As per a report in Business Standard, the feud between McDonald's and one of its Indian partners Vikram Bakshi has taken a turn for the worse, with the latter alleging that the world's second-largest fast-food chain was acting with the BL-Jatia-group-owned Hardcastle Restaurants, which has the franchise for the west and south of India.
In a petition to the Company Law Board filed on September 9, Bakshi has said that McDonald's began "arm-twisting" him to sell his entire shareholding in Connaught Plaza Restaurants, the equal joint venture between him and McDonald's, from 2008, at an undervalued price of $5 million, which was later raised to $7 million. The petition goes on to say that McDonald's was doing this at the behest of Hardcastle, which in a meeting in 2011 even expressed its desire to buy out Bakshi's entire shareholding saying that the parent company had given it the tacit approval to do so.
Bakshi has also said that McDonald's was favouring Hardcastle by allowing it to avail credit lines to the tune of Rs 142 crore in 2009 and Rs 182.7 crore till it became a development licensee in 2010. And that Hardcastle's negative networth of $3.87 million in 2009 was allowed to be increased to $7.65 million as of March 31, 2010. All this was done to help Hardcastle grow, while Connaught Plaza'a growth was stifled despite it turning profitable in 2009.
Moreover, the capital contributed by McDonald's of Rs 107.9 crore was completely written off in Hardcastle and it was converted into a development license in 2010. In contrast, McDonald's froze Bakshi's rights to borrow money, stifled his remuneration as MD from 2008, did not pay him dividend despite extracting its share of investment in the JV to the tune of Rs 193 crore as royalty and initial fees.
Further, McDonald's sent a call option notice on August 16 to Bakshi to "forcibly" acquire his shares without seeking his consent on the matter. Call option is an instrument that gives right to a shareholder to buy the other partner at a pre-determined price and date.
Bakshi has denied McDonald's charge that the latest review of January 25, 2013, disclosed as many as 13 high-risk control issues with significant operational and regulatory repercussions. He has also refuted allegation that he failed to conduct due diligences on third parties or failed to obtain comparable data on lease transactions. He has stated that not a single balance sheet between 2007 and 2011 carries any qualification in relation to non-compliance of any accounting standards or any breaches of FCPA/anti-bribery/conflict of interest provisions.
Connaught Plaza operates 154 McDonald's outlets in north and east India.
The McDonald's-Bakshi feud became public last month when the US company issued a public notice stating that its Indian partner for the last 17-18 years had ceased to be the managing partner of the joint venture company. Following this , McDonald's sent an email to suppliers informing them of the change in management. More importantly, a copy of this mail was marked to Hardcastle and not Bakshi, as per the petition.