It clarified that unless and until a party seeking an anti-arbitration injunction can demonstrably show that the arbitration agreement is null and void, inoperative or incapable of being performed, no such relief can be granted in the suit or as an interim measure therein.
As is known, McDonald’s India and Vikram Bakshi are 50:50 partners in Connaught Plaza Restaurants, which runs the fast food chain in the north and eastern parts of the country. 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.
Bakshi had subsequently moved the CLB challenging his ouster. He had even accused Hardcastle Restaurants, which runs the operations in the west and southern part of the country, of influencing the US fast food chain “to take oppressive steps” against him. The fast food chain’s operations in west and south India is run by the BL Jatia Group-owned Hardcastle Restaurants under a development licence by McDonald’s.
Bakshi’s basic argument was that his appointment as managing director was made at a board meeting and the same was not a subject matter of any arbitration agreement. The matter of appointment was governed by Article 35 of the articles of association of the company. He had also argued that the joint venture agreement does not cover the managing director’s appointment by the board of directors, but only provides for the election of a managing director at a general meeting. However, legal experts told FE that by scrapping the JV agreement McDonald’s has raised larger issues relating to the shareholders’ agreement wherein it was within its rights to move for arbitration.
According to the experts, if in any JV the agreement is scrapped by a party, the matter becomes of a dispute in shareholders’ agreement and not about day-to-day running of the company. In such a case, the party concerned can move for arbitration even if the matter is pending before any other forum for adjudication.
Spats in fryer
McDonald’s India and Vikram Bakshi are 50:50 partners in Connaught Plaza Restaurants. This runs the fast food chain in the north and eastern parts of the country. The two fell out when CPRL did not reappoint him as MD in August 2013. Bakshi had subsequently moved CLB challenging his ouster McDonald’s moved for international arbitration in September 2013. Bakshi got a stay from arbitration proceedings from the Delhi High Court in December 2014