McDonald's gets NCLT notice, will 169 India outlets face closure today?

The National Company Law Tribunal’s (NCLT) principal bench has issued a show-cause notice to fast food chain McDonald’s, for not following an earlier order that it should not interfere in the running of outlets given on franchise.

The tribunal’s order came as it prima facie found McDonald’s guilty of violating a final order issued by it on long drawn matter of dispute between Vikram Bakshi and McDonald’s India, following the former’s ouster from the post of managing director (MD) of the joint venture (JV) company. The NCLT bench had asked McDonald’s not to intervene in operations of Connaught Plaza Restaurants Pvt Ltd (CPRL). However, CPRL turned defunct after McDonald’s last month terminated the franchise licensing agreement with it.

The NCLT has also asked petitioner Vikram Bakshi, the ousted MD of CPRL, to file fresh petition in the National Company Law Appellate Tribunal (NCLAT) for all matter concerning the dispute. McDonald’s has already approached the appellate tribunal against the NCLT order that reinstated Vikram Bakshi in his position in a July order. 

“We had made a few fresh points before the NCLT given that the termination letter from McDonald’s came after its order. And, the tribunal has rightly asked us to approach the NCLAT without getting into the merits of the arguments”, said Vikram Bakshi.

The dispute that came out in open in September 2013 following Bakshi ouster by his American partner, has recently gained steam. However, the fate of 169 restaurants is in limbo as the last date of termination period ended on Tuesday. Bakshi told Business Standard that to take a final call, the CPRL board will meet on Wednesday morning under the chairmanship of former justice G S Singhvi, whom the NCLT appointed as an administrator.

McDonalds, however, continues to withdraw its branding from the JV. In an emailed statement, the company said, “The termination notice period ends today (September 5). Therefore, CPRL is no longer authorised to use the McDonald’s system and its intellectual property. It means they need to stop using the McDonald’s names, trademarks, designs, branding, operational and marketing practice and policies, and food recipes and specifications. We are proceeding with exercising our legal and contractual rights.”

CPRL, formed in 1995 as an equal JV between McDonald’s India and Bakshi, along with Bakshi Holdings, currently oversees 169 McDonald’s outlets and employs 6,500 people directly. While Bakshi (with Bakshi Holdings) and McDonald’s India hold an equal number of equity shares in CPRL, over the years McDonald’s has pumped Rs 193 crore against non-convertible preference shares.

According to sources, to clear the mess and initiate its business with a fresh approach and a new partner, McDonald’s is considering writing off its investments in CPRL.