TMI Blog2017 (7) TMI 1092X X X X Extracts X X X X X X X X Extracts X X X X ..... and that of the petitioners as has already been noticed in the preceding paras. Once the aforesaid findings are recorded then the jurisdiction of this Tribunal to invoke sections 397, 398 and 402 would be unquestionable. A (i) The proceedings of the meeting of the Board of Directors held on 06.08.2013 relating to re-election of Mr. Vikram Bakshi as Managing Director of the Company are set aside and declared illegal, unjust and malafide. Consequently, the uploading of Form-32 with the Registrar of Companies is also nullified and is declared illegal. The status of Mr. Vikram Bakshi as Managing Director of Connaught Plaza is restored. He shall continue to act as Managing Director of Connaught Plaza subject to passing of any resolution under the Chairmanship of learned Administrator. (ii) All steps taken in pursuance of non-election of Mr. Vikram Bakshi as Managing Director, are also declared illegal, unlawful, unjust and malicious. (iii) The Board of Directors of Connaught Plaza is divided in 50-50. In order to break the impasse we deem it just and equitable to appoint Hon'ble Mr. Justice G.S. Singhvi, Former Judge Supreme Court, 7 Padmini Enclave, Arvindoo Marg, New Delhi-1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... akshi' 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, Mr. Vikram Bakshi and McDonald's India Pvt. Ltd.-Respondent No. 2 (for brevity 'Mc Donald's India'). They have 50-50 partnership as per Joint Venture Agreement dated 31.3.1995 (for brevity 'JV Agreement'). JV ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ₹ 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 ₹ 1000/- (Rs. One thousand Only) each and ₹ 17,73,021 (Seventeen lacs seventy three thousand and twenty one) cumulative redeemable preference shares of ₹ 1000/- each which have been held by McDonald's India and Vikram Bakshi plus Bakshi Holding in the following manner:- Shareholder No. of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laced on record (Annexure P-7). The '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 Dire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may deem fit and proper in the facts and circumstances.' 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 lai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thereafter that Mc Donald's India Mc Donald Corporation, 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 execu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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, managem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anges 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ination of Fair Market Value and Purchase Price a. Definitions: For the purposes of this Paragraph, the following terms shall have the meaning ascribed to them below: 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 Compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. McDonald's any of its wholly-owned subsidiaries or affiliates as designated by McDonald's, or any person or entity designated by McDonald'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 tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt and continuation as such was paramount for preservation of joint venture between the Petitioners and Mc Donald's India. A reference has been invited to clause 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I (Store Operating Income) Restaurant for the JV -Fixed + Revenue share 9. EDM Mall, Kaushambi (UP) (3675 Sqft)- The first mall in East Delhi 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 maj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ical panels without charging any rent for the same. Copies of various newspaper clippings evidencing the opening of McDonald's first restaurant are 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Director that till date the 'Connaught Plaza' has not authorized any foreigner or non-representative of McDonald to carry on its business for the '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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the business model and operations of the Mc Donald Corporation. The nominee directors of Mc Donald India have, at best, over a 18 years period spent not more than 180 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erest of the shareholders may also be ascertained, which was rejected by letter dated 11.11.2008 without any substantial reason. In the same letter dated 11.11.2008 Mc Donald'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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #39;Connaught Plaza', borrowing embargos and has forced Petitioners to invest in the Company to improve its net worth beside freezing the remuneration of the Managing Director. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) held on September 15, 2011 Mr. Bakshi was subject to the approval of shareholders, which was granted vide the resolution passed by the Company at the annual general meeting of the Company 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 Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing to be held on 6 August 2013 to all the directors of the Company (Company Petition, Annexure P-33, pp. 501-531; Convenience File Vol. III. pp. 25-26). 31. The petitioners have asserted 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, Anne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13, disclosed by Mc Donald India, shows that there were and there could be no reasons for such decisions. 