McDonald's vs Bakshi: This legal battle is far from over

Estranged managing director of Connaught Plaza Restaurants that runs McDonald’s chain in North and East India, Vikram Bakshi, is now facing another legal battleas the government backed lender Housing and Urban Development Corporation (Hudco) has moved the court against him after a loan defaultafter he failed to meet loan obligations worth Rs 80 crore.

According to a report in the Economic Times,Bakshi owes around Rs 100 crore to Hudco in debt and penalty charges due to non-payment of a loan by his hospitality arm Ascot Hotels & Resorts.

Bakshi’s hospitality venture Ascot Hotels had borrowed Rs 60 crore in 2007-08 from Hudco for Savoy Club planned in sector 62, Noida, in the National Capital Region, which is still not operational.

“Cheques signed by Bakshi had bounced several times,” Rajinder Paul, executive director-finance, Hudco told ET, adding that the lender has filed a case in the debt recovery tribunal.

Hudco’s Chairman and Managing Director V P Baligar told PTI that the cheque bounce happened in 2012 and Hudco had already filed several cases against Bakshi under Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act.

However,Sanjeev Gulati, CFO, Ascot Hotels & Resorts Pvt Ltd told PTI that the company hasalready paid above Rs 40 crore as interest and principal without the project being operational.

“HUDCO is the main lender who for their own reasons did not release the entire sanction loan amount thereby causing the hospitality (project) to come to a standstill…As the matter is sub-judice, we do not want to comment beyond this,” Gulati said.

The legal battle with Hudco further complicates matters for Bakshi who was oustedby McDonald’s from the post of managing director of their equal joint venture company, Connaught Plaza Restaurants.

McDonald’s has accusedBakshi of using the Connaught Plaza resources for his other privately held companies.

McDonal’s has added another twist to the matter by alleging that Bakshi committed breach of agreement by pledging his shares of the 50:50 joint venture with financial institutions to raise funds for his other hospitality businesses, another ET report said .

On Monday, the Company Law Board directed Connaught Plaza Restaurants to maintain status quo on shareholding and board pattern.

Passing an interim order, the CLB asked McDonald’s India, its parent firm and nominee directors on the JV to file short affidavits before September 20.

In his petition to the CLB, Bakshi had accused the American fast food chain “of implementing a pre-determined scheme of attempt to take over the Company (CPRL) in a coercive, oppressive and illegal manner contrary to law”.

During the proceedings, senior advocate Sudipto Sarkar for McDonalds India Pvt Ltd (MIPL) denied the allegation of ‘oppression’ by the company and said that US food chain has lost confidence in Bakshi and was not satisfied with his conducts.

Sarkar further said Bakshi’s two-year contract as Managing Director MIPL had “proposed to form a management committee – one from our and other from his side, but he wants sole management”.

Moreover, he further added that the company has lost trust because he had pledged his CPRL shares to raise funds for his other business Ascot Estate (Manesar) Pvt Ltd and the pledge was extended also.

Concluding his arguments for interim relief, VikramBakshi’s counsel S N Mukherjee submitted that his client has right to manage the company and such denial is an act of oppression.

On the next date of hearing later this month, Senior advocate Rajiv Nayyar would argue on behalf of Robert Dale Larson and Ayesel Melbye, two independent directors nominated by McDonald’s on CPRL board.

With inputs from PTI