TaxTMI 
TaxTMI 
2017 (7) TMI 1092
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.... Vikram Bakshi' and 'Bakshi Holding' respectively. The Petitioners have impleaded ten Respondents and it would be necessary to give a brief introduction of each one of the petitioner and the respondents to facilitate understanding of the cause. 2. 'Mr. Vikram Bakshi' and 'Bakshi Holding' are shareholders in Respondent No. 1-Company namely Connaught Plaza Restaurants Pvt. Ltd.(for brevity 'Connaught Plaza'). Both of them jointly hold 1,45,600 (One Lac Forty Five thousand and Six Hundred) equity shares which represent 50% of the issued and paid up share capital of the Company. Petitioner No. 1 has been the Managing Director of the 'Connaught Plaza' since its inception in 1995 and is duly authorized signatory on behalf of Petitioner No. 2 vide its Board Resolution dated 5.9.2013 (annexure P-8). The share certificates have been annexed (P-9 colly). The latest annual returns of the Connaught Plaza (annexure P-10) has also been filed. 3. The 'Connaught Plaza' (Respondent No. 1) was incorporated on 29.6.1995 with its registered office at Tolstoy Marg, New Delhi (annexure P-1) which was preceeded by a Joint Venture Agreement dated 3....
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....ice at Singapore and has been attending most of the Board Meetings of 'Connaught Plaza'. Respondent No. 10 Mrs. Madhurima Bakshi is a nominee Director of Bakshi Holdings on the Board of 'Connaught Plaza' and is stated to be performa Respondent. She is a holder of a Master degree from the Delhi School of Economics and is a Co-signatory to the JV Agreement. She was Director marketing of 'Connaught Plaza' till the year 2000. In September 2011, she has taken up additional responsibility as a Senior Director (Human Resources) of the 'Connaught Plaza' and is claimed to have hired some of the best talent in the crucial departments like business development, real estate, facility management, equipment, construction and operations. She also heads the Promotions Committee and the investigation Committee of the Company. 5. The Petitioners have claimed that at present, issued and paid up share capital of the Company is Rs. 206,42,21,000/- (Rs. Two hundred Six Crores Forty Two Lacs and Twenty One Thousand Only) divided into 2,91,200 (Two Lacs Ninety One thousand two hundred) equity share of Rs. 1000/- (Rs. One thousand Only) each and Rs. 17,73,021 (Seventeen l....
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....cts. 7. A copy of the Memorandum and Articles of Association have been placed on record (Annexure P-7). The 'Connaught Plaza' is and was at all material times engaged in the business of managing and operating quick service restaurants. 8. The Petitioners have approached this Tribunal with various allegations of acts of oppression and mismanagement; mala fide actions of Respondent and has thus made the following prayers:- 'i. Injunction restraining the respondent Nos. 2 to 9 from interfering with the management and affairs of the company; ii. Injunction restraining the Respondent nos. 2 to 9 from preventing the Petitioner No. 1 from acting as or holding out or representing himself to be the Managing Director of the Company; iii. Injunction restraining the Respondent Nos. 2 to 9 and each one of them from giving any effect or further effect to the resolution purportedly passed at the meeting of the Board of Directors held on 6 August 2013 in so far as it relates to re-appointment/re-election of the Petitioner No. 1 as Managing Director of the Company; iv. Injunction restraining the Respondent Nos. 2 to 9 and each one of them from g....
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....nd/or 6 August 2013 to be continued on such terms as this Hon'ble Board may deem fit and proper; xvii. Pass such order or further order(s) as this Hon'ble Board may deem fit and proper in the facts and circumstances.' 9. Before dealing with the controversy, it would be necessary to make a brief survey of facts which led to the formation of joint venture and 'Connaught Plaza'. As has already been revealed in the preceding paras that McDonald Corporation is a US based Company and the practice adopted by it is to structure its business by forming either a wholly owned subsidiary or a joint venture or a development license or an individual franchise. In the context of the Indian Diaspora, McDonald Corporation U.S.A. realized that for development of its business in this country it could flourish by initiating a joint venture and associating a partner who has extensive knowledge of Indian market and socio-economic condition. Accordingly, through an advertisement McDonald Corporation U.S.A. invited individual entrepreneurs as partners for McDonald's in New Delhi and Mumbai with the object of setting up and running a chain of restaurant/fast food joints/....
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....e not to expect any profit prior to 15 years of operation of business of the 'Connaught Plaza' in India and example were cited of countries like Australia and UK. It was thereafter that Mc Donald's India & Mc Donald Corporation, Respondent No. 5 conducted a thorough due diligence exercise to check on the credentials of Mr. Vikram Bakshi. After being satisfied about his suitability to be a partner of Mc Donald's Corporation U.S.A. for its business in India a draft of an agreement was proposed. The agreement was eventually signed on 31.03.1995. It was however made clear that the affairs of the 'Connaught Plaza' were to be governed by its memorandum and articles of association. 11. It is also pertinent to notice that after satisfying themselves with its entrepreneur's skills and competence of Mr. Bakshi it decided to launch and establish McDonald branch. Accordingly, McDonald India entered into JV agreement with the petitioners on 31.03.1995 laying the foundation of 'Connaught Plaza'. 12. Mc Donald's India entered into three Operating License Agreements for a period of 20 years each to permit 'Connaught Plaza' to market products un....
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....y, shall not have any right to cast a deciding vote. (b) Minutes of Board of Directors.... 7. Managing Director. The JV Parties shall promptly cause the nomination and election of Partner as the sole Managing Director of JV Company. (a) Acceptance. Partner agrees to accept the office of Managing Director, to maintain his residence in the National Capital Region of Delhi, and to devote his full business time and best efforts to the promotion and development of the McDonald's Restaurants operated by the JV Company. (b) Training. Partner must satisfactorily complete a training program in the United States and/or such other places as McDonald's may reasonably require for a period of at least 9 months, but which in any case shall be sufficient, in the judgment of McDonald's, to thoroughly familiarize Partner, consistent with his individual abilities, with the development and operation of McDonald's restaurants, including without limitation, the McDonald's Management Development Program (which itself includes the Basic Operations Course, the Basic Management Course, the Intermediate Operations Course, the Applied Equipment Course and the ....
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....or settle legal proceedings on behalf of JV Company except for matter requiring emergency action; (8) to establish or amend pension or profit sharing plans of any kind; (9) to make changes in the menu items or menu prices offered at any McDonald's Restaurants operated by JV Company; (10) to cause the establishment of new McDonald's Restaurants or the closing of existing McDonald's Restaurants; (11) to grant any license, service agreement, lease or any other form of contract to any third party to operate a McDonald's Restaurant or use any part of the McDonald's System. (12) to appoint or promote any officer of JV Company or to appoint and remunerate any employee who shall earn more than the Indian Rupee equivalent of US$ 30,000 per year, inclusive of all bonuses and benefits; (13) to invest funds of JV Company if the amount invested is more, in the aggregate, than the Indian Rupee equivalent of US$ 100,000, unless such investment is made in accordance with investment guidelines previously approved and not subsequently repeated by the Board of Director; (14) to execute, amend or terminate any license o....