37. In fact, the Board Resolution of Mc Donald India dated 5 August 2013 was disclosed only 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 ) c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion'. 43. There is further allegation against Mr. Vikram Bakshi that he is engaged in business in competition with the business of 'Connaught Plaza' and therefore, has not been able to devote his entire 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regard to his business interest in another Companies including the nature of business transacted by those companies. The details are available on record (summed up in paras 118 to 127 of the convenience volume). 49. The Petitioner 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gments of the Hon'ble Supreme Court and reliance has been placed on the judgment rendered in Pasupulati Venkateswarlu v. Motor General Traders [1975] 1 SCC 770 and Needle Industries (India) Ltd. v. Needle Industries Newey (India) 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 dism ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ken by the Respondents Nos. 2 to 4 56. In the reply filed by Mc Donald India and its nominee directors it has been urged that in view of the orders dated 17.09.2016 passed by this Tribunal in C.A. No. 79/2016, as clarified by the observations 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 Do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndents the relief of specific performance of a personal contract cannot be granted by any Court. 60. The Respondents have placed reliance on clause 32 of the JV Agreement, which provides that if Mr. Vikram Bakshi was to terminate or suffer termination 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t have not been incorporated into the articles of the Company. It has also been reiterated in para 98 of the Petitioner's rejoinder (Vol.11). In the Written submissions, the Petitioners have taken the stand that the Articles of Association of Respondent 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all the allegations made in the note like unauthorized withdrawal by Mr. Vikram Bakshi amounting to ₹ 7 crores for Regal Loan Transaction, failure of Mr. Vikram Bakshi to spend substantially all of his business time in the performance of his obligations under JV 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 canno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e urged for the dismissal of the petition by stating that Petitioners were not entitled to any relief. RIVAL SUBMISSIONS A. On behalf of the Petitioners the following arguments have been advanced (1) The cessation of Mr. Vikram Bakshi as a sole Managing Director is consequence 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 p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dia and Respondent Nos. 3 to 5, illegal attempt to interfere with the functions of the Company by Ms. Aysel Melby (Respondent No. 4). During the course of argument on behalf of the Petitioner reliance has also been placed on various judgments viz., (a) Needle Industries (India) Ltd. (supra); (b) Sangramsinh 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 peti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure an order of specific performance of JV Agreement to continue as the managing director which is a salary based post and it would amount to asking this Tribunal to create a fresh employment agreement which is wholly impermissible in law. In that regard reference has been made to prayer No. XVI whereby 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 relie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of Hartford Fire Insurance Co. Ltd. (supra),it would become wholly destructive of the first paragraph and the first paragraph therefore, must prevail over the second. It has also been submitted that the petitioner has not been removed as the managing director but his relationship as a managing director came 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shi Holdings (Pg. 169, Company Petition [Vol.-1]), on the basis of which the Company Petition has been filed on behalf of Petitioner No. 2, authorizes Mr. Bakshi to represent Petitioner No. 2 in matters arising out of or pursuant to the Joint Venture Agreement dated 31st March 1995 and its subsequent amendments . (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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P. Gaikwad v. Savjibai Haribai Patel [2001] 5 SCC 101. Moreover, the performance of JV Agreement is dependent on the volition of the parties, as has been observed in paragraph 38 of the judgment of the Hon'ble Supreme Court rendered in the case Rajasthan State Road Transport Corpn. v. Bal Mukund Bairwa [2009] 4 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 ₹ 1,876 crores. A chart setting out the indebtedness of Mr. Bakshi as avai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me has been rendered infructuous. (13) Learned counsel have also argued that at the meeting of the Board of Directors held on 06.08.2013 Mr. Bakshi could not be elected or re-appointed as managing director for the reasons recorded in a detailed note tabled by nominee directors of McDonald India. The summary of the note is evident 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 ₹ 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ations exchanged between the parties to seek an amicable parting of ways cannot be termed oppressive, especially when Petitioner No. 1 was willing to exit, but at a highly exaggerated price [See Section E.I at Pages 66 of the detailed submissions] b. Restrictions on borrowings, restaurant development and attempts to cure the negative net-worth 