IN THE NATIONAL COMPANY LAW TRIBUNAL, NEW DELHI PRINCIPAL BENCH GP No.110(ND\/2013 IN THE MATTER OF: 1 Vikram Bakshi 157, Golf Links, New Delhi-+10 003, Bakshi Holdings Private Limited a Company incorporated under the provisions of the Companies Act, 1956 and having its registered office at Mohan Dev Building, 415" Floor, 13, Tolstoy Marg, New Delhi-110 004 v. Pefitioners Versus Connaught Plaza Restaurants Limited a Company incorporated under the provisions of the Companies Act, 1956 and having its registered office at Mohan Dev Building, 15" Floor, 13, Tolstoy Marg, New Delhi-110 001 And Corporate Office at 13-A, Jor Bagh Market, New Delhi-110 003. McDonald's india Private Limited a Company incorporated under the provisions of the Companies Act, 1956 and having its registered office at 202-206, Tolstoy House, 15, Tolstoy Marg, New Delhi-110 001 Also at E-20, Hauz Khas Main Markel, New Delhi-110-016. Mr. Robert Dale Larson Nominee Director of Respondent No. 2 having its office at 202-206, Tolstoy House, 15, Tolstoy Marg, 40 0014. Ms. Ayesel Melbye Nominee Director of Respondent No. 2 having its office at 202-206, Tolstoy House, 15, Tolstoy Marg, New Delhi-110 001 5. McDonald's Corporation, One McDonald's Plaza ‘Oak Brook, Iilionis 60521, USA. Also at 202-206, Tolstoy House, 15, Tolstoy Marg, New Delhi-110 001 6. Mr. Tony Larocco Vice-President — Franchising i McDonald's Asia Pacific, Middle East & Africa Group : 1 Kim Seng Promenade #08-01, Great World City East Tower Singapore Also at 202-206, Tolstoy House, 15, Tolstoy Marg, New Delhi-110 001 7. Mr. Peter Rodwell Division President, Pacific Middle East & South Africa McDonald's Asia Pacific, Middle East & Africa Group 1 Kim Seng Promenade #08-01, Great World City East Tower Singapore Also at 202-206, Tolstoy House, 15, Tolstoy Marg, New Delhi-110 001 8. Devinder Jain, General Manager Legal & Company Secretary, Connaught Plaza Restaurants P. Limited Bakshi Holdings Private Limited 18-A, Jor Bagh Market, New Delhi-110 003, 9. Mr. Manish Yadav Vice-President & General Counsel, McDonald's Asia Pacific, Middle East & Africa Group 1 Kim Seng Promenade #08-01, Great World City East Tower Singapore eo at202-208, Tolstoy House, 15, Tolstoy Marg, New Delhi-110 004 10. Mrs, Madhurima Bakshi, Whole Time Director, Connaught Plaza Restaurants Limited 13-A, Jor Bagh Market, New Delhi-110 003. -. Respondents Judgment delivered on 13.07.2017 Coram: CHIEF JUSTICE (RETD.) M.M. KUMAR Hon'ble President Sh. S.K. Mohapatra Hon’ble Member (T) For the Petitioner(s) = Shri S.N. Mookherjee, Sr. Advocate Shri Tejas Ka Shri Pritpal Singh Nijar, Shri Manavendra Mishra, Shri Karan Mehra, Advocates For Respondent No. 2,384 : Shri Sudipto Sarkar, Sr. Advocate: Shri Iqbal M. Chagla, Sr. Advocate Shri Rajiv Nayar, Sr. Advocate Shri Rahul P. Dave, Shri Amit Dhingra, Shri Rahul Narayan, Shri Sumit Chopra, Shri Rohan Jaitley, Shri Shivam Raheja, Ms. Naira Jejecbhoy, Advocates For Respondent No. 8 : Shri Arun Kathpalia, Sr. Advocate Shri Satyajit Sarna, Shri Mohit Negi, Advocates4 CHIEF JUSTICE (RETD.) KUMAR, PRESIDENT JUDGMENT 1, INTRODUCTION & FACTS: 1. The instant petition has been preferred by one Mr. Vikram Bakshi who has also been referred as ‘partner’ (Petitioner No.1) and a corporate entity namely Bakshi Holdings Pvt. Ltd. (Petitioner no. 2) under sections 397, 399, 402, 403 and 406 of the Companies Act, 1956 (for brevity ‘the Act’). They shall be referred as ‘Mr. Vikram Bakshi and ‘Bakshi Holding’ respectively. The Petitioners have impleaded ten Respondents and it would be necessary to give a brief introduction of each one of the petitioner and the respondents to facilitate understanding of the cause. 2. 'Mr. Vikram Bakshi 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 retums of the Connaught Plaza (annexure P-10) has also been filed. woThe ‘Connaught Plaza’ (Respondent No. 1) was incorporated on 29.68.1995 with its registered office at Tolstoy Marg, New Delhi (annexure P-1) which was preceeded by a Joint Venture Agreement dated 31.03.1995. 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 Agreement was entered into between Petitioner No.1, McDonald's India and McDonalds’ Corporation-Respondent No.5 (for brevity ‘Mc Donald's Corporation U.S.A). A copy of the JV Agreement has been placed on record (annexure P- 2). A supplemental agreement dated 11.12.1998 was also entered into between McDonald’s India, Mr. Vikram Bakshi, Mc Donald's Corporation U.S.A. and Bakshi Holdings. It has also been placed on record (annexure P-3). It has also come on record that JV Agreement has been subjected to amendments from time to time. On 6.3.2003 first amendment was inserted, then JV Agreement was amended on 27.5.2005 which is second amendment to it'and on §.11.2012 third amendment was effected. All the amendments have also been placed on record as annexures P-4, P-5 and P-6 respectively. McDonald's India Pvt. Ltd. (Respondent No. 2) is a shareholder in Connaught Plaza holding 1,45,600 equity share which represents 50% of the issued and paid up share capital of the Company. Respondent Nos. 3 and 4 namely Mr Robert Dale Larson and Ms Ayese! Melbye respectively are the nominee Directors of McDonald's India on the Board of Directors of the ‘Connaught Plaza’. ‘McDonald's Corporation U.S.A." (Respondent No. 5) is a corporation organized and existing under laws of the State of Delaware, United States of America and is a confirming party to JV Agreement. Mr. Tony Larocco- 5Respondent No.6 is the officer of McDonald's Corporation U.S.A. who was. deputed to contact the Mr. Vikram Bakshi for the purposes of attracting his shareholding in ‘Connaught Plaza’. Mr. Peter Rodwell-Respondent No.7 is also an officer of McDonald's Corporation U.S.A. Respondent No.8 Mr. Devinder Jain is the Secretary of ‘Connaught Plaza’ who is alleged to have filed form No.32 at the behest of nominee director of ‘McDonald's India’. Respondent No. 9 Mr. Manish Yadav is one of the Directors of ‘McDonald's India’ and is also the General Counsel of McDonald's Corporation's Asia Pacific Region. He has his office at Singapore and has been attending most of the Board Meetings of ‘Connaught Plaza’. Respondent No.10 Mrs. Madhurima Bakshi is a nominee Director of Bakshi Holdings on the Board of ‘Connaught Plaza’ and is stated to be performa Respondent. She is a holder of 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’ tll 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. The Petitioners have claimed that at present, issued and paid up share capital of the Company is Rs.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 Rs.1000/- (Rs. One thousand Only) each and Rs.17,73,021 (Seventeen lacs seventy three thousand and twenty one) cumulative redeemable preference shares of Rs.1000/- each which have 6been held by McDonald's India and Vikram Bakshi plus Bakshi Holding in the following manner: ‘Shareholder No. of equity | Equity No. of] Preference | shares of | shareholding | preference —_| share _ holding Rs.1000/- | % shares of | % each Rs.1000/- each ‘McDonald's 1,45,600 50% | _17,73,021 100% [Vikram Bakshit | 1,45,600 50% 0 0% [ Bakshi Holdings 8. The main objects of the ‘Connaught Plaza’ provided in the Memorandum of 1 Association are as under:- To manage, administer establish, develop, lease, license, franchise operate, maintain and to carry on the business of running hotels, restaurants, fast food outlets, refreshment rooms, exporters importers and manufacturers of aerated, mineral and artificial waters and purveyors, caterers for public amusement; to enter into contracts, agreement and/or arrangements for aerated waters, soft-drinks, cereals, preparation materials, raw materials and the like including sourcing of bakery products, milk products, vegetables, fruits meats and. poultry. Also to-develop scientific process and methods for running managing and operating the restaurants and eating houses under strict quality assurances and quality standards. To cary on the business of consultants to the hotels, restaurants, etc. in existence or to be started and to train chefs, cooks, bearers and other staff for hotelrestaurant/industry, To set up, install, purchase or otherwise acquire plant, machinery, equipment and related facilities for the manufacture of Ice and Ice Creams and to open, ‘manage construct hire, rent, ioe cream parlours for sale of ice creams and other related facilities generally associated therewith and jor are capable of being combined profitably therewith, To carry on the business as keepers of dray and cold storage chambers, ince-plants, godowns, warehouses, refrigerators, freezing houses and room coolers for storing sea foods, marine products, meat eggs, poultry products, atprotein foods, mild, cream, butter, cheese, bacon sausages, fruits, herbs, vegetables or other substance made from all or any of them and canned, tinned and processed foods of every description and to act as transporters of aforesaid foods, substance and products. 7. A copy of the Memorandum and Articles of Association have been placed 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; ji, 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; ii, 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 Directorship of the Petitioner No. 1; v. direction that a scheme be framed for the management and affairs of the company; vi. direction that the Articles of Association of the Company be suitably amended to provide for the exclusive management and control of the ae ey by the Petitioners and/or their nominees on such terms ands conditions as this Hon’ble Board may deem fit and proper, vii. Injunction restraining the Respondent Nos. 3 and 4 from acting as or holding themselves out as directors of the Company; vili, Injunction restraining the Respondent Nos. 2 to 9 and each one of them from giving any effect or further effect to the letter dated 16 August 2013 and the reply dated 29 August 2013 in any manner whatsoever, x. direction that a resolution passed at the meeting of the company held on 6 August 2013 in so far as it relates to the appointmentite-election of the Petitioner No. 1/as Managing Director of the Company and the Form 32 filed with regard to cessation of Petitioner No. 1 as Managing Director of the Company be cancelled and adjudged void; x. Injunction restraining the Respondent Nos. 2 to 9 from altering the shareholding composition of the Company in any manner whatsoever; xi, Injunction restraining the Respondent Nos. 2 to 9 from dealing with, disposing of, encumbering the assets and properties of the Company in any manner whatsoever; xii, Injunction restraining the Respondent Nos. 2 to 9 from altering the composition of the Board. of Directors or management of the Company in any manner whatsoever, xii. Injunction restraining the Respondent Nos. 2 to 9 from issuing any circular/communication which are similar or identical to the circulars or communications referred to herein above; xiv. Appropriate directions be issued to the respondent Nos. 2 to 5 to feimburse the Company for all losses caused to the Company upon such enquiry being made as this Hon'ble Board may deem fit and proper; xy Injunction restraining Respondent Nos. 2 to 5 from preventing the company from using the mark/brand “McDonald’s' in any manner whatsoever;xvi. Directions given for the management and administration of the company as subsisting on 16 July 2013 and/or 6 August 2013 to be continued on such terms as this Hon'ble Board may deem fit and proper, xvii, Pass such order or further order(s) as this Hon’ble Board 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 2 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 Fequirement for such venture was to identify prime locations. One of the crucial eligibility criteria for a prospective joint venture partner laid down in the advertisement was to have experience in the field of real estate and construction. Accordingly, Mr. Vikram Bakshi applied on 24.09.1994 to be considered as a joint venture partner (P/11). Mr. Bakshi in unequivocal terms has to his credits his business experience and also his existing core business which included inter alia, real estate and construction. He claims to be an ety errors engaged in diverse areas of business during the. petiod 1975- 101994. He has worked in various sectors including the real estate sector apart from working in several countries. It is claimed that. he was in a position to understand and follow international business standard at the time of association with Me Donald's India and Mc Donald’s Corporation. It has further been claimed that after working in several countries he returned to India to start new business in the real estate sector. He was associated with, and developed several commercial and residential projects for multinational projects, for multinational corporations and has been closely associated with AT & T, Schlumberger, Societe Generale Bank, Lintas Worldwide, Qantas KPMG, Liz Claiborne, BBC, Quelle to name just a few. 10. In pursuance of his application a meeting was scheduled on 18.10.1994 between the representative of Mc Donald Corporation U.S.A and Mr, Vikram Bakshi, After the meeting Mr. Bakshi was requested to undergo a ‘On job evaluation” in Singapore McDonald's Restaurant. Thereafter he was requested to meet the CEO/President Intemational of Me Donald Corporation U.S.A. in Mumbai Mr. Jim Cantalupo, who explained the business model of Mc Donald Corporation to Mr. Bakshi and apprised him that primarily it has been following the pattem “mass marketeer". That business modal ensured positive returns after initial period of 15 years rather than bringing profits at the initial stages. According to the business model it first provides its product affordable to its consumers in the market in which it has plans to expand its business. It was in that background that Mr. Vikram Bakshi was expected to sign a 25 years agreement for the aforesaid venture in india. According to the averments made the petitioners were not to expect any profit prior to 15 years of operation of business of the ‘Connaught Plaza’ in India and example were cited of countries qo: u1 12. like Australia and UK. It was thereafter that Me 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. 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’, 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 Il at New Delhi. Likewise, similar agreements from time to time were executed between 1997 to 2013 in respect of other restaurants. At the time of filing the petition only one restaurant out of the aforesaid three has survived at Vasant Lok. A specimen copy of the operating license agreement has been placed on record (P/12). According to the petitioners Mc Donald India eared an initial fee of US$ 45,000 upfront and 5% royalty on gross sales of each restaurant which included similar other restaurant. A copy of each ‘subsisting operating license agreement has been placed on record (P/13/P/14). 213. The Petitioners have set out the whole JV agreement dated 31.03.1996 in para 7.12 of the petition. However, we feel that only relevant clauses need to be noticed. Accordingly extracts of JVA are set out below:- “4, Ownership. The JV Parties shall own the following percentages of shares in JV Company: Partner 50% Mc Donald's 50% ‘Such shares shall be paid up in full when issued. The JV Parties undertakes to cause their shares to be voted at any time so as to comply with the provisions of this Agreement. 6. Board of Directors. The Board of Directors of JV Company shall have four (4) member, two (2) of which shall be nominated by Partner and two (2) of which shall be nominated by McDonald's. The: JV Parties agree to vote for the election of the Directors so nominated by Partner and McDonald's. Each member of the Board of Directors shall have one vote. fa Director shall die or if a vacancy shall otherwise occur in a directorship nominated by either JV Party, a new Director shall be nominated by said JV Party within thirty (30) days after such death or other vacancy. (@) Quorum and Voting. Meetings of the Board of Directors shall be duly convened when at least one (1) of the Directors nominated by Partner and one (1) of the Directors nominated by McDonald's shall be personally present. All resolutions passed 3at a Board of Directors meeting shall require the affirmative vote of a majority of the Directors of JV Company whether personally present or not. All resolutions passed by circular resolution shall fequire the affirmative vote of all Directors. The Chairman of the Board, if any, shall not have any right to cast a deciding vote. (b) Minutes of Board of, .ctors. Managing Director. The JV: Patties 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 eee Course, the Intermediate Operations Course, the 143 Applied Equipment Course and the Advanced Operations Course). The training program may also include instruction concerning related areas including, by way of example, management accounting, purchasing, construction, marketing and equipment. McDonald's. shall design and conduct the training program. JV Company shall bear reasonable expenses for transportation, lodging and related incidental expenses incurred by Partner during his training program. The training program must be satisfactorily completed prior to the opening of the first McDonald's Restaurant to be operated pursuant to this Agreement. In the event that partner shall fail to diligently pursue his training or shall fail to satisfactorily complete the training program, the Senior Vice President and Relationship Partner of the Confirming Party, having the sole discretion to judge whether either failure shall have occurred, may terminate this Agreement on written notice. In the event of such termination, Partner shall receive a prompt refund of all amounts invested by him in JV Company, less fifty percent (50%) of expenses related to his individual training program. Scope of Authority. As Managing Director, Partner shall manage the day-to-day operation of the JV Company. In the exercise of his authority as Managing Director, Partner shall require the prior approval of the Board of Directors for any of the following actions on behalf of JV Company.