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Case Study of Vikram Bakshi v/s McDonald's India Private Limited

In this article, we will study the facts of Vikram Bakshi vs McDonald's India Private Limited and the ruling of NCLT and NCLAT.

Facts of the case
There are three persons involved in this case, particularly Vikram Bakshi, McDonald’s India Private Limited, Cannaught Plaza Restaurants Limited. In 1995 McDonald’s India Private Limited and Cannaught Plaza Restaurants Limited had a joint venture in such a way that 50 per cent of equity share was with McDonald’s India Private Limited and 50 per cent equity shares with Cannaught Plaza Restaurants Limited. Vikram Bakshi was the Managing Director of this joint venture, he was also MD of CPRL[1]. In a joint venture agreement, there was clause 7e, which stated 4, provisions which should be satisfied to be MD of the joint venture.

Those conditions were as follows:
  1. A person should reside in the NCR region
  2. A person should devote substantial time to the company
  3. A person should be holding 50 per cent shares of the company
  4. A person should discharge his responsibility faithfully and competently.

Clause 7e also states that MD shall be elected every two years.
Clause 32 states that MIPL[2] may purchase all of the shares at a purchase price determined as per para 26 if any of the following circumstances occur.
  1. Partner personally fails to maintain his principal residence in the National Capital Region of Delhi or fails to devote his full business time and best efforts to JV Company;
  2. Partner terminates or suffers the termination of his relationship as Managing Director of JV The company, other than his death or incapacity. In the event of his death or incapacity, Paragraph 29(d) shall govern; or
  3. Upon expiration or termination of the agreement.
In 2008, MIPL proposed 5 million USD to Vikram Bakshi based on 50 per cent equity shares he initially invested in 1995. He rejected the proposal. The offered amount increased to 7 million USD, but he again rebuffed the proposal.
 
On 2013 August 5, a board meeting was held, and on August 21, Vikram Bakshi received notice that he has been expelled from his office and has to relinquish his office within 15 days. MIPL contested that he was not faithful and also he did not devote substantial time to the company. By these two conditions, he was not qualified to be the MD of the joint venture.
He filed the suit in Company Law Board under section 397, 399 and 402[3] alleging oppression and mismanagement. Company Law Board passed the order to maintain the status quo over the shareholding, board pattern and right of call option until further order. In 2014, the matter transferred to NCLT under section 241 and 245[4] of the new act.
 
Meanwhile, MIPL invoked the arbitration agreement by its request for arbitration and instituted arbitration proceedings in the London Court of International Arbitration. London Court of International Arbitration passed an award stating, if the fair market value is furnished, MIPL can purchase shares.
 
Held
NCLT stated that Vikram Bakshi managed the joint venture company single-handed as a result, the business reached from 0 branches to 154 branches in India. From 1995 till 2013 company had no single complaint against him, therefore, it can be concluded there was oppression in the company to acquire 50 per cent of equity shares. Removal of Vikram Bakshi was held unreasonable. It also appointed the former Supreme Court judge, Honourable Mr Justice G S Singhvi, to investigate the matter and prepare the report.
 
The matter went to NCLAT. It said the opinion made by NCLT is proper as it already investigated the matter and appointed an administrator. The administrator has to look into the matter and tell whether the act was mismanagement or not. Until and unless the company will not prove their contention to remove Vikram Bakshi, he will not vacate his office.
When the matter went to Delhi HC, MIPL simultaneously withdrew all food licence from CPIL and dissolved the joint venture.
 
End-Notes:
  1. Cannaught Plaza Restaurants Limited
  2. McDonald's India Private Limited
  3. Companies Act 1956
  4. The Companies Act 2013

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