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Bakshi and McDonald India was not in the nature of a partnership - the JV Agreement states to the contrary. The true nature, composition and character of the Company would reveal the unequal nature of the relationship between parties (including the amount of investment), and that McDonald India and Respondent No. 5 exercised supervision and control over 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 fun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... four years. She then took over as a Corporate Communications Department which she has been heading. In her capacity as a Incharge of Corporate Communications Department she spearheaded the Corporate Social Responsibility programme of I-Care for eye care and aligned McDonald's as part of ORBIS International and Dr. Shroffs Charity Hospital. Likewise, she has highlighted 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 cog ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3.1995 entered between McDonald's India Pvt. Ltd.-respondent No. 2, Vikram Bakshi-petitioner No. 1 and McDonald's Corporation of USA. It also includes supplementary agreement dated 11.12.1998 entered between aforesaid three parties and additionally between Bakshi Holding Pvt. Ltd.-petitioner No. 2 and all other written modifications made 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n expressly referred to and it appears to be incorporated in the Articles if provisions of Articles 2(g) and 6 are kept in view. Article 2(g) has included all subsequent changes, amendments and supplementary agreements concerning joint venture agreements in the definition of Joint Venture and Article 6 makes a reference 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in excess of the Indian Rupee equivalent of US$100,000; (5) to purchase securities of any other company; (6) to operate, establish or acquire other businesses for JV Company or expend into other lines of businesses other than the operation of McDonald's Restaurants; (7) to initiate, compromise or settle legal proceedings 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 agg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of his obligations under this Agreement and the Operating License Agreements executed hereunder; (2) he and the Investing Company (as defined below), in combination, own at least 50% of the equity shares of JV Company; (3) he discharges the responsibilities of management of JV Company in a competent and faithful manner; (4) he 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erating License Agreement executed hereunder; (2) He and the Investing Company in combination own at least 50% of the equity shares of respondent No. 1 Company; (3) The further condition was that he discharges the responsibilities of management of JV Company in a competent and faithful manner; (4) And is not in breach of any term of 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 place ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the Company and McDonald's, including exposure to liability under extra-territorial anti-corruption legislation. In the aforesaid McDonald's Internal Audits completed since the year 2007, the Company has been consistently receiving unsatisfactory ratings in respect of its internal controls and management systems. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting. His involvement in other businesses has grown to such an extent that, at the very least, it cannot be said that he is devoting his entire business time or substantial portion of his business time to the office of the managing director of the Company. Additionally, he has misused his position as the Managing Director of the Company for promoting his other business interests outside of the Company by advertising/promoting such interests in the McDonald's restaurants of the Company without any authorization. (v) For the past few years, the Company, McDonald's and their respective senior executives and professional advisors have been exposed to the risk of criminal litigation 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vote his full business time or even substantial portion of his business time towards discharging his responsibilities as the Managing Director of the Company. At this stage the Company requires a managing director who will be able to focus all his time and energy in the promotion and development of McDonald's restaurants operated by the Company and who commands the trust and confidence of its Board of directors and shareholders to bring to the Company the fulfilment of all its value. Every effort has been made by McDonald's for all these years to work with Mr. Bakshi, but recent events have shown that their forbearance has not restored the relationship. On the 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 trus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... single handedly. His last appointment as Managing Director was made on 16.09.2011 for a period of two years at the Annual General Meeting. No grievance of any sort was raised nor a single complaint has ever been lodged. On the contrary following uncontroverted instances of appreciation of his work have been cited which read thus: (i) Email dated 15 May 2012 from Mr. Dave Garland of Mc Donald's Corporation U.S.A.to Mr. Vikram Bakshi states that we all are excited about the growth opportunity for the JV and more so that we are poised to capture the opportunity with strong unit economics and a restaurant development pipeline that continues to grow . Here the Company is being described 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Respondents were to