McDonald’s to enforce closure of all 169 outlets as NCLAT refuses interim relief
New Delhi: The Indian unit of McDonald’s Corp. said it will exercise its right to shut all its 169 outlets in northern and eastern India after estranged partner Vikram Bakshi failed to win interim relief on a petition challenging the fast-food chain’s termination of their franchise agreement.
McDonald’s India Pvt. Ltd announced its intention immediately after the National Company Law Appellate Tribunal (NCLAT) said it would hear Bakshi’s interim plea along with the main appeal scheduled for hearing on 21 September.
On 21 August, McDonald’s India terminated its franchise agreement with Connaught Plaza Restaurants Pvt. Ltd (CPRL) for all 169 McDonald’s outlets in northern and eastern India, citing non-payment of royalties as the primary reason. Bakshi, the managing director of CPRL (a joint venture between him and McDonald’s India), was supposed to shut the restaurants within 15 days of termination (by 6 September).
“Following the NCLAT hearing today, the termination notice remains effective as of September 6, which requires CPRL to cease the use of the McDonald’s system and its associated intellectual property. We will continue to take steps to exercise our legal and contractual rights and enforce the termination,” said Barry Sum, director, corporate relations, Asia Foundational Markets, McDonald’s Corp, in an e-mailed response to queries.
The closure of the restaurants would affect 6,500 McDonald’s employees in northern and eastern India besides 3,500 workers at its suppliers and business associates.
Bakshi, in a text message, indicated that McDonald’s outlets will remain open until a decision (on the termination and NCLAT hearing) is reached by the CPRL board.
“The administrator (appointed by National Company Law Tribunal, or NCLT) shall be requested to call for a board meeting at the earliest so as to discuss the above (NCLAT hearing). Till a decision is taken by the board of CPRL, it is business as usual,” he said.
As per the termination notice issued by McDonald’s India, Bakshi was supposed to cease using the McDonald’s name, trademarks, designs, branding, operational and marketing practices, policies, food recipes and specifications from 6 September.
NCLT-appointed administrator G.S. Singhvi on Wednesday had asked both sides to wait for the hearing of the appellate tribunal on Thursday before taking any decision.
NCLAT will now hear the matter on 21 September, with the main appeal brought by McDonald’s India against the NCLT’s order of July reinstating Bakshi as managing director of CPRL. A separate appeal was also filed by Bakshi requesting a fair valuation of the fast-food chain’s outlets in northern and eastern India.
In 2013, McDonald’s voted against the re-election of Bakshi as managing director of CPRL, following which Bakshi challenged his removal at the Company Law Board (now NCLT). NCLT reinstated Bakshi as the managing director on 13 July.
Earlier this week, NCLT had also issued a show-cause notice to McDonald’s Corp. on a contempt application filed by Bakshi alleging that the termination of the franchise agreement was in conflict with the NCLT order, which asked the American fast-food chain to refrain from interfering in the smooth functioning of CRPL and all its 169 restaurants.