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....), in combination, own at least 50% of the equity shares of JV Company; (3) he discharges the responsibilities of management of JV Company in a competent and faithful manner; (4) he is not in breach of any term of this Agreement or any other agreement between the JV Parties or their affiliates or subsidiaries. 26. Determination of "Fair Market Value" and "Purchase Price" a. Definitions: For the purposes of this Paragraph, the following terms shall have the meaning ascribed to them below: "Acquisition Fraction" equals the fractional ownership interest in JV Company being acquired by McDonald's Partner. "Net Book Value" equals the book value of the shares of JV Company, as of the date on which notice requesting a determination of Fair Market Value is sent (the Notice Date), as determined in accordance with generally accepted accounting principles in the United States of America consistently applied ("US GAAP"). "JV Company Cash Flow" equals the sum of (1) sixty per cent (60%) of JV Company's after-tax net income (or loss) for the immediately preceding twelve (12) months. Plus ....
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....es shall not be less than the amount of Partner's total cash investment in JV Company, plus interest accrued on such amount at the rate of ten per cent (10%) per annum, compounded annually. d. Audited Financial Statements. All figures necessary in order to perform the calculations required pursuant to this Paragraph shall be derived from the audited financial statements of JV Company prepared as of the Notice Date. 32. McDonald's Option to Purchase Shares. McDonald's any of its wholly-owned subsidiaries or affiliates as designated by McDonald's, or any person or entity designated by McDonald's, may purchase all of the shares of JV Company owner or controlled by Partner at a purchase price determined in accordance with Paragraph 26 above if any of the following events shall occur: (a) 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; (b) Partner terminates or suffers the termination of his relationship as Managing Director of JV Company, Other than by reason his death or incapacity. In the event of Partner'....
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....September 2011 and has hired the best talent in the crucial departments like business development, real estate, facility management, equipment, construction and operations. She is also head of promotion and investigation committee. 18. The Petitioners have claimed that the foundation of JV Agreement proceeded on the basis that Mr. Vikram Bakshi individually was to be the sole managing director of 'Connaught Plaza' which has been since 18.07.1995 in terms of Article 35 of the Articles. His appointment and continuation as such was paramount for preservation of joint venture between the Petitioners and Mc Donald's India. A reference has been invited to clause 32 of the JV Agreement which provides that if Petitioner No. 1 terminates or suffers a termination of his status as managing director of 'Connaught Plaza' then Mc Donald's India was to have option to purchase the shares of the Petitioner. On the construction of the aforesaid the petitioners have submitted that their existence in the 'Connaught Plaza' is tied up with one fact namely continuation of Mr. Vikram Bakshi as M.D. because otherwise they are likely to loose everything including their sha....
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.... - Discounted rental and the lowest rental outflow out of the 5 downtown CP restaurants. (1/4th the market rates) 6. P-16, Sector 18 Market Noida (UP)- First restaurant in NCR Noida (8320 sqft). Sold the property at cost price to the JV. - Current price is over 10 times the sold price. 7. Savoy Suites P-18, Sector 16, Noida (UP)- An attached Drive Thru restaurant in NCR Noida with one of the best SOI (Store Operating Income) for the JV. - Pure revenue share, no fixed rental. 8. Savoy Greens, GT Road Karnal (Haryana)- Food Court cum Drive Thru restaurant with one of the best SOI (Store Operating Income) Restaurant for the JV -Fixed + Revenue share 9. EDM Mall, Kaushambi (UP) (3675 Sqft)- The first mall in East Delhi with all 3 operating formats of: a. Full House restaurant b. Food Court c. Dessert Kiosk - Pure revenue share 10. Jabli (Himachal Pradesh)- On the National Highway (3000 sqft), a unique restaurant on a bridge - Fixed+Revenue share" 21. The Petitioner also claimed that office premises at Mohandev Building, 15th floor, 1....
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....n Park and Greater Kailash, respectively. f. The Company's first restaurant & India's 1st McDonald's was opened under the guidance, leadership and support of Petitioner No. 1 on 13 October 1996 at 47, Basant Lok, Vasant Vihar, New Delhi. For ensuring that the Company opened India's first McDonald's Restaurant at a 1000 location having all the requisite utilities and services, Petitioner No. 1 personally invested in part of the property and purchased the upper floors of Vasant Vihar outlet located at 47, Basant Lok, New Delhi in his Company's name. In fact, he gave rights for two-third of the terrace of his purchased area for installation of water tanks, generation set, water filtration plant and electrical panels without charging any rent for the same. Copies of various newspaper clippings evidencing the opening of McDonald's first restaurant are annexed herewith and marked as Annexure-P 20 ("Colly"). g. In May 2001, there was intense mob fury and vandalism against McDonald's Corporation in India, a reaction to the admittance of beef flavouring being added to French fries in the US. This information outraged the religious sentiments....
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.... the lowest per sq. ft. rental out of all the 5 properties in Connaught Place, in which McDonald's restaurants operates. A copy of the CBRE Report dated June 2009 is annexed (Annexure - P 24). l. Further, Mr. Vikram Bakshi personally provided the Company with many properties at prime locations so that McDonald's restaurants could be established in India with the right quality real estate and a viable business model with the sole intention of benefitting the Company.' 22. The Petitioners have claimed that on account of Mr. Vikram Bakshi concentration, complete devotion and undivided attention the Company has reached the present business standing and profitability. It is the net result of full time attention and discharge of his duty as the Managing Director that till date the 'Connaught Plaza' has not authorized any foreigner or non-representative of McDonald to carry on its business for the 'Connaught Plaza' and the entire business success is ascribed to the functioning and financial control/acumen of Mr. Vikram Bakshi. Readers Digest rated McDonald's India as the 'Most Trusted Brands in India' for two consecutive years (2010-2011....
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....rties out of which the restaurants of the Company are operated. The term of leases and/or revenue share arrangements/agreements entered into by Mr. Vikram Bakshi, on behalf of the Company is in the range of 15-40 years, which itself is extraordinary in asmuch as in the retail sector in India, the Company is well known for having secured long terms arrangements on extremely attractive and beneficial terms which is practically impossible for other companies and/or entities to achieve. This path-breaking lease hold arrangements in India shows the long term vision of Mr. Vikram Bakshi and his sustained interest in the JV Company. 7.46 Mr. Vikram Bakshi and his wife- Respondent No. 10 are the only directors of the Company who are resident in India and at the same time have extensive knowledge of the business model and operations of the Mc Donald Corporation. The nominee directors of Mc Donald India have, at best, over a 18 years period spent not more than 180 days in India and have absolutely no knowledge whatsoever of the business environment of India. As such, they are in no position to discharge any functions or responsibilities on behalf of the 'Connaught Plaza'. Mr....
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....lieu of their interests in the Company. A copy of the letter has been placed on record (P/27). In his reply sent by Mr. Bakshi on 06.09.2008 it was intimated that he was stunned by the offer considering that he had invested close to 5 million US$ way back in 1996 when 'Connaught Plaza' commenced its operations in India (P/28). Thereafter on 23.10.2008 McDonald Corporation U.S.A. extended the offer to buy the entire interest of the Mr. Vikram Bakshi till 30.11.2008 stating that in case the Petitioners disagree with their offer then they may provide their expected sale price in respect of their interest in the Company (P/29).On 23.10.2008 Mr. Vikram Bakshi had met Mr. Peter Rodwell-Respondent No. 7 in Kuala Lumpur and made a proposal of fair market valuation from a third party and the individual interest of the shareholders may also be ascertained, which was rejected by letter dated 11.11.2008 without any substantial reason. In the same letter dated 11.11.2008 Mc Donald's Corporation U.S.A. increased the amount of the offer to 7 million US$ (P/30). Mr. Bakshi again expressed his anguished in his letter dated 30.11.2008 for not accepting his counter proposal of valuation o....