continue to be together in the joint venture and that the Mr. Vikram Bakshi would play a key role in strategic decisions to be taken in relation to the Company (Company Petition, Annexure P-43 (Colly), p.723). (ix) Mr. Vikram Bakshi's performance as Managing Director was rated as 'Significant' by Mc Donald Corporation U.S.A. itself, and he has been granted Long Term Incentives in February 2012 and February 2013 (Company Petition, Annexure P-47 (Colly), pp.768-772). These e-mails have not been disputed either in the pleadings or during the course of arguments. All that has been argued by respondents is that JV Agreement has not been incorporated 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 Me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ither the GCR report nor the statutory reports make any allegation against Mr. Vikram Bakshi; (b) Not once have the GCR Reports been tabled in the Board Meeting of the Respondent No. 1 Company (c) In fact, the reports of statutory auditors for years ending 31 March 2009, 31 March 2010, 31 March 2011 and 31 March 2012 that the Company has an internal audit system commensurate with the size and nature of its business (Company Petition, Annexure P-36 (Colly), at pp. 571, 587, 604 and 623); (d) The Reports of Statutory Auditors of the Company for the financial years ending 31 March 2009, 31 March 2010, 31 March 2011 and 31 March 2012 clearly record that there are adequate internal procedure in place in 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 Petit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sel Melbye approval was required before the same could be placed before the Board of Directors of the Company. (Additional Documents Vol I, p.1-3 C) 19 November 2007 Deepak Sharma GM, F A also sent a proposal to her relating to proposed McDonalds site at Regal Connaught Plaza along with an article from the Economic Times describing Connaught Place as the second fastest growing shopping destination in the World. (Additional Documents Vol I, p.4-8D) 19 November 2007 Ms Ayesel Melbye-Respondent No. 4 confirmed the receipt of the above emails and stated that she would process the proposal 'right away'. (Additional Documents Vol I, p.4) 20 November 2007 Alok Arora from F A department of 'Connaught Plaza' sent the entire layout of second floor terrace of Regal Building to Ms. 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 N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay orders of ₹ 1.65 crores each towards loan of ₹ 4.95 crores (first tranche of the total loan amount of ₹ 7 crores) as requested for by VB Co. in its letter dated 21 November 2007. The letter also stated that in the event of non-receipt of approval from McDonald Corporation-Respondent No. 5 for sanctioning the loan amount, the loan amount would be returned with interest within two weeks from the date of request of the Company. (Additional Documents Vol I, p.43) 26 November 2007 Sanjay Sareen sent another reminder to the 'Connaught Plaza' regarding the Regal issue. (Additional Documents Vol I, p.9) 28 November 2007 Sanjay Sareen in his email to Ms. Ayesel Melbye Respondent No. 4 outlined the terms proposed by 'Connaught Plaza' to Vikram Bakshi Co for the loan, which are as follows: a. The Company could extend the loan to VB Co. b. Rent free agreement from VB Co. in respect of services to be placed in their property for the entire lease period of McDonald's Property in Regal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 December 2007 Alok Arora confirmed to Ms. Ayesel Melbye -Respondent No. 4 that the Company had received the property documents for the collateral security for Regal loan. He requested for a copy of the security agreement so that it could be executed. Alok Arora reminded Respondent No. 4 about the security agreement on 19 December 2007. (Additional Documents Vol I, p.24) 8 January 2008 VB Co. requested the Company for a loan of ₹ 5 lakhs (third tranche of the total loan amount of ₹ 7 crores) for the Regal property on the same terms as previous two tranches. The loan amount was requested to be issued through a pay order of ₹ 5 lakhs in the name of VB Co. The letter specifically stated that the pay orders would not be handed over to the three individuals till the proposal for providing the service area in Regal had been approved by Respondent No. 5 (Additional Documents, Vol I, p.27) 2 February 2008 Alok Arora informed Respondent No. 4 that the local documentation in respect of the loan of ₹ 7 crores disbursed to VB Co. had been c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an transaction concluded that the transaction was not only commercially viable but also financially favourable for the Company (Annexure P-24 of the Rejoinder dated 1 October 2013 to R2's Reply, pp 623-643, at p. 633. 17. A perusal of the list of events establishes beyond doubt that the proposal for loan amount of ₹ 7 crores was for the benefit of 'Connaught Plaza'. It was routed through Ms. Ayesel Melbye-respondent No. 4 who duly acknowledged it. The proposal disclosed a site to open a McDonald Restaurant at Regal in Connaught Plaza as it was second fastest growing shopping destination of the world. The CEO/F A department of Connaught Plaza sent entire lay out of the second floor terrace of Regal building to Ms. Ayesel Melbye. 