McDonald’s pulls the plug on Bakshi, JV in tatters

Dec 04 2013, 03:44 IST
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Summary* Fate of dispute in CLB in balance as US firm taps London court

In an ugly turn of events, McDonald’s has terminated its joint venture agreement with Vikram Bakshi, simultaneously moving the London Court of International Arbitration to settle the ongoing legal dispute between the two. The partnership between the US fast-food chain and Bakshi, a franchisee for the northern and eastern regions, was housed in Connaught Plaza Restaurants (CPRL), a 50:50 joint venture that runs 150 outlets in northern and eastern India. The JV was formed way back in 1995.

McDonald’s counsel told the Company Law Board (CLB) on Tuesday the firm had moved the London Court of International Arbitration, which was within its contractual rights and also because that matter was independent of the proceedings in India. Bakshi’s counsel, however, objected to the move, saying the matter was sub-judice and saying McDonald’s could not take such a step without CLB approval. The hearings will resume on December 16.

Bakshi is understood to have received a notice on November 30 from the London court, directing him to constitute an arbitration tribunal within 30 days of the receipt of the notice for disposal of the matter. Typically, the agreement between the parties gives them the right to determine the number of arbitrators and the composition of the arbitration tribunal.

McDonald’s move seems to have surprised Bakshi, since at the recent hearings in October and November, McDonald’s had requested the case be moved to the London Court of International Arbitration. The CLB was to hear and decide on this plea in its hearings on December 2 and 3.

Bakshi’s term as managing director of CPRL expired on July 17. Soon after, problems between the partners surfaced.

On August 30, McDonald’s issued notices in select newspapers saying Bakshi had ceased to be the MD of CPRL. In early September, Bakshi moved the CLB for his reinstatement as MD, arguing that his appointment was made at a board meeting and was, therefore, not the subject matter of any arbitration agreement.

Bakshi’s affidavit also says the JV 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.

Legal experts believe that by scrapping the JV agreement, McDonald’s has raised larger issues relating to the shareholder’s agreement wherein it was within rights to move for arbitration. They point out that since the CLB and the Arbitration court are adjudicating on different issues, the two

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