TaxTMI 
TaxTMI 
2017 (7) TMI 1092
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....ng' 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 31.3.1995. It was promoted by Petitioner No. 1....
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.... 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 lacs seventy three thousand and twenty one) cumula....
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....39;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 giving any effect or further effect to Form 32 filed with regard to the cession of the Managing Directorship of the Petitioner No. 1; v. direc....
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....#39; 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/quick service restaurant. A key requirement for such venture was to identify prime locations. One of the crucial eligibility criteria for a prospective joint venture partner laid down in the advertisement was to have experience in the f....
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....n, 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 under the brand name 'McDonald' in respect of restaurant situated at Vasant Lok, Green Park & GK II at New Delhi. Likewise, similar agreements from time to time were executed between 1997 to 2013 in respect of other restaurants. At the ....
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.... 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 Advanced Operations Course). The training program may also include instruction concerning related areas including, by way of example, management accounting, purchasing, construction, marketing and equipment. McDonald's shall design and conduct the training program. JV Company shall bear re....
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....staurants 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 or technical assistance agreement on behalf of JV Company; (15) to initiate any transactions involving the issuance or redemption of shares in JV Company, changes in the capital structure of JV Company or an increase or decrease of the capital of JV Company; (16) to declare a dividend; (17) to enter into any transaction which may constitute a conflict of interest (as described in Paragraph 2....
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....bsp;"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 (2) forty per cent (40%) of JV Company's after-tax net income (or loss) for the twelve (12) months preceding the twelve month period specified in sub-paragraph (1) above. provided, however that if JV Company shall have been existing for less than twenty-four (24) months, JV Company Cash Flow shall equal JV Company's after-tax income (or loss) for the actual number of months JV Company shall have been existing, but shall not exceed the total after-tax Income (or loss) for the twelve (12) immediately preceding months. In all cases, JV....
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....#39;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's death or incapacity, Paragraph 29(d) shall govern; or (c) upon expiration or termination of this Agreement.' 14. In pursuance of the JVA, the 'Connaught Plaza' was incorporated on 26.09.1995. A copy of articles of association at the time of incorporation has been placed on record (P/15) which has been amended from time to time as has already been revealed in the preceding para. 15. For the purposes of showing that the petitioner is being subjected to different treatment than the party to a similar joint venture agreement for west and south India region, averments have been made in para 7.15, 7.16 and 7.17, the same ....
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.... 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 shareholding. Mr. Vikram Bakshi since its inception is a Managing Director. He has laid firmer foundation of 'Connaught Plaza' and has been successfully carrying out its day-to-day operations. The prior approval by the Board of Directors is required only for specified items mentioned in clause 7(c) of the JV Agreement. 19. From the first meeting it was resolved that Mr. Vikram Bakshi would be appointed as the Managing Director for a period of two years and he has remained as such at all material times without interruption. His appointment as Managing Director was also approved in an extraordinary meeting of the General Body of the shareholders on 23.08.1995. Theref....
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....i 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, 13, Tolstoy Marg, New Delhi has also been provided free of cost to 'Connaught Plaza' where it runs its registered office. He has obtained license in his personal name for operating the first three quick service restaurant (QSR) in India along with the operating license agreement entered into between the 'Connaught Plaza' and Mc Donald's India. He has therefore taken the entire burden of running the business of the 'Connaught Plaza' in the assigned territory of India. The rates at which the properties were made available to 'Connaught Plaza' were lower than the market rates. He claims to have taken steps to ensure that the beef tallow crisis which erupted into a major controversy relating to McDonald product did not prejudicially affect the business of the Company in India and that criminal cases instituted ....
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.... 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 of Hindus all over the world. Petitioner No. 1 fearlessly protected the brand and stood resolute against threats of physical violence, public protests and vandalism. Petitioner No. 1 ensured that the faith, trust and interest of McDonald's Corporation in India remained unaffected. As a matter of fact, no one from the US operation sent any advance warning against the impending problem nor did anyone from McDonald's Corporation, visited India during this period. A copy of the power point presentation detailing the beef crisis and crisis action plan is annexed (Annexure - P21). h. Petitioner No. I has incurred personal liabilities upon himself and initiated/defended several legal proceedings to protect the interest of the Company and ensured that brand McDonald's remain unblemished. On 12 August, 2007, an explosion rocked the first McDonald's restaurant in Kolkata. The life....
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....9;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). The well known Business-World Magazine also awarded McDonald's India with the 'Most Respected Company' Award in the Food Services Sector for four years (2003-2007). It ranked at 13th position amongst '100 Top Retailers in India' whereas the competitors like Pizza Hut and KFC were at ranked 34th and 39th. It ranked No. 3 in the North and East-India region. In comparison, the West & South-India region rank 10th in 2009 to 2011, No. 9 in 2010 and No. 11 in 2012 (P/26). 23. The Mr. Vikram Bakshi has further claimed that while discharging his responsibilities as Managing Director of the Company, he has single handedly managed the numerous functions which are primarily responsible for the present sound position of the Company. In sub-paras of para 7 following averments have been made: 7.42 Mr. Vikram Bakshi and the other whole-time nominee director of the Petitioners on the board of the Company have manage....
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....0 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. Vikram Bakshi after being 'hand-picked" by the Mc Donald India and Mc Donald Corporation as their 'partner' in India, has undergone extensive training at various locations in which Mc Donald Corporation carries on business operations. The Petitioners in particular the Mr. Bakshi have, at all material times, used their experience and knowledge for the advancement and 7.46 improvement of the business and business prospects of the Company in India. 24. The Petitioners have further made allegations of mala fide attempts to oust him from the Company at a crucial time when the struggle of 15 years has started showing it as a profitable venture. The Petitioners have asserted that at the time of joint venture Mc Donald's Corporation U.S.A. through its senior management had shared the business plan and structure with Mr. Vikram Bakshi. He was intimated that the joint venture partnership being a mass market business model was to run a loss for first 1....