18. Mr. Vikram Bakshi Co. Pvt. Ltd. also requested 'Connaught Plaza' for a loan of ₹ 4.95 crore (first tranche) for the same purpose. The loan was taken on 05.12.2007 with collateral security and it was paid back on 31.03.2008 with interest. It is imaginary to say that a serious lapse occurred. We are of the considered view that the Petitioners have succeeded to set up the plea that 'Connaught ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (c) The scheme of Connaught Plaza is repugnant to the concept of a board managed company. It is the Managing Director/Partner i.e. me - Mr. Vikram Bakshi, who is entrusted with day-to-day operations of Connaught Plaza. There are only certain matters which are specified in clause 7 (c) of the JV Agreement, in relation to which, he is required to seek prior approval of the Board of Directors. All other matters are within his express authority as per the JV Agreement and the Articles of the JV Company. (d) There is no reversionary or residual powers to assume the authorities, which are conferred by the JV Agreement and the Articles on me. The power of appointment and/or re-election is an obligation of the shareholders as is evident from clause 7 of the JV Agreement read with Article 35 of the Articles, which incorporates clause 7 of the JV Agreement. The duty to cause the re-election is a continuing one and a prompt obligation and is required to be exercised to ensure that there is no hiatus in the management of the JV Company. There is a duty on the shareholders to continuously re-elect the Managing Director every two (2) years. The duty is to vote for the re-election of the Ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9;s also has been fully aware about my other businesses since inception and has been updated of the same from time to time. Despite that McDonald's agreed to elect and re-elect me as the sole Managing Director of the JV Company since 1995, which is clearly evident from the basic nature of the JV Agreement. (i) Mr. Bakshi rightly claims that during his tenure as Managing Director, the business of Connaught Plaza has seen good growth both in sales profitability in the North East-India Region, which is evident from the fact that his region was ranked 3rd in McOpCo margin in 2009 and 2011, 2nd in 2010 and 5th in 2012, and has consistently out performed the West South-India Region, which was ranked No. 10 in 2009 and 2011, No. 9 in 2010 and No. 11 in 2012. From 1995 and till date, Connaught Plaza has opened 154 McDonald's restaurants in prime locations in North East-India Region, including, the recently opened, largest flagship restaurant in India, at Noida, UP with a seating capacity of 325 people. (j) It is also rightly claimed that McDonald's performance in India has been recognized by various organizations and media houses Magazines on account of Mr. Bakshi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ikram Bakshi as Managing Director. The consequences are far reaching as it would trigger the action contemplated by clause 26 read with clause 32 of the JV agreement dated 31.03.1995 (Annexure P/2). We are relying upon those two clauses to show malafide. According to the aforesaid clauses if Mr. Vikram Bakshi (described as partner) fails to continue as Managing Director then 50% shareholding of petitioners is to become saleable at the fair market value/purchase price according to the formula given in clause 26 therefore, the note presented by respondent Nos. 3 4, the nominee directors in the meeting dated 06.08.2013 was malicious as none of the charges/allegations have substance. In view of the aforesaid facts we are of the considered view that non-voting by respondent Nos. 3 4 in favour of Mr. Vikram Bakshi is an acute act of oppression within the meaning of sections 397 and 398 read with Section 402 of the Companies Act, 1956. It is with a view to grab hard labour of Mr. Bakshi which has been invested in Connaught Plaza that had triggered the non-voting in his favour on the meeting dated 06.08.2013. It is also an act against the interests of Connaught Plaza and is detriment t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s or members holding not less than one-tenth of the issued share capital of the company, provided that the applicant or applicants have paid all calls and other sums due on their shares; (b) in the case of a company not having a share capital, not less than one-fifth of the total number of its members. Section 402. Powers of [Tribunal] on application under section 397 or 398.- Without prejudice to the generality of the powers of the [Tribunal] under section 397 or 398, any order under either section may provide for- (a) the regulation of the conduct of the company' s affairs in future; (b) the purchase of the shares or interests of any members of the company by other members thereof or by the company; (c) in the case of a purchase of its shares by the company as aforesaid, the consequent reduction of its share capital; (d) the termination, setting aside or modification of any agreement, howsoever arrived at, between the company on the one hand, and any of the following persons, on the other, namely:- (i) the managing director, (ii) any other director, (v) the manager, upon such terms and conditions as may, in the opinion of the [Tribunal] be jus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of his relationship as a Managing Director of the JV Company. Therefore, it is not a simple case of inter-se dispute between the Directors. The situation created by the non-voting by respondent Nos. 3 4 (Mr. Robert Dale Larson Ms. Ayesel Melbye) has resulted in grave set back to the interests of Connaught Plaza and that of the petitioners as has already been noticed in the preceding paras. Once the aforesaid findings are recorded then the jurisdiction of this Tribunal to invoke sections 397, 398 and 402 would be unquestionable. A Division Bench of Hon'ble Madras High Court in the case of V.M. Rao v. Rajeswari Ramakrishnan, [1987] 61 Comp. Cas. 20 at page 66 has analyzed a number of judgments of Indian and English Courts which supports the conclusion we have recorded. It is also well settled that the legality or illegality of an action is not to be examined, but only its fairness towards the shareholders and its probity has to be kept in view, as has been held in the case of Dr. T.N. Raghunath v. Lake Side Madical Centre (P.) Ltd. [2010] 1 taxmann.com 158 (CLB). 