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McDonald's accuses Bakshi of negligence
Posted On: 06-09-2013 00:00:00 13

In India, McDonald's operates through two franchises. Its outlets in the western and southern parts of the country are run by the BL Jatia Group-promoted Hardcastle Restaurants, which had bought the US Company’s 50 % stake a few years ago. In the North and East it is run by Connaught Plaza Restaurants, a 50:50 Joint Venture with Vikram Bakshi.

On August 30, McDonald's had announced in a public notice that Bakshi would no longer be the India Managing Director and the JV would be run by the board. It had also said Bakshi's term had ended on July 11 and the four-member board was divided on whether or not to allow his continuance as the JV's MD.

According the report McDonald's told Bakshi he was giving little attention to Connaught Plaza Restaurants Pvt. Ltd, even as his other businesses like hospitality and real estate were growing rapidly. The chain also said these businesses were in conflict with the JV, which was in a related area. Mc Donald’s is also supposed to have commented on Bakshi’s failure in developing and maintaining internal controls and questioned him for financial mismanagement, claiming he transferred Rs 7 crore from the JV's account to one of his own group firms.

Bakshi’s reply to all the questions is expected to be in his petition to the Company Law Board in which he will also seek his reinstatement as India managing director. The response is expected to say that he devoted enough time to the JV and that his other businesses, which were well-established, were run by his family members, including his daughters and wife. He would also make it clear that McDonald's, which had undertaken a detailed due-diligence before forming the JV, was aware of all his various businesses and had never objected to those.

He would also clarify that the Rs 7 crore transferred to his group company was for making advance payment for a premium location to open a McDonald's outlet. That company, part of his own business, was negotiating this deal. Besides the JV board's approval, the proposal had also been cleared by audit firm Grant Thornton, which felt the deal was both commercially viable and financially favorable. Bakshi is also expected to argue that the JV's royalty payment to McDonald's so far had been over Rs 193 crore - an amount even higher than the US company's share capital in the joint venture.


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