The feud between McDonald's and one of its Indian partners Vikram Bakshi took a turn for the worse, with the latter alleging that the world's second-largest fast-food chain was acting with the BL-Jatia-group-owned Hardcastle Restaurants, which runs Big Mac outlets in the west and south of India.
In his petition to the Company Law Board filed on September 9, Bakshi has said that McDonald's began "arm-twisting" him to sell his entire shareholding in Connaught Plaza Restaurants, the equal joint venture between him and McDonald's, from 2008, at an undervalued price of $5 million, which was later raised to $7 million.
The petition goes on to say that McDonald's was doing this at the behest of Hardcastle, which in a meeting in 2011 even expressed its desire to buy out Bakshi's entire shareholding saying that the Illinois-based company had given it the tacit approval to do so.
"The West & South-India Region joint venture partner also went to the extent of saying that McDonald’s would not let the Petitioners (Bakshi) function effectively if they refuse to sell out," the petition says of the 2011 meeting between Bakshi and Hardcastle.
In response to an email, a Hardcastle spokesperson said, "We do not have any information on what has been filed with CLB. Additionally, this is a matter internal to Connaught Plaza Restaurants Pvt Ltd and hence we cannot comment on it."
A McDonald's spokesperson in the US said, "This is now a matter before the courts. We will therefore make our comments in the appropriate forum. There is no further comment."
Bakshi has also said that McDonald's was favouring Hardcastle by allowing it to avail credit lines to the tune of Rs 142 crore in 2009 and Rs 182.7 crore till it became a development licensee in 2010. And that Hardcastle's negative networth of $3.87 million in 2009 was allowed to be increased to $7.65 million as of March 31, 2010. All this was done to help Hardcastle grow, while Connaught Plaza'a growth was stifled despite it turning profitable in 2009, said the petition.
Moreover, the capital contributed by McDonald's of Rs 107.9 crore was completely written off in Hardcastle and it was converted into a development license in 2010. In contrast, McDonald's froze Bakshi's rights to borrow money, stifled his remuneration as MD from 2008, did not pay him dividend despite extracting its share of investment in the JV to the tune of Rs 193 crore as royalty and initial fees and thrust internal audits on the JV in "a measure to arm-twist and buy the Indian shareholders out at a throw-away price".
McDonald's sent a call option notice on August 16 to Bakshi to "forcibly" acquire his shares without seeking his consent on the matter, the petition said. Bakshi's name was not recommended for re-election to the post of MD during the board meet on August 6 and following issue of the public notice on August 30 that Bakshi was no longer MD of the JV, McDonald's sent an email to suppliers informing them of the change in management. More importantly, a copy of this mail was marked to Hardcastle and not Bakshi, the petition said.
