Vikram Bakshi moves Company Law Board against McDonald's

Seeks reinstatement as managing director in his joint venture JV Connaught Plaza Restaurants

Vikram Bakshi, the estranged joint venture partner of US fast food chain McDonald’s, approached the Company Law Board (CLB) on Monday for his reinstatement as managing director of the joint venture company, Connaught Plaza Restaurants Pvt Ltd.

In his plaint, Bakshi requested the CLB to break the ‘deadlock’ as the four-member board of the joint venture company is divided on whether or not to allow him to continue as managing director. Bakshi also alleged that McDonald’s was using pressure tactics to force him to sell his 50 per cent stake in the JV at a cheap price. The joint venture company runs the franchise for the foods chain in the northern and eastern parts of India.

Bakshi declined to comment on the issue. An email questionnaire to Mcdonald’s Corporation, too, did not elicit any response at the time of going to press. A few years ago, the US company had offered to buy Bakshi’s stake but was not ready to give him more than $10 million (about Rs 65 crore), which he refused. According to him, his 50 per cent stake in the venture was worth Rs 200 crore.

Sources close to the development said McDonald’s, in its board meeting on August 6, raised various issues regarding Bakshi’s running of the business. It was felt that with his other businesses, including hospitality and real estate growing rapidly, he was showing a lack of commitment and attention to the joint venture. The meeting decided that Bakshi’s other businesses were in conflict with the joint venture business. The US chain also questioned some of Bakshi’s financial dealings.

According to sources, Bakshi will challenge these issues saying that he devotes enough time to the joint venture and that his other businesses are run by his daughters and wife and that they are well-established. Bakshi will also contend that McDonald’s was aware of all his other businesses and did not object when the JV was formed. The US chain, in fact, had undertaken thorough due diligence before getting into the joint venture.

Bakshi will also clarify that all key financial decisions were taken by the board and all deals were vetted by them. Sources said he will argue that the JV has forked out Rs 193 crore as royalty payment to McDonald’s, more than the value of the US company’s stake in the venture. Sources added that under the Articles of Association of the JV, McDonald’s is obligated to appoint him the managing director.

McDonald’s operates in India through two franchisees.  Its outlets in the western and southern parts of the country are run by the BL-Jatia Group-promoted Hardcastle Restaurants, which had bought over the 50 per cent stake of the US company a few years ago.