NEW DELHI: After a five-year-long legal battle over royalties, McDonald’s and its former India partner Vikram Bakshi have finally agreed to go for an out of court settlement. The counsels for McDonald’s India Pvt Ltd and Vikram Bakshi told a two-member National Company Law Appellate Tribunal (NCLAT) bench headed by Chairperson S J Mukhopadhyay that they were trying to work out a settlement, following which the bench directed that either of the parties may file an affidavit including the terms of the settlement on the next date of hearing on May 13.
McDonald’s and Bakshi had in 1995 signed a partnership agreement to open outlets of the US fast food chain in India. The two partners had formed a 50:50 joint venture—Connaught Plaza Restaurant Ltd (CPRL)—which was responsible for outlets of the fast-food chain in the country’s northern and eastern regions through the franchise route. It was for a period of 25 years.
In the southern and western regions, McDonald’s outlets are run by Amit Jatia-led Westlife Development.
However, trouble started brewing after Bakshi was ousted as the managing director of Connaught Plaza Restaurants (CPRL) in 2013, following which he approached the NCLT, which reinstated him to his position. McDonald’s has challenged the same in the appellate tribunal NCLAT.
The dispute reached its peak in 2017 when McDonald’s terminated CPRL’s franchise agreement citing non-payment of royalties. Vikram Bakshi and the board of CPRL decided to continue full legal recourse against termination of the licence. In August 2017, McDonald’s had told the NCLAT that settlement of the dispute with its estranged partner Bakshi was not possible. Both the parties are now fighting out their case in various legal forums, including NCLT, NCLAT and the Delhi High Court.
All this has taken a toll on the profit of the company. In 2016-17, McDonald’s net loss had surged to Rs 305 crore. So far, the company has registered an accumulated loss of Rs 421 crore since it set foot in India in 1996. The company managed to earn a net profit of Rs 65.2 lakh in FY 18 after making a provision of Rs 198.2 crore in its financial statements in June to cut back losses accumulated due to a legal battle with estranged franchise partner CPRL.