Can't allow McDonald's-Vikram Bakshi deal without hearing Hudco: NCLAT

Tribunal suggests Bakshi settle Hudco Rs 195 crore dues before going ahead with CPRL stake sale

The National Company Law Appellate Tribunal (NCLAT) on Wednesday said that it could not allow the McDonalds India Private Limited-Vikram Bakshi out-of-court settlement deal to go ahead until Housing and Development Corporation's (Hudco) intervention application seeking Rs 195 crore dues from Bakshi were heard. The matter will be next heard on May 27.

A two-member bench headed by Justice S J Mukhopadhaya on Wednesday also said that Bakshi would first have to clear Hudco's dues before selling his stake in Connaught Plaza Restaurants Limited (CPRL) to McDonalds India.

Hudco had approached the NCLAT with a plea that Bakshi owed the state run company nearly Rs 195 crore in a matter which is still subjudice at the Debt Recovery Tribunal.

In 2013, Hudco had filed a criminal case under the Negotiable Instruments Act against Bakshi in a 2012 cheque bounce case and said its dues owed to Bakshi had crossed Rs 75 crore. Hudco had also filed cases against Bakshi under Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act.

During the hearing on Wednesday, the counsels for McDonalds India and Bakshi sought that since the case pending in DRT had nothing to do with the deal between them, the settlement should be allowed to go on as per schedule.

The plea, however, was turned down by NCLAT, which suggested that Bakshi settle his dues with Hudco.

“We cannot annul a tribunal's order. If the settlement is contrary to law, then we cannot allow it. You settle it with Hudco,” the two member Bench said.

Bakshi and McDonald's India had, on May 7, informed the NCLAT that the two parties were working on an out-of-court- settlement to settle their six-year-old dispute. The NCLAT had then allowed both parties to go ahead with settlement talks and keep the appellate tribunal apprised of the developments in talks.

According to the terms of the settlement, McDonald’s India has bought over the 50 per cent stake held by Bakshi and his wife in CPRL for an undisclosed amount.

In 1995, Bakshi had inked a deal with McDonald’s to open outlets in India. The partnership, a 50:50 joint venture between McDonald’s India and Bakshi’s CPRL, was inked in a way such that Bakshi’s CPRL would be responsible for opening and managing McDonald's outlets in north and east India.

McDonald’s India ousted Bakshi from the post of Managing Director (MD) of CPRL in 2013. Following the ouster, McDonalds India had offered Bakshi Rs 120 crore for the 50 per cent stake held by him and his wife in CPRL.

The deal fell through as Bakshi sought Rs 1,800 crore. In July 2017, the National Company Law Tribunal restored Bakshi to the post of MD in CPRL.

In June 2017, McDonald’s India terminated the franchise deal of 169 outlets managed by CPRL citing non-payment of royalties and asked suppliers to stop dealing with the latter. CPRL suppliers included Vista Processed Foods, Schreiber Dynamix Dairies, Cremica Foods Industries and Amrit Foods. Subsequently, McDonald’s India also challenged the use of the McDonald’s trademark by CPRL.

With an out-of-court settlement being set in motion, McDonalds India said it would focus on revamping the business in India. Though the outlets of the US-based fast food company would be shut down temporarily, the company said it hopes to restart operations within a fortnight.