(a) (2) @) @) (5) 6) 1) (8) to enter into any contract or obligation or series of such contracts or obligations that would obligate JV Company ‘or a term in excess of twelve (12) months or a total amount in excess of the Indian Rupee equivalent of US$100,000; to enter into any borrowing or other credit arrangements which will obligate JV Company for a period exceeding twelve (12) months or for a total amount in excess of the Indian Rupee equivalent of US$100,000; to acquire of transfer any interest in real estate; to acquire, transfer, sell assign, mortgage, pledge, encumber or otherwise dispose of capital assets having a value in excess of the Indian Rupee equivalent of US$100,000; to purchase securities of any other company; to operate, establish or acquire other businesses for JV Company or expand into other lines of businesses other than the operation of McDonald's Restaurants; to initiate, compromise or settle legal proceedings on behalf of JV Company except for matter requiring emergency action; to establish or amend pension or profit sharing plans of any kind; Beals(9) (10) (14) (12) (13) (14) to make changes in the menu items or menu prices offered at any McDonald's Restaurants operated by JV Company; to cause the establishment of new McDonald's Restaurants or the closing of existing McDonald's Restaurants; to grant any license, service agreement, lease or any other form of contract to any third party to operate a MeDonald's Restaurant or use any part of the McDonald's System to appoint or promote any officer of JV Company or to appoint and remunerate any employee who shall earn more than the Indian Rupee equivalent of US$ 30,000 per year, inclusive of all bonuses and benefits; 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; to execute, amend or terminate any license or technical assistance agreement on behalf of JV Company; gs wv(15) (16) (17) (18) (19) (20) The 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 of the capital of JV Company; to declare a dividend; to enter into any transaction which may constitute a conflict of interest (as described in Paragraph 25 below); to establish bank accounts and the signature authority with respect to such accounts; to issue guarantees of third party debt, including licensee or suppliers; to do any other act or acts required by law, statute or the Articles. of Association to have Board of Directors approval. Board of Directors may amend any or all of the above requirements at any time. The Managing Director shall also regularly inform the Board of Directors about the business activities of JV ‘Company, including; (1) the operation of existing Restaurants; (2) development.and opening of new Restaurants; and4) (3) the selection, removal or replacement of outside consultants for JV Company including advertising and public relations agencies, attorneys, outside accounting firms and auditors. Salary of Managing Director. JV Company shall pay Partner a gross annual salary as Managing Director of JV Company in an amount equal to the indian Rupee equivalent of US$ 85,000 payable monthly in arrears, The salary shall commence as of the effective date of this Agreement and shall be reviewed annually by the Board of Directors. The Managing Director shall be entitled to a bonus and such other perquisites as may be declared by the Board of Directors. In addition, JV Company shall reimburse Partner for reasonable business expenses incurred in connection with JV Company's business. Re-election of Managing Director. The Managing Director shail be elected every two (2) years, McDonald's agrees to vote for the reelection of Partner as Managing Director for so long as; (1) he resides in the National Capital Region of Delhi and spends substantially all of his business time in the performance 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; @—_—— 19a (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. Determination of “Fair Market Value” and “Purchase Price” De ions: 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 percent (60%) of JV Company's after-tax net income (or loss) for the immediately preceding twelve (12) months, Plus (2) forty percent (40%) of JV Company's after-tax net income (or loss) for the twelve (12) months preceding the twelve month ph Petiad enectied in subperagraph (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 Company shall have been existing, but shall not exceed the total after-tax Income (or loss) for the twelve (12) immediately preceding months. In all cases, JV Company's after-tax net income (or loss) shall be adjusted by: (1) adding depreciation and amortization; (2) adding after-tax interest expense; (3) subtracting after-tax interest income; (4) excluding extraordinary items (net of taxes), as determined in accordance with US GAAP; (5) excluding changes in accounting principles, non-recurring items and translation gains and losses (net of taxes); (6) excliding gains and losses on sales of property (net of taxes); and (7) excluding gains and losses on the sales of McDonald's Restaurants and upon option exercises pursuant to Business Facility Lease agreements (net of taxes). “JV Company Cash Flow Multipte” equals eight (8) multiplied by JV. Company Cash Flow. “JV Company Net Debt” equals JV Company's total liabilities, jess cash or cash equivalents, plus the cost of all reinvestment required in order for alt of the McDonald's Restaurants operated by JV Company to meet McDonald’s then-current standards and ge_Seetieatons 2= b Fair Market Value. The Fair Market Value of JV Company shallbe the greater of: (1) Net Book Value; or (2) JV Company Cash Flow Multiple minus JV Company Net Debt. e Purchase Price. If McDonald's (or its designee) or Partner elects to exercise the option to purchase some or all of the shares of the other in accordance with the terms of this Agreement, the purchase price for such shares shall be determined by multiplying the Acquisition Fraction by the Fair Market Value of JV Company; provided, however, that if MeDonald’s (or its designee) purchases in the event of Partner's death or disability within five (6) years after the date of the first McDonald's Restaurant opened under this Agreement, the purchase price for such shares shall not be less than the amount of Partner's total cash investment in JV Company, plus interest accrued on such amount at the rate of ten percent (10%) per annum, compounded annually. d Audited Financial Statements. All figures necessary in order to perform the calculations required pursuant to this Paragraph shall be derived from the audited financial statements of JV Company prepared as of the Notice Date. 32. McDonald’s Option to Purchase Shares, 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 shail 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 28.09.1995. 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 treatment than the party to a similar joint venture agreement for west and south India region, averments have been made in para 7.15, 7.16 and 7.17, the same shall be discussed at the appropriate place. 16. The Petitioners have also asserted that from the terms of JV agreement and the Articles of Association of “Connaught Plaza’, the Company is and was at all a 2material times in the nature of partnership between the Petitioner and Mc Donald's Corporation U.S.A. through the agency of Mc Donald's India in the guise of limited liability Company. The Petitioners and Respondents or their nominees were expected to act in the best interest of ‘Connaught Plaza’ with utmost good faith towards each other. The petitioners have asserted that apart from the rights conferred by Articles of Association and the JV Agreement there were following legitimate expectations:- “a The said Respondents would act in utmost good faith when dealing with the Petitioners; b. The Joint venture between the Petitioners and the Respondent No. through the agency of the Respondent No, 2 and/or between the Petitioners and the Respondent No.2 would be in force for at least twenty five (25) years; and ¢. The Petitioners would have contro! of the day-to-day management and affairs of the Company.” 17. The claim of the Petitioner is sought to be supported by the fact that wife of Mr. Vikram Bakshi namely Madhurima Bakshi has been a whole-time director of the Company from its very inception who has actively participated in its management and administration. She was director marketing of the Company till the year 2000 and thereafter she took over ‘the functions of Corporate Communications in respect of ‘Connaught Plaza’ and continued to be so iill date, She took over an additional responsibility as a Senior Director (Human eqs Resource) of the Company since September 2011 and has hired the best talent| in the crucial departments like business development, real estate, facility management, equipment, construction and operations. She is also head of promotion and investigation committee. 18. The Petitioners have claimed that the foundation of JV Agreement proceeded on the basis that Mr. Vikram Bakshi individually was to be the sole managing director of ‘Connaught Plaza’ which has been since 18.07.1995 in terms of Article 35 of the Articles. His appointment and continuation as such was paramount for preservation of joint venture between the Petitioners and Me 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 @ 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 without interruption. His appointment as qe Manesina Director was also approved in an extraordinary mesting of the 2520. General Body of the shareholders on 23.08.1995. Therefore, he could have been removed as Managing Director of the Company at a meeting of the shareholders in an extraordinary meeting of general body of the shareholders in accordance with law. It is pertinent to mention that in @ meeting of the general body of the shareholders of ‘Connaught Plaza’ held on 16.09.2014 Mr. Vikram Bakshi was reappointed as Managing Director of the Company for a further period of two years (P/17). ‘The Petitioner has enumerated various acts performed by him for the benefit of ‘Connaught Plaza’ which has earned appreciation from respondents (P/18). According to the averments made Mr. Vikram Bakshi provided to ‘Connaught Plaza’ his personal properties and the property of those Companies under his ‘own control and his family members’ control to enable ‘Connaught Plaza’ to carry on its business. The particulars of said properties are as under:~ List of properties provided to JV 1. Registered office 15th Floor, Mohan Dev, 13 Tolstoy Marg, New Deihi- 110001 - Free of rental 2. Corporate/Home Office 12 &13A Jorbagh Market, New Delhi- 110603 (Approx 5000 sqft) = Discounted rental 3. Warehouse (Approx 10,000 sqft), PS PF IV, Sector 17 Rohini, Delhi ~ Discounted rental47 Basant Lok, New Delhi- Helped JV acquire the property by purchasing the top two floors of the building to allow the 1#Restaurant in India open at a prime location. We have provided open space of 1000 sqft on roof - Free of rental P-14 Connaught Circus, New Delhi- 110001- as the first downtown. restaurant in Connaught Place (CP) (2800 sqft) - Discounted rental and the lowest rental outflow out of the 5 downtown CP restaurants. (1/4"the market rates) P-16, Sector 18 Market Noida (UP)- First restaurant in NCR Noida (8320 sqft). Sold the property at cost price to the JV. - Current price is over 10 times the sold price. Savoy Suites P-18, Sector 16, Noida (UP)- An attached Drive Thru restaurant in NCR Noida with one of the best SO! (Store Operating Income) for the JV. - Pure revenue share, no fixed rental. Savoy Greens, GT Road Kamal (Haryana)- Food Court cum Drive Thru restaurant with one of the best SO! (Store Operating Income) Restaurant forthe JV -Fixed + Revenue share EDM Mall, Kaushambi (UP) (3675 Saft)- The first mall. in East Delhi with all 3 operating formats of: a. Full House restaurant b. Food Court ©. Dessert Kiosk 2Siena 21. - Pure revenue share 10. Jabli (Himachal Pradesh)-,On the National Highway (3000 sqft), a unique restaurant on a bridge ~ Fixed+Revenue share” The Petitioner also claimed that office premises at Mohandev Building, 15” 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 Tuning 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 major controversy relating to McDonald product did not prejudicially affect the business of the Company in India and that criminal cases instituted against the Directors of the Company were dismissed in relation to the outlet of the Company at Kolkatta, In addition, the Petitioner has given detailed particulars of all the aforesaid acts which are as under:- ‘a. Inimediately after signing of the JV Agreement, the Petitioner No. 1 set up the Company office in one of his own properties in Connaught Place and did not charge the Company any rent. b. In June 1995, the Petitioner No. 4 along with 24 managers attended training in Jakarta, Indonesia and underwent an intense restauranttraining wherein he worked at a McDonald's restaurant for a period of approximately 9 months. c. The Petitioner No. 1 also completed three (3) courses which included, inter alia, Basic Operations Course (“BOC”), Basic Management Course (“BMC”) and Advanced Operations Course (“AOC”), which was held at Hamburger University in Oak Brook, Illinois. d. In the year 1996, the then ruling goverment had declined to grant licenses to open and operate restaurants in Delhi to the Company and the permission was granted only due to the relentless efforts put in by Petitioner No. 1 and the license was issued in the individual name of Petitioner No. 1. Thus, the first beef-less McDonald's restaurant was opened in India on 13 October 1996. ©. The Petitioner No. 1 along with the development team from the US cattied intensive research to finalize sites for setting up McDonald's restaurants in India and signed up three (3) properties in Vasant Vihar, Green Park and Greater Kailash, respectively. f, The Company's first restaurant & India's 1st McDonald's was opened under the guidance, leadership and support of Petitioner No. 1 on 13 October 1996 at 47, Basant Lok, Vasant Vihar, New Delhi, For ensuring that the Company opened India’s first McDonald's Restaurant at a 1000 location having all the requisite utilities and services, Petitioner No. 1 personally invested in part of the property and purchased the upper floors of Vasant Vihar outlet located at 47, ct Basant Lok, New Delhi in his Company's name. In fact, he gave rights.for two-third of the terrace of his purchased area for installation of Water tanks, generation set, water fitration plant and electrical 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 warming 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- P 21) h. Petitioner No. | has incurred personal liabilities upon himself and initiated/defended several legal proceedings to protect the interest of the Company and ensured that brand McDonald's remain unblemished. On 12 August 2007, an explosion rocked the first McDonald's restaurant’ in Kolkata, The life of a pedestrian across the street was unfortunately lost and many people were seriously injured. A criminal case was filed against the 30Company and all its directors including the nominee directors of Mc Donald India, Petitioner No, 1 not only provided the best medical care available to the injured people but also helped in resolving disputes, including the criminal case against the Company and the nominee directors of Mc Donald India. A copy of the power point presentation detailing the Kolkata fire incident is annexed (Annexure -P 22). Me Donald India further caused Mr. Vikram Bakshi to part with his own property to the Company in Sector 18 Noida, which houses a McDonald's restaurant, as a result of which, Mr. Vikram Bakshi suffered a huge loss on escalation of price of property. Petitioner No. | provided his real estate in prime locations in Central Delhi to the Company to be utilized as office space by the Company. For the first year, Mr. Vikram Bakshi did not charge any rentals for these properties, Thereafter, the rentals charged were much lower than the market rete. A copy of the Office Space ‘Comparable Report has been placed on record, (Annexure P 23). Mr. Vikram Bakshi passed on various personal benefits to the Company including his personal properties at the cost price or at discounted or minimal rent, He provided the very first property in premier shopping centre Connaught Place at New Delhi. Till this date, it has the lowest per sq. ft. rental out of all the 5 properties in Connaught Place, in which McDonald's restaurants operates. A copy of the CBRE Report dated June 2009 is annexed (Annexure — P 24). tee 3: |. Further, Mr. Vikram Bakshi personally provided the Company with many properties at prime locations so that McDonald's restaurants could be established in India with the right quality real estate and a viable business model with the sole intention of benefitting the Company. 22. The Petitioners have claimed that on account of Mr. Vikram Bakshi concentration, complete devotion and undivided attention the Company has reached the present business standing and profitability. It is. the net result of full time attention and discharge of his duty as the Managing 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 sucess is ascribed to the functioning and financial controVacumen 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’ Awatd in the Food Services ‘Sector for four years (2003-2007). It ranked at 13® position amongst ‘100 Top Retailers in India’ whereas the competitors like Pizza Hut and KFC were at ranked » 34" and 39". It ranked No. 3 in the North and East-India region. In comparison, the West & South-India region rank 10" in 2009 to 2011, No.9 in 2010 and No. 14 in 2012 (P26). 23. The Mr. Viktam 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 following averments have 32742 743 7.44 745 Mr. Vikram Bakshi and the other whole-time nominee director of the Petitioners on the board of the Company have managed and supervised the recruitment of all employees of the Company. Presently, the ‘Company has more than 7000 employees. Mr. Vikram Bakshi has represented the Company before. all governmental and non-govermental authorities in particular, in all contracts signed on behaif of the Company, including, material contracts such as operating licenses with Respondent No. 5. ‘The Petitioner No, 1 is the only director of the Company who has been responsible for incurring expenditure for the conduct of the business of the Company such as payment of salaries to the Company's ‘employees, payment of rent for the premises, which have been taken on rent / lease by the Company, and other expenditure as has been necessary for the conduct of the day-to-day business operations of the Company, The Petitioner No. 1 has negotiated all lease agreements and other documents in relation to the premises in which restaurants are operated by the Company. The Petitioner No. 1 has been able to discharge such functions and responsibilities because save and except the Petitioner No. 1 no other officer, director or employee of the Company has extensive in-depth knowledge of the real estate business in India. It is noteworthy that as a result of the efforts put in by the Petitioners and in particular by Mr. Vikram Bakshi, the Company has been able to secure long term lease / revenue share arrangements in respect of prime 337.46 TAT properties out of which the restaurants of the Company are operated. The term of leases and/ or revenue share arrangements / agreements entered into by Mr. Vikram Bakshi, on behalf of the Company is in the range of 15-40.years, which itself is extra-ordinary in as much as in the retail sector in india, the Company is well known for having secured long terms arrangements on extremely attractive and beneficial terms which is practically impossible for other companies and or entities to achieve, This path-breaking lease hold arrangements in India shows the long term vision of Mr. Viktam Bakshi and his sustained interest in the JV Company. Mr. Vikram Bakshi and his wife- Respondent No. 10 are the only directors of the Company who are resident in India and at the same time have extensive knowledge of 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 responsibiities on behalf of the ‘Connaught Plaza’. Mr. Vikram Bakshi after being ‘hand-pioked” by the Mc Donald India and Mc Donald Corporation as their ‘partner’ in India, has undergone extensive training at various locations in which Me 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 34improvement of the business and business prospects of the Company in India. 24, The Petitioners have further made allegations of malafide 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 business plan and structure with Mr. Vikram Bakshi. He was intimated that the joint venture partnership being a mass market business model was to run a loss for first 15 years and, thereafter it would eam substantial profits. It was at that stage that Mr. Vikram Bakshi for his labour and investment would be duly fewarded as had happened in Australia and UK. On the assurance given by Mc Donald's Corporation U.S.A, Mr. Vikram Bakshi relentlessly, with his full dedication and hard work ensured growth and development of the Company's business. it has now 154 good quality restaurants in the North and East-india Region. It is in the aforesaid background that Mc Donald's India and Mc Donald Corporation U.S.A. developed ulterior motive to get rid of the Petitioners from ‘Connaught Plaza since the time it started showing the signs of moving towards profitability. in the years 2007-08 attempts had started to usurp the success and investments of the Petitioners unfairly, illegally and oppressively by arm twisting to sell their entire shareholding in the Company. It was on 19.08.2008, Mr. Peter Rodwell-Respondent No. 7 made a telephone call to Petitioner No. 1 expressing the desire of Mc Donald's Corporation U.S.A. to buy out the Petitioners entire shareholding in the ‘Connaught Plaza’ for a pittance US$ 5 million. The Petitioner Tejected the same on the telephone itself. In their letter dated 22.08.2008 eeh_sasrossed 10 the Petitioner the same offer was made. on 19.08.2008 and the 3525. Petitioners were asked to provide the expectations of sale price in lieu of their interests in the Company. A copy of the letter has been placed on record (P/27). In his reply sent by Mr. Bakshi on 08.09.2008 it was intimated that he was stunned by the offer considering that he had invested close to § million US$ way back in 1996 when ‘Connaught Plaza’ commenced its operations in India (P/28). Thereafter on 23.10.2008 McDonald Corporation U.S.A. extended the offer to buy the entire interest of the Mr. Vikram Bakshi til 30.11.2008 stating that in case the Petitioners disagree with their offer then they may provide their expected sale price in respect of their interest in the Company (P/29).On 23.10.2008 Mr. Vikram Bakshi had met Mr. Peter Rodwell-Respondent No. 7 in Kuala Lumpur and made a proposal of fair market valuation from a third party and the individual interest 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 Conporation U.S.A. increased the amount of the offer to 7 million USS (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 (P231). ‘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 Thomton 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 Me Donald's Corporation U.S.A. attended a presentation at New Delhi on 03.07.2008 given by Grant Thomton explaining the methodology of the valuation. After the presentation no further steps were taken by Me Donald's India and Mc Donald Corporation U.S.A. either by themselves or through any of their representative which led to a reasonable inference that they had no intention to acquire the shares of the Petitioners in the joint venture at a fair market value. 26. The attempts of Mc Donald India and Me Donald's Corporation U.S.A. thereafter commenced to forcibly acquire the shareholding of the Petitioners which are malafide and motivated. They have even got involved the partners of West and South India Region to further their malafide designs to take oppressive steps against the Petitioners which is evident from another fact. In 2011 the joint venture partner for West & South-India Region expressed his desire to buy out the shares of the Petitioners and categorically informed Petitioner No. 1 that Mc Donald's Corporation U.S.A had given him a tacit approval for the same. He went on to claim that McDonald's Corporation U.S.A would not et Petitioners function effectively if they refuse to sell out. The same Mr. Tony Larraco, Vice President, Franchising of McDonald's Corporation repeated the seme words in a meeting in Delhi in early 2012. Mr. Vikram Bakshi claims he categorically told him that he is ot concemed about the purchaser as long as he gets fair market value, Therefore, McDonald's Corporation U.S.A continuous acts of oppressions have been towards one sole object of forcing out the Petitioners from the Company. Having failed in their evil designs it has now indulged in illegal acts like non- reappointment of Petitioner No. 1 2s Managing Director of the Company so that it ey exercise its option to buy back shares as stated in clause 32 of the 727. IVA referred to in the preceding paras of this judgment. The Pelitioner has also ited the evil conduct of McDonald Corporation U.S.A in many previous joint venture across Asia which include country ike Thailand, Indonesia and Pakistan. Accordingly, it has started similar tactics since 2008 of oppressing its joint venture partners across the globe and force them into a corner to buy them out at pittance for monetary gain. McDonald's Corporation U.S.A has thrust multiple arbitrary and baseless internal audits on ‘Connaught Plaza’, borrowing embargos and has forced Patitioners 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 Patitioners 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 conceming appointment of Mr. Vikram Bakshi as Managing Director of ‘Connaught Plaza’. Malafides in cessation of Mr. Vikram Bakshi as Sole Managing Director. a. _Interms 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). te —— 3828, His last appointment as Managing Director of the Company was on 16 September 2011 at the Company's Annual General Meeting for a period of two years (Company Petition, Annexure P-17, p.296). This clearly shows that the Respondents had no grievance with regard to the management of the Company by Mr. Vikram Bakshi till that date. Pursuant to above mentioned Annual General Meeting, an agreement between Mr. Vikram Bakshi and ‘Connaught Plaza'("MD Agreement") was executed on 11 October 2011. Since then the Respondents have not made a single complaint against Mr. Vikram Bakshi conceming his duties as Managing Director of the Company. It is also pertinent to note that the efforts of Mr. Vikram Bakshi thereafter have been rewarded by Mc Donald India and Mc Donald's Corporation U.S.A. for his performance as Managing Director and growth of Company under his stewardship After 16" September, 2011 there are numerous instances quoted which show that the Respondents were satisfied with the performance of Mr. Vikram Bakshi and it would show that the Respondents envisaged that he would continue to be at the helm of affairs of the Company: Petitioners have further pointed out that the MD Agreement dated 11 October 2011 categorically provided that the Company envisaged a ‘sole’ managing director at all points of time and unless terminated the same was to be renewed. 4 (Short Reply of Respondent No. 2 dated 22 September 2013, Annexure 15, p.697). The MD Agreement contemplated Mr. Vikram Bakshi to be the MD, which is evident from a perusal of Article 35 of the Articles of Association provides as follows:- “The Board of Directors may from time to time subject to section 197A of the Companies Act, 1956 appoint one of their numbers (members?) to be Managing Director, and such number (s) of whole-time director (s) for ‘such period and upon such terms as it thinks fit. “Subject to the provisions of the Act and paragraph 7 of the Joint Venture Agreement the Managing Director shall be entrusted with substantial powers of management subject to the superintendence, control and direction of the Board of Directors. He shall manage the day- to-day operation of the Company.” (Company Petition, Annexure P-7, p.162). Paragraph 2 of the MD Agreement (Short Reply on behalf of Respondent No.2, Annexure 15, pp:697-703) has. reference to Clause 35 of the Articles which provides that at a meeting of the Board of Directors of the Company (hereinafter referred to as the “Board’) 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 18" July 2011 for a petiod of two (2} years on the terms and conditions as hereinafler appearing pursuant to Article 35 of the Articles of Association of the Company arid the JV Agreement I. Bakshi has ted_his_re-appointment_as the Managit qr _Distoest the Company on such terms and conditions. Clause G of 40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 afore stated facts give rise to a justifiable and legitimate expectation that the Mr. Vikram Bakshi, having successfully managed the Company for 18 years would remain the Managing Director for the entire term of the JV period, and therefore be promptly re-elected by Mc Donald India and its nominee directors i.e. the Respondent Nos. 2 to 4. The Petitioners have relied upon judicial precedents to submit that denial of such expectation is, in itself, a grave and oppressive act. 30. The agenda for Board Meeting dated 6 August 2013 mandated the re-election of Mr. Vikram Bakshi as Managing Director. This Agenda was prepared by Mr. Jain who is Company Sacretary-Respondent No. 8, and in Item 6 of the Agenda it is “to recommend re-appointment of Mr. Vikram Bakshi as the Managing Director of the Company”. (Company Petition, Annexure P-33, p. 501-531. The ‘Agenda and the supporting papers had the approval of the Respondent No, 2-5 which shows that they were satisfied with the performance of Mr. Vikram Bakshi as will be evident from various facts namely: On 22 July 2013, rgr_eseondent 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 Meeting to be held on 6 August 2013. In the above email, the Respondent No. 8 proposed to send the relevant agendas, for approval from Respondent No. 9, as under (Additional Documents Volume II, p.1) i. To reappoint Mr. Vikram Bakshi as Managing Director of the ‘Company (Item No. 6) i, To consider and approve the annual revision in the remuneration of Mrs. Madhurima Bakshi, the Whole Time Director w.e.f. 1 April 2013 (Item No.6) iii. To discuss and review the remuneration of Mr. Vikram Bakshi, in light of the market review conducted by AON Hewit on the remuneration of CEOs and MDs for the multinational companies in retails and FMCG sector. (Item No. 10) b. Additionally, with the above mentioned email dated 22 July 2043, the Respondent No. 8 also circulated draft of the Agreement for re- appointment of Mr. Vikram Bakshi as Managing Director as Annexure Il of the above email c. The above mentioned agenda and draft agreement for reappointment of Mr. Vikram Bakshi as Managing Director of the Company were duly approved by Respondent No. 9 (representative of Respondent No.5) and Respondent No. 5. a231. 33. d. Thereafter, on 25 July 2013, after obtaining approval from Respondent No. 9 the above mentioned agenda, draft MD Agreement was circulated along with the notice of Board Meeting 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. Ill. pp. 25-26). The petitioners have asserted that from the above mentioned 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. According to the petitioners contention of Mc Donald India is false when it asserts that Managing Directorship of Mr. Vikram Bakshi stood terminated on 17 July 2013, because. this is inconsistent with the conduct of Respondents after 17 July 2013 (when the Managing Director Agreement allegedly expired). Itis 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 USA. 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, Annexure P-2 (Colly) p:26); (b) Email issued by representative of Me Donald Corporation U.S.A. dated 18 July 2013 addressed to all Managing Directors of ‘APMEA Region of Respondent No. 5 (Annexure P-2 (Colly) to Rejoinder to Short 3Reply filed by Respondent No. 8, p.43); (c ) Email issued by representative of Me Donald Corporation U.S.A. dated 19 July 2013 addressed to all Managing Directors of APMEA Region of Respondent No. 5 (Annexure P-2 (Colly) to Rejoinder to Short Reply filed by Respondent No. 8, p.32); (d) Email issued by representative of Mc Donald Corporation U.S.A. dated 22 July 2013 addressed to all Managing Directors of APMEA Region of Respondent No. 5 (Annexure P-2 (Colly) to Rejoinder to Short Reply filed by Respondent No. 8, at p.36); (e) Email issued by representative of Mc Donald Corporation U.S.A. dated 28 July 2013 addressed to all Managing Directors of APMEA Region of Respondent No. 5 (Annexure P-2 (Colly) to Rejoinder to Short Reply filed by Respondent No. 8, p.45); (f) Email issued by representative of Mc Donald Corporation U.S.A. dated 30 July 2013 addressed to all Managing Directors of APMEA Region of Respondent No. 5 (Annexure P-2 (Colly) to Rejoinder to Short Reply filed by Respondent No. 8, p.40); (g) Email issued by representative of Mc Donald Corporation U.S.A. dated 1 August 2013 addressed to all Managing Directors of APMEA Region of Respondent No. 5 (Annexure P-2 (Colly) to Rejoinder to Short Reply filed by Respondent No. 8, p.39). This clearly shows that the Mr. Vikram Bakshi had de-facto continued as MD. even after 17 July 2013 and had been treated by the Respondent No. 2-5 as the MD of the Company, by their own acts and conduct. ‘On 5 August 2013, Respondent No. 3 and 4 (nominee directors of Mc Donald India on the Board of the Connaught Plaza also had drinks and dinner with Mr. Vikram Bakshi and-his wife Madhurima Bakshi-Respondent No. 10, and therewas no indication of the events that transpired on 6 August 2013 (Company Petition, Annexure P-59, p.816). ‘36. _Itis asserted that at the Board Meeting of Mc Donald held on 5" August 2013, two decisions had already been taken by the non-executive nominee directors that is (a) not to re-elect Mr. Vikram Bakshi as the MD of Company; (b) to exercise call option with respect to the Petitioners’ shares in the Company. A bare perusal of the resolution dated 5" August 2013, 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 Donaid India dated 5 August 2013 was disclosed only on 28 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 i 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. et 4539. 40. 4 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’) containing some purported grounds for non-re-election of Mr. Vikram Bakshi as. the Managing Director. itis pertinent to mention that the Respondents for the first, time raised allegations against him by way of the Note after his reappointment as Managing Director of the Company in 2011. No opportunity was afforded to Mr. Vikram Bakshi to respond to any of the allegations raised in the Note at the Board Meeting held on 6 August 2015.” In the note two principal allegations were made viz (1) Failure to develop and maintain adequate internal controls allegedly arising out of McDonalds’ internal audit-General Controls Review ((GCR") and statutory audits (2) Mr. Bakshi engaged in financial mismanagement in relation to the funds of the ‘Connaught Plaza’ by drawing a sum of Rs. 70 millon from its bank account and transferring the amount to his group company, that is, Vikram Bakshi & Company Pvt. Ltd. under the pretext of an urgency in relation to a new restaurant opening without obtaining approval of Board of Directors of the Company or any formal documentation (for brevity “Regal Loan Transaction’). In respect of both the allegations detailed reply has been entered. In respect of allegation (1) the Petitioner has stated that the conclusion arrived at in the GCR Reports and Statutory Auditors Reports is false. and concocted. The baseless allegations have been raised on the basis of self-serving audits conducted by Mc Donald Corporation U.S.A. in a bid to arm-twist the Petitioners to sell their shares. The audits had commenced after the ‘Connaught Plaza’ became42, 43. profitable in the year 2007 and no such audit was ever conducted prior thereto, The allegations are false and baseless for various reasons:- In respect of allegation (i) it has been stated that it was a stale loan transaction which had taken place in the year 2007 and was procured as a ground to sustain their claim of unseating Mr. Vikram Bakshi as Managing Director. Thereafter he has been re-elected as Managing Director several times. The transaction was held commercially viable by a third party audit conducted by Grant Thornton. The transaction was duly ratified in the Board Meeting of the Company held on 17 April 2008. The Petitioner has relied upon the list of dates to belie the allegations of the Respondents with regard to what is known as ‘Regal Loan Transaction’. 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. 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 Piaza’ 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 electroni¢ records of attendance would show that Petitioner ea a7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 the Board of Directors of Respondent No.1-Company. At no stage, any objection has been raised to any of the disclosures made in Form 24AA where Mr. Bakshi’s interest in other businesses were fully disclosed, (Para 12 of Rejoinder to Company dated 1 October 2013; Annexure P-1 “Colly" to the Rejoinder). The Pefitioner is not engaged in any competing business with McDonald’s Restaurant in any manner whatsoever which he clarified in his reply to the note on 03.09.2013. No such allegation has ever been raised against the erstwhile joint venture partner of the West and South India Region. Mr. Amit Jatia, despite the fact that he is a director of 23 ‘Companies, including Fame india Ltd., inox Leisure Limited, Sterling Holiday Resorts (India) Ltd., Global Trendz Ltd., Westlife Development Ltd. etc. These are all listed Companies holding formal board meetings. Mr. Jatia is also Executive Chairman of various companies and the West & South India have never generated any profits. Despite the fact, Mr. Jatia is running business in direct competition with McDonalds which was converted into a development license by McDonald's. It has. been implemented by writing off the equity and preference shares of McDonalds. It has been pointed out that discriminatory and pick and choose method has been preferred to favour one entity which shows bias against the Petitioners with the oblique motive of purchasing his shareholding, (In that regard, detailed facts have been given in para 84 to 99 of the convenience volume.) wt45. 46. 47. 48. 49. ‘There are further allegations of exposing the McDonalds senior executive and professional advisers to criminal litigation which has been stoutly denied in the Tesponse which is evident from the perusal of the paras 100 to 106 of the ‘convenience volume. Another allegation against the Petitioner is that they created a pledge on 51,300 equity shares held by them in the Gompany which has also been replied in detailed (para 107 to 117 of the convenience volume), The Petitioner has also asserted that Respondents No. 2 to 5 have waived their rights to raise any of the allegation mentioned in the note either because of the applications of principles of waiver as the allegation pertains to the year 2007 and that Mr. Vikram Bakshi has been appointed as Managing Director twice thereafter. Moreover, he has made all necessary disclosures with 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) The Petitioner has again reiterated his allegation with regard to illegal and malafide exercise of call option by Mc Donald India on 16.08.2013. In this regard details have also been furmished 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 En Yatous legal infirmities have been pointed out to submit that the same cannot be 49,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 the price of the Company, McDonald's have manipulated the valuation mechanism to further their self-serving needs. All this has been done to undervalue the Company so as to purchase the Petitioners’ shares at a pittance. ‘The Petitioner has repeated the instances from the year 2008 onwards (paras 142, 143, 144 & 145) 51.’ The Petitioner has further alleged that there was designed efforts to oust Mr. Vikram Bakshi as MD of the Company. Accordingly, Respondents No. 3 & 4 in collusion with Respondent No. 8 caused to be filed Form 32 with the Registrar of Companies to show cessation of Mr. Vikram Bakshi as Managing Director of ‘Connaught Plaza’. There were no signed minutes of Board of Directors which was, and continues to be a necessary requirement for filing of Form 32. In para 147 the sequence. of event has been narrated to highlight the malafides of Mc Donald India, its nominee directors of Me Donald Corporation USA in connivance with Respondent No. 8 in-fling Form 32. Mr. Vikram Bakshi sent email to Respondent No. 8 condemning his act of filing Form 32 as illegal winich was clear and intentional violation of Clause 6(b) of the Joint Venture Agreement (para 8.54 at p. 50, Annexure P54, p. 798). However, the Respondent No. 8 did th _notoffer any defence and instead the nominee director Mr. Robert Dale sent an 50email fo Mr. Vikram Bakshi on 30.08.2013 justifying the acts of Respondent No. 8. It also issued a public notice in leading daily newspapers stating that Mr. Vikram Bakshi was no longer the Managing Director of the ‘Connaught Plaza’. On the same day, a representative of Respondent No. 5 sent an email to the suppliers as well as other parties but no intimation was sent to the Petitioner. The act of sending email was with a oblique motive to undermine the authority of the Mr. Vikram Bakshi and to create circumstances to oust him from the ‘Connaught | Plaza’ setting the stage for Mc Donald India to acquire the shares held by the Petitioners at a pittance. The act of public notice and act of sending of email was defamatory and against the interest of the Company. 52. The Petitioner has also highlighted the events subsequent to the filing of the Company Petition by stating that the oppressive acts of Mc Donald India and its nominee directors have been continuing. All such acts can be taken into account by virtue of various judgments 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 conceming 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 Me 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 51erstwhile Company Law Board on 30.012014 (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 dismissed by NCLAT on 04.10.2016. ‘On 28.11.2013 Mc Donald India purported to terminate the JVA by issuing a notice of termination sought to invoke another call option. Such a step could not have been taken in the backdrop of Status Quo order passed by the erstwhile Company Law Board. In the order dated 16,09.2013 the Company Law Board directed the respondent to maintain status quo over share holding, Board pattern and also over the right of call option. The aforesaid interim order has continued to operate on 04.10.2013 til further order. That there is overlap of the grounds raised by Me Donald india to purport termination of JVA and those alleged in the note dated 06.08.2013. It was in pursuance of the aforesaid note that Respondent No, 2 to 4 did not re-elect Mr. Vikram Bakshi as Managing Director of the Company. According to Mr. Vikram Bakshi the allegations contained in the note of 06.08.2013 are within the exclusive competence and jurisdiction of this, Forum for adjudication of Company Petition which has been filed prior in time, On 03.12.2013, Mr. Robert Dale, the nominee director wrote to the entire team of McDonalds Delhi disclosing that Mc Donald india has terminated the JV Agreement and until the legal formalities are completed, ‘Connaught Plaza’ was to continue to be managed by its Board of Directors. The notice of ah_fomination and the subsequent efforts on the part of Respondents is an attempt 5255, to overreach this Tribunal and cause restraint in the adjudication of CP 110/ND of 2013; The termination notice is part of an ugly design and scheme of Mc Donald India in collusion and conspiracy with Respondent Nos. 3 to 8 to usurp the control of the Company. The second call option therefore has been challenged on similar grounds which have been taken to challenge the first call option. The Petitioner has also raised minor disputes of defamatory and intemperate language coercing the employees of the Company to sign blank vendor registration form so on and so forth. Some illegal attempt to interfere with functioning of the Company by Respondent No. 4-Brig. (Retd.) G.D. Chadha have also been highlighted. ‘The petitioners have also listed under the caption ‘Other oppressive acts’. Reference has been invited to C.A. No. 177/2015 and C.A. No. 148/2015 filed by Respondents and C.A. No. 150/2015 filed by the Petitioners. ‘Stand taken by the Respondents No. 2 to 4 56. In the reply fled 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 CA. (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 ie. London (TR Couto tnormational Arbitration which has been initiated by Me Donald india. (a) 53,57. 58. the validity of the termination of the joint venture agreement dated 31.03.1995 between, amongst others, the Petitioners, Respondent No. 2 and 5 and (b) the valuation, and purchase, of the Petitioners’ shares in Respondent No. 1- Company by Respondent No. 2. 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 Donald India and its nominee directors to re-elect Mr. Vikram Bakshi as the Managing Director of the Company at the meeting of the Board of Directors held on 06.08.2013 as per the provisions of Article 36 of Articles of Association and other connected provisions, The Respondents have urged that Petitioners were not entitled to seek enforcement of a contractual right in proceedings under Section 397 of the Companies Act, 1956, and the Petitioners cannot rely on the provisions JV Agreement in that regard because as er the petitioners’ own assertion, the provisions of the JV Agreement have not been incorporated in the Articles of the Company. In that regard referenice has been made to para 8.66 of the Company Petition (Vol I, p. 53). It is also the stand of the Respondents that the agreement dated 11.10.2011 employing Mir. Vikram Bakshi as Managing Director of Respondent No. 1- Company had. expired by efflux of time on 17.07.2013 (pg. 804, Company Petition ~ clause A, pg. 805 and Clause K, pg. 809 (Vol.-3). The agreement specifically provided that the same was to be renewed for further term of two years in accordance with the terms of the JV Agreement as amended from time we to Ata meeting of the Board held on 06.08.2013, he was not re-appointed sa59. which resulted in filing of instant Company Petition before the erstwhile Company Law Board on 09.09.2013. It has further been submitted that a series of oppressive acts since 2007 have been pleaded and even the instant petition was filed in September, 2013 as is admitted by the Petitioner (para 7.49, pg. 30, Company Petition (Vol.1). The call option exercised by Me Donald India on 16.08.2013 pursuant to para 32 of the JV Agreement is also subject matter of challenge in the Company Petition which is consequential to and dependent upon the termiriation of his relationship as Managing Director of the Company. No relief of restoration can be granted as it existed on 16.07.2013, a day prior to the expiry of Petitioner's term as Managing Director-of the ‘Connaught Plaza’ andlor 06.08.2013 to enable him to continue as the Managing Director of the Company. As a matter of fact, Mr. Vikram Bakshi for all intents and purposes is seeking specific performance of the JV Agreement and is praying to this Tribunal to create-a fresh terms of the agreement by rewtting it for the parties. According to the Respondents the relief of specific performance of a personal contract cannot be granted by any Court: The Respondents have placed reliance on clause 32 of the JV Agreement, which provides that if Mir. Vikram Bakshi was to. terminate or suffer termination of his relationship as Managing Director of JV Company than Me 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. 62. 63. Respondents have also referred to clauses (i), (i), (ix) and (xii) 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 been made to the reply filed to the C.A. No. 94/2013 which was preferred by Mc Donald India under Section 45 of the Arbitration and Conciliation Act, 1996. ‘The Respondents have also adversely commented upon the other reliefs claimed lke filing of Form No. 32 and the call option exercised on 16.08.2013 by Mc Donald India in pursuance of clause 32 of the JV Agreement. in that regard reference has been made to paras (iv), (vii) (x) and (xii) of the relief clause of the petition. Therefore, it has been urged that no relief with regard to valuation or call option in respect of the Petitioners’ shares in ‘Connaught Plaza’ by Mc Donald India could either be claimried nor it can be granted by this Tribunal, The Petitioner hhas cited pr. 10 from the judgment of Hon'ble the Supreme Court in the case of Cotton Corporation of India Limited v. United Industrial Bank Limited and Ors. (1983) 4 SCC 625 (para 10) and other decisions for the proposition that interim relief can only be in aid of and ancillary to final relief in a suit or proceeding The Respondents have also pleaded that the claims under commercial contractsiprivate arrangements are. outside the scope of proceedings under Section 397 of the Companies Act, 1956. In that regard reliance has been placed on paras 143-144 of a judgment of Hon'ble the Supreme Court in the case of (PGhatterjee Petrochem (India) Private Limited v. Haldia Petrochemicals 56Limited and Ors. (2011) 10 SCC 466. Likewise, reliance has also been placed on the judgment of Hon'ble the Supreme Court in the case of Incable Net (Andhra) Limited and Ors. v. AP Aksh Broadband Limited and Ors. (2010) 6 SCC 749. The Petitioner then made a reference to Articles of Association and have pleaded that Articles do not give any right to Mr. Vikram Bakshi to be, or continue as, Managing Director of ‘Connaught Plaza’. According to the Respondents there is no pleadings which shows deliberate ‘omission of this aspect. In the joint venture Agreement signed on 31.03.1995 it was made clear in unequivocal term that as far as the affairs of the Company are concemed, it would be govemed by Memorandum and. Articles of Association, The Respondents have placed reliance on para 8.66, pg. 53 of the Company Petition (Vol-1) where it is stated that none of the issues raised in the present proceedings are in any way relatable to the JV Agreement in as much as the provisions of the JV Agreement 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 Me Donald India to elect Mr. Viktam 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 fth_2nly fom AV Agreement alone which has never been incorporated inthe Articles. 57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. 'n that regard reliance placed by the Petitioner on Articles 35 of the Articles of Association has been controverted as wholly misconceived and erroneous. The Respondents have pleaded for interpretation by putting Article 35 in two separate and distinct parts. The first parts provide for the power of the Board to appoint a Managing Director and a whole-time director. The second para applies after Managing Director is appointed and power he is entitled to exercise. The expression ‘may’ use in Article 35 implies that anyone can be appointed as the Managing Director and there is no obligation cast on Mc Donald India to re-elect Mr. Vikram Bakshi alone. The reference has then been made to Article 30 with regard to the removal of the Managing Director even before the expiry of the period of his office and Article 47 allows the Board to delegate any of its powers to persons other than a Managing Director which clearly shows that in the absence of the Managing Director the Board can function by delegating: the Power. It has also been urged that no part of the JV Agreement by deeming fiction could be deemed to have been incorporated in the Articles of Association. The question of repugnancy would not arise because such @ rule applies only when the latter clause wholly destroys the earlier clause, as has been held in the case of Central Bank of India v. Hartford Fire Insurance Co. Ltd. AIR 1985 SC 1288: ‘The Respondents have also pointed out that there is no question of removal of Mr. Vikram Bakshi as Managing Director of the Company, but the issue is of non- Chee his term expired. He has no right to continue as Managing65. 66. Director for all times to come and he has only right to seek re-election under, and subject to the provisions of the JV Agreement. There is no possibility of granting the relief of specific performance of JV Agreement as sought by the Petitioners, It has also been submitted that the petition has been filed for a collateral purpose and the same is liable to be dismissed at the threshold. It is founded on suppression and falsehood and even on that score itis liable to be dismissed. In any case the JV Agreement has been terminated which cannot be challenged in these proceeding therefore, the cause of action in the Company Petition no longer survives. Thus, the Company Petition is rendered infructuous and the matter must end there. The Respondents have reiterated all the allegations made in the note like unauthorized withdrawal by Mr. Vikram Bakshi amounting to Rs. 7 crores for Regal Loan Transaction, failure of Mr. Vikram Bakshi to spend substantially all of his business ime 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 Me 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 Eph_Sesagerated price at which he was willing to exit the Company. These attempts. 5967. 68. to arrive at an amicable exit of the Petitioners from the Company cannot be regarded as an act of oppression, ‘The Respondents have also controverted that imposing @ freeze on borrowings, a moratorium on new restaurant development and regulating negative net worth of the Company are not acts of oppression and have elaborated the same in various paras of the short reply. Likewise, non deciaration of dividends, payment of Mr. Vikram Bakshi's remuneration and payment of royalties can also not be regarded as acts of oppression. The averments made in the petition are misleading, inaccurate and incorrect and would not constitute oppression. The Respondents have also entered apply to the allegations concerning Mc Donald India’s erstwhile joint venture in South and West Asia. The allegation with regard 40 filing of Form 32 and issuance of public notice are also controverted by asserting that these are no! acts of oppression. The assertion of the Petitioner that the issue concerning 2007 and thereafter have been waived/acquiesced by efflux of time has also been controverted. It is replied by stating that there is no question of waiver and in that regard a reliance has also been placed on paragraph 40 (j) and 48 of the JV Agreement, With regard to the events after filing of the Company Petition, the Respondents have controverted all the allegations. it has been stated that the non allotment of shares against the share application money lying with the Company is not an act of oppression if the same is considered in the light of attending circumstances. The allegation with regard to the decision of not selling the Basant Lok property have also been controverted being not oppressive at all. The Respondents also denied that the termination of the JV Agreement is oppressive.69. The Respondents have also highlighted the conduct of Mr. Vikram Bakshi and Mrs, Bakshi (Respondent No. 10) which disentitled them for obtaining any ‘equitable relief. The examples have been quoted where their actions have caused detriment to the interest of the Company. They have gone to the extent o/ alleging that winding up notice was issued to the Connaught Plaza at the instance of Mr. Vikram Bakshi and his wife. Respondents have also denied the allegation that the JV Agreement between the parties was in the nature of a i partnership. Various paragraphs of the joint venture Agreement have been quoted to highlight the aforesaid issue and they have urged for the dismissal of the petition by stating that Petitioners were not entitled to any relief. RIVAL SUBMISSIONS A. Onbehaif of the Petitioners the following arguments have been advanced (1) The cessation of Mr. Vikram Bakshi as a sole Managing Director is consequence of malafide intention of Mc Donald India to pressurize the Petitioner to sell out his shareholding at a throwaway price. Leamed counsel has elaborated the aforesaid argument by highlighting the e-mails, comespondence 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. 6b(2) Atticle 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 points of time unless terminated. His term was to be renewed. In that regard submission made in the pleadings and noted in the preceding paras have been relied upon. (3) Mr. Bakshi had legitimate expectation to continue as the Managing Director in view of various facts, clauses in the MD agreement and Article 35 of the Articles of Association. According to the leamed counsel denial of such legitimate expectation is, in itself, a grave and oppressive act as has been held by various Courts in the following judgments:- a. Gurmit Singh v. Polymer Paper Ltd. (2005) 123 CompCas 486 (CLB) b. Jagjit Singh Ahuja v. Tirthram (2004) 149 CompCas 486 (CLB) ¢. Vaishnav Shrill v. KishreKundanla Sippy (2004) 120 CompCas (Bom) (4). The allegation made in the note dated 06.08.2013 are afterthought, malafide and motivated. Most of the allegations pertains to the period of 2007 to 2011 and Mr. Vikram Bakshi has already been appointed Managing Director and the principles of waiver would apply. Learned counse! has placed reliance on various allegations which have already been noted in the preceding paras. (6). Another argument advanced by the leamed counsel is illegal and malafide exercise of call option by Mc Donald india on 16.08.2013 and the call. option 62(6). It has further been argued that McDonald Corporation has thwarted growth of Connaught Plaza to manipulate the valuation of the shares. (7). Mc Donald India and McDonald Comoration, USA has resorted to unlawful Publication of public notice harming the reputation of the Petitioners and further sending of emails to suppliers. (8). There are a number of events subsequent to the filing of the Company Petition which: further elaborate the allegations of oppression and unfair treatment unleashed on the petitioners. In that regard reliance has been placed on the judgment of the Hon'ble Supreme Court in the case of Needel Industries (india) Ltd. (supra) and Pasupulati Venkateswarlu(supra).. (9). The Petitioners have been oppressed on account of refusal to grant approval for sale of Basant Lok property. The termination of joint venture is another instance of ‘oppression specifically when status quo order has been operating, (10). Learned counsel has then made brief reference to other acts of oppression like Respondent No. 8 biased acts in conjunction with Mc Donald India 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. v. Needle industries Newey (India) Holding Ld. ~ 1981 (3) SCC 333. (paras 171-173); (b) Sangramsinh Gaekwad —v. Shantadevi Gaekwad - (2005) 11 SCC 314 (paras 181, 199); (c )MS.D.C. Radharamanan v. M.S.D. Chandrasekara Raja — (2008) 6 SCC 750. (paras 37- 43); (d) Krishan Lal Ahuja v. Suresh Kumar Ahuja — (1983) 53 Comp Cas 60; frh_f6) Chander Krishan Gupta v. Pannalal Girdhari Lal (P) Lid. ~ (1984) 55 Comp. 64 Cas 702; and (f) Caparo India Ltd. v. Caparo Maruti Ltd. - (2007) 140 Comp Cas 481 (paras 37-40) B. On behalf of Respondents No. 2 to 4 the following arguments were advanced (1). tt 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 peiition. Therefore, the respondents were not required to address arguments with regard to the validity of the termination of the JV Agreement and valuation/purchase of petitioners’ shares in the Company by McDonald India. According to the submissions made by the learned counsel the aforesaid issues are contractual and arbitrable. The arbitration proceedings on these issues have already been commenced by McDonald India before the London Court of Intemational Arbitration which are stil pending. Therefore, the respondents have purportedly focused their attention confining to the alleged acts ‘of oppression and mismanagement of not re-electing Mr. Vikram Bakshi as the Managing Director of the Company, In that regard reference has been made to para 8.66 of the Company petition wherein the petitioners’ have themselves suggested that the provisions of the JV Agreement have not been incorporated in the Articles of association. (2). The other argument raised is that the Company petition with the grievance of non re-election of petitioner No. 1 as managing director is not maintainable because it is founded upon agreement dated 11.10.2011 which specifically talks of ih Stlamental Mr. Vikram Bakshi as managing cretor of ‘Connaught Plaza’ ands @). same having expired by efflux of time on 17.07.2013, no right would survive in the petitioner to claim re-election in the face of the provisions made in the agreement itself that the agreement was to be renewed for further term of two years in accordance with the terms of the JV Agreement as amended from time to time. Mr. Vikram Bakshi having not been re-appointed as the managing director of the Company filed the instant petition with Bakshi Holdings Private Limited on 09.09.2013. Their principal grievance is that Mr. Bakshi was not re-elected as managing director of the Company and the series of allegations pertains to the year commencing from 2007 onwards. The call option exercised by McDonald India on 18.08.2013 pursuant to para 32 of the JV Agreement, has also been challenged by the petitioner but the same is consequential to and dependent upon Mr. Bakshi suffering the termination of his relationship as managing director of the company. The petitioner has sought restoration of status quo ante as existed on 16.07.2013 to enable him to continue as managing director of the company. The Asgument seems to be to procure 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. ‘The petitioner has not claimed any relief for valuation of buy-out of the petitioners’ share in the respondent Company by Me Donald India as noticed in the order dated 17.09.2016, As no amendment has been sought by incorporating the relief conceming valuation the maintainability of the Company petition has: to be4). 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 relief can only be in aid of and ancillary to @ final relief in a suit or proceeding. If final relief cannot be granted then interim relief can hardly be granted. In that regard, reliance has been placed on the observation made in para 10 of the judgment of the Hon'ble Supreme Court rendered in the case of Cotton Corporation of India Limited (supra). Learned counsel then argued that olaims under commercial contracts/private arrangements are outside the scope of proceedings under Section 397 of the Companies Act, 1956. In that regard reliance has been placed on the observation made in paragraph 143-144 of the judgment of the Hon'ble Supreme Court rendered in the case of Chatterjee Petrochem (India) Private Limited v. Haldia Petrochemicals Limited and Ors., (2011) 10 SCC 466 and M.S.D.C. Radharamanan v. M.S.D. Chandrasekara Reja, (2008) 6 SCC 750. On the basis of aforesaid observation, the submission made is that once the breach of the agreement was between two members of the Company then no relief can be claimed under Section 397 or 402 of the 1956, Act against the Company. It is vehemently argued that the petifioners had sought to mask a purely contractual claim for re-election as managing director which is dealt with in para 7 (e) of the JV ‘Agreement by masking it as a case of oppression and by invoking Article 35 of the Articles of Association. tt is falsely claimed that paragraph 7 (e) is incorporated by virtue of Article 35 of the Articles of Association. Such an argument is bound to fail4 in the face of the clear admission at page 53 of the Company petition which specifically says that the provisions of the JV Agreement have not been incorporated into the articles of the Company. Even the proper interpretation of Article 35 would not oblige the Board of Directors to appoint Mr. Bakshi as the managing director because it maintains in the first paragraph of Article 35 the power to appoint one of the member as the managing director. The Board may exercise its powers but it is not obliged to exercise the power in favour of Mr, Bakshi alone. The second paragraph deals with the post appointment stage and his power as the managing director. According to the learned counsel if the interpretation advanced on behalf of the petitioners is accepted then it would render the second paragraph wholly destructive of the first paragraph, Therefore, in such a situation and according to the principles of interpretation approved by the Hon'ble Supreme Court in the case 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 settied 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 Aticles. 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6). ©. ‘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 as repugnant and the earlier clause prevails. It is misconception on the part of the petitioner that he was removed as a managing director. The fact of the matter is that his term expired and he was not re-elected. It is maintained that petitioner has no absolute tight to continue as managing director. His right to re-election is and has always been subject to the provisions of JV Agreement which is in the realm of contractual obligations. In that Tegard, reliance has been placed on para 7 of the JV Agreement which provides for existence of various conditions which are'sine qua non for re-election of partner as Managing Director. It has also been submitted that paragraph 7(e) itself distinguishes between the “Managing Director’ of the ‘Connaught Plaza’ and Mr. Bakshi, the latter being referred to therein as “Partner”. Paragraph 7(e) first provides that the “Managing Director” shall be elected every two years. It does not provide that "Partner” shall be elected as “Managing Director” every two years. To accept such an interpretation would render the remaining provisions of Paragraph 7(e) meaningless and redundant, thereby violating one of the fundamental rules of interpretation of contracts. Paragraph 7(e) thereafter provides that McDonald India would vote for the re-election of "Partner’ as “Managing Director’, for so long as” he complies with the conditions prescribed therein, Accordingly, such obligation to vote for the re-election of Mr. Bakshi as the managing director of ‘Connaught Plaza’ is neither absolute nor unconditional, Thus, Paragraph 7(e) itself ‘contemplates that Mr. Bakshi _may not be the managing director of the Company gp ie but only “for so feng as" he complies with the conditions prescribed 68therein. The respondents have also placed reliance on the averments made in paragraph 7.21 alleging that the appointment of Mr. Bakshi and his continuation as the managing director of the Company was paramount as it is interlinked with the continuation of the joint venture between the petitioners and McDonald's India. ‘According to the leamed counsel all these factors are contractual in nature and not in the realm of enforcement through the process of Section 397 read with Section 402 of the Companies Act, 1956. It has further been submitted that the resolution dated 05.09.2013 of the board of directors of Bakshi 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 fo the Joint Venture Agreement dated 31% March 1995 and its subsequent amendments”. |. Itis 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 accordance with the terms hereof, this Agreement shall be renewed for further te mere years in accordance with the terms of the JV Agreement as amended 69from time to time” (emphasis supplied). Thus, the renewal of the MD Agreement was dependent on Mr. Bakshi's compliance: with the provisions of the JV Agreement, and in particular, Paragraph 7(e) thereof. (8). Learned counsel then argued that Mr. Bakshi committed various acts of omissions and commissions violating the conditions prescribed in paragraph 7(e) of the JV Agreement and therefore, he was not entitled to continue as managing director of ‘Connaught Plaza. As a consequence, the petitioners were not entitled to continue as shareholders. Any dispute regarding the non re-election of petitioner No. 1 as ‘managing director of the Company on 06.08.2013 or the exercise of call option on 16.08.2013 at the instance of McDonald India would be regarded as a breach of JV Agreement and its enforcement cannot be sought by the process of Section 397 read with Section 402 of Companies Act, 1956. A reference has been made to the short reply fied by McDonald. India on 22.09.2013 (pages 26-29 Vol). The other arguments raised by the respondents No. 2 to 4 is that assuming without admitting the same that it is permissible for this Tribunal to consider a claim for specific performance of a commercial contract/private arrangement, in law no relief can be granted since specific performance of JV Agreement as sought by the petitioners is not possible. in that regard, reliance has been placed on Section 14 and 41 of the Specific Relief Act, 1963. Leamed counsel also placed reliance on Paragraph 12 of the judgment of the Hon'ble Supreme Court rendered in the case of Indian Oil Corporation Ltd. v. Amritsar Gas Service and Ors., (1991) 1 SCC 533, and the judgment rendered in the case of Rajasthan Breweries v. The Stroh Brewery Company, 2000 (55) Dispute Resolution Journal 68. and paragraphs 100 to 105 of the judgment rendered in the case of Classie Motors Ltd. v. Maruti eae Live Le 1997 (40) Dispute Resolution Journal 462 and has argued that the 70JV Agreement involves the performance of a continuous duty which this Tribunal is not equipped to supervise. In that regard, our attention has been invited to the observation made in para 58 of the judgment of the Hon'ble Supreme Court rendered in the case Her Highness Maharani Shantidevi P. Gaikwad v. Savjibhai Haribhai Patel, (2001) § 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 SRTC v. Bal Mukund Bairwa (2), (2009) 4 SCC 299. Another 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). Leamed counsel has then submitted that by filing Company Application No. 4188/2015 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 fled for a collateral purpose and the same is-liable to be dismissed without hearing it on merit. According to the leamed counsel the petitioner has admitted in his pleading before the Hon'ble High Court of Delhi an indebtedness aggregating to approximately Rs. 1,876 crores. A chart setting out the indebtedness of Mr. Bakshi as available on the website of the Ministry of Corporate Affairs has been placed on record as (Annexure R4). By filing the Company Petition he is trying to avoid his obligation under para 26 of the JV Agreement and under Article 11 (c) of the Articles. His efforts are only to exiract the maximum amount in lieu of his shareholding ftom McDonald India so as to meet the staggering indebtedness (ft _ieured by tim in relation to his other business ventures, Learned counsel has npointed out that the petitioners’ investment in the Company is only Rs, 14.56 crores, whereas his investment in other business ventures is significantly higher than the aforesaid amount, For a petition filed with the oblique and collateral purpose reliance has been placed on a judgment of the English Court in the case of Re Bellador Silk Ltd,, (1965) 1 All E.R. 667 which has been followed by the Division Bench of Hon'ble Kerela High Court in the case of Palghat Exports Private Limited v. T.V. Chandran &Ors., (1993) 3 ILR 706. According to the learned counsel on that score alone the petition is liable to be dismissed. (11). Learned counsel then argued that the petition is founded on suppression a material facts and false case has been made out. Therefore, the petition is liable to be dismissed at the threshold. As a matter of fact, the petitioners have deliberately suppressed the fact that on 13.06.2013 at a meeting in Bangkok, Thailand Mr. Vikram Bakshi voluntarily offered to exit the Connaught Plaza by selling his entire sharehoiding. The offer-has been recorded in the email dated 16.08.2013 sent by McDonald india to the petitioner. In that regard, our attention has been invited to page 794 of the short reply filed by the McDonald India. On this ground alone the Company Petition is liable to be dismissed. According to the leamed counsel the Court is required to examine the conduct of a party if it has approached the Court for equitable relief. Reliance has been placed on paragraph 196-197 of the judgment of the Hon'ble Supreme Court rendered in the case of Sangramsinh P. Gaekwad v. Shantadevi P. Gaekwad, (2005) 11 SCC 314. (12). It was then submitted that no cause of action would survive as the JV Agreement admittedly has been terminated. The termination of the JV Agreement has not been challenged and in any case, cannot be challenged. The cause of action in the 7Company Petition no fonger survives and the same 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 Rs. 7 Crote 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 D.ll at Page 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 to protect Connaught Plaza, the McDonald's brand and the McDonald's System. The report of April 2013 recorded 13 high risk items which could result in prejudice to the Company [See Section DV at Page 53 to 55 of the detailed submissions] €. Petitioner No. 1 did not comply with Paragraph 7(e)(1) of the JV qpn_hateoment as he failed to devote substantially all his business time RBtowards the performance of his duties in the Company, a requirement in the JV Agreement and his employment contract, His growing investments in his other businesses and involvement in their troubles forced him to divert his time and attention from the Connaught Plaza [See Section D.V at Page 55 to 58 of the detailed submissions} Mr. Bakshi did not comply with Paragraph 7(e)(3) & (4) of the JV Agreement as Petitioner No.1 had breached his non-competition obligations (including under Paragraph 24 of the JV Agreement and Clause 1 of his employment contract) as he (directly or through his companies) was engaged in restaurant businesses other than McDonald's. There is a serious confit of interest, in particular as the managing director of a company operating McDonald's restaurants, Although expressly prohibited from being a landlord to other restaurants, he continues to be a landlord to Domino’s and Dunkin's Donuts (Quick Service Restaurants) even today. In 2013, it was discovered that he had falsely stated that he was only a landlord to:a restaurant, which he was actually operating through one of his company [See Section D.VI at Page 58 to 62 of the detailed submissions}" According to the learned counsel respondents No. 3 & 4 acted in the best interest of the Company by refusing to vote in favour of proposed resolution and therefore, Mr. Bakshi is not a fit and proper person to be the managing director of the Company. tt was in the aforesaid circumstances that McDonald India exercised the option to purchase all the shares held by the petitioners in the Company-a e_Sometual remedy available with it under paragraph 32 of the JV Agreement. 74‘Therefore, invoking the contractual right cannot be labeled as an oppressive act, especially when Mr. Bakshi had himself expressed his desire to exit the Company. (14), Learned counsel has then entered his response to other allegations labeled by the petitioner by making following submissions:- *a, Communications exchanged between the parties to seek an amicable parting of ways cannot be termed oppressive, especially when Petitioner i No, 1 was willing to exit, but at a highly exaggerated price [See Section E.| at Page 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 El at Page 66 to 68 of the detailed submissions} ©. 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 MeDonaid’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 Page 68 to 71 of the detailed submissions} d. Differential treatment by a private party McDonald India between two te parties, in relation to whom the levels of trust and faith are starkly cee 6different, cannot be termed oppressive. Proceedings under Section 397 do not fall within the ambit of writ jurisdiction, and cannot seek ‘enforcement of fundamental rights (including Article 14 of the Constitution) [See Section E.IV at Page 71 to 72 of the detailed submissions} ©. Fling of Form 32 by the company secretary of the Company, in compliance with the Companies Act, 1956 cannot be termed oppressive, especially if there is no dispute regarding the fact that Mr. Bakshi's status as managing director of the Company had changed [See Section E.V at Page 72 to 73 of the detailed submissions] f. There has been no waiver of past breaches committed by Mr. Bakshi, as. incorrectly contended by the Petitioners [See Section F at Page 74 of the detailed submissions] g. Non-allotment of shares against share application money, which would violate. the status quo order of the CLB, cannot be termed as an act of oppression [See Section GJ at Page 75 to 76 of the detailed submissions] h, Deferment of sale of Basant Lok (a property owned by the Company) at an undervalue, and in the face of a perceived conflict of interest cannot be termed to be oppressive [See Section G.il at Page 76 of the detailed submissions] i, The validity of the termination of JV Agreement, which is a purely contractual dispute being considered by the Arbitral Tribunal in the Arbitration Proceedings between the parties, cannot be subject matter of fg 76c. * challenge in proceedings under Section 397 of the Act. Without prejudice to the aforesaid, the termination of the JV Agreement, which was compelled by the acts of the Petitioners (including material defaults, the ‘express rejection of fundamental terms of the JV Agreement, and the entire JV Agreement itself, and the likelihood of further encumbrances on the Petitioners’ shares) cannot be termed oppressive [See Section G.lll at Page 77 to 79 of the detailed submissions} Mr. Bakshi and his wife’s (Respondent No. 10) conduct before and during the pendency of the present. proceedings (unilateral termination of employees, and causing the issuance of a winding-up notice upon the Company) would disentitle the Petitioners from obtaining any equitable relief in a petition under Section 397 [See Section H at Page 80 to 86 of the detailed submissions] .. The joint venture between Mr. 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. § exercised supervision and control over the powers of Mr. Bakshi and the functioning of the Company [See Section | at Page 87 fo 91 of the detailed submissions]" ‘Submissions made on behalf of Respondent Ne On behalf of respondent No. 8 the following submissions were made:- 7(1). (2). ®). tis 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 cartied out his professional duties and functions in pursuance of the authorization given to him vide Board resolution dated 05.06.2009, According to the aforesaid resolution he is empowered to act as Company Secretary and General Manager (Legal) of “Connaught Plaza’. Learned counsel has argued that in pursuance of provisions of Section 303 (2) of the Companies Act, 1956 the Company Secretary (Respondent 8) was under legal obligation to send the prescribed form within 30 days by reporting any change, interalia, among its directors/Managing director. According to the leamed counsel the change has taken place on 17.07.2013 and the Form 32 was required to be filed on or before 16.08.2013, As a meeting of the Board of Directors was to be held on 18.08.2013 respondent No. 8 prefer to wait for the Board meeting to take place and eventually uploaded Form 32 on 27.08.2013, the delay in filing the form has been visited with additional fee of Rs. 1,000/- which has been duly paid. Afier the order was reserved respondent No. 8 filed CA, No. 134/(PB)2017 and has brought on record an order dated 08.04.2017 passed by the Disciplinary Board of The Institute of Company Secretaries of India exonerating him from any allegation of professional misconduct alleged in Complaint No. DC/245/2014 filed gy bev Bakshi there. It has thus been argued that no allegation against the 78a) respondent No. 8 would survive and he has been unnecessarily made a scapegoat in the fight of two barring groups. Submissions made on behalf of Respondent No. 10 On her behalf leamed counsel submitted that she has been working as a Senior Director, Human Resouroes for ‘Connaught Plaza. She focused her time and energies on hiring executives at all levels in crucial departments of the Company such as business development, real estate, facility management, equipment, construction, marketing and operations in preparation of the rapid growth of Connaught Plaza. Respondent No. 10 is wife of Mr. Vikram Bakshi, has also highlighted her various activities in Connaught Plaza in her capacity as a whole time ditector since 1996. Initially she was head of Marketing Department and was responsible for the first TV commercial for McDonald's in India. She was responsible for launch of new restaurants in the market area, press releases and public relations. She states that she never claimed any salary for first 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 Care for eye care and aligned McDonald's as part of ORBIS Intemational and Dr. Shroffs Charity Hospital. Likewise, she has highlighted many other activities regarding the celebration of 5" and 10" anniversaries of McDonald's India Pvt Utd. She has labeled serious allegations against respondent No. 8 who was Company Secretary and General Manager (legal). 79ll, 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 directiors 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 cognate issue is whether it is actuated by malafides emanating from extraneous consideration, This question is significant for two reasons; (a) as per clause 32 of JV Agreement the day Mr. Vikram Bakshi is voted out as a Managing Director, the McDonald India (Respondent No. 2) becomes entitled to exercise an option to purchase the whole 50% shareholding of both the petitioners (b) the purchase of shares has to be at the rates to be determined in accordance with clause 26 of the JV Agreement. In other words, ‘Connaught Plaza’ is at the mercy of shareholder McDonald India (Respondent no. 2). 2. Inorder to answer the aforesaid question, it would first be apposite to examine various provisions of the Article of Association. Article 2(i) (g) defines the Joint Venture Agreement and the same reads as under: “2.()) —_Inthese Regulations:-(9) “Joint Venture Agreement” means the Joint Venture Agreement dated 31* March 1995 entered into between McDonald's, Bakshi and McDonald's Corporation, a Delaware Corporation with office at 4, McDonald's Plaza, Oak Brook, illinois 60523, USA (‘McDonald's Corporation’) (as a confirming party), read with the Supplemental Agreement dated 11" December 1998 entered into between inter alia McDonald's, Bakshi, MeDonald’s Corporation (as a confirming patty), the Company and Bakshi Holdings Private Limited and all other written modifications made to the Joint Venture Agreement dated 31% March 1995 from time to time including (4) the Joint Venture Amendment Agreement dated 6" March 2003 entered into between McDonald's, Bakshi, McDonald's Corporation (as a confiming party) and the Company; (2) the Joint Venture Amendment Agreement dated 27" May 2005 entered into between McDonald's, Bakshi, McDonald's Corporation (as a confirming party) and the Company; and (3) the Third Amendment to the Joint Venture Agreement dated 5" November 2012 entered into between McDonaid’s, Bakshi, McDonald's Corporation (a8 a confirming “ah patty), Bakshi Holdings Private Limited and the Company. 81(Amended by Special Resolution passed at the Extreordinary General Meeting held on 14” December 2012)” A perusal of the aforesaid clause would show that joint venture agreement has been defined in the Articles of Association to mean the joint venture agreement dated 31.03.1995 entered between McDonald's India Pvt. Ltd.-respondent No. 2, Vikram Bakshi-petioner 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, 27.08.2005, 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 provie’ . -' Articles 6, 35 & 36 which read as under:- “Article 6: The shares shall be under the contro! and disposal of the Board who may, subject to the provisions of the Joint Venture Agreement, allot or otherwise dispose of the same to such persons and on such terms as the Board may think fit and to give any persons any shares whether at par or at a premium and for such consideration as the Board may think fit, Bakshi and/or his nominee cin anos ome ot the issued and subscribed equity capital of the company and ErMcDonald's and/or its nominee shall hold 50% of the said equity capital, provided however, such nominee(s) fulfil the conditions laid down in paragraph 29 of the Joint Venture Agreement. (Article amended by Special Resolution passed on 6" June, 2003) “IX. MANAGING DIRECTOR AND WHOLE TIME DIRECTOR (8) 35. The Board of Directors may from time to time subject to section 197 A of the Companies Act, 1956 appoint one of their numbers (member?) to be a Managing Director, and such number(s) of whole-time Director (s) for ‘such period and upon such terms as it thinks fit. Subject to the provisions of the Act and paragraph 7 of the Joint Venture ‘Agreement the Managing Director shall be entrusted with substantial powers of management subject to the superintendence, control and direction of the Board of Directors. He shall manage the day-to-day operation of the company. 36. Subject to the provisions of the Act and paragraph 7 (d) of the Joint Venture Agreement, the Managing Director shall be paid such remuneration as may be determined by the company in general mesting from time to time.” A perusal of Article 35 would show as to how a Managing Director and the Whole- time Directors are to be appointed. It then proceeds to lay down that the Board of Directors may from time to time appoint one of their members to be a Managing Director, and such numbers of whole-time Directors for such period and upon such terms as it thinks fit. However, it has been made subject to the provisions of the ay 1956 and paragraph 7 of the Joint Venture Agreement. 83 4 34. According to the joint venture agreement the Managing Director has to be entrusted with substantial powers of management subject to the superintendence, control and directions of the Board of Directors. He is also to manage day-to-day ‘management of the respondent No. 1 Company, The remuneration according to Atticle 36 read with para 7 (d) of the Joint Venture Agreement is to be paid as determined by the Company in general meeting from time to time. ‘tis significant to notice that paragraph 7 of the JVA has been 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.lt 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 effors 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 4 judgment of McDonald's, to thoroughly familiarize Partner, consistent with his 84: 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 instructions conceming related areas including, by way of example, management accounting, purchasing, construction, marketing and equipment. McDonald's shall design and conduct the training program. JV Company shall bear reasonable expenses for transportation, lodging and related incidental expenses incurred by Partner during his training program. The training program must be satisfactorily completed prior to the opening of the first McDonald's Restaurant to be operated pursuant to this Agreement. In the event that Partner shall fail to diligently pursue his training or shall fail to satisfactorily complete the training program, the Senior Vice President and Relationship Partner of the Confirming Party, having the sole discretion to judge whether either failure shall have occurred, may terminate this Agreement on written notice. In the event of such termination, Partner shall receive a prompt refund of all amounts invested by him in JV Company, less fifty percent (60%) of expenses related to his individual training program. ¢. Scope of Authority. As Managing Director, Partner shall manage the day-to-day operations of JV Company. In the exercise of his authority as Managing Director, Partner shall require the prior approval of the Board of Directors for any of, the following actions on behalf of JV Company: (1) to enter into any contract or obligation or series of such contracts or obligations that would obligate JV Company for a term in excess of twelve (12) 85months or a total amount in excess of the Indian Rupee equivalent of US$100,000; (2) to enter into any borrowing or other credit arrangements which will obligate JV Company for period exceeding twelve (12) months or for a total amount in excess of the Indian Rupee equivalent of US$100,000; (3) to acquire or transfer any interest in real estate; (4) to acquire, transfer, sell, assign, mortgage, pledge, encumber or otherwise dispose of capital assets having a value of the in excess of the Indian Rupee equivalent of US$100,000; (8) to purchase securities of any other company; (8) 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; 86(14) 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 eam 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$100,000, unless such investment is made in accordance with investment guidelines previously approved and not subsequently repealed by the Board of Directors; (14) to execute, amend or terminate any license or technical assistance agreement on behalf of JV Company; (18) to initiate any transactions involving the issuance or redemption of shares in JV Company, changes in the capital structure of JV Company or an increase or decrease of the capital of JV Company; (16) to dectare a dividend; (17) to enter into any transaction which may constitute a conflict of interest {as described in Paragraph 25 below); (18) to establish bank accounts and the signature authority with respect to ‘such accounts; (19) to issue guarantees of third party debt, including licensee or Kiso 87(20) to do any other act or acts required by law, statute or the Articles of Association to have Board of Directors approval. ‘The Board of Directors may amend any or all of the above requirements at any time. The Managing Director shall also regularly inform the Board of Directors about the business activities of JV Company, including: (1) the operation of existing Restaurants; (2) development and opening of new Restaurants; and (3) the selection, removal or replacement of outside consultants for JV Company including advertising and public relations agencies, attorneys, outside accounting firms and auditors, d. Salary of Managing Director, JV Company shall pay Partner a gross annual salaty as Managing Director of JV Company in an amount equal to the Indian Rupee equivalent of US$ 85,000 payable monthly in arrears. The salary shall commence as of the effective date of this Agreement and shall be reviewed annually by the Board of Directors, The Managing Director shall be entitled to a bonus and such other perquisites as may be decided by the Board of Directors. In addition, JV Company shall reimburse Partner for reasonable business expenses incurred in connection with JV Company's business, e. Re-election of Managing Director.The Managing Director shall be elected every two (2) years. McDonald's agrees to vote for the reelection of Partner as Managing Director for so long as: (1) he resides in the National Capital Region of Delhi and spends gh See ‘of his business time in the performance: of his obligations 88/ 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.” 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 31% 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 “the JV Parties” and individually as “JV Party.” McDonald's, Partner and the Confirming Party are referred to collectively as “the Parties” and individually as “Party”. 7. A perusal of the opening sentence of para 7 under the sub heading Kgp_Manaaing Drector clearly shows that JV Parties were to promptly cause 39the nomination and election of Partner as the sole Managing Director of the Joint Venture company. It happens in practice in the same fashion. A reference has then been made to the act of acceptance by Mr. Vikram Bakshi who has been referred as ‘Partner’ and he had agreed to maintain his residence in the National Capital Region of Delhi. He further agreed to devote his full business time and best efforts fo the promotion and efficient management of the McDonald's Restaurants operated by JV Company. He was to satisfactorily complete training program in the United States. He completed his training program satisfactorily. His scope of authority as Managing Director was to manage the day-to-day operations of JV Company. In respect of items listed in para 1 to 20 he was required to seek prior approval of the Board of Directors. The Managing Director was also required to inform the Board of Directors about the business activities of ‘Connaught Plaza’ including the operation of existing Restaurants, development and opening of new Restaurants. It also included the selection, removal or replacement of outside consultants for Connaught Plaza including advertising and public relations agencies, attomeys, outside accounting firms and auditors. The salary of the Managing Director was also fixed in accordance with clause 7 (d) of the JV Agreement. Salary has also been fixed as per clause 7(d) of the JV Agreement. Clause 7 (e} of the JV ‘Agreement also provides that he was to continue as a Managing Director if he was not in breach of any condition of JV Agreement or any other agreement between the J.V. parties. What all this shows? 8. However, the most controversial clause is 7 (e). According to clause 7 (e), oh McDonald India has in essence agreed to vote for the re-election of 90Mr. Vikram Bakshi as Managing Director subject to the four conditions namely: (1) Petitioner No, 4 resides in the National Capital Region of Delhi and spends substantially all of his business time in the performance of his obligations under this Agreement and Operating 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. . The JV Agreement was signed on 31.03.1985 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 Intemational 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 placed on record of the meeting which contains various allegations in terms of clause 7 (e) of the JV Agreement. Obviously, ct is alleged in terms of clause 7 (e) that Mr. Vikram Bakshi failed to devote a1whole of his business time to ‘Connaught Plaza’. It is thus evident that parties have understood the Articles of Association in those terms. 9.1, The note is set out below verbatim: “Dear Board Members, We refer to the agenda item for considering the re-appointment of Mr. Vikram Bakshi as the Managing Director of Connaught Plaza Restaurants Private Limited (‘Company’), for a further term of two years. Mr. Bakshi's fem as the Managing Director of the Company has come to an end on 17% July 2013, ‘As you are aware, since the incorporation of the Company, McDonald’s India Private Limited ("McDonald's india’) has been represented on the Board of the Company by non-executive directors, Therefore, McDonald's India's relationship with Mr. Vikram Bakshi, as joint venture partners, had to be one of complete trust and utmost confidence. ‘Over the last few years this relationship has been severely tested because of the manner in which the business of the Company has been managed by Mr. Bakshi, his inability to give his full focus and attention to the Company, and him having shown no desire to remedy the failure and short-coming repeatedly brought to his attention as can be seen from the illustrative list of issues highlighted hereinbelow; () " The Company has, under Mr. Vikram Bakshi, consistently failed to develop and maintain adequate internal controls. This is based on @Qh_annual reviews of the Company conducted by McDonald's Intemal 92Audit team since the year 2007. The latest review of 25" January 2013 disclosed as many as 13 high risk control issues which could have significant operational and regulatory repercussions. Moreover, ‘the inadequacies identified in January 2013 have remained un- femediated, in particular the failure to conduct due diligence on third parties, failure to obtain comparable data on lease transactions and conduct due diligence on title and failure to have applicable anti- corruption, anti-bribery and conflict of interest language in contracts and, most importantly, failure to have valid contracts with third parties Providing services and products to the Company, thereby, creating ‘material risk exposure for the Company and McDonald's, incliding 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 fp_improvements have not been achieved: 93.Year Review Type Resulls 2007 | General Control” Review (full | Unsatisfactory scope) 2008 | General Control Review (limited | Unsatisfactory scope) 2009 | Follow-up review from 2008 No overall evaluation 2010 | General Control Review (limited | Needs scope) improvement 2017 General Control Review (limited [Needs scope) improvement 2013 | General Control Review (limited | Unsatisfactory scope) From a McDonald's system perspective, this represents an unacceptable level of risk to the Company's Operations on a continuing basis: (ii) There have been various instances where the statutory auditors of the Company have also highlighted glaring inadequacies with respect to the internal controls systems as welll as disregard to applicable law. (ill). ‘There also has been an instance in the past where Mr. Vikram Bakshi has engaged in financial mismanagement in correction with the funds 94tiv) of the Company by drawing a sum of Rs, 70,000,000/- (Rupees Seventy Million) from the Company's bank account and transferring such amount to his group company (i.e. Vikram Bakshi and Company Private Limited ("VBCo’) under the pretext of an urgent necessity in relation to @ new restaurant opening, without the approval of the Board of directors of the Company or any formal documentation. Although the funds involved were recalled and repaid to the Company, it created a certain level of mistrust in Mr. Bakshi’s management of the Company and his role as a trustee of the Company's property and funds. This required McDonald’s to put in place limits on his ability to operate bank accounts of the Company which has led to certain operational inefficiencies in the system that could well have been avoided, but cannot be, as McDonald's trust in Mr. Bakshi's managerial and financial credibility has been compromised, Mr. Bakshi has, during his tenure as the Managing Director and especially over the last few years, been increasingly focusing his energies in developing his other businesses, including businesses connected directly or indirectly with the food, restaurant and hospitality sectors, which compete with the business of the Company. Further, he is also directly or indirectly involved in several companies owning properties from which other restaurants (including QSR format restaurants} are operating. His involvement in other businesses has grown fo such an extent that, at the very least, it qe_sannot be said that he is devoting his entire business time or 95,w 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. 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. In addition to the above, it has recently come to our notice that to secure a loan facility of Rs. 200,000,000/- (Rupees Two Hundred Million) for the purposes of development of Savoy Outlet Mall cum Services Apartments. in Manesar in terms of a Master Facility Agreement dated 11" October 2011 entered between Ascot Estates (Manesar) Private Limited (a (p_Lompeny Hrectiyfnarecty controled by Mr. Bakshi) end Housing 96Development Finance Corporation Limited, apparently Mr. Bakshi and Bakshi Holdings Private Limited (“Bakshi HoldCo”) created a pledge on 51,300 equity shares held by them in the Company, despite the Company being a private limited company and there being a prohibition on its shares held by Mr. Bakshi and Bakshi HoldCo, inter alia, being encumbered without the prior written consent of McDonald's India. Since the incorporation of the Company in the year 1995 and commencement of its business in 1996, McDonald's has invested Rs. 1,018,621,000/- (Rupees One Billion, Nine Hundred and Eighteen Million, ‘Six Hundred and Twenty One Thousand) equivalent to approximately USD 32,000,000/- (United States Dollars Thirly Two Million) in the share capital of the Company without any return. While on the one hand absence of any return on its investment is proving to be onerous and difficult to explain to the shareholders of McDonalds Corporation, @ publicly held corporation in the United States of America, on the other, the Company is at a juncture where it should be poised for growth which will necessitate further investments by the shareholders. In this scenario it is essential that the Company be led by a managing director who is able to devote his full attention to the Company, Moreover, the managing director of a company must command the Implicit faith and ‘rust of the company and its shareholders. Further, Mr. Bakshi holds directorship in about 25 other companies and is Cpt_2 Partner in 3 partnership firms. This signifies that despite_being 97tesponsible for carrying out the day-to-day management of the Company as Managing Director, Mr. Bakshi has voluntarily assumed the additional burden. of attending at least 100 board meetings each year, effectively reducing the time and attention he can devote to the Company. In most of such companies and firms, he also has ownership interests. This, by itself indicates that Mr. Bakshi is unable to devote 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 enesay in the promotion and development of McDonald's festaurants operated by the Company and who commands the trust and confiden its Board of directors and shareholders to bring to the Company the fulfillment 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 trust, faith and confidence in Mr. Vikram Bakshi. It is therefore the decision of the nominee directors of McDonald's India, not to ~“ 98vote in favour of the resolution proposed in the Agenda to re-elect Mr. Vikram Bakshi as the managing director of the Company for a further term. the nominee Directors of McDonald's India Private Limited Aysel Melbye Robert Larson” 9.2. It may be recalled that Mr. Vikram Bakshi was to be re-elected as a Managing Director if he fulfilled the four conditions namely (1) he resides in the National Capital Region of Delhi and spends substantially all of his business time in the performance of his obligations assumed under the JV Agreement and he alongwith his Investing Company jointly own at least 50% of the equity shares of respondent No. 1 Company; and that he discharge his responsibilities as a Managing Director of ‘Connaught Plaza’ in a competent and faithful manner. Lastly he is not in breach of any term of JV Agreement or any other agreement between the JV Parties or their affiliates or subsidiaries. 10. A perusal of the note shows that there are allegations leveled against Mr. Vikram Bakshi, He has replied each allegation in his detailed reply/letter dated 03.09.2013 (Annexure P-36). The reply was sent to Mr, Robert Dale and Ms. Ayesel Melbye, who are the nominee directors. It runs into 30 pages therefore, we would extract only few paras in this judgment which are relevant and also directly relates to four conditions specified in clause 7 (e) read with Atticle 35 of the Articles of Association. 11. There is no controversy that petitioners have maintained 50% shareholding in the ‘Connaught Plaza’. Secondly it has also not been doubted that Mr. VikramBakshi has always resided in the National Capital Region of Delhi. He alongwith his wife have been managing the affairs of Connaught Plaza since 1996 is also a fact which has remained undisputed. 12. The allegations pitched against Mr. Vikram Bakshi pertains to spending substantially his business time in performance of his obligations under the JV agreement, discharge of his duties as Managing Director and thereby violating conditions postulated in the JV agreement. A bare perusal of the reply sent by Mr, Vikram Bakshi would show that he has, built up Connaught Plaza and has established ‘McDonald’ brand in the assigned territory of India 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: “(). Email dated 15 May 2012 from Mr. Dave Garland of Me Donald's Corporation U.S.A.to Mr. Vikram Bakshi states that "we all are excited about the grovih 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); (i). Email dated 10 January 2013 from Mr. Dave Hoffmann of Mc Donald's Corporation U.S.A. to Mr. Vikram Bakshi (Company Petition, Annexure rs 100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 ‘o realize the dream of India’. This ‘sufficiently showed full faith in the Mr. Vikram Bakshi and their Partnership; ii). Email dated 28 January 2013 from Mr. Dave Hoffman of Mc Donald's Corporation U.S.A. to Mr. Vikram Bakshi states that “as : always, appreciate your candor and transparency.......it’s what makes us better. Working on our meeting at your HQ in the near future.” (Company Petition, Annexure P-37 (Colly), p.711); (iv). Email dated 18 March 2013 from Mr. Andrew Hipsley of Mc Donald's Corporation U.S.Ato Mr. Vikram Bakshi (Company Petition, Annexure P-41, p-719) wherein he congratulated Petitioner No. 1 ‘on the success of National Breakfast Day. (vi) Email dated 22 March 2013 from Mr. Larson-Respondent No. 3 to Mr. Vikram Bakshi (Company Petition, Annexure P-39, p.716) wherein the Respondent No. 3 “Our entire group found our visit to be very interesting and everyone shows that the Respondents were satisfied with Mr. Vikram Bakshi and growth of the business ‘of the Company as a joint venture. (vi). Email dated 26 June 2013 from Mr. Dave Hoffmann of Mc Donald Corporation U.S.A. to Mr, Vikram Bakshi (Company Petition, ‘Annexure P-40 (Colly), p.717) wherein he congratulated him on ah ____being one of the first Asian countries to launch the WOS. 101(vii) (viii) (ix) Email dated 3 July 2013 from Respondent No. 3 (nominee director of Mc Donald India) to Mr. Vikram Bakshi stating"we are available during the week of August 5th and could plan the meeting between the 5-7th of August. | know the financials wouldn't be ready for Board approval by this date but we could do that in connection with Phase Il. aside from that there are several other subjects, including financing for growth that will be in the 3-1-Q plan that we should discuss in the Board Meeting.” This clearly shows that the Mr. Vikram Bakshi and the Respondents continued to be together and strived towards bringing about the growth of the Company (Company Petition, Annexure P-43 (Colly), P.724), Email dated 29 July 2013 from Respondent No. 3 (nominee director of Mc Donald India) to Mr. Vikram Bakshi stating “How are you? Looking forward to the visit next week........The purpose of our meeting would be discuss the strategic directions: how many openings, approx. capex required for new stores and re-investment, comp sales and GC's approx. G&A growth etc". The above email shows that the Mr, Vikram Bakshi and 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 (Golly), p.723). 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 ah43. 13.1 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. ‘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. 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. Meeting to be held on 6 August 2013, In the above email, the Respondent No. 8 proposed to send the relevant agendas, for approval from Respondent No. 9, as under (Additional Documents Volume Il, p.1) a. To reappoint Mr. Vikram Bakshi as Managing Director of the Company (item No. 6); To consider and approve the annual revision in the remuneration of Mrs. Madhurima Bakshi, the Whole Time Director w.e.f, 1 April 2013 (Item No.6); To discuss and review the remuneration of Mr. VikramBakshi, in light of the market review conducted by AON Hewit on the remuneration of CEOs and MDs for the multinational companies in retails and FMCG sector. (Item No. 10) ae —_— 103i i b. Additionally, with the above mentioned email dated 22 July 2013, the Respondent No. 8 also circulated draft of the Agreement for re- appointment of Mr. Vikram Bakshi as Managing Director as Annexure Ill of the above email, c. The above mentioned agenda and draft agreement for reappointment of Mr. Vikram Bakshi as Managing Director of the Company were duly approved by Respondent No. 9 (representative of Respondent No.5) and Respondent No. 5. d. Thereafter, on 25 July 2013, after obtaining approval from Respondent No. $ the above mentioned agenda, draft MD Agreement was circulated along with the notice of Board Meeting 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. Ill. pp. 25-26)." 14. Its also evident that at the Board Meeting of McDonald India-tespondent No. 2 held a day before on 05.08.2013 it was decided not to re-elect Mr. Vikram Bakshi as Managing Director and surprisingly it was also decided to exercise call option with respect to petitioners’ share by invoking clause 32 of JV agreement. A bare perusal of the resolution dated 05.08.2013 disclosed by McDonald India by virtue of order passed by the then Company Law Board shows that there were no allegations made and there could not be any reason for such a decision. The note appears to be a supplement act of two nominee directors. It is not understood how the note against Mr. Bakshi was presented in the meeting of Board of Directors of Connaught Plaza on 08.08.2013 if it was {{h_Nol approved by MeDenald India. Would it ot be unauthorized act? 10415. The allegations based on audit report also do not inspire confidence if we take into account various facts. (a) Neither 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 (©) 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 intemal audit system commensurate with the size and nature of its business” (Company Petition, Annexure P-36 (Colly), at pp. 571, 887, 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.657); (¢) 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 Petition, Annexure P- 39, p-558); (g) The balance sheet from the year 2007 to 2011 do not camry any qualification in relation to non-compliance of any accounting standards or breach of FCPAVanti-briberyiconflict of interest provision’ (Para 43 of the Letter dated 3 ‘September 2013; Company Petition, Annexure P-39, p.559); (h) Neither the report of statutory auditors nor the minutes of the meetings of the Board of the ‘Connaught Plaza sefer to any such allegation, Even after the last GCR Report there was no complaint on the leadership of Mr. Vikram Bakshi (Para 44 of the Letter dated 3 September 2013; Company Petition, Annexure P-39, p.560); ees i) The 105.16. only issue regarding disregard to applicable laws finds mention in the audit report of 31 March 2012 because of Respondent No, 4’s non-disclosure to the Company of her appointment as a director of Vista Processed Foods Pvt. Lid, (Para 45 of the Letter dated 3 September 2013, Company Petition Annexure P-39, p.560) for which Mir. Vikram Bakshi and his wife-Respondent No. 10 had to approach this Hon'ble Board and pay fines from their own pocket in order to compound the offence of Respondent No, 4. itis pertinent to submit herein that the Respondent No. § chose to remain quiet and did not take note or any action against such a fegulatory breach pointed out by the Statutory Auditor by its employee despite treating it as a grave enough cause not to re-elect Mr. Vikram Bakshi, Such double standards and inaction on part of Mc Donald Corporation U.S.A. are also ‘oppressive on the Petitioners, In respect of loan transaction styled as ‘Regal Loan Transaction’ involving seven million dollars no material benefit could be derived by the respondents by banking upon the allegations. First the transaction is stale and has lost its significance as it happened in 2007. Then it was duly ratified in the meeting of the Board of Director of ‘Connaught Plaza’ held on 17.04.2008. The petitioners have rightly placed reliance in a tabulated form drawn date wise which is as under:~ DATE PARTICULARS 14 November 2007 | Mr. Sanjay Sareen, the then CFO, sent a write up to Ms. Ayesel Melbye the nominee director for the reasons and the need of the proposed loan amount of INR 70 million, The mail specifically stated that Ms. Ayesel Melbye 106‘approval was required before the same could be placed before the Board of Directors of the Company. (Additional Documents Vol |, p.1-3 C) 49 November 2007 Deepak Shama 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 |, 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 |, p.4) 20 November 2007 ‘Alok Arora from F&A department of ‘Connaught Plaza’ sent the enti layout of second floor terrace of Regal Building to Ms. Ayesel Melbye, Respondent No. 4. (Additional Documents Vol |, p.11-12, 12D) 21 November 2007 Sanjay Sareen sent an email fo Ms. Ayesel Melbye Respondent No, 4, inter alia, about McDonald’s response to proposal on the Regal matter after Respondent No. 4 was scheduled to have a discussion with Dave Garland. (Additional Documents Vol |, pp-10, 12B) ‘21 November 2007 Vikram Bakshi & Co. Pvt. Lid. (VB & Co’). requested the ‘Connaught Plaza’ for a loan of Rs. 4.95 crores (first 107= tranche of the total loan amount of Rs. 7 crores) for the | purpose of providing space for installation of critical equipment of Air conditioning, Generating set, Water tanks, Pumps .. the McDonalds Restaurant at Regal. According to the terms of the loan, it was to be repaid on or before 31* March 2008 with an interest rate of 9% per annum or the average borrowing cost of the Company on the monthly rent basis, whichever was higher. The loan amount was requested to be issued through three Pay orders of Rs. 1,65 crores each (equaling Rs. 4.95 crofes) in the names of Mr. Kamal Nath Monga b) Mr. Ravinder Nath Monga and c) Mr. Vimal Nath Monga. The lotter 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 the Mc Donald Corporation U.S.A.- Respondent No. 5. (Additional Documents Vol |, pp.13- 13B). 21 November 2007 Vikram Bakshi & Co. sought to find out from ‘Connaught Plaza’ the property documents that Company would like to keep as a collateral security for the loan, in the event that it was sanctioned by the Company. (Additional Documents Vol |, pp.14-14A). 10822 November 2007 Ms. Melbye-Respondent No. 4 in an email to Sanjay | Sareen informed that Dave Garland has taken note of the | proposal, but that there was no reply from him yet. {Additional Documents Vol |, pp. 9, 124-128) 22 November 2007 The ‘Connaught Plaza’ signed a Memorandum of Understanding ("MoU") with Vikram Bakshi & Co. for granting a loan of Rs. 7 crores to it. Clause 6 of the MoU stated that in the event of non-receipt of approval from Mc Donald Corporation U.S.A. (Respondent No. 5) for sanctioning the loan amount, the loan amount would be returned with interest within two weeks from the date of request. (Additional Documents Vol |, pp.14A-14C), 22 November 2007 ‘The ‘Connaught Plaza’ issued three pay orders of Rs. 165 crores each towards loan of Rs. 4.95 crores (fist tranche of the total loan amount of Rs. 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 retumed with interest within two weeks from the date of request of the Company. (Additional Documents Vol |, p.43) 26 November 2007 ‘Sanjay Sareen sent another reminder to the ‘Connaught Plaza’ regarding the Regal issue. (Additional Documents Vol |, p:8) 109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 Jease period of McDonald's Property in Regal. ©. Pro-rata dilution of Mr Vikram — Bakshi's shareholding in the ‘Connaught Plaza’ as collateral for Rs.7 crores loan to Vikram Bakshi & Co. The above email also stated that Mr. Vikram Bakshi did not agree on the pro-rata dilution of shareholding. {Additional Documents Vol |, pp. 22-23) 29 November 2007 Deepak Sharma re-sent the email dated 28.11.2007 of Sanjay Sareen to the Company and also stated that Mr. Vikram Bakshi hed informed Mr. Peter Rodwell, Respondent No. 7, that he was not comfortable with dilution of his shareholding in the ‘Connaught Plaza’, Deepak Sharma urged Respondent No. 4 to arrive at a decision on the Regal transaction at the earliest. Ms. Ayesel Melbye -Respondent No. 4 confirmed receipt of this email on 30 November 2007. (Additional Documents Vol ,p.22). 110‘3 November 2007 ‘Alok Arora sent the draft rent agreement for the Regal property to Ms. Ayesel Melbye-Respondent No. 4 (Additional Documents Vol |, p. 21) 5 December 2007, VB & Co. requested the Company for a loan of Rs. 2 crores (20 million) (second tranche of the total loan amount of Rs,7 crores) for the Regal property. According to the terms of the loan, it was to be repaid on or before 31% March 2008 with an interest rate of 9% pet annum or the average borrowing cost of the Company on the monthly rent basis, whichever was higher. The loan amount was requested to be issued through a pay order of Rs. 2 crores in the name of VB & Co. The letter specifically stated that the pay orders would not be handed over to the party till the proposal for providing the service area in Regal had been approved by McDonald Corporation-Respondent No. 5. (Additional Documents Vol |, p.20) ‘S December 2007 Pursuant to the letter above, the Company issued a ‘cheque of Rs. 2 crores (second tranche of the total loan amount of Rs. 7 crores) as reqliested for by VB & Co. 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 |, p19) un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 on19 December 2007. (Additional Documents Vol |, p.24) | 8 January 2008 ‘VB & Co. requested the Company for a loan of Rs. 5 lakhs (third tranche of the total loan amount of Rs. 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 Rs. 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, p.27) | 2 February 2008 ‘Alok Arora informed Respondent No. 4 that the local documentation in respect of the loan of Rs7 crores disbursed to VB & Co. had been completed. Further, he also sought the relevant documents from Respondent No, 4 so that they could be placed before the Board of Directors of R1, (Additional Documents Vol |, p.28) 7 March 2008 Respondent No. 4 baselessly asserted that the Regal loan had been disbursed without the final approval of McDonald 12Corporation-Respondent No. 5 and the documentation had been signed without their knowledge. She also sought all documents and information on the Regal transaction. (Additional Documents Vol |, p.34-35) [10 March 2008 Ri, through a letter by Alok Arora to VB & Go, sought the repayment of the loan amount of INR 7 crores along with interest within two weeks from the date of the letter. On the same day, Mr. Vikram Bakshi sent a detailed note to Dave Garland of Respondent No. 5 on the Regal transaction and asserted that the decision to grant loan was taken in the interests of the Company. (Additional Documents Vol t, p.38) ‘31 March 2008 VB & Co. sent a cheque of Rs. 5.80 crores to the| Company, in addition to the payments made earlier, towards full and final settlement to the Regal loan amount (Additional Documents Vol I, p.60) 4 April 2008 Alok Arora communicated to Respondent No. 4 as the receipt of repayment of loan amount from JV & Co along with interest (Additional Documents Vol I, p.32) 17 Apa 2608 Regal loan transaction was discussed at the Board Meeting of the Company where Peter Rodwell, Respondent No. 7 acknowledged that Mr. Vikram Bakshi had initially sought consent from the Board of Directors of the Company regarding the possibility of obtaining a loan from R1. 13Mr. Vikram Bakshi explained to the Board of Directors that the Regal transaction was needed to secure the ‘opening of McDonald's restaurant in a prime downtown property in Regal (CP) and that he only acted in the best interests of the Company. In fact, Mr. Dave Garland, CFO, APMEA Region of Respondent No. 5 also acknowledged that the soundness of the location of McDonald's restaurant was not in doubt. (Company Petition, Annexure P-36 (Colly) Vol. Il, pp.568-710 at p. 703: | 18 August 2009 Report of Grant Thornton on the Regal loan transaction concluded that the transaction was not only commercially viable but also financially favourable for the Company (Annexure P-24 of the Rejoinder dated 4 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 Rs.7 crores was for the benefit of ‘Connaught Plaza’. It was outed 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. i 1418. Mr. Vikram Bakshi & Co. Pvt. Ltd. also requested ‘Connaught Plaza’ for a loan of Rs, 4.95 crore & (first tranche) for the same purpose. The loan was taken on 06.12.2007 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 Plaza’ sought prior approval of Me Donald Corporation U.S.A. for disbursement of the loan. It had acknowledged the receipt of the proposal for the regal loan transaction. Mr. Viktam Bakshi provided detailed background and reasons for undertaking the transaction to Mr. Dave Garland an officer of McDonald Corporation. The Grant Thornton report concluded that the transaction was not only commercially viable but also financially favourable for the Company and the transaction was duly ratified in the Board Meeting held on 17.04.2008. Mr. Vikram Bakshi was re-appointed twice as Managing Director of ‘Connaught Plaza’ thereafter. In any case, no financial loss has been caused to ‘Connaught Plaza’ by Teason of the regal loan transaction and the ‘Connaught Plaza’ secured the use of this space practically free of cost (at the rate of Rs. 100 per month) at prime location in New Delhi for its restaurant for a period of 30 years.. What could be a more beneficial act of a Managing Director for ‘Connaught Plaza’? This is an act of ‘good management and displays his vision. 19. It would now be necessary to sum up few paras of the reply of Mr. Vikram Bakshi tendering explanation to various allegations made in the note presented in the meeting dated 06.08.2013 which are as under:- (@). Mr. Vikram Bakshi completely disagreed with the contents of the Note because according to him the same were false, malicious, incorrect and were 11splaced before the board by two (2) nominee directors, acting in breach of their fiduciary duties towards the Connaught Plaza whilst furthering the malafide intention and ulterior motive of McDonald's, of implementing a pre- determined scheme of attempting to take over Connaught Plaza in a coercive, oppressive and illegal manner contrary to law. The allegations taised in the Note are stale, unfounded and without any basis. In any event, the false and fabricated allegations, if at all, have already been waived or acquiesced in during the various board meetings of Connaught Plaza. {b) McDonalc’s India, pursuant to the Joint Venture Agreement as amended from time to time and the Articles of Association (“Articles”) of the Connaught Plaza had agreed to "promptly cause the nomination and election of Partner as the sole Managing Director of the JV Company”. The JV Agreement refers to Mr. Bakshi as “Partner”. (c) The scheme of Connaught Plaza is repugnant to the concept of a board managed company. It is the Managing Director/Partner ie. 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. (@) 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 fth_evident from clause 7 of the JV Agreement read with Article 35 of the 116@) ® (9) Asticles, 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 Managing Director. itis illegal for the nominee directors to breach the provisions of Clause 7 of the JV Agreement which is part of Articles and requires shareholder parties to promptly cause election of Vikram Bakshi as the sole Managing Director. Since there is term of office of two (2) years, the promptness of election at the general meeting is necessitated prior to expiry of term and/or considered continuation of the term beyond the terms of two (2) years in the absence of proof or reason not to vote at the general meeting. In addition and without prejudice, the nominee directors of McDonald's were interested directors as they are employees of McDonald's and McDonald's has pecuniary interest in causing non-appointment of Vikram Bakshi as Managing Director in a blatant attempt to usurp the shareholding of Vikram Bakshi and Bakshi Holdings (Pvt) Lid. (“BHPL”) (together the “Indian Shareholders”), {tis stated that each of the allegation made in the Note is rebuttable and it is. our case that allegations have been deliberately raised to sustain a forced purchase of shares of the Indian Shareholders. Such actions of McDonalds’ tte _ clear acts of oppression and malafide behavior, as set out herein below. 17(h) The hollowness of any one of the several, false, stale, incorrect or waived complaints/charges/causes result in the failure of the entirety of the Note. The Note was tendered with the sole and malicious purpose of ousting the Indian Shareholders in a coercive, oppressive and illegal attempt to take over the undertaking of the Indian Company at a time when the gestation period of the business has started reaping profits due to several years of investment, both in money and my hard work, as the Managing Director for establishing a viable and profitable business in India. In order to somehow force me to sell my shares in the JV Company. MeDonald’s cannot prejudice the interests of the JV Company. The Company's interest is paramount. It cannot be compromised even if one shareholder has any petsonal motive to ‘cause the exit of another shareholder or group of shareholders, McDonald's entered into the Joint Venture Agreement dated 31 March 1995 with me only after being fully satisfied that | had requisite background, competence, expertise in launching and establishing McDonald's brand in India, McDonald'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. () 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 ere was ranked 3 in McOpCo margin in 2009 and 2011, 2 in 182010 and 5” in 2012, and has consistently out performed the West & South- India Region, which was ranked No. 10 in 2008 and 2011, No. 9 in 2010 and No. 11 in 2012. From 1995 and til date, Connaught Plaza has opened 164 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. () 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 relentless efforts such as Readers Digest rated McDonald's as the ‘Most Trusted. Brands in India’ for two consecutive years. (2010-2011). The well known Business-World Magazine awarded McDonald's the ‘Most Respected Company’ Award in the Food Services Sector for four (4) consecutive years (2003-2007). McDonald’s is ranked 13! amongst the 100 Top Retailers in India’ in 2011, by the Retailer Magazine. The closest competitors, Pizza Hut and KFC were at 34" and 39" position, respectively. (k) He has given his full and undivided attention in running the business of the Connaught Plaza to the extent that he passed on various benefits to the ‘Connaught Plaza, including his personal properties which have been given to it at either the purchase price or on discounted or nominal or no rentals at all, He has also incurred personal liabilities upon him and have initiated/defended several legal proceedings to protect the interest of Connaught Plaza and ensured that the JV Company and brand McDonald's eres wrlomined Some of the more important instances we have 119: already noticed these facts in paras 20, 21, 22, 23 under Part | Introduction & Facts — List of properties provided to Joint Venture. 20. These instances can be multiplied further and the safe conclusion which we have reached on the basis of material placed before us is that Mr. Vikram Bakshi alongwith his wife has given their full business time to ‘Connaught Plaza’ and on account of their sincere efforts ‘Connaught Plaza’ is running a large number of 154 restaurants. We also find that non-voting in favour of Mr. Vikram Bakshi in the board meeting of 06.08.2013 is preceded by talks of purchasing 50% shareholding of the petitioners at a throw away price. We feel persuaded to accept that averments noted in para 24 of the introduction and Facts inspire confidence. It was followed by the valuation report by the auditors of M/s Grant ‘Thomton, in that regard detail averments are also noticed in para 25 which again are acceptable. We are persuaded to take the view that the non-voting in favour of Mr. Vikram Bakshi was based on extraneous consideration causing great prejudice the petitioners. It is also against the interests of the ‘Connaught Plaza’. 21. Itis also required to be bore in mind that it is not simple non-voting to re-elect Mr. Vikram 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 fespondent Nos. 3 & 4, the nominee directors in the meeting dated 06.08.2013 fh tee mane ‘none of the charges/allegations have substance. In view of the 12022. 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. itis also an act against the interests of Connaught Plaza and is detriment to public interest, A large number of employees would suffer by such an approach. Therefore, the same is liable to be set aside and all other consequential act like uploading of Form 32 with the Registrar would also become illegal. This is further bom out from the facts that in the meeting held on 05.08.2013 by McDonald India-respondent No. 2 the decision to vote against Mr, Vikram Bakshi had already been taken and even further decision consequent upon his non re-election to exercise the call option was also taken. It shows the pre-determined mind of respondent Nos. 3 & 4, The decision is not based on any note which was presented in the meeting by respondent Nos. 3 & 4, nominee directors of McDonald India on the Board of ‘Connaught Plaza’. There is no approval of any such note by McDonald India in its resolution. The directors would be acting without any authorization by presenting the note. ‘Once it is clear that non-voting by the nominee directors of respondent No. 2 Company was actuated by extraneous considerations and all acts on the part of Mr. Vikram Bakshi were strictly in accordance with the provisions of the Articles of Association and clause 7 of the JV Agreement which stand incorporated in the Articles then there is no escape from the conclusion that McDonald India as a shareholder through its nominee directors has acted to oppress Mr. Vikram @ Bakshi and petitioner No. 2 with malafide intentions to avail the benefit of clause qa.26 and 32 of the Joint Venture Agreement which provides for option to recall and purchase the shareholding of petitioners in accordance with the formula provided in the Joint Venture Agreement, 23. The Companies Act, 1956 deals with prevention of Oppression and Mismanagement. Section 397 deals with the powers of the Tribunal and the right of the oppressed party to apply for redressal of his grievances, Section 402 envisages the power of the Tribunal to pass order on such application. Both the aforesaid provisions are set out below for facility of reference: “Section 399. Right to apply under sections 387 and 398.- (1) The following members of a company shall have the right to apply under section 397 or 398:- (a) _ in the case of a company having a share capital, not less than ‘one hundred members of the company or not less than one- tenth of the total number of its members, whichever is less or any members 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- fx_(@)_the regulation of the conduct of the company’ s affair in future;(b) the purchase of the shares or interests of any members of the company by other members thereof or by the company; (©) 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, (i) any other director, () the manager, upon such terms and conditions as may, in the opinion of the [Tribunal] be just and equitable in all the circumstances of the case; {e) the termination, setting aside or modification of any agreement between the company and any person not referred to in clause (@), provided that no such agreement shall be terminated, set aside or modified except after due notice to the party concerned and provided further that no such agreement shall be modified except after obtaining the consent of the party concerned; (f) the setting aside of any transfer, delivery of goods, payment, execution or other act relating to property made or done by or against the company within three months before the date of the application under section 397 or 398, which would, if made or done by or against an individual, be deemed in his insolvency to MtA__bea fraudulent preference; 12324. 25. {g) any other matter for which in the opinion of the [Tribunal] itis just and equitable that provision should be made,” The facts and circumstances of the present case would leave no manner of doubt that @ case for winding up is made out satisfying the condition envisaged by Section 397 (2) (b) of 1956 Act. However, we are of the view that winding up the Connaught Plaza would unfairly prejudice the petitioners who have 50% of shareholding. Therefore, we do not feel that it would be just and equitable to order winding up. It is well settied that if the conduct of the one group of shareholders was oppressive to the other group of shareholders then it would require consideration of totality of facts. The finding of oppression cannot thus be concluded on the basis of one or two events. The conduct must be burdensome, harsh and wrongful. These principles have been laid down by the Hon'ble Supreme Court at pages 366, 367 in the case of Shanti Prasad Jain v. Kalinga Tubes Ltd., (1965) 35 Com Cases 351. Accordingly, we have recorded our satisfaction that the affairs of Connaught Plaza have been conducted in a manner oppressive to the petitioners as recorded in preceding paras. The finding which we have recorded in the preceding paras do not ‘springs from inter-se dispute of the Directors but goes to the roots of proprietary Tights of the petitioners as shareholders. According to clause 32 of the JV ‘Agreement McDonald India has been given the option to purchase the shares of the ‘toners at a price determined in accordance with para 26 if Mr. Vikram. Bakshi suffers the termination of his relationship as a Managing Director of the se_sV 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 Section 397, 398 and 402 would be unquestionable. A Division Bench of Hon'ble Madras High Court in the case of Rao (V.M.) v. Rajeswari Ramakrishnan, (1987) 61 Com Cases 20 al 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 faimess towards the shareholders and its probity has to be kept in view, as has been held in the case of TN Raghunath (Dr) v. Lake Side Medical Centre P: Ltd., (2007) 137 Com Cases 741. 26, It is in the aforesaid facts and circumstances that Section 402 provide for exercise of jt isdiction by the Tribunal by passing any order for the regulation of the conduct of the company’ s affairs in future; the termination, setting aside or modification of any agreement between the company on the one hand and the Managing Director, any order setting aside any transfer, delivery of goods etc, The Tribunal is also clothed with the power to provide for any other matter for which in the opinion of the Tribunal itis just and equitable that provision should be made. Thus, the powers given to the Tribunal by Section 397 and 398 read with 402 of the 1956, Act are very wide as has been laid down in the case of Venture India Properties P. Ltd. v. Cap. Manmohan Singh Kohli, (2011) 103 {th_CLA 185 (Dey. 125# 27. 28. We may now notice the arguments raised by respondents, On behalf of respondents 2 to 4, objections have been raised against reading of paragraph 7 of the Joint Venture Agreement as part of the Articles of Association on the ground that in para 8.66 of the petition there is an admission made by the petitioner that the provisions of JV Agreement have not been incorporated in the Articles of Association. The second ground urged in support of the aforesaid submission is that in any case on proper interpretation of Articles 35 and 36, it cannot be concluded that paragraph 7 of the Joint Venture Agreement as a whole stands incorporated in the Articles. ‘The aforesaid objection raised by respondents 2 to 4 is not sustainable for a variety of reasons. Firstly, the admission to which reference is made has been read by respondents in isolation. In para 8.66, the petitioners have submitted that the issues raised in the present Company Petition were not relatable to the JV Agreement as its provisions have not been incorporated in the Articles of the. company. However, itis divorced from various parts of para 8, where a specific reference has been made to Articles 35 & 36 for reading it with paragraph 7 of the JV Agreement. A close examination of averments made in paras 8.3, 8.5, 8.8, 8.7 and 8.12 of the petition would patently show that the petitioners have asserted incorporation of clause 7 of the JV Agreement in the Articles by repeatedly referring it with Article 35 and 36. It would be profitable to read para 8.7, 8.8, 8.11 and 8.12, which are as under: “8.7. It is submitted that there is no reversionary powers on the Board of Directors assume the authorities, which are conferred by the JV Agreement and the Articles on Potitioner No. 1. The power of ct appointment and/or re-election is an obligation of the shareholders as is 126evident from clause 7 of the JV Agreement and Article 35 of the Artictes, 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 duly 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 fo derive to profit therefrom that too, without cogent evidence. 8.11. itis submitted that the Nominee Directors of McDonald's have no locus a8 nominees not to promplly cause the nomination and/or re- election of MD as McDonela’s right to vote is only available at the general meeting. The action of Nominee Directors of McDonald's is uitra-vires. their authority as directors and is in breach of their fiduciary duty and also in breach of Clause 7 of the JV Agreement embedded in Article 35 of the Articles of Association of the JV Company. 8.12. (t is thus submitted that it is illegal for the Nominee Directors to breach the provisions of Clause 7 of the JV Agreement, which requires shareholder parties to promptly cause election of Petitioner No. 1 as the ‘sole MD. Since there is term of office of two (2) years, the promptness of election at the general meeting is necessitated prior to expiry of term and/or considered continuation of the term beyond the terms of two (2) years in the absence of proof or prude reason to not to vote at the general meeting. Hence it is submitted that the Petitioner No. 4 continues tobe the sole MD of the Company’. a7A perusal of the aforesaid paras would not leave any manner of doubt that the case set up by the petitioner is that the provisions of whole para-7 of the Joint Venture Agreement stand incorporated in the Articles, The so-called admission in para 8.66 is entirely in different context. Moreover, it is well settled that admission on a question of law would not bind the parties. In that regard, Teliance may be placed on the observations made by a Constitution Bench of the Supreme Court in the case of Banar:. Das vs. Kanshi Ram- AIR 1963 SC 1165. There is a categorical statement of law that the admission would bind the maker only in so far as the facts are concerned but not on a question of law. 29. In any case, if admissions are erroneous, then the same are liable to be ignored. In the present case in Article 36 & 36 not only reference to para 7 of JV Agreement has been made, it goes further to say that the Managing Director is to be elected subject to the provisions of Para 7 of the J.V. Agreement and to be entrusted with substantial power of management subject fo the superintendent, control and direction of the Board; and he is to manage the day-to-day operation of the Connaught Plaza. 30. The other argument that Article 35 only incorporates a part of para 7 of the JV. Agreement is completely divorced from the settled principles of construction, A contract has to be read asa whole keeping in mind the nature and purpose 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 (TA__2nd understanding between the parties just cannot be overlooked before 128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 Pvt. Ltd. 2010 (3) RAJ 292 (Born). 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. {t 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 Lid. v. Town and Country Planning Department (2010) 14 SCC 1. If Article 2) (g) is seen all amendments made in J.V. Agreement were incorporated expressly then the scope of this argument is marginalized. According to Article 2(j) (g) of Articles of Association, J.V. agreement not only means the agreement dated 31.03.1995 it also include ‘all other written modifications made to the Joint Venture Agreement from time to time including (1) the Joint Venture Agreement dated 6.3.1995....... (2)ec..-27.05.2008, .......5.41.2012 and 14.12.2012. ‘What does it show? In fact, the definition clause tends to show the intention of the parties to incorporate every clause of J.V, Agreement into the Articles. itis also evident from Article 6 of the Articles of Association. Moreover, the parties have understood and acted upon the Articles in the manner as provided in para 7 of the J.V. Agreement. Therefore, at least whole para 7 of the Articles is incorporated. From the inception, Mr. Vikram Bakshi has been the Managing {th _Ditector. The note also makes an attempt to bring the case of Respondents 2 129= to 4 within the parameters of para 7 (e) of J.V. Agreement because parties regarded it as a part of Articles. Similarly, acceptance to act as Managing Director in terms of 7 (a) by the ‘Partner’ referring to Mr. Vikram Bakshi, undergoing trainin, in erms of 7(b), exercise of authority always in accordance with 7(c), salary paid in accordance with