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....onald'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 of the entire Company and the individual interest. He informed Mc Donald's Corporation U.S.A. that the time frame given to him for determining his interest in the Company is not adequate and he would be in a better position to provide his expectations by 15.02.2009 (P/31). 25. The Petitioners at their own cost, undertook a valuation exercise of the 'Connaught Plaza' by engaging a well reputed international Accounting Firm M/s Grant Thornton, which has submitted its valuation report (P/32).According to the report submitted by Grant Thornton the equity value arrived at is US$ 200 million and 50% of the same would be US$ 100 million. A letter to this effect was sent by Mr. Vikram Bakshi to Mr. Peter Rodwell-Respondent No. 7 on 17.03.2009. Thereafter Mc Donald's Corporation U.S.A. attended a presentation at New Delhi on 03.07.2009 given by Grant Thornton explaining the methodology of the valuation. After the presentation no further steps were taken by Mc Dona....
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....rector. 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 India and Mc Donald's Corporation U.S.A. ACTS OF OPPRESSION AND MISMANAGEMENT 27. Petitioners have alleged that Mc Donald India and Mc Donald's Corporation U.S.A. have committed various acts of oppression and mismanagement. The petitioners have listed under various which are as under: (1) Controversy concerning appointment of Mr. Vikram Bakshi as Managing Director of 'Connaught Plaza'. Mala fides in cessation of Mr. Vikram Bakshi as Sole Managing Director. a. In terms of the JV Agreement, there is a positive obligation on Mc Donald India to re-elect Mr. Vikram Bakshi as the Managing Director of the Company (Para 8.8, Company Petition, p. 36). b. His last appointment as Managing Director of the Company was on 16 September 2011 at the Company's Annual General Meeting for a period of two years (Company Petition, Annexure P-17, p. 296). This clearly shows that the Respondents had no grievance with regard to the management of the Company by Mr. Vikram Ba....
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....ny 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 terms and conditions as hereinafter appearing pursuant to Article 35 of the Articles of Association of the Company and the JV Agreement and Mr. Bakshi has accepted his re-appointment as the Managing Director of the Company on such terms and conditions. Clause G of the MD Agreement allows Mr. Bakshi to sub-delegate any of his powers, except the matters enumerated therein; Clause K states that if the Agreement is not terminated, it shall be renewed; In such circumstances, Mc Donald India was bound to exercise its voting rights through its nominees at the Board Meeting and by itself at General Meeting of the Company to ensure election/re-election of Mr. Vikram Bakshi as the MD of the Company.' 29. Further, the aforestated facts give rise to a justifiable and legitimate expectation that the Mr. Vikram Bakshi, having successfully managed the Company for 18 years would remain the Managing Director for the entire term of the JV period, and therefore be promptly re-elected by Mc Donald India and its nominee directors i.e. the Responde....
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....erted that from the abovementioned agenda it is clear that, as late as 25 July 2013, it was contemplated that the Mr. Vikram Bakshi would continue to be the MD of Connaught Plaza, and the agenda was approved by the Respondents without any objection as is evident from the above mentioned correspondence. 32. According to the petitioners contention of Mc Donald India is false when it asserts that Managing Directorship of Mr. Vikram Bakshi stood terminated on 17th July 2013, because this is inconsistent with the conduct of Respondents after 17th July 2013 (when the Managing Director Agreement allegedly expired). 33. It is stated that after 17 July 2013, the Respondents marked several emails to the Mr. Vikram Bakshi in his capacity as the MD of the Company, which are enlisted as follows: (a) Email issued by representative of Mc Donald Corporation U.S.A. dated 18 July 2013 addressed to all Managing Directors of APMEA Region of Respondent No. 5 (Rejoinder to Short Reply filed by Respondent No. 8, Annexure P-2 (Colly) p. 26); (b) Email issued by representative of Mc Donald Corporation U.S.A. dated 18 July 2013 addressed to all Managing Directors of APMEA Region of Respondent No. 5 (Annex....
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....nly on 29 January 2014 pursuant to the order of the erstwhile Company Law Board to file the same. The said Board Resolution envisages a potential dispute with Mr. Vikram Bakshi, as it authorizes Respondent Nos. 3 (Robert Dale) and 4 (Ms. Melbye) to 'defend or initiate legal proceedings' for or against Mr. Vikram Bakshi. It also shows that the oppressive measure was mala fide and in bad faith. It was an 'ambush operation' which was pre-planned and executed by the non-executive nominee directors of Mc Donald India with the sole purpose of grabbing the shareholding of the petitioners for a pittance. 38. This also clearly shows that the Respondent Mc Donald India and its nominees were aware that their decision not to vote in favour of re-election of Mr. Vikram Bakshi was unfair, oppressive and would lead to litigation. 39. At the Board Meeting of the 'Connaught Plaza' held on 6 August 2013, Respondent Nos. 3 and 4 handed over a note dated 6 August 2013 ("Note") containing some purported grounds for non-re-election of Mr. Vikram Bakshi as the Managing Director. It is pertinent to mention that the Respondents for the first time raised allegations against him by ....
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....ntire business time to the office of the Managing Director of the Company. 44. It has also been alleged that he is promoting his own business by putting advertisement in McDonald's Restaurants without authorization. Even this allegation has been refuted as the 'Connaught Plaza' had ranked as one of the top performers in the Greater Asia Region and has consistently been performing better than the West & South-India Region (Para 48 of Reply dated 3 September 2013; Company Petition, p. 561). The Petitioner has further explained that biometric and other electronic records of attendance would show that Petitioner No. 1's business time has been invested in the development and growth of the Company which is reflected in the performance of the Company (Para 50 of the letter dated 03.09.2013; Company Petition, Annexure P-39 at p. 562). He has been consistently filing Form 24(AA) every year since the inception of Company and thus, disclosing all his interests to the Board of Directors of Respondent No. 1-Company. At no stage, any objection has been raised to any of the disclosures made in Form 24AA where Mr. Bakshi's interest in other businesses were fully disclosed. (Pa....
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....titioner has again reiterated his allegation with regard to illegal and mala fide exercise of call option by Mc Donald India on 16.08.2013. In this regard details have also been furnished in paras 128 to 136 of the convenience volume. There are further allegations that pricing prescribed under paragraph 26 of the JV Agreement is contrary to Indian law. Therefore, being void it is unenforceable various legal infirmities have been pointed out to submit that the same cannot be acted upon. It has also been submitted that para 26 of the JV Agreement is contrary to regulations and directions issued under the Foreign Management Act, 1999. The Petitioner has requested this Forum not to permit such gross abuse of the process and keep the FDI norms intact by foreign/downstream investors. 50. The petitioners have further alleged that McDonald's has thwarted growth to manipulate the valuation of the shares by imposing para 26 of the JV Agreement. In order to reduce the price of the Company, McDonald's have manipulated the valuation mechanism to further their self-serving needs. All this has been done to undervalue the Company so as to purchase the Petitioners' shares at a pittance....
