Delhi HC dismisses Mc Donald’s plea against the NCLT show cause Notice; grants relief to CPRL denying restraint from selling products under the MC Donald’s Brand Name

The Delhi High Court has dismissed McDonald’s plea against NCLT show cause notice in September 2017, in a contempt application filed by Vikram Bakshi, managing director (MD) of the burger chain’s north and east India licencee Connaught Plaza Restaurants Pvt. Ltd (CPRL).

On 21 August, 2017, McDonald’s India had terminated its franchise agreement with CPRL, under which Vikram Bakshi was supposed to shut all 169 restaurants from 6 September. Aggrieved by the termination of franchise agreement, Vikram Bakshi, in September, had filed a contempt application before the NCLT alleging that the termination violated an earlier NCLT order of 13 July 2017, which had asked McDonald’s Corp. to refrain from interfering in the smooth functioning of CPRL and all its 169 restaurants.

Thus the NCLT had issued a show cause notice to the Mc Donald’s India.

The NCLT order of 13th July 2017 related to the matter when Mc Donald’s India had voted against the re-election of Vikram Bakshi and thereby Bakshi had challenged his removal at the NCLT. The NCLT through its order had reinstated Vikram Bakshi as the Managing Director of CPRL and refrained the US-based food giant from interfering in its functioning.

McDonald’s India had challenged the NCLT order of 13th July before the National Company Law Appellate Tribunal which is still pending.

According to a report by the Economic Times, under the present petition before the High Court, McDonald’s India while referring to the NCLT Show cause notice had stated that that in the absence of rules for conduct of contempt action under Section 425 of the Companies Act read with the Contempt of Court Act, such proceedings would deprive it and others of their fundamental rights and further the NCLT ought not to have entertained the contempt plea when they had already filed an appeal against its July 13, 2017, decision in the appellate tribunal (NCLAT).

However, the Court had earlier put a hold on the show cause notice but finally the Delhi high court dismissed the appeal of Mc Donald’s India which meant that NCLT could now resume the contempt proceedings against McDonald’s Corp. which were stalled up until now.

Another bench of the Delhi High Court headed by Justice Rajiv Sahai Endlaw refused to pass an interim order restraining the joint venture of Mc Donald with CPRL from selling products using the Mc Donald’s brand name. The court however has allowed a representative of the McDonald’s legal team to visit the stores operated by Vikram Bakshi under the name of Connaught Plaza Restaurants (CPRL) to conduct quality checks.

A plea had been filed by McDonald’s seeking to restrain CPRL from using trademark after the US based Food Chain had terminated the franchise agreement with CPRL in August.

According to a report by the Economic Times, the legal representatives of the McDonald’s had submitted before the court that the CPRL was using products and packaging that did not measure up to its standards because they were obtained from different suppliers and If CPRL did not follow the global standards maintained by McDonald’s, then it could not use the brand name. They further argued that CPRL could not sell products in their name without following the worldwide standards followed by McDonald’s.

The High Court however held that the restaurants were a running business and hence could not be stayed ex-parte without proper consideration of all aspects. The Court pointed out that CPRL’s reply is yet to be examined and taken into account wherein the CPRL had contended that some of the suppliers of packaging material were “threatened” and refused to provide the McDonald’s-branded packaging to them.

CPRL is an equal joint venture between McDonald’s and Vikram Bakshi, who is the managing director (MD) of the burger chain’s north and east India licencee. These chains operated 169 McDonald’s restaurants across north and east India.

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