McDonald's defends arbitration move

Company tells CLB arbitration law doesn't prohibit this, even if an appeal on the matter is pending in a different court

Lawyers of American fast-food chain McDonald’s on Monday told the Company Law Board (CLB) the company could seek a reference for arbitration, as the law in question didn’t prohibit this even if an appeal regarding the matter was pending in a different court.

CLB will hear the matter again on Tuesday.

The company had sent a notice to the London Court of International Arbitration, regarding a dispute with its Indian joint venture (JV) partner, Vikram Bakshi, about three months before it published a public notice announcing the end of Bakshi’s term as managing director of Connaught Plaza Restaurants Pvt Ltd, the joint venture.

Tenability
During the past few months, CLB has been hearing the argument on the tenability of McDonald’s plea to refer the dispute to the London Court of International Arbitration.

Bakshi’s counsel has filed an application before CLB, stating the termination notice was ex facie untenable, as it had been issued in an attempt to overreach CLB’s process. The application added the termination notice interfered with the course of CLB’s judicial proceedings.

The termination notice was illegal and liable to struck down and set aside by CLB, Bakshi’s counsel said in the application. He added unless CLB struck down the termination order, the petitioner would suffer irreparable loss; he sought an injunction restraining the termination notice issued on November 28.

In his application, Bakshi requested CLB to pass an order directing the initiation of proceedings against McDonald’s for willful and intentional contempt.

Earlier, Bakshi had said the attempt by McDonald’s to terminate its agreement with him was illegal and not binding, adding it would have no bearing on the shareholding pattern (the partners hold 50 per cent each), board composition (both sides have two nominees) and the working of the company.

On August 30, McDonald’s had, in a public notice, stated, “Vikram Bakshi has ceased to be the managing director of Connaught Plaza Restaurants, pursuant to expiration of Bakshi’s term on July 17.” Following this, Bakshi moved CLB for his reinstatement as managing director, arguing his appointment was made at a board meeting and wasn’t the subject matter of any arbitration agreement.

Apart from its joint venture with Bakshi, McDonald’s also has another partner, the Jatias of Hardcastle Restaurant, with whom it has a franchise agreement to run operations in west and south India.