New Delhi: Vikram Bakshi, the estranged partner of McDonald’s India Pvt. Ltd, on Wednesday challenged in the Delhi high court a partial arbitration award made by the London Court of International Arbitration on 12 September.
During the hearing, McDonald’s India also sought specific relief restraining Bakshi from exercising any voting rights in Connaught Plaza Restaurants (CPRL), the 50:50 local joint venture between Bakshi and the US fast food chain’s Indian subsidiary that serves as the McDonald’s franchisee for northern and eastern India.
Bakshi’s counsel Amit Sibal argued that the partial award was unenforceable as it was inconsistent with the previous orders by the National Company Law Tribunal (NCLT) and the National Company Law Appellate Tribunal (NCLAT) that had reinstated Bakshi as managing director of CPRL. McDonald’s India has already been directed not to interfere in the affairs of CPRL, Sibal said.
“The NCLT and NCLAT orders are prior to the arbitration award... NCLT had reinstated Bakshi as MD, calling the removal malafide and oppressing... G.S Singhavi was appointed as administrator to break the deadlock. NCLAT had refused to stay the order. No foreign award can be enforced if it is in contravention with the fundamental policy of Indian law," Sibal said. It is only when the court is satisfied that a foreign award is enforceable does the award attain the status of a decree that can be executed, Sibal argued.
Sibal argued that the arbitration clause in the joint venture deal did not pertain to “all or any" dispute, but for specific disputes mentioned in the agreement, and said the dispute between McDonald’s India and Bakshi was not one of them. He also disputed the status of London as being the ‘seat of arbitration’ and argued London was merely the place/venue of arbitration; hence, the governing law should be Indian law and not English.
McDonald’s India and Bakshi landed in court after the former voted against the re-election of Bakshi as MD of CPRL in 2013. Bakshi challenged his removal at the Company Law Board (now NCLT), accusing McDonald’s India of mismanagement and oppression. NCLT reinstated Bakshi as managing director on 13 July, and restrained McDonald’s India from interfering in the functioning of CPRL. McDonald’s India invoked the arbitration clause in the JV agreement.
On 12 September, the London court passed a partial award, asking Bakshi to sell his stake in CPRL to McDonald’s India. It also called for the appointment of independent experts to determine a fair value for Bakshi’s stake in CPRL for the US-based fast food chain to buy.
In August, McDonald’s India terminated its franchise agreement with CPRL for all 169 outlets, citing non-payment of royalties as reason. This termination was challenged by Bakshi before NCLT for being in contempt of the earlier NCLT order, which had asked the American fast food chain to refrain from interfering in the smooth functioning of CPRL. The matter is still before the court.
The court will hear the matter again in January.