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....t of forcing out the Petitioners from the Company. Having failed in their evil designs it has now indulged in illegal acts like non-reappointment of Petitioner No. 1 as Managing Director of the Company so that it may forcibly exercise its option to buy back shares as stated in clause 32 of the JVA referred to in the preceding paras of this judgment. The Petitioner has also cited the evil conduct of McDonald Corporation U.S.A in many previous joint venture across Asia which include country like Thailand, Indonesia and Pakistan. Accordingly, it has started similar tactics since 2008 of oppressing its joint venture partners across the globe and force them into a corner to buy them out at pittance for monetary gain. McDonald's Corporation USA has thrust multiple arbitrary and baseless internal audits on 'Connaught Plaza', borrowing embargos and has forced Petitioners to invest in the Company to improve its net worth beside freezing the remuneration of the Managing Director. It has raised frivolous issues which are stale, waived/acquiesced to arm-twist the JV Partners to sell their shareholding. The Company has suffered due to dominating and callous approach of Mc Donald Ind....
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....tors may from time to time subject to section 197A of the Companies Act, 1956 appoint one of their numbers (members?) to be Managing Director, and such number (s) of whole-time director (s) for such period and upon such terms as it thinks fit. "Subject to the provisions of the Act and paragraph 7 of the Joint Venture Agreement the Managing Director shall be entrusted with substantial powers of management subject to the superintendence, control and direction of the Board of Directors. He shall manage the day-to-day operation of the Company." (Company Petition, Annexure P-7, p. 162). Paragraph 2 of the MD Agreement (Short Reply on behalf of Respondent No. 2, Annexure 15, pp. 697-703) has reference to Clause 35 of the Articles which provides that at a meeting of the Board of Directors of the Company (hereinafter referred to as the "Board") held on September 15, 2011 Mr. Bakshi was subject to the approval of shareholders, which was granted vide the resolution passed by the Company at the annual general meeting of the Company held on September 16, 2011, re-appointed as the Managing Director of the Company with effect from 18th July 2011 for a period of two (2) years on the term....
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.... iii. To discuss and review the remuneration of Mr. Vikram Bakshi, in light of the market review conducted by AON Hewit on the remuneration of CEOs and MDs for the multinational companies in retails and FMCG sector. (Item No. 10) b. Additionally, with the above mentioned email dated 22 July 2013, the Respondent No. 8 also circulated draft of the Agreement for re appointment of Mr. Vikram Bakshi as Managing Director as Annexure III of the above email. c. The abovementioned agenda and draft agreement for reappointment of Mr. Vikram Bakshi as Managing Director of the Company were duly approved by Respondent No. 9 (representative of Respondent No. 5) and Respondent No. 5. d. Thereafter, on 25 July 2013, after obtaining approval from Respondent No. 9 the above mentioned agenda, draft MD Agreement was circulated along with the notice of Board Meeting to be held on 6 August 2013 to all the directors of the Company (Company Petition, Annexure P-33, pp. 501-531; Convenience File Vol. III. pp. 25-26). 31. The petitioners have asserted that from the abovementioned agenda it is clear that, as late as 25 July 2013, it was contemplated that....
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....learly shows that the Mr. Vikram Bakshi had de-facto continued as MD even after 17 July 2013 and had been treated by the Respondent No. 2-5 as the MD of the Company, by their own acts and conduct. 35. On 5 August 2013, Respondent Nos. 3 and 4 (nominee directors of Mc Donald India on the Board of the Connaught Plaza also had drinks and dinner with Mr. Vikram Bakshi and his wife Madhurima Bakshi-Respondent No. 10, and there was no indication of the events that transpired on 6 August 2013 (Company Petition, Annexure P-59, p.816). 36. It is asserted that at the Board Meeting of Mc Donald held on 5th August 2013, two decisions had already been taken by the non-executive nominee directors that is (a) not to re-elect Mr. Vikram Bakshi as the MD of Company; (b) to exercise call option with respect to the Petitioners' shares in the Company. A bare perusal of the resolution dated 5th August 2013, disclosed by Mc Donald India, shows that there were and there could be no reasons for such decisions. 37. In fact, the Board Resolution of Mc Donald India dated 5 August 2013 was disclosed only on 29 January 2014 pursuant to the order of the erstwhile Company Law Board to file the same.....
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....arm-twist the Petitioners to sell their shares. The audits had commenced after the 'Connaught Plaza' became profitable in the year 2007 and no such audit was ever conducted prior thereto. The allegations are false and baseless for various reasons:- 42. In respect of allegation (ii) it has been stated that it was a stale loan transaction which had taken place in the year 2007 and was procured as a ground to sustain their claim of unseating Mr. Vikram Bakshi as Managing Director. Thereafter he has been re-elected as Managing Director several times. The transaction was held commercially viable by a third party audit conducted by Grant Thornton. The transaction was duly ratified in the Board Meeting of the Company held on 17 April 2008. The Petitioner has relied upon the list of dates to belie the allegations of the Respondents with regard to what is known as 'Regal Loan Transaction'. 43. There is further allegation against Mr. Vikram Bakshi that he is engaged in business in competition with the business of 'Connaught Plaza' and therefore, has not been able to devote his entire business time to the office of the Managing Director of the Company. 44. It ....
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....9 of the convenience volume.) 45. There are further allegations of exposing the McDonalds senior executive and professional advisers to criminal litigation which has been stoutly denied in the response which is evident from the perusal of the paras 100 to 106 of the convenience volume. 46. Another allegation against the Petitioner is that they created a pledge on 51,300 equity shares held by them in the Company which has also been replied in detailed (paras 107 to 117 of the convenience volume). 47. The Petitioner has also asserted that Respondents Nos. 2 to 5 have waived their rights to raise any of the allegation mentioned in the note either because of the applications of principles of waiver as the allegation pertains to the year 2007 and that Mr. Vikram Bakshi has been appointed as Managing Director twice thereafter. 48. Moreover, he has made all necessary disclosures with regard to his business interest in another Companies including the nature of business transacted by those companies. The details are available on record (summed up in paras 118 to 127 of the convenience volume). 49. The Petitioner has again reiterated his allegation with regard to illegal and m....
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....t Mr. Vikram Bakshi was no longer the Managing Director of the 'Connaught Plaza'. On the same day, a representative of Respondent No. 5 sent an email to the suppliers as well as other parties but no intimation was sent to the Petitioner. The act of sending email was with a oblique motive to undermine the authority of the Mr. Vikram Bakshi and to create circumstances to oust him from the 'Connaught Plaza' setting the stage for Mc Donald India to acquire the shares held by the Petitioners at a pittance. The act of public notice and act of sending of email was defamatory and against the interest of the Company. 52. The Petitioner has also highlighted the events subsequent to the filing of the Company Petition by stating that the oppressive acts of Mc Donald India and its nominee directors have been continuing. All such acts can be taken into account by virtue of various judgments of the Hon'ble Supreme Court and reliance has been placed on the judgment rendered in Pasupulati Venkateswarlu v. Motor & General Traders [1975] 1 SCC 770 and Needle Industries (India) Ltd. v. Needle Industries Newey (India) Holding Ltd. [1981] 3 SCC 333. The Petitioner also made allega....
