Tribunal asks McDonald's, Vikram Bakshi to wait for NCLAT verdict on franchise agreement

Key highlights:

• McDonald's will have to wait more time for the final verdict from the NCLAT
• NCLT issued notices to McDonald's asking them to give a reason why contempt proceedings should not be initiated against it
• It has asked McDonald's to file the reply by September 20

The resolution to the battle between Vikram Bakshi, the 50:50 joint venture partner of franchise license firm for Connaught Plaza Restaurant for Northern and Western India for McDonald's, and the US food-fast giant had to wait more time for the final verdict from the National Company Law Appellate Tribunal (NCLAT).

The part of NCLT's decision went Bakshi's way as they admitted to his plea against McDonald's for contempt of its July 13 order reinstating him as the Managing Director of the company that runs the outlets in northern and eastern part of India. However, it dismissed his other plea challenging the termination of the franchise agreement by McDonald's, according to a Financial Express report.

The NCLT has further issued notices to McDonald's asking them to give the tribunal a reason why contempt proceedings should not be initiated against it. It has asked them to file the reply by September 20.

With regards to the termination of the franchise agreement, the tribunal said that since the National Company Law Appellate Tribunal (NCLAT) is looking into the matter already, it would not be appropriate for it to pass any directions and that both Bakshi and McDonald's should wait for the appellate body to take a call on it.

The NCLAT had intervened in the dispute between McDonald's and its joint venture partner Connaught Plaza Restaurants Ltd (CPRL) head Vikram Bakshi at the end of August, after McDonald's terminated the franchise agreement with it.

The NCLAT has asked McDonald's India and Bakshi to inform the tribunal by August 30 if the settlement of the dispute is possible.

The tribunal had heard McDonald's appeal against Bakshi on August 30. Besides this, it asked McDonald's and Bakshi not to act against each other until the next date.

McDonald's termination of its franchise agreement with CPRL would mean uncertainty regarding the future of 169 outlets and nearly 10,000 employees working in them.

However, a McDonald's spokesperson the company will mitigate the impact on the employees, suppliers and landlords of CPRL.

McDonald's in August gave the company 15 days time to stop using the burger chain’s brand name, trademarks, designs, branding, operational and marketing practice, and food recipes in India.

The reason for the termination of the franchise agreement McDonald's said, according to media reports, is because of CPRL's violation of certain essential obligations, including “default in the payment of royalties to McDonald's India”.

Bakshi however says that McDonald's had known for years that the royalties were going unpaid without raising any objection. He further added that the company had been unable to pay the royalties because of falling sales, as well as demand by McDonald's that CPRL repay its bank debts rather than rolling over loan facilities.

Bakshi and McDonald's have been in a bitter battle since 2013 when the he was removed as the managing director of the company. However, the NCLT in July 2017 reinstated him as the Managing Director of CPRL, while appointing justice GS Singhvi as administrator of the board.

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