In an anticipated move, McDonald’s India Pvt. Ltd, the local subsidiary of the US fast food major, has decided to terminate its joint venture agreement with Vikram Bakshi-owned Connaught Plaza Restaurants Pvt Ltd. Now, the company is scouting another developmental licensee (DL) partner for North and East India.
Previously, the US fast food chain had signed an agreement with CPRL to open and manage McDonald’s stores in North and East India.
“We have been compelled to take this step because CPRL has breached the terms of the respective franchise agreements relating to the affected restaurants, and has failed to remedy the breaches despite being provided with an opportunity to do so in accordance with the agreements,†MIPL said in a statement.
The company will take time to bring the current situation to a final resolution. Currently, the firm is committed to finding the right DL partner for North and East India, it said.
“We have issued CPRL’s board a notice of termination of the franchise agreements between McDonald’s India (MIPL) and CPRL for 169 McDonald’s restaurants operated by CPRL in North and East India,†it said.
The development comes soon after the National Company Law Tribunal (NCLT) had ordered MIPL to reinstate Bakshi as managing partner of CPRL. CPRL is the local joint venture between MIPL and Bakshi.
CPRL will not be able to use McDonald’s systems and associated intellectual properties after 15 days from the termination notice, according to the statement.
During the hearing at NCLT, the US firm had alleged that Bakshi had pledged 51,300 of his CPRL shares to get a Rs 20 crore loan for development of a mall and a cluster of service apartments in Manesar by his company Ascot Estate (Manesar) Pvt. Ltd. According to McDonald’s, he did not seek approval from the firm before pledging the shares.
However, Bakshi refuted the allegations and said CPRL’s board, which had representatives from McDonald’s too, was aware of the pledging of shares.
In 2014, Bakshi offered to buy McDonald’s stake in CPRL at a net asset value of Rs 150 crore. In return, the US company made a Rs 48-50 crore offer for Bakshi’s stake. Bakshi then said he is ready to sell his stake for a fair market value of Rs 2,500 crore, which he later reduced to Rs 1,800 crore.
McDonald’s is also pursuing arbitration against Bakshi in the London Court of International Arbitration. Tejas Karia, a partner at law firm Shardul Amarchand Mangaldas & Co, had advised Bakshi during the hearing at NCLT.