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....ication of CP 110/ND of 2013. The termination notice is part of an ugly design and scheme of Mc Donald India in collusion and conspiracy with Respondent Nos. 3 to 8 to usurp the control of the Company. The second call option therefore has been challenged on similar grounds which have been taken to challenge the first call option. 54. The Petitioner has also raised minor disputes of defamatory and intemperate language coercing the employees of the Company to sign blank vendor registration form so on and so forth. Some illegal attempt to interfere with functioning of the Company by Respondent No. 4-Brig. (Retd.) G.D. Chadha have also been highlighted. 55. The petitioners have also listed under the caption 'Other oppressive acts'. Reference has been invited to C.A. No. 177/2015 and C.A. No. 148/2015 filed by Respondents and C.A. No. 150/2015 filed by the Petitioners. Stand taken by the Respondents Nos. 2 to 4 56. In the reply filed by Mc Donald India and its nominee directors it has been urged that in view of the orders dated 17.09.2016 passed by this Tribunal in C.A. No. 79/2016, as clarified by the observations made by the National Company Law Appellate Tribunal ....
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....on was filed in September, 2013 as is admitted by the Petitioner (para 7.49, pg. 30, Company Petition (Vol.1). The call option exercised by Mc Donald India on 16.08.2013 pursuant to para 32 of the JV Agreement is also subject matter of challenge in the Company Petition which is consequential to and dependent upon the termination of his relationship as Managing Director of the Company. 59. No relief of restoration can be granted as it existed on 16.07.2013, a day prior to the expiry of Petitioner's term as Managing Director of the 'Connaught Plaza' and/or 06.08.2013 to enable him to continue as the Managing Director of the Company. As a matter of fact, Mr. Vikram Bakshi for all intents and purposes is seeking specific performance of the JV Agreement and is praying to this Tribunal to create a fresh terms of the agreement by rewriting it for the parties. According to the Respondents the relief of specific performance of a personal contract cannot be granted by any Court. 60. The Respondents have placed reliance on clause 32 of the JV Agreement, which provides that if Mr. Vikram Bakshi was to terminate or suffer termination of his relationship as Managing Director of....
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....ment of Hon'ble the Supreme Court in the case of Incable Net (Andhra) Ltd. v. AP Aksh Broadband Ltd. [2010] 100 SCL 402. The Petitioner then made a reference to Articles of Association and have pleaded that Articles do not give any right to Mr. Vikram Bakshi to be, or continue as, Managing Director of 'Connaught Plaza'. According to the Respondents there is no pleadings which shows deliberate omission of this aspect. In the joint venture Agreement signed on 31.03.1995 it was made clear in unequivocal term that as far as the affairs of the Company are concerned, it would be governed by Memorandum and Articles of Association. The Respondents have placed reliance on para 8.66, pg. 53 of the Company Petition (Vol.-1) where it is stated that none of the issues raised in the present proceedings are in any way relatable to the JV Agreement inasmuch as the provisions of the JV Agreement have not been incorporated into the articles of the Company. It has also been reiterated in para 98 of the Petitioner's rejoinder (Vol.11). In the Written submissions, the Petitioners have taken the stand that the Articles of Association of Respondent No. 1-Company has incorporated various p....
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.... of the Company, but the issue is of non-re-election after his term expired. He has no right to continue as Managing Director for all times to come and he has only right to seek re-election under, and subject to the provisions of the JV Agreement. There is no possibility of granting the relief of specific performance of JV Agreement as sought by the Petitioners. 65. It has also been submitted that the petition has been filed for a collateral purpose and the same is liable to be dismissed at the threshold. It is founded on suppression and falsehood and even on that score it is liable to be dismissed. In any case the JV Agreement has been terminated which cannot be challenged in these proceeding therefore, the cause of action in the Company Petition no longer survives. Thus, the Company Petition is rendered infructuous and the matter must end there. 66. The Respondents have reiterated all the allegations made in the note like unauthorized withdrawal by Mr. Vikram Bakshi amounting to Rs. 7 crores for Regal Loan Transaction, failure of Mr. Vikram Bakshi to spend substantially all of his business time in the performance of his obligations under JV Agreement and Operating License A....
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....circumstances. The allegation with regard to the decision of not selling the Basant Lok property have also been controverted being not oppressive at all. The Respondents also denied that the termination of the JV Agreement is oppressive. 69. The Respondents have also highlighted the conduct of Mr. Vikram Bakshi and Mrs. Bakshi (Respondent No. 10) which disentitled them for obtaining any equitable relief. The examples have been quoted where their actions have caused detriment to the interest of the Company. They have gone to the extent of alleging that winding up notice was issued to the Connaught Plaza at the instance of Mr. Vikram Bakshi and his wife. Respondents have also denied the allegation that the JV Agreement between the parties was in the nature of a partnership. Various paragraphs of the joint venture Agreement have been quoted to highlight the aforesaid issue and they have urged for the dismissal of the petition by stating that Petitioners were not entitled to any relief. RIVAL SUBMISSIONS A. On behalf of the Petitioners the following arguments have been advanced (1) The cessation of Mr. Vikram Bakshi as a sole Managing Director is consequence of mala f....
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....dia and McDonald Corporation, USA has resorted to unlawful publication of public notice harming the reputation of the Petitioners and further sending of emails to suppliers. (8) There are a number of events subsequent to the filing of the Company Petition which further elaborate the allegations of oppression and unfair treatment unleashed on the petitioners. In that regard reliance has been placed on the judgment of the Hon'ble Supreme Court in the case of Needel Industries (India) Ltd. (supra) and Pasupulati Venkateswarlu (supra). (9) The Petitioners have been oppressed on account of refusal to grant approval for sale of Basant Lok property. The termination of joint venture is another instance of oppression specifically when status quo order has been operating. (10) Learned counsel has then made brief reference to other acts of oppression like Respondent No. 8 biased acts in conjunction with Mc Donald India and Respondent Nos. 3 to 5, illegal attempt to interfere with the functions of the Company by Ms. Aysel Melby (Respondent No. 4). During the course of argument on behalf of the Petitioner reliance has also been placed on various judgments viz., (a) Needle Industrie....
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....e renewed for further term of two years in accordance with the terms of the JV Agreement as amended from time to time. Mr. Vikram Bakshi having not been re-appointed as the managing director of the Company filed the instant petition with Bakshi Holdings Private Limited on 09.09.2013. Their principal grievance is that Mr. Bakshi was not re-elected as managing director of the Company and the series of allegations pertains to the year commencing from 2007 onwards. The call option exercised by McDonald India on 16.08.2013 pursuant to para 32 of the JV Agreement, has also been challenged by the petitioner but the same is consequential to and dependent upon Mr. Bakshi suffering the termination of his relationship as managing director of the company. The petitioner has sought restoration of status quo ante as existed on 16.07.2013 to enable him to continue as managing director of the company. The Argument seems to be to procure an order of specific performance of JV Agreement to continue as the managing director which is a salary based post and it would amount to asking this Tribunal to create a fresh employment agreement which is wholly impermissible in law. In that regard reference has ....
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....the Company petition which specifically says that the provisions of the JV Agreement have not been incorporated into the articles of the Company. Even the proper interpretation of Article 35 would not oblige the Board of Directors to appoint Mr. Bakshi as the managing director because it maintains in the first paragraph of Article 35 the power to appoint one of the member as the managing director. The Board may exercise its powers but it is not obliged to exercise the power in favour of Mr. Bakshi alone. The second paragraph deals with the post appointment stage and his power as the managing director. According to the learned counsel if the interpretation advanced on behalf of the petitioners is accepted then it would render the second paragraph wholly destructive of the first paragraph. Therefore, in such a situation and according to the principles of interpretation approved by the Hon'ble Supreme Court in the case of Hartford Fire Insurance Co. Ltd. (supra),it would become wholly destructive of the first paragraph and the first paragraph therefore, must prevail over the second. It has also been submitted that the petitioner has not been removed as the managing director but hi....