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....dia) Holding Ltd. [1981] 3 SCC 333. The Petitioner also made allegations concerning non-allotment of shares towards share application money already contributed by them and the refusal to grant approval for sale of Basant Lok property. It has further been highlighted that Mc Donald India filed an application under section 45 of the Arbitration and Conciliation Act, 1996 with the prayer to refer the claim of the Connaught Plaza along with the claim of Mc Donald India to arbitration. However, the aforesaid application after completion of pleadings was permitted to be withdrawn by the erstwhile Company Law Board on 30.01.2014 (Annexure-G). In other words, Mc Donald India has submitted to the exclusive jurisdiction of this Tribunal for the adjudication of all disputes raised in the Company Proceedings initiated by the Petitioners. Another application CA No. 79/2016 under section 45 was again filed which was dismissed on 17.9.2016. Even the appeal has been dismissed by NCLAT on 04.10.2016. 53. On 28.11.2013 Mc Donald India purported to terminate the JVA by issuing a notice of termination sought to invoke another call option. Such a step could not have been taken in the backdrop of Statu....
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....ions made by the National Company Law Appellate Tribunal in its order dated 04.10.2016 in C.A. (AT) No. 13/2016 that Mr. Vikram Bakshi sought relief in the Company Petition for his reinstatement as Managing Director of the Company, hence Respondents were not required to address arguments with regard to the issues which are purely contractual, arbitrable and pending consideration before the Arbitral Tribunal i.e. London Court of International Arbitration which has been initiated by Mc Donald India, (a) the validity of the termination of the joint venture agreement dated 31.03.1995 between, amongst others, the Petitioners, Respondent Nos. 2 and 5 and (b) the valuation, and purchase, of the Petitioners' shares in Respondent No. 1-Company by Respondent No. 2. 57. In view of the aforesaid the Respondents have submitted that the principal issue which falls for consideration of this Tribunal would be whether there is any obligation cast on Mc Donald India and its nominee directors to re-elect Mr. Vikram Bakshi as the Managing Director of the Company at the meeting of the Board of Directors held on 06.08.2013 as per the provisions of Article 35 of Articles of Association and other con....
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....ation of his relationship as Managing Director of JV Company than Mc Donald India (Respondent No. 2) would have the option to purchase shares of the Petitioners. It is pleaded that contrary to the Petitioners' claim that he has right to be the Managing Director of the Company by virtue of the Petitioners' shareholding in the Company, it was Mr. Vikram Bakshi's duty to serve in such a manner which would allow them to continue as shareholders in the Company. 61. Respondents have also referred to clauses (ii), (iii), (ix) and (xiii) of the prayer concerning relief(s) the claimed and have submitted that the relief has been sought for virtually continuation as the Managing Director of the Company. It has further been highlighted that as per the Petitioners' own showing they have claimed principal relief for reinstatement of Mr. Vikram Bakshi as Managing Director of the 'Connaught Plaza'. In that regard reference has been made to the reply filed to the C.A. No. 94/2013 which was preferred by Mc Donald India under section 45 of the Arbitration and Conciliation Act, 1996. 62. The Respondents have also adversely commented upon the other reliefs claimed like filing ....
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....nt No. 1-Company has incorporated various provisions of the JV Agreement which has been amended from time to time. The last two amendments were effected on 27.05.2005 and 01.11.2012 and in terms of the JV Agreement, there is positive obligation on Mc Donald India to elect Mr. Vikram Bakshi as the Managing Director of the Respondent No. 1-Company. According to the Respondents despite amendment of Articles incorporating certain provisions of the JV Agreement, the obligation on Respondent No. 2 to re-elect Mr. Vikram Bakshi as the Managing Director of the Company emerges only from JV Agreement alone which has never been incorporated in the Articles. Therefore, the issue carved out by the Respondents is whether there is any requirement in the Articles that obliged Mc Donald India and its nominee directors to re-elect Mr. Vikram Bakshi as the Managing Director of the Connaught Plaza. In that regard reliance placed by the Petitioner on Articles 35 of the Articles of Association has been controverted as wholly misconceived and erroneous. The Respondents have pleaded for interpretation by putting Article 35 in two separate and distinct parts. The first parts provide for the power of the B....
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....V Agreement and Operating License Agreement, failure to put in place adequate internal controls, breach of non-compete clause, encumbrance created on their shares in the Company and so on and so forth. There is categorical denial to the August call option exercised on 16.08.2013. The other grounds of oppression have also been controverted on account of loss of faith in the Petitioners for unauthorized withdrawal and the Mc Donald India and Mc Donald Corporation USA have attempted to achieve an amicable parting of ways between Mc Donald India and Mr. Vikram Bakshi by offering an amount significantly higher than the price which the Petitioners were entitled to. Mr. Vikram Bakshi participated in an exchange of communications and undertook a valuation exercise quoting a highly-exaggerated price at which he was willing to exit the Company. These attempts to arrive at an amicable exit of the Petitioners from the Company cannot be regarded as an act of oppression. 67. The Respondents have also controverted that imposing a freeze on borrowings, a moratorium on new restaurant development and regulating negative net worth of the Company are not acts of oppression and have elaborated the sam....
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....nsequence of mala fide intention of Mc Donald India to pressurize the Petitioner to sell out his shareholding at a throwaway price. Learned counsel has elaborated the aforesaid argument by highlighting the e-mails, correspondence and by involving even outsider making proposal to purchase. The officers of Mc Donald Corporation have made offers and then Mr. Bakshi went for valuation by a incredible firm of auditors. It is submitted that Form No. 32 was filed with the Registrar of Companies without any signed board minutes which is mandatory requirement. In that regard, reliance has been placed on various facts which have been noticed in preceding paras. (2) Article 35 of the Articles of Association read with para 7 of the joint venture agreement and various clauses of the Agreement concerning appointment of Mr. Vikram Bakshi as Managing Director, envisaged Mr. Bakshi to be a sole Managing Director at all points of time unless terminated. His term was to be renewed. In that regard submission made in the pleadings and noted in the preceding paras have been relied upon. (3) Mr. Bakshi had legitimate expectation to continue as the Managing Director in view of various facts, clauses i....