26. It is in the aforesaid facts and circumstances that section 402 provide for exercise of jurisdiction by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties, which are conferred by the JV Agreement and the Articles on Petitioner No. 1. The power of appointment and/or re-election is an obligation of the shareholders as is evident from clause 7 of the JV Agreement and Article 35 of the Articles, which incorporates clause 7 of the JV Agreement by reference. Thus, the duty to cause the nomination and/or election is the continuing and a prompt obligation of McDonald's. There is duty on the shareholders to continuously re-elect the Managing Director every two (2) years. The duty is to vote for the re-election of the Petitioner No. 1 as the Managing Director. 8.8. There is a positive obligation of the Respondent No. 2 and no Nominee Director of the McDonald's is entitled to deny the nomination and/or election of the Managing Director at the meeting of the board and that too in absence of proven facts that there is a breach of the JV Agreement. McDonald's cannot be the judge in its own cause and then seek to derive to profit therefrom that too, without cogent evidence. 8.11. It is submitted that the Nominee Directors of McDonald's have no locus as nominees not to promptly cause the nomination and/or re election of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pose of the business. The court must see the relationship between the words, sentences, clauses, chapters and the whole document. No contract condition or a clause should be read in isolation. The faith, trust, fiduciary relationship and understanding between the parties just cannot be overlooked before interpreting such private commercial document as the Articles of Association and J.V. Agreement. In that regard, we draw support from the observations made by Hon'ble Bombay High Court in the case of Unity Realty and Developers' Ltd. v. B W Highways Star (P.) Ltd. 2010 (3) RAJ 292. It is further well settled that the function and purpose of Articles of Association and contract is to design how to actualise its objectives, interests, values and policy. It comprises the joint intent of the parties. It creates reasonable, legally protected expectations between the parties and reliance on its results. It is not the intent of a single party and it has content of mutuality. It is joint intent of both the parties which can be gathered from the entirety of the circumstances surrounding its formation. (See DLF Universal Ltd. v. Town and Country Planning Department [2010] 14 SCC 1. If ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that paragraph 7 in Article 35 should be confined only to the second part of Article 35 which deal with entrustment of substantial power of management. However, such an interpretation would not be possible because in the definition clause, JVA has been defined to mean all clauses including amendment from time to time upto 2012. Moreover, the translation of intentions of the parties in practice from 1995 to 2013 cannot be brushed aside by adopting an interpretation which would be contrary to the understanding of the parties of the whole contract to justify one sole deviation. Therefore, we are not able to concur with the objection raised by respondent Nos. 2 to 4 and have no hesitation to reject the same. 33. On behalf of respondents 2 to 4, it has also been argued that Managing Director is a salaried employee and specific performance of such a contract cannot be ordered. According to the learned Counsel the M.D. agreement provides for two years term. Reliance has been placed on various provisions of sections 14 and 41 of the Specific Relief Act, 1963. The argument is superfluous because it is not a single case of employee-employer contract. In the present case, Mr. Vikram Baksh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion has been filed by one Mr. Deepak Khosia for intervention with a prayer to process against Mr. Vikram Bakshi under section 340 of the Criminal Procedure Code for prosecution of the petitioner No. 1. 38. We have heard Mr. Khosla at a considerable length who has urged that Mr. Vikram Bakshi is liable to be prosecuted. 39. Having heard the learned counsel we find that the allegations of perjury at the instance of third party cannot be gone into. There is no findings of perjury at this stage. Accordingly, we do not find any merit to allow the application of the intervener to intervene in the matter. Accordingly, the prayer is rejected. However, the refusal to accept the request made by the intervener shall not be construed to prejudice his rights in any other proceeding. The application C.A. with Cri. Misc. No. 184/2013 stands disposed of. 40. All other applications stand disposed of. 41. As a sequel to the above discussion this petition succeeds. We consider it just and equitable to provide as under:- (i) The proceedings of the meeting of the Board of Directors held on 06.08.2013 relating to re-election of Mr. Vikram Bakshi as Managing Director of the Company are set ..... X X X X Extracts X X X X X X X X Extracts X X X X
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