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....he re-election of Mr. Bakshi as the managing director of 'Connaught Plaza' is neither absolute nor unconditional. Thus, Paragraph 7(e) itself contemplates that Mr. Bakshi may not be the managing director of the Company at all times, but only "for so long as" he complies with the conditions prescribed therein. The respondents have also placed reliance on the averments made in paragraph 7.21 alleging that the appointment of Mr. Bakshi and his continuation as the managing director of the Company was paramount as it is interlinked with the continuation of the joint venture between the petitioners and McDonald's India. According to the learned counsel all these factors are contractual in nature and not in the realm of enforcement through the process of section 397 read with section 402 of the Companies Act, 1956. It has further been submitted that the resolution dated 05.09.2013 of the board of directors of Bakshi Holdings (Pg. 169, Company Petition [Vol.-1]), on the basis of which the Company Petition has been filed on behalf of Petitioner No. 2, authorizes Mr. Bakshi to represent Petitioner No. 2 "in matters arising out of or pursuant to the Joint Venture Agreement dated 3....
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....ment as sought by the petitioners is not possible. In that regard, reliance has been placed on sections 14 and 41 of the Specific Relief Act, 1963. Learned counsel also placed reliance on paragraph 12 of the judgment of the Hon'ble Supreme Court rendered in the case of Indian Oil Corporation Ltd. v. Amritsar Gas Service (1991) 1 SCC 533, and the judgment rendered in the case of Rajasthan Breweries v. Stroh Brewery Co. [2000] 55 Dispute Resolution Journal 68 and paragraphs 100 to 105 of the judgment rendered in the case of Classic Motors Ltd. v. Maruti Udyog Ltd. 1997 (40) Dispute Resolution Journal 462 and has argued that the JV Agreement involves the performance of a continuous duty which this Tribunal is not equipped to supervise. In that regard, our attention has been invited to the observation made in para 58 of the judgment of the Hon'ble Supreme Court rendered in the case Her Highness Maharani Shantidevi P. Gaikwad v. Savjibai Haribai Patel [2001] 5 SCC 101. Moreover, the performance of JV Agreement is dependent on the volition of the parties, as has been observed in paragraph 38 of the judgment of the Hon'ble Supreme Court rendered in the case Rajasthan State Roa....
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....exit the Connaught Plaza by selling his entire shareholding. The offer has been recorded in the email dated 16.08.2013 sent by McDonald India to the petitioner. In that regard, our attention has been invited to page 794 of the short reply filed by the McDonald India. On this ground alone the Company Petition is liable to be dismissed. According to the learned counsel the Court is required to examine the conduct of a party if it has approached the Court for equitable relief. Reliance has been placed on paragraphs 196-197 of the judgment of the Hon'ble Supreme Court rendered in the case of Sangramsinh P. Gaekwad (supra). (12) It was then submitted that no cause of action would survive as the JV Agreement admittedly has been terminated. The termination of the JV Agreement has not been challenged and in any case, cannot be challenged. The cause of action in the Company Petition no longer survives and the same has been rendered infructuous. (13) Learned counsel have also argued that at the meeting of the Board of Directors held on 06.08.2013 Mr. Bakshi could not be elected or re-appointed as managing director for the reasons recorded in a detailed note tabled by nominee direct....
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....lord to a restaurant, which he was actually operating through one of his company [See Section D.VI at Pages 58 to 62 of the detailed submissions]" According to the learned counsel respondents Nos. 3 & 4 acted in the best interest of the Company by refusing to vote in favour of proposed resolution and therefore, Mr. Bakshi is not a fit and proper person to be the managing director of the Company. It was in the aforesaid circumstances that McDonald India exercised the option to purchase all the shares held by the petitioners in the Company-a contractual remedy available with it under paragraph 32 of the JV Agreement. Therefore, invoking the contractual right cannot be labeled as an oppressive act, especially when Mr. Bakshi had himself expressed his desire to exit the Company. (14) Learned counsel has then entered his response to other allegations labeled by the petitioner by making following submissions:- "a. Communications exchanged between the parties to seek an amicable parting of ways cannot be termed oppressive, especially when Petitioner No. 1 was willing to exit, but at a highly exaggerated price [See Section E.I at Pages 66 of the detailed submissions....
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....he Arbitral Tribunal in the Arbitration Proceedings between the parties, cannot be subject matter of challenge in proceedings under section 397 of the Act. Without prejudice to the aforesaid, the termination of the JV Agreement, which was compelled by the acts of the Petitioners (including material defaults, the express rejection of fundamental terms of the JV Agreement, and the entire JV Agreement itself, and the likelihood of further encumbrances on the Petitioners' shares) cannot be termed oppressive [See Section G.III at Pages 77 to 79 of the detailed submissions] j. Mr. Bakshi and his wife's (Respondent No. 10) conduct before and during the pendency of the present proceedings (unilateral termination of employees, and causing the issuance of a winding-up notice upon the Company) would disentitle the Petitioners from obtaining any equitable relief in a petition under section 397 [See Section H at Pages 80 to 86 of the detailed submissions] k. The joint venture between Mr. Bakshi and McDonald India was not in the nature of a partnership - the JV Agreement states to the contrary. The true nature, composition and character of the Company would reveal the u....
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.... the respondent No. 8 would survive and he has been unnecessarily made a scapegoat in the fight of two barring groups. D. Submissions made on behalf of Respondent No. 10 (1) On her behalf learned counsel submitted that she has been working as a Senior Director, Human Resources for 'Connaught Plaza'. She focused her time and energies on hiring executives at all levels in crucial departments of the Company such as business development, real estate, facility management, equipment, construction, marketing and operations in preparation of the rapid growth of Connaught Plaza. Respondent No. 10 is wife of Mr. Vikram Bakshi, has also highlighted her various activities in Connaught Plaza in her capacity as a whole-time director since 1995. Initially she was head of Marketing Department and was responsible for the first TV commercial for McDonald's in India. She was responsible for launch of new restaurants in the market area, press releases and public relations. She states that she never claimed any salary for first four years. She then took over as a Corporate Communications Department which she has been heading. In her capacity as a Incharge of Corporate Comm....
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....er alia McDonald's, Bakshi, McDonald's Corporation (as a confirming party), the Company and Bakshi Holdings Private Limited and all other written modifications made to the Joint Venture Agreement dated 31st March 1995 from time to time including (1) the Joint Venture Amendment Agreement dated 6th March 2003 entered into between McDonald's, Bakshi, McDonald's Corporation (as a confirming party) and the Company; (2) the Joint Venture Amendment Agreement dated 27th May 2005 entered into between McDonald's, Bakshi, McDonald's Corporation (as a confirming party) and the Company; and (3) the Third Amendment to the Joint Venture Agreement dated 5th November 2012 entered into between McDonald's, Bakshi, McDonald's Corporation (as a confirming party), Bakshi Holdings Private Limited and the Company. (Amended by Special Resolution passed at the Extraordinary General Meeting held on 14th December 2012)" A perusal of the aforesaid clause would show that joint venture agreement has been defined in the Articles of Association to mean the joint venture agreement dated 31.03.1995 entered between McDonald's India Pvt. Ltd.-respondent....