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....ngramsinh P. Gaekwad v. Shantadevi P. Gaekwad [2005] 57 SCL 476 (SC) (paras 181, 199); (c) M.S.D.C. Radharamanan v. M.S.D. Chandrasekara Raja [2008] 83 SCL 451 (SC)(paras 37-43); (d) Krishan Lal Ahuja v. Suresh Kumar Ahuja [1983] 53 Comp. Cas. 60 (Delhi); (e) Chander Krishan Gupta v. Pannalal Girdhari Lal (P.) Ltd. [1984] 55 Comp. Cas. 702 (Delhi); and (f) Caparo India Ltd. (U.K.) v. Caparo Maruti Ltd. [2007] 75 SCL 287 (Delhi) (paras 37-40). B. On behalf of Respondents Nos. 2 to 4 the following arguments were advanced (1) It has first been submitted that on account of clarification given by this Tribunal in the order dated 17.09.2016 while dismissing the application under section 45 of the Arbitration Act and in the light of the order passed by the Appellate Tribunal on 04.10.2016 the relief which is required to be considered must be confined to the prayers made in the Company petition. Therefore, the respondents were not required to address arguments with regard to the validity of the termination of the JV Agreement and valuation/purchase of petitioners' shares in the Company by McDonald India. According to the submissions made by the learned counsel the aforesaid issues ar....
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....directions have been sought for the management and administration of the Company as subsisting on 16.07.2013 and to continue as such as this Tribunal may deem fit and proper. (3) The petitioner has not claimed any relief for valuation or buy-out of the petitioners' share in the respondent Company by Mc Donald India as noticed in the order dated 17.09.2016. As no amendment has been sought by incorporating the relief concerning valuation the maintainability of the Company petition has to be determined on the basis of the prayer made in the original Company petition. Therefore, any prayer during the course of argument from the petitioner for valuation and buy-out of the petitioners' shares in the Company by McDonald India would be contrary to, and in direct conflict with, the final reliefs prayed for in the Company petition. According to the learned counsel the interim relief can only be in aid of and ancillary to a final relief in a suit or proceeding. If final relief cannot be granted then interim relief can hardly be granted. In that regard, reliance has been placed on the observation made in para 10 of the judgment of the Hon'ble Supreme Court rendered in the case of ....
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....me to an end upon the expiry of his term of two years on 17.07.2013. It is well settled that whenever the parties intended to incorporate a particular clause of the JV Agreement in the Articles of Association they have expressly provided for this by reproducing such provisions in the Articles. In that regard, a list of clauses of JV Agreement incorporated in the Articles has been placed on record (Annexure-R2). The Articles were amended in accordance with the amendment in JV Agreement in 2003, 2005, and 2012. According to the learned counsel the principles of interpretation would apply as has been adopted in the Hartford Fire Insurance Co. Ltd (supra). The view taken by Hon'ble the Supreme Court is that if in a deed an earlier clause is followed by a later clause which destroys altogether the obligation created by the earlier clause, then the later clause is to be rejected as repugnant and the earlier clause prevails. (5) It is misconception on the part of the petitioner that he was removed as a managing director. The fact of the matter is that his term expired and he was not re-elected. It is maintained that petitioner has no absolute right to continue as managing director. H....
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....". (7) It is next contended that the Petitioners make no reference to the MD Agreement in the body of the Company Petition. A copy of the MD Agreement was filed as an attachment to Form 32 annexed as Annexure P-56 to the Company Petition [Pg. 801 at 804, Company Petition [Vol.-1]). However, in the Written Submissions, the Petitioners now claim (Para. 56, Pg. 18, Petitioners' Written Submissions [Vol.-61]) that the MD Agreement "categorically provided" that "unless terminated the same would be renewed". It is also alleged (Para. 56.d, Pg. 19, Petitioners' Written Submissions [Vol.-1]) in relation to the MD Agreement that "Clause K states that if the Agreement is not terminated, it shall be renewed". The Petitioners have deliberately misrepresented Clause K of the MD Agreement [Pg. 809, Company Petition [Vol.-3]), which inter alia provided that "Unless terminated in accordance with the terms hereof, this Agreement shall be renewed for further term of two years in accordance with the terms of the JV Agreement as amended from time to time" (emphasis supplied). Thus, the renewal of the MD Agreement was dependent on Mr. Bakshi's compliance with the provisions of the JV Agree....
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.... SCC 299Another reason invoked against passing any order with regard to specific performance is loss of trust and confidence in each other. There are irreconcilable differences which exist between the parties so as to compel them to pull along together. (9) Learned counsel has then submitted that by filing Company Application No. 188/2015 the petitioners have themselves stated that the fair market value may be decided for the exit of the petitioners. (10) Learned counsel has vehemently argued that the Company Petition has been filed for a collateral purpose and the same is liable to be dismissed without hearing it on merit. According to the learned counsel the petitioner has admitted in his pleading before the Hon'ble High Court of Delhi an indebtedness aggregating to approximately Rs. 1,876 crores. A chart setting out the indebtedness of Mr. Bakshi as available on the website of the Ministry of Corporate Affairs has been placed on record as (Annexure R4). By filing the Company Petition he is trying to avoid his obligation under para 26 of the JV Agreement and under Article 11(c) of the Articles. His efforts are only to extract the maximum amount in lieu of his shareholding f....
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....from the following five allegations which clearly violates the provisions of condition precedent postulated in clause 7(e) of the JV Agreement and the same read as under:- "a. Petitioner No. 1 did not comply with 7(e)(3) of the JV Agreement as he withdrew Rs. 7 Crore from the Company (an amount almost equal to his capital contribution to the Company at the time) for the benefit of one of his companies, without the prior approval or knowledge of McDonald India and Respondent No.5. This was critical as it triggered a loss of faith and trust in Mr. Bakshi, which continued even in 2013, as acknowledged by him [See Section DII at Pages 48 to 52 of the detailed submissions] b. Mr. Bakshi did not comply with Paragraph 7(e)(3) of the JV Agreement as he failed to put in place adequate internal controls (as evidenced in internal audit reports) essential to protect Connaught Plaza, the McDonald's brand and the McDonald's System. The report of April 2013 recorded 13 high risk items which could result in prejudice to the Company [See Section D.IV at Pages 53 to 55 of the detailed submissions] c. Petitioner No. 1 did not comply with Paragraph 7(e)(1) of the JV Agreement as he faile....
