BackMcDonald’s case: NCLAT asks parties to settle dispute; stores to continue to operate
NCLAT's directive comes after McDonald's India terminated its franchise agreement with CPRL earlier this week for all 169 outlets, citing non-payment of royalties as the reason
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New Delhi: The National Company Law Appellate Tribunal (NCLAT) on Friday asked McDonald’s India Pvt. Ltd and joint venture partner Vikram Bakshi to try and settle longstanding disputes that caused the American fast-food chain to terminate their partnership this week.
NCLAT also asked McDonald’s India and Bakshi’s Connaught Plaza Restaurants Pvt. Ltd (CPRL) to keep their 169 outlets in north and east India open and running while the talks for a settlement are underway.
The directive came after McDonald’s India terminated its franchise agreement with CPRL this week for all 169 outlets, citing non-payment of royalties as the reason. CPRL was supposed to shut the outlets down within 15 days of termination (by 6 September).
NCLAT chairperson S.J. Mukhopadhaya asked the parties to decide whether an “amicable settlement" can be reached by 30 August.
“Before going to the merit (of the case), we allow the parties to examine if there is a chance of amicable settlement on certain terms and conditions," he said.
CPRL can continue to operate the 169 McDonald’s outlets while the negotiations are underway.
Mukhopadhaya asked both parties not to pursue any criminal proceedings against each other till the case is settled.
“McDonald’s will give an undertaking that the date which is going to lapse on 6 September will be extended till the negotiation goes on. They (Bakshi) will give an undertaking that they will not pursue the criminal case against the people who are coming to India (to negotiate) till the matter is finally settled," he said, referring to a criminal case filed by Bakshi against McDonald’s executives.
The case will be heard next on 30 August.
The tribunal is hearing an appeal brought by McDonald’s India against a National Company Law Tribunal (NCLT) order of July reinstating Bakshi as managing director of CPRL.
“We are examining the order rendered today and do not have anything to share at the moment," said Barry Sum, director, corporate relations, Asia Foundational Markets, McDonald’s Corp.
In 2013, McDonald’s had voted against the re-election of Bakshi as managing director of CPRL, following which Bakshi challenged his removal at the Company Law Board (now the National Company Law Tribunal, or NCLT), accusing McDonald’s of mismanagement and oppression.
One expert said the ongoing legal battle could harm the McDonald’s brand in India even if all 169 outlets remain open.
“Remaining open and giving good customer experience are two different things. The legal battle and prevailing uncertainty will harm the brand till the case is settled. The loss is of the consumers and the competition is expected to gain market share," said Abneesh Roy, senior vice-president and research analyst (institutional equities) at Edelweiss Securities Ltd.
NCLT reinstated Bakshi as the managing director on 13 July and restrained McDonald’s Corp. from interfering in the functioning of CPRL.
“This litigation is not of my creation. My stand for a fair settlement remains unchanged. I am a businessman who has always been amenable to a fair settlement...but a settlement as per the laws of this sovereign, democratic republic of India, which prescribes a fair market value as per the RBI (Reserve Bank of India) guidelines," said Bakshi.
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