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....t to the provisions of the Act and paragraph 7(d) of the Joint Venture Agreement, the Managing Director shall be paid such remuneration as may be determined by the company in general meeting from time to time." A perusal of Article 35 would show as to how a Managing Director and the Whole-time Directors are to be appointed. It then proceeds to lay down that the Board of Directors may from time to time appoint one of their members to be a Managing Director, and such numbers of whole-time Directors for such period and upon such terms as it thinks fit. However, it has been made subject to the provisions of the Companies Act, 1956 and paragraph 7 of the Joint Venture Agreement. 4. According to the joint venture agreement the Managing Director has to be entrusted with substantial powers of management subject to the superintendence, control and directions of the Board of Directors. He is also to manage day-to-day management of the respondent No. 1 Company. The remuneration according to Article 36 read with para 7(d) of the Joint Venture Agreement is to be paid as determined by the Company in general meeting from time to time. It is significant to notice that parag....
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....g the sole discretion to judge whether either failure shall have occurred, may terminate this Agreement on written notice. In the event of such termination, Partner shall receive a prompt refund of all amounts invested by him in JV Company, less fifty per cent (50%) of expenses related to his individual training program. c. Scope of Authority. As Managing Director, Partner shall manage the day-to-day operations of JV Company. In the exercise of his authority as Managing Director, Partner shall require the prior approval of the Board of Directors for any of the following actions on behalf of JV Company: (1) to enter into any contract or obligation or series of such contracts or obligations that would obligate JV Company for a term in excess of twelve (12) months or a total amount in excess of the Indian Rupee equivalent of US$100,000; (2) to enter into any borrowing or other credit arrangements which will obligate JV Company for period exceeding twelve (12) months or for a total amount in excess of the Indian Rupee equivalent of US$100,000; (3) to acquire or transfer any interest in real estate; (4) to acquire, transfer, sell, assign, mor....
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.... any or all of the above requirements at any time. The Managing Director shall also regularly inform the Board of Directors about the business activities of JV Company, including: (1) the operation of existing Restaurants; (2) development and opening of new Restaurants; and (3) the selection, removal or replacement of outside consultants for JV Company including advertising and public relations agencies, attorneys, outside accounting firms and auditors. d. Salary of Managing Director. JV Company shall pay Partner a gross annual salary as Managing Director of JV Company in an amount equal to the Indian Rupee equivalent of US$ 85,000 payable monthly in arrears. The salary shall commence as of the effective date of this Agreement and shall be reviewed annually by the Board of Directors. The Managing Director shall be entitled to a bonus and such other perquisites as may be decided by the Board of Directors. In addition, JV Company shall reimburse Partner for reasonable business expenses incurred in connection with JV Company's business. e. Re-election of Managing Director. The Managing Director shall be elected every two ....
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....ted his training program satisfactorily. His scope of authority as Managing Director was to manage the day-to-day operations of JV Company. In respect of items listed in paras 1 to 20 he was required to seek prior approval of the Board of Directors. The Managing Director was also required to inform the Board of Directors about the business activities of 'Connaught Plaza' including the operation of existing Restaurants, development and opening of new Restaurants. It also included the selection, removal or replacement of outside consultants for Connaught Plaza including advertising and public relations agencies, attorneys, outside accounting firms and auditors. The salary of the Managing Director was also fixed in accordance with clause 7(d) of the JV Agreement. Salary has also been fixed as per clause 7(d) of the JV Agreement. Clause 7(e) of the JV Agreement also provides that he was to continue as a Managing Director if he was not in breach of any condition of JV Agreement or any other agreement between the J.V. parties. What all this shows? 8. However, the most controversial clause is 7(e). According to clause 7(e), McDonald India has in essence agreed to vote for....
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....as been represented on the Board of the Company by non-executive directors. Therefore, McDonald's India's relationship with Mr. Vikram Bakshi, as joint venture partners, had to be one of complete trust and utmost confidence. Over the last few years this relationship has been severely tested because of the manner in which the business of the Company has been managed by Mr. Bakshi, his inability to give his full focus and attention to the Company, and him having shown no desire to remedy the failure and short-coming repeatedly brought to his attention as can be seen from the illustrative list of issues highlighted hereinbelow: (i) The Company has, under Mr. Vikram Bakshi, consistently failed to develop and maintain adequate internal controls. This is based on annual reviews of the Company conducted by McDonald's Internal Audit team since the year 2007. The latest review of 25th January 2013 disclosed as many as 13 high risk control issues which could have significant operational and regulatory repercussions. Moreover, the inadequacies identified in January 2013 have remained un-remediated, in particular the failure to conduct due diligence on third....
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....pany (i.e. Vikram Bakshi and Company Private Limited ("VBCo") under the pretext of an urgent necessity in relation to a new restaurant opening, without the approval of the Board of directors of the Company or any formal documentation. Although the funds involved were recalled and repaid to the Company, it created a certain level of mistrust in Mr. Bakshi's management of the Company and his role as a trustee of the Company's property and funds. This required McDonald's to put in place limits on his ability to operate bank accounts of the Company which has led to certain operational inefficiencies in the system that could well have been avoided, but cannot be, as McDonald's trust in Mr. Bakshi's managerial and financial credibility has been compromised. (iv) Mr. Bakshi has, during his tenure as the Managing Director and especially over the last few years, been increasingly focusing his energies in developing his other businesses, including businesses connected directly or indirectly with the food, restaurant and hospitality sectors, which compete with the business of the Company. Further, he is also directly or indirectly involved in several companies own....
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....o approximately USD 32,000,000/- (United States Dollars Thirty Two Million) in the share capital of the Company without any return. While on the one hand absence of any return on its investment is proving to be onerous and difficult to explain to the shareholders of McDonalds Corporation, a publicly held corporation in the United States of America, on the other, the Company is at a juncture where it should be poised for growth which will necessitate further investments by the shareholders. In this scenario it is essential that the Company be led by a managing director who is able to devote his full attention to the Company. Moreover, the managing director of a company must command the implicit faith and trust of the company and its shareholders. Further, Mr. Bakshi holds directorship in about 25 other companies and is a partner in 3 partnership firms. This signifies that despite being responsible for carrying out the day-to-day management of the Company as Managing Director, Mr. Bakshi has voluntarily assumed the additional burden of attending at least 100 board meetings each year, effectively reducing the time and attention he can devote to the Compan....
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....es or subsidiaries. 10. A perusal of the note shows that there are allegations leveled against Mr. Vikram Bakshi. He has replied each allegation in his detailed reply/letter dated 03.09.2013 (Annexure P-35). The reply was sent to Mr. Robert Dale and Ms. Ayesel Melbye, who are the nominee directors. It runs into 30 pages therefore, we would extract only few paras in this judgment which are relevant and also directly relates to four conditions specified in clause 7 (e) read with Article 35 of the Articles of Association. 11. There is no controversy that petitioners have maintained 50% shareholding in the 'Connaught Plaza'. Secondly it has also not been doubted that Mr. Vikram Bakshi has always resided in the National Capital Region of Delhi. He alongwith his wife have been managing the affairs of Connaught Plaza since 1995 is also a fact which has remained undisputed. 12. The allegations pitched against Mr. Vikram Bakshi pertains to spending substantially his business time in performance of his obligations under the JV agreement, discharge of his duties as Managing Director and thereby violating conditions postulated in the JV agreement. A bare perusal of the reply s....
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.... (vi) Email dated 26 June 2013 from Mr. Dave Hoffmann of Mc Donald Corporation U.S.A. to Mr. Vikram Bakshi (Company Petition, Annexure P-40 (Colly), p.717) wherein he congratulated him on being one of the first Asian countries to launch the WOS. (vii) Email dated 3 July 2013 from Respondent No. 3 (nominee director of Mc Donald India) to Mr. Vikram Bakshi stating "we are available during the week of August 5th and could plan the meeting between the 5-7th of August. I know the financials wouldn't be ready for Board approval by this date but we could do that in connection with Phase II. aside from that there are several other subjects, including financing for growth that will be in the 3-1-Q plan that we should discuss in the Board Meeting." This clearly shows that the Mr. Vikram Bakshi and the Respondents continued to be together and strived towards bringing about the growth of the Company (Company Petition, Annexure P-43 (Colly), P.724). (viii) Email dated 29 July 2013 from Respondent No. 3 (nominee director of Mc Donald India) to Mr. Vikram Bakshi stating "How are you? Looking forward to the visit next week. The purpose of our meeting would be discuss the....
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....shi as Managing Director of the Company were duly approved by Respondent No. 9 (representative of Respondent No.5) and Respondent No. 5. d. Thereafter, on 25 July 2013, after obtaining approval from Respondent No. 9 the above mentioned agenda, draft MD Agreement was circulated along with the notice of Board Meeting to be held on 6 August 2013 to all the directors of the Company (Company Petition, Annexure P-33, pp. 501-531; Convenience File Vol. III. pp. 25-26)." 14. It is also evident that at the Board Meeting of McDonald India-respondent No. 2 held a day before on 05.08.2013 it was decided not to re-elect Mr. Vikram Bakshi as Managing Director and surprisingly it was also decided to exercise call option with respect to petitioners' share by invoking clause 32 of JV agreement. A bare perusal of the resolution dated 05.08.2013 disclosed by McDonald India by virtue of order passed by the then Company Law Board shows that there were no allegations made and there could not be any reason for such a decision. The note appears to be a supplement act of two nominee directors. It is not understood how the note against Mr. Bakshi was presented in the meeting of Board of Dire....
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....60) for which Mr. Vikram Bakshi and his wife-Respondent No. 10 had to approach this Hon'ble Board and pay fines from their own pocket in order to compound the offence of Respondent No. 4. It is pertinent to submit herein that the Respondent No. 5 chose to remain quiet and did not take note or any action against such a regulatory breach pointed out by the Statutory Auditor by its employee despite treating it as a grave enough cause not to re-elect Mr. Vikram Bakshi. Such double standards and inaction on part of McDonald Corporation U.S.A. are also oppressive on the Petitioners. 16. In respect of loan transaction styled as 'Regal Loan Transaction' involving seven million dollars no material benefit could be derived by the respondents by banking upon the allegations. First the transaction is stale and has lost its significance as it happened in 2007. Then it was duly ratified in the meeting of the Board of Director of 'Connaught Plaza' held on 17.04.2008. The petitioners have rightly placed reliance in a tabulated form drawn date wise which is as under:- DATE PARTICULARS 14 November 2007 Mr. Sanjay Sareen, the then CFO, sent a write up to Ms. Ayesel ....
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.....13-13B). 21 November 2007 Vikram Bakshi & Co. sought to find out from 'Connaught Plaza' the property documents that Company would like to keep as a collateral security for the loan, in the event that it was sanctioned by the Company. (Additional Documents Vol I, pp.14-14A). 22 November 2007 Ms. Melbye-Respondent No. 4 in an email to Sanjay Sareen informed that Dave Garland has taken note of the proposal, but that there was no reply from him yet. (Additional Documents Vol I, pp. 9,12A-12B) 22 November 2007 The 'Connaught Plaza' signed a Memorandum of Understanding ("MoU") with Vikram Bakshi & Co. for granting a loan of Rs. 7 crores to it. Clause 6 of the MoU stated that in the event of non-receipt of approval from Mc Donald Corporation U.S.A. (Respondent No. 5) for sanctioning the loan amount, the loan amount would be returned with interest within two weeks from the date of request. (Additional Documents Vol I, pp.14A-14C). 22 November 2007 The 'Connaught Plaza' issued three pay orders of Rs. 1.65 crores each towards loan of Rs. 4.95 crores (first tranche of the total loan amount of Rs. 7 crores) as requested for by VB & Co. in its le....
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....Co. The letter specifically stated that the pay orders would not be handed over to the party till the proposal for providing the service area in Regal had been approved by McDonald Corporation-Respondent No. 5. (Additional Documents Vol I, p.20) 5 December 2007 Pursuant to the letter above, the Company issued a cheque of Rs. 2 crores (second tranche of the total loan amount of Rs. 7 crores) as requested for by VB & Co. The letter also stated that in the event of non-receipt of approval from McDonald Corporation Respondent No. 5 for sanctioning the loan amount, the loan amount would be returned with interest within two weeks from the date of request of the Company. (Additional Documents Vol I, p.19) 6 December 2007 Alok Arora confirmed to Ms. Ayesel Melbye -Respondent No. 4 that the Company had received the property documents for the collateral security for Regal loan. He requested for a copy of the security agreement so that it could be executed. Alok Arora reminded Respondent No. 4 about the security agreement on 19 December 2007. (Additional Documents Vol I, p.24) 8 January 2008 VB & Co. requested the Company for a loan of Rs. 5 lakhs (third tranche of the total....
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....prime downtown property in Regal (CP) and that he only acted in the best interests of the Company. In fact, Mr. Dave Garland, CFO, APMEA Region of Respondent No. 5 also acknowledged that the soundness of the location of McDonald's restaurant was not in doubt. (Company Petition, Annexure P-36 (Colly) Vol. Ill, pp.568-710 at p.703. 18 August 2009 Report of Grant Thornton on the Regal loan transaction concluded that the transaction was not only commercially viable but also financially favourable for the Company (Annexure P-24 of the Rejoinder dated 1 October 2013 to R2's Reply, pp 623-643, at p. 633. 17. A perusal of the list of events establishes beyond doubt that the proposal for loan amount of Rs. 7 crores was for the benefit of 'Connaught Plaza'. It was routed through Ms. Ayesel Melbye-respondent No. 4 who duly acknowledged it. The proposal disclosed a site to open a McDonald Restaurant at Regal in Connaught Plaza as it was second fastest growing shopping destination of the world. The CEO/F&A department of Connaught Plaza sent entire lay out of the second floor terrace of Regal building to Ms. Ayesel Melbye. 18. Mr. Vikram Bakshi & Co. Pvt. Lt....
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....e various board meetings of Connaught Plaza. (b) McDonald's India, pursuant to the Joint Venture Agreement as amended from time to time and the Articles of Association ("Articles") of the Connaught Plaza had agreed to "promptly cause the nomination and election of Partner as the sole Managing Director of the JV Company". The JV Agreement refers to Mr. Bakshi as "Partner". (c) The scheme of Connaught Plaza is repugnant to the concept of a board managed company. It is the Managing Director/Partner i.e. me - Mr. Vikram Bakshi, who is entrusted with day-to-day operations of Connaught Plaza. There are only certain matters which are specified in clause 7 (c) of the JV Agreement, in relation to which, he is required to seek prior approval of the Board of Directors. All other matters are within his express authority as per the JV Agreement and the Articles of the JV Company. (d) There is no reversionary or residual powers to assume the authorities, which are conferred by the JV Agreement and the Articles on me. The power of appointment and/or re-election is an obligation of the shareholders as is evident from clause 7 of the JV Agreement read with Article 35 ....
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....ompany's interest is paramount. It cannot be compromised even if one shareholder has any personal motive to cause the exit of another shareholder or group of shareholders. McDonald's entered into the Joint Venture Agreement dated 31 March 1995 with me only after being fully satisfied that I had requisite background, competence, expertise in launching and establishing McDonald's brand in India. McDonald's also has been fully aware about my other businesses since inception and has been updated of the same from time to time. Despite that McDonald's agreed to elect and re-elect me as the sole Managing Director of the JV Company since 1995, which is clearly evident from the basic nature of the JV Agreement. (i) Mr. Bakshi rightly claims that during his tenure as Managing Director, the business of Connaught Plaza has seen good growth both in sales & profitability in the North & East-India Region, which is evident from the fact that his region was ranked 3rd in McOpCo margin in 2009 and 2011, 2nd in 2010 and 5th in 2012, and has consistently out performed the West & South-India Region, which was ranked No. 10 in 2009 and 2011, No. 9 in 2010 and ....
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.... the auditors of M/s Grant Thornton. In that regard detail averments are also noticed in para 25 which again are acceptable. We are persuaded to take the view that the non-voting in favour of Mr. Vikram Bakshi was based on extraneous consideration causing great prejudice the petitioners. It is also against the interests of the 'Connaught Plaza'. 21. It is also required to be borne in mind that it is not simple non-voting to re-elect Mr. Vikram Bakshi as Managing Director. The consequences are far reaching as it would trigger the action contemplated by clause 26 read with clause 32 of the JV agreement dated 31.03.1995 (Annexure P/2). We are relying upon those two clauses to show malafide. According to the aforesaid clauses if Mr. Vikram Bakshi (described as partner) fails to continue as Managing Director then 50% shareholding of petitioners is to become saleable at the fair market value/purchase price according to the formula given in clause 26 therefore, the note presented by respondent Nos. 3 & 4, the nominee directors in the meeting dated 06.08.2013 was malicious as none of the charges/allegations have substance. In view of the aforesaid facts we are of the considered ....
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....n such application. Both the aforesaid provisions are set out below for facility of reference:- "Section 399. Right to apply under sections 397 and 398.- (1) The following members of a company shall have the right to apply under section 397 or 398:- (a) in the case of a company having a share capital, not less than one hundred members of the company or not less than one-tenth of the total number of its members, whichever is less or any members or members holding not less than one-tenth of the issued share capital of the company, provided that the applicant or applicants have paid all calls and other sums due on their shares; (b) in the case of a company not having a share capital, not less than one-fifth of the total number of its members. Section 402. Powers of [Tribunal] on application under section 397 or 398.- Without prejudice to the generality of the powers of the [Tribunal] under section 397 or 398, any order under either section may provide for- (a) the regulation of the conduct of the company' s affairs in future; (b) the purchase of the shares or interests of any members of the company by other members ....
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....ecorded our satisfaction that the affairs of Connaught Plaza have been conducted in a manner oppressive to the petitioners as recorded in preceding paras. The finding which we have recorded in the preceding paras do not springs from inter-se dispute of the Directors but goes to the roots of proprietary rights of the petitioners as shareholders. According to clause 32 of the JV Agreement McDonald India has been given the option to purchase the shares of the petitioners at a price determined in accordance with para 26 if Mr. Vikram Bakshi suffers the termination of his relationship as a Managing Director of the JV Company. Therefore, it is not a simple case of inter-se dispute between the Directors. The situation created by the non-voting by respondent Nos. 3 & 4 (Mr. Robert Dale Larson & Ms. Ayesel Melbye) has resulted in grave set back to the interests of Connaught Plaza and that of the petitioners as has already been noticed in the preceding paras. Once the aforesaid findings are recorded then the jurisdiction of this Tribunal to invoke sections 397, 398 and 402 would be unquestionable. A Division Bench of Hon'ble Madras High Court in the case of V.M. Rao v. Rajeswari Ramakris....
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....where a specific reference has been made to Articles 35 & 36 for reading it with paragraph 7 of the JV Agreement. A close examination of averments made in paras 8.3, 8.5, 8.6, 8.7 and 8.12 of the petition would patently show that the petitioners have asserted incorporation of clause 7 of the JV Agreement in the Articles by repeatedly referring it with Articles 35 and 36. It would be profitable to read paras 8.7, 8.8, 8.11 and 8.12, which are as under: "8.7. It is submitted that there is no reversionary powers on the Board of Directors assume the authorities, which are conferred by the JV Agreement and the Articles on Petitioner No. 1. The power of appointment and/or re-election is an obligation of the shareholders as is evident from clause 7 of the JV Agreement and Article 35 of the Articles, which incorporates clause 7 of the JV Agreement by reference. Thus, the duty to cause the nomination and/or election is the continuing and a prompt obligation of McDonald's. There is duty on the shareholders to continuously re-elect the Managing Director every two (2) years. The duty is to vote for the re-election of the Petitioner No. 1 as the Managing Director. &n....
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....6 not only reference to para 7 of JV Agreement has been made, it goes further to say that the Managing Director is to be elected subject to the provisions of Para 7 of the J.V. Agreement and to be entrusted with substantial power of management subject to the superintendent, control and direction of the Board; and he is to manage the day-to-day operation of the Connaught Plaza. 30. The other argument that Article 35 only incorporates a part of para 7 of the J.V. Agreement is completely divorced from the settled principles of construction. A contract has to be read as a whole keeping in mind the nature and purpose of the business. The court must see the relationship between the words, sentences, clauses, chapters and the whole document. No contract condition or a clause should be read in isolation. The faith, trust, fiduciary relationship and understanding between the parties just cannot be overlooked before interpreting such private commercial document as the Articles of Association and J.V. Agreement. In that regard, we draw support from the observations made by Hon'ble Bombay High Court in the case of Unity Realty and Developers' Ltd. v. B W Highways Star (P.) Ltd. 2010....
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.... the remuneration of the managing Director. In pursuance of the aforesaid Articles 35 & 36, the parties have appointed Mr. Vikram Bakshi as the Managing Director from the inception upto the year 2013. In other words, the provisions of Articles 35 & 36 read with para 7 of the Joint Venture Agreement have been acted upon for the last more than 17 years. It is well settled that if the parties have understood the contents of a contract/document by acting upon it in particular manner, then it is not possible to accept any contrary interpretation or proposition. 32. On the issue of interpretation, it was suggested that paragraph 7 in Article 35 should be confined only to the second part of Article 35 which deal with entrustment of substantial power of management. However, such an interpretation would not be possible because in the definition clause, JVA has been defined to mean all clauses including amendment from time to time upto 2012. Moreover, the translation of intentions of the parties in practice from 1995 to 2013 cannot be brushed aside by adopting an interpretation which would be contrary to the understanding of the parties of the whole contract to justify one sole deviation.....
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....de by Mr. Vikram Bakshi. Accordingly, he has been found 'not guilty of professional or any other misconduct'. It is appropriate to mention that Mr. Vikram Bakshi has labelled various allegations against Mr. Devinder Jain-respondent No. 8 alleging that respondent No. 8 had filed Form-32 on 27.08.2013 without any copy of signed minutes of meeting. Accordingly, we take the order dated 08.04.2017 on record as passed by The Institute of Company Secretaries of India without making any further observation. It shall not however acts to the prejudice of any of Mr. Vikram Bakshi. 37. Likewise, another application has been filed by one Mr. Deepak Khosia for intervention with a prayer to process against Mr. Vikram Bakshi under section 340 of the Criminal Procedure Code for prosecution of the petitioner No. 1. 38. We have heard Mr. Khosla at a considerable length who has urged that Mr. Vikram Bakshi is liable to be prosecuted. 39. Having heard the learned counsel we find that the allegations of perjury at the instance of third party cannot be gone into. There is no findings of perjury at this stage. Accordingly, we do not find any merit to allow the application of the intervene....