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....th of the Company cannot be termed oppressive, especially when such measures resulted in achieving profitability in the Company for the first time [See Section E.ll at Pages 66 to 68 of the detailed submissions] c. Non-declaration of dividends and payment towards royalty cannot be termed oppressive, especially when non-declaration of dividends affected significantly larger shareholder like McDonald India more. Equally, it is absurd to label oppressive, payments towards royalty for use of the McDonald's brand, conveniently ignoring that the benefits received by Mr. Bakshi (of which these Respondents are aware) exceeded the Petitioner's investment in the Company. [See Section E.lll at Pages 68 to 71 of the detailed submissions] d. Differential treatment by a private party McDonald India between two private parties, in relation to whom the levels of trust and faith are starkly different, cannot be termed oppressive. Proceedings under section 397 do not fall within the ambit of writ jurisdiction, and cannot seek enforcement of fundamental rights (including Article 14 of the Constitution) [See Section E.IV at Pages 71 to 72 of the detailed submissions] e. Filing of Form 32....
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....er the powers of Mr. Bakshi and the functioning of the Company [See Section I at Pages 87 to 91 of the detailed submissions]" C. Submissions made on behalf of Respondent No. 8 On behalf of respondent No. 8 the following submissions were made:- (1) It is appropriate to mention at the outset that respondent No. 8 is a Company Secretary who has been charged with the allegation that he has uploaded Form No. 32 on the website of the Registrar of Companies which provides for discontinuation of petitioner as managing director of the Company. It has been submitted that respondent No. 8 is an impartial entity and is not interested in the present shareholders disputes nor he stands with either of the two groups as he is salaried employee. According to the learned counsel respondent No. 8 has carried out his professional duties and functions in pursuance of the authorization given to him vide Board resolution dated 05.06.2009. According to the aforesaid resolution he is empowered to act as Company Secretary and General Manager (Legal) of 'Connaught Plaza'. (2) Learned counsel has argued that in pursuance of provisions of Section 303(2) of the Companies Act, 1956 the Company Se....
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....ighlighted many other activities regarding the celebration of 5th and 10th anniversaries of McDonald's India Pvt. Ltd. She has labeled serious allegations against respondent No. 8 who was Company Secretary and General Manager (legal). III. CONCLUSION 1. We have bestowed our thoughtful consideration on the submissions made by the learned counsels for the parties. We have also perused a large number of volumes of paper books and convenience volumes. The sole question which arises for determination in the present proceeding is 'whether non-voting in favour of Mr. Vikram Bakshi for his re-election as Managing Director at the instance of nominee directors of McDonald India would amount to an act of oppression and is liable to be corrected by exercising power under section 397 read with 402 of the 1956 Act. The cognate issue is whether it is actuated by mala fides emanating from extraneous consideration. This question is significant for two reasons; (a) as per clause 32 of JV Agreement the day Mr. Vikram Bakshi is voted out as a Managing Director, the McDonald India (Respondent No. 2) becomes entitled to exercise an option to purchase the whole 50% shareholding of both the pe....
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....de to the Joint Venture Agreement dated 31.03.1995 from time to time including the Joint Venture Amendment Agreement dated 06.03.2003, 27.05.2005, 05.11.2012 & 14.12.2012. It is evident that whenever supplementary agreement was made or amendment was effected in the Joint Venture Agreement it was incorporated in the Articles of Association. What is the effect or meaning of such incorporation is to be scene in the succeeding paras. 2.1 Reference to the joint venture agreement has been made in various Articles of Association namely Articles 6, 35 & 36. 3. At this juncture it would be appropriate to notice the provisions of Articles 6, 35 & 36 which read as under:- "Article 6: The shares shall be under the control and disposal of the Board who may, subject to the provisions of the Joint Venture Agreement, allot or otherwise dispose of the same to such persons and on such terms as the Board may think fit and to give any persons any shares whether at par or at a premium and for such consideration as the Board may think fit. Bakshi and/or his nominee shall hold 50% of the issued and subscribed equity capital of the company and McDonald's and/or its nominee shall hold....
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....ce to joint venture agreement. 5. It may now be necessary to peruse the provisions of para 7 of the joint venture agreement which reads as under :- "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 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....
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....roceedings on behalf of JV Company except for matters 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 repealed by the Board of Directors; (14) to execute, amend or terminate any license or technical assistance agreement on behalf of JV Company; (15) to initiate ....
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.... is not in breach of any term of this Agreement or any other agreement between the JV Parties or their affiliates or subsidiaries." 6. It would also be profitable to know that the word 'partner' has been associated with Mr. Vikram Bakshi which is evident from the opening para of JV Agreement. "THIS AGREEMENT (the "Agreement") effective as of this 31st day of March, 1995, between McDonald's India Private Limited, an Indian company with an office at 204 Tolstoy House, 15, Tolstoy Marg, New Delhi 110011, India ("McDonald's"). Vikram Bakshi, residing at 157 Golf Links, New Delhi 110003, India ("Partner"), and McDonald's Corporation, a Delaware corporation with an office at One McDonald's Plaza, Oak Brook, Illinois 60521, U.S.A. (the "Confirming Party"). McDonald's and Partner are referred to collectively herein as "the JV Parties" and individually as "JV Party." McDonald's, Partner and the Confirming Party are referred to collectively as "the Parties" and individually as "Party". 7. A perusal of the opening sentence of para 7 under the sub-heading 'Managing Director' clearly shows that JV Parties were to promptly cause the nomination ....
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.... this agreement or any other agreement between the JV Parties or their affiliates or subsidiaries. 9. The JV Agreement was signed on 31.03.1995 and a JV Company-Connaught Plaza was incorporated on 29.06.1995 under the provisions of the Companies Act, 1956. From the date of its inception Mr. Vikram Bakshi has been the Managing Director. There is an objective criteria laid down comprising four conditions for Mr. Vikram Bakshi to must fulfil to continue as a Managing Director. It is expected from a brand of International repute to act fairly by avoiding any arbitrary, whimsical and unfair conduct. However, in the crucial meeting concerning Connaught Plaza held on 06.08.2013 the nominee directors of McDonald's India namely Mr. Robert Dale and Ms. Ayesel Melbye refused to vote in favour of Mr. Vikram Bakshi on the basis of a written note placed on record of the meeting which contains various allegations in terms of clause 7(e) of the JV Agreement. Obviously, it is alleged in terms of clause 7(e) that Mr. Vikram Bakshi failed to devote whole of his business time to 'Connaught Plaza'. It is thus evident that parties have understood the Articles of Association in those terms.....
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....ystems. There have been detailed discussions, meetings and presentations where McDonald's representatives have advised the officers, executives and management of the Company that the internal controls systems of the Company have failed to meet McDonald's systems standards and emphasized on the necessity of immediate remediation. However, as can be noted from the results of the Company's internal control assessment in the recent years under the leadership of Mr. Vikram Bakshi tabulated below, the requisite improvements have not been achieved: Year Review Type Results 2007 General Control Review (full scope) Unsatisfactory 2008 General Control Review (limited scope) Unsatisfactory 2009 Follow-up review from 2008 No overall evaluation 2010 General Control Review (limited scope) Needs improvement 2011 General Control Review (limited scope) Needs improvement 2013 General Control Review (limited scope) Unsatisfactory From a McDonald's system perspective, this represents an unacceptable level of risk to the Company's Operations on a continuing basis: (ii) There have been various instances where the statutory auditors of the Company have....
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....tion on account of funds of the Company being used by Ascot Hotel and Resorts Limited (a company directly/indirectly controlled by Mr. Bakshi) in its dealings with certain land owners and other associates of Mr. Bakshi, again without the approval of the Board of directors of the Company. In this regard, there have also been allegations of Mr. Bakshi having forged certain share transfer forms and minutes of annual general meeting of a company (Montreaux Resorts (P) Limited) in which he had invested. In addition to the above, it has recently come to our notice that to secure a loan facility of Rs. 200,000,000/- (Rupees Two Hundred Million) for the purposes of development of Savoy Outlet Mall cum Services Apartments in Manesar in terms of a Master Facility Agreement dated 11th October 2011 entered between Ascot Estates (Manesar) Private Limited (a company directly/indirectly controlled by Mr. Bakshi) and Housing Development Finance Corporation Limited, apparently Mr. Bakshi and Bakshi Holdings Private Limited ("Bakshi HoldCo") created a pledge on 51,300 equity shares held by them in the Company, despite the Company being a private limited company and there being a prohibition ....
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....contrary the instances highlighted above (which are illustrative) manifest that, Mr. Bakshi has not been spending substantially all of his business time in the performance of his obligations. He has failed to discharge his responsibilities of managing the Company in a competent and faithful manner and he has also been in breach of certain material terms of his contractual agreements with McDonald's India (his joint-venture partner) and its affiliate (s). Consequently, McDonald's India has lost all its trust, faith and confidence in Mr. Vikram Bakshi. It is therefore the decision of the nominee directors of McDonald's India, not to vote in favour of the resolution proposed in the Agenda to re-elect Mr. Vikram Bakshi as the managing director of the Company for a further term. the nominee Directors of McDonald's India Private Limited Aysel Melbye Robert Larson" 9.2 It may be recalled that Mr. Vikram Bakshi was to be re-elected as a Managing Director if he fulfilled the four conditions namely (1) he resides in the National Capital Region of Delhi and spends substantially all of his business time in the performance of his obligations assumed under the JV Agreement a....
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....scribed as a JV which clearly shows that it remained a partnership between Mr. Vikram Bakshi and the Mc Donald India (Company Petition, Annexure. P-38 (Colly), p. 713); (ii) Email dated 10 January 2013 from Mr. Dave Hoffmann of Mc Donald's Corporation U.S.A. to Mr. Vikram Bakshi (Company Petition, Annexure P-40 (Colly), p.717). It is evident from this email that as recently as January 2013, the Respondents were looking forward to stand side-by-side with Mr. Vikram Bakshi 'to realize the dream of India'. This sufficiently showed full faith in the Mr. Vikram Bakshi and their partnership; (iii) Email dated 28 January 2013 from Mr. Dave Hoffman of Mc Donald's Corporation U.S.A. to Mr. Vikram Bakshi states that "as always, appreciate your candor and transparency it's what makes us better. Working on our meeting at your HQ in the near future." (Company Petition, Annexure P-37 (Colly), p.711); (iv) Email dated 18 March 2013 from Mr. Andrew Hipsley of Mc Donald's Corporation U.S.A. to Mr. Vikram Bakshi (Company Petition, Annexure P-41, p-719) wherein he congratulated Petitioner No. 1 on the success of National Breakfast Day. (v) Email dated 22 March 2013 fro....
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....in the Articles of Association. We propose to deal with the objection later. 13. The agenda and the supporting papers for the meeting of 6.8.2013 had the approval of McDonald India and its nominee directors (Respondent Nos. 2 to 4). Even respondent No. 5 had approved the following agenda issued for the meeting of 6.8.2013. 13.1 On 22 July 2013, Respondent No. 8 the Company Secretary sent an email to Respondent No. 9 (Mr. Manish Yadav) with a draft notice along with the agenda for the Board Meeting to be held on 6 August 2013. In the above email, theRespondent No. 8 proposed to send the relevant agendas, for approval from Respondent No. 9, as under (Additional Documents Volume II, p.1) a. To reappoint Mr. Vikram Bakshi as Managing Director of the Company (Item No. 6); To consider and approve the annual revision in the remuneration of Mrs. Madhurima Bakshi, the Whole Time Director w.e.f. 1 April 2013 (Item No.6); To discuss and review the remuneration of Mr. VikramBakshi, 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 emai....
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.... the Company (Para 38 of the Letter dated 3 September 2013, being response of Mr. Vikram Bakshi to the Note; Company Petition, Annexure P-39 at p.557); (e) No objection has ever been raised by the Respondents to the Statutory Auditors Reports; (f) The GCR team in 2011 has itself stated that the Company has made substantial progress in improving the control environment and remedying the audit issues identified in previous audit (Para 41 of the Letter dated 3 September 2013; Company Petition, Annexure P-39, p-558); (g) The balance sheet from the year 2007 to 2011 do not carry any qualification in relation to non-compliance of any accounting standards or breach of FCPA/anti-bribery/conflict of interest provision (Para 43 of the Letter dated 3 September 2013; Company Petition, Annexure P-39, p.559); (h) Neither the report of statutory auditors nor the minutes of the meetings of the Board of the Connaught Plaza refer to any such allegation. Even after the last GCR Report there was no complaint on the leadership of Mr. Vikram Bakshi (Para 44 of the Letter dated 3 September 2013; Company Petition, Annexure P-39, p.560); .(i) The only issue regarding disregard to applicable laws finds ment....
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....s. Ayesel Melbye, Respondent No. 4. (Additional Documents Vol I, p.11-12,12D) 21 November 2007 Sanjay Sareen sent an email to Ms. Ayesel Melbye Respondent No. 4, inter alia, about McDonald's response to proposal on the Regal matter after Respondent No. 4 was scheduled to have a discussion with Dave Garland. (Additional Documents Vol I, pp.10,12B) 21 November 2007 Vikram Bakshi & Co. Pvt. Ltd. ("VB & Co"), requested the 'Connaught Plaza' for a loan of Rs. 4.95 crores (first tranche of the total loan amount of Rs. 7 crores) for the purpose of providing space for installation of critical equipment of Air conditioning, Generating set, Water tanks, Pumps of the McDonalds Restaurant at Regal. According to the terms of the loan, it was to be repaid on or before 31st March 2008 with an interest rate of 9% per annum or the average borrowing cost of the Company on the monthly rent basis, whichever was higher. The loan amount was requested to be issued through three pay orders of Rs. 1.65 crores each (equaling Rs. 4.95 crores) in the names of Mr. Kamal Nath Monga b) Mr. Ravinder Nath Monga and c) Mr. Vimal Nath Monga. The letter specifically stated that the pay order....
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....eral for Rs. 7 crores loan to Vikram Bakshi & Co. The above email also stated that Mr. Vikram Bakshi did not agree on the pro-rata dilution of shareholding. (Additional Documents Vol I, pp. 22-23) 29 November 2007 Deepak Sharma re-sent the email dated 28.11.2007 of Sanjay Sareen to the Company and also stated that Mr. Vikram Bakshi had informed Mr. Peter Rodwell, Respondent No. 7, that he was not comfortable with dilution of his shareholding in the 'Connaught Plaza'. Deepak Sharma urged Respondent No. 4 to arrive at a decision on the Regal transaction at the earliest. Ms. Ayesel Melbye -Respondent No. 4 confirmed receipt of this email on 30 November 2007. (Additional Documents Vol I, P-22). 3 November 2007 Alok Arora sent the draft rent agreement for the Regal property to Ms. Ayesel Melbye-Respondent No. 4 (Additional Documents Vol I, p. 21) 5 December 2007 VB & Co. requested the Company for a loan of Rs. 2 crores (20 million) (second tranche of the total loan amount of Rs. 7 crores) for the Regal property. According to the terms of the loan, it was to be repaid on or before 31st March 2008 with an interest rate of 9% per annum or the average borrowing cost of the Com....
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....ransaction. (Additional Documents Vol I, p.34-35) 10 March 2008 R1, through a letter by Alok Arora to VB & Co., sought the repayment of the loan amount of INR 7 crores along with interest within two weeks from the date of the letter. On the same day, Mr. Vikram Bakshi sent a detailed note to Dave Garland of Respondent No. 5 on the Regal transaction and asserted that the decision to grant loan was taken in the interests of the Company. (Additional Documents Vol I, p.38) 31 March 2008 VB & Co. sent a cheque of Rs. 5.80 crores to the Company, in addition to the payments made earlier, towards full and final settlement to the Regal loan amount. (Additional Documents Vol I, p.60) 4 April 2008 Alok Arora communicated to Respondent No. 4 as the receipt of repayment of loan amount from JV & Co along with interest (Additional Documents Vol I, p.32) 17 April 2008 Regal loan transaction was discussed at the Board Meeting of the Company where Peter Rodwell, Respondent No. 7 acknowledged that Mr. Vikram Bakshi had initially sought consent from the Board of Directors of the Company regarding the possibility of obtaining a loan from R1. Mr. Vikram Bakshi explained to the Board of....
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....on of the regal loan transaction and the 'Connaught Plaza' secured the use of this space practically free of cost (at the rate of Rs. 100 per month) at prime location in New Delhi for its restaurant for a period of 30 years. What could be a more beneficial act of a Managing Director for 'Connaught Plaza'? This is an act of good management and displays his vision. 19. It would now be necessary to sum up few paras of the reply of Mr. Vikram Bakshi tendering explanation to various allegations made in the note presented in the meeting dated 06.08.2013 which are as under:- (a) Mr. Vikram Bakshi completely disagreed with the contents of the Note because according to him the same were false, malicious, incorrect and were placed before the board by two (2) nominee directors, acting in breach of their fiduciary duties towards the Connaught Plaza whilst furthering the malafide intention and ulterior motive of McDonald's, of implementing a pre-determined scheme of attempting to take over Connaught Plaza in a coercive, oppressive and illegal manner contrary to law. The allegations raised in the Note are stale, unfounded and without any basis. In any event, the false and ....
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....ing non-appointment of Vikram Bakshi as Managing Director in a blatant attempt to usurp the shareholding of Vikram Bakshi and Bakshi Holdings (Pvt.) Ltd. ("BHPL") (together the "Indian Shareholders") (g) It is stated that each of the allegation made in the Note is rebuttable and it is our case that allegations have been deliberately raised to sustain a forced purchase of shares of the Indian Shareholders. Such actions of McDonalds' are clear acts of oppression and malafide behavior, as set out herein below. (h) The hollowness of any one of the several, false, stale, incorrect or waived complaints/charges/causes result in the failure of the entirety of the Note. The Note was tendered with the sole and malicious purpose of ousting the Indian Shareholders in a coercive, oppressive and illegal attempt to take over the undertaking of the Indian Company at a time when the gestation period of the business has started reaping profits due to several years of investment, both in money and my hard work, as the Managing Director for establishing a viable and profitable business in India. In order to somehow force me to sell my shares in the JV Company. McDonald's cannot prejudice t....
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....ich have been given to it at either the purchase price or on discounted or nominal or no rentals at all. He has also incurred personal liabilities upon him and have initiated/defended several legal proceedings to protect the interest of Connaught Plaza and ensured that the JV Company and brand McDonald's remains unblemished. Some of the more important instances we have already noticed these facts in paras 20, 21, 22, 23 under Part I Introduction & Facts - List of properties provided to Joint Venture. 20. These instances can be multiplied further and the safe conclusion which we have reached on the basis of material placed before us is that Mr. Vikram Bakshi alongwith his wife has given their full business time to 'Connaught Plaza' and on account of their sincere efforts 'Connaught Plaza' is running a large number of 154 restaurants. We also find that non-voting in favour of Mr. Vikram Bakshi in the board meeting of 06.08.2013 is preceded by talks of purchasing 50% shareholding of the petitioners at a throw away price. We feel persuaded to accept that averments noted in para 24 of the Introduction and Facts inspire confidence. It was followed by the valuation re....
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....ght Plaza'. There is no approval of any such note by McDonald India in its resolution. The directors would be acting without any authorization by presenting the note. 22. Once it is clear that non-voting by the nominee directors of respondent No. 2 Company was actuated by extraneous considerations and all acts on the part of Mr. Vikram Bakshi were strictly in accordance with the provisions of the Articles of Association and clause 7 of the JV Agreement which stand incorporated in the Articles then there is no escape from the conclusion that McDonald India as a shareholder through its nominee directors has acted to oppress Mr. Vikram Bakshi and petitioner No. 2 with malafide intentions to avail the benefit of clauses 26 and 32 of the Joint Venture Agreement which provides for option to recall and purchase the shareholding of petitioners in accordance with the formula provided in the Joint Venture Agreement. 23. The Companies Act, 1956 deals with prevention of Oppression and Mismanagement. Section 397 deals with the powers of the Tribunal and the right of the oppressed party to apply for redressal of his grievances. Section 402 envisages the power of the Tribunal to pass order ....
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....is insolvency to be a fraudulent preference; (g) any other matter for which in the opinion of the [Tribunal] it is just and equitable that provision should be made." 24. The facts and circumstances of the present case would leave no manner of doubt that a case for winding up is made out satisfying the condition envisaged by section 397(2)(b) of 1956 Act. However, we are of the view that winding up the Connaught Plaza would unfairly prejudice the petitioners who have 50% of shareholding. Therefore, we do not feel that it would be just and equitable to order winding up. 25. It is well settled that if the conduct of the one group of shareholders was oppressive to the other group of shareholders then it would require consideration of totality of facts. The finding of oppression cannot thus be concluded on the basis of one or two events. The conduct must be burdensome, harsh and wrongful. These principles have been laid down by the Hon'ble Supreme Court at pages 366, 367 in the case of Shanti Prasad Jain v. Kalinga Tubes Ltd. [1965] 35 Comp. Cas 351. Accordingly, we have recorded our satisfaction that the affairs of Connaught Plaza have been conducted in a manner oppressive to t....
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....sed by respondents. On behalf of respondents 2 to 4, objections have been raised against reading of paragraph 7 of the Joint Venture Agreement as part of the Articles of Association on the ground that in para 8.66 of the petition there is an admission made by the petitioner that the provisions of JV Agreement have not been incorporated in the Articles of Association. The second ground urged in support of the aforesaid submission is that in any case on proper interpretation of Articles 35 and 36, it cannot be concluded that paragraph 7 of the Joint Venture Agreement as a whole stands incorporated in the Articles. 28. The aforesaid objection raised by respondents 2 to 4 is not sustainable for a variety of reasons. Firstly, the admission to which reference is made has been read by respondents in isolation. In para 8.66, the petitioners have submitted that the issues raised in the present Company Petition were not relatable to the JV Agreement as its provisions have not been incorporated in the Articles of the company. However, it is divorced from various parts of para 8, where a specific reference has been made to Articles 35 & 36 for reading it with paragraph 7 of the JV Agreement. ....
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....n of the term beyond the terms of two (2) years in the absence of proof or prude reason to not to vote at the general meeting. Hence it is submitted that the Petitioner No. 1 continues to be the sole MD of the Company". A perusal of the aforesaid paras would not leave any manner of doubt that the case set up by the petitioner is that the provisions of whole para-7 of the Joint Venture Agreement stand incorporated in the Articles. The so-called admission in para 8.66 is entirely in different context. Moreover, it is well settled that admission on a question of law would not bind the parties. In that regard, reliance may be placed on the observations made by a Constitution Bench of the Supreme Court in the case of Banarsi Das v. Kanshi Ram AIR 1963 SC 1165. There is a categorical statement of law that the admission would bind the maker only insofar as the facts are concerned but not on a question of law. 29. In any case, if admissions are erroneous, then the same are liable to be ignored. In the present case in Articles 35 & 36 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 provisi....
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....d upon the Articles in the manner as provided in para 7 of the J.V. Agreement. Therefore, at least whole para 7 of the Articles is incorporated. From the inception, Mr. Vikram Bakshi has been the Managing Director. The note also makes an attempt to bring the case of Respondents 2 to 4 within the parameters of para 7 (e) of J.V. Agreement because parties regarded it as a part of Articles. Similarly, acceptance to act as Managing Director in terms of 7 (a) by the 'Partner' referring to Mr. Vikram Bakshi, undergoing training in terms of 7(b), exercise of authority always in accordance with 7(c), salary paid in accordance with 7 (d) and re-election for 17 long years would not leave any manner of doubt that parties understood that clause 7 of J.V. Agreement is a part of Articles of Association. Therefore, we do not feel persuaded to accept the submissions made on behalf of respondents 2 to 4 and have no hesitation to reject the same. 31. Article 36 by specifically incorporating paragraph 7(d) of the JV Agreement provide for the remuneration of the managing Director. In pursuance of the aforesaid Articles 35 & 36, the parties have appointed Mr. Vikram Bakshi as the Managing Dire....
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....in the facts and circumstances is not attracted and applicable. We have referred to para 7 of the JV Agreement read with Articles 35 and 36 of the Articles of Association and we have regarded it as a part of Articles of Association as had already been held. We have referred to clauses 26 and 32 of the JV Agreement for the purposes of showing oblique motives and malafide intentions of Respondents 2,3 & 4. Therefore, whole gamut of section 397 read with section 402 of 1956 Act would come in play to protect a party from oppression by exercising just and equitable jurisdiction under section 402 of the 1956 Act. Therefore, we find the argument without substance and the same is rejected. 35. We are also not impressed with the submission that there is mis-statement as we do not find any such material misrepresentation. 36. Respondent No. 8 filed an application being C.A. No. 134(PB)/2017 on 03.05.2017 bringing on record an order passed by The Institute of Company Secretaries of India exonerating him from the allegations made 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 Baks....