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Last week, Vikram Bakshi and McDonald’s had announced the settlement of the five-year-old dispute out of court with the US-based fast food major buying out fifty percent voting equity shares of Bakshi in Connaught Plaza Restaurants Pvt Ltd (CPRL), that operated a chain of McDonald’s restaurants in north and east India.
But now Housing and Urban Development Corporation (HUDCO) has moved the National Company Law Appellate Tribunal seeking a bite of Rs 195 crore from the settlement amount payable to Vikram Bakshi.
In its application filed through advocates Rohit Sharma, Atul Agarwal, Rounak Nayak and Anshul Chowdhary, HUDCO has contended that the settlement is in the teeth of an order passed by the Debts Recovery Tribunal (DRT) on February 2, 2016. The order had restrained Bakshi from transferring or creating any third-party interests in the shares held by him in CPRL.
“The respondent Vikram Bakshi is trying to alienate his shares by entering into a settlement with M/s Mc Donald’s India Pvt Ltd- Appellant in the present appeal in order to get the seal of approval from this Hon’ble Forum. This attempt.. is clearly an abuse of the process of this Hon’ble Tribunal.”, HUDCO has claimed.
It has further argued that if the settlement is allowed to go through without payment of the dues to HUDCO, it would cause “grave and irreparable losses to the public exchequer”.
A two-member Bench of the Appellate Tribunal headed by Chairperson Justice SJ Mukhopadhyay on Wednesday agreed to hear HUDCO’s application before it gives its seal of approval on the settlement deal.
“If the terms of the settlement order are against any court of law, we cannot allow it“, the Court had remarked while it allowed HUDCO’s intervention.
The dispute before the DRT pertained to the recovery of a loan amount of nearly Rs 63 crore extended by HUDCO to Bakshi’s Ascot Hotels and Resorts Pvt Ltd in 2006. Bakshi and his wife Madhurima Bakshi executed personal guarantees for repayment of the loan, apart from various other securities in the loan agreement.
After the loan account was declared as a Non-Performing Asset, HUDCO moved the DRT in 2011. In 2013, HUDCO preferred an application to attach the shares of Bakshi in CPRL. Pursuant to the application, Bakshi undertook to not transfer his stake in CPRL. The same was recorded by the DRT in its order.
Subsequently, the DRT decreed in favour of HUDCO in 2015. It held that HUDCO was entitled to recover a sum of Rs 68,62,91,032 with simple interest @ 14% per annum from the date of the order until the recovery from Ascot Hotels and Resorts, Vikram Bakshi, Madhurima Bakshi and Vikram Bakshi & Co Pvt Ltd, jointly and severally.
It was during the execution proceedings that the DRT restrained Bakshi from transferring his 3100 shares in CPRL.
As soon as the deal was announced, HUDCO approached the DRT.
The DRT, on May 9, not only directed Vikram Bakshi and McDonald’s India to appear before it but also asked McDonald’s to deposit the proceeds of the settlement with it.
Although the financial details of the settlement are still unknown, Senior Counsel Abhinav Vashisht appearing for Bakshi (briefed by Satvik Varma and Shardul Amarchand Mangaldas Partner Tejas Karia) informed the NCLAT on Wednesday that he has received “some money” from McDonald’s till now.
HUDCO has thus prayed that any amount which is payable to Bakshi be deposited with the DRT by McDonald’s for settlement of dues.
With the NCLAT closing for the summer break in June, the long drawn legal battle between Bakshi and McDonald’s is unlikely to attain any finality for the time being.
The seeds of the dispute were sown in 2008 when McDonald’s tried to buy out Bakshi’s stake in their 50:50 joint venture. After Bakshi was removed as the Managing Director of CPRL in 2013, he moved the Company Law Board (now NCLT) alleging mismanagement and oppression. The NCLT ruled in favour of Bakshi by reinstating him as Managing Director. It also directed McDonald’s to not interfere in the functioning of CPRL.
While McDonald’s moved an appeal before the NCLAT against the order, it had also invoked the arbitration clause in the JV agreement.
On September 12, 2017, a London Arbitral Tribunal passed a partial award, asking Bakshi to sell his stake in CPRL to McDonald’s India. McDonald’s had then moved the Delhi High Court to enforce the award.
In 2017, McDonald’s also terminated CPRL’s franchise agreement for non-payment of royalties. The same was also challenged in a separate plea before the Delhi High Court.
Once the out-of-court settlement between Bakshi and McDonald’s attains the approval of the NCLAT, the web of litigation between the two will also come to an end.
HUDCO is being represented by Solicitor General Tushar Mehta.
The matter will be heard next by the NCLAT on May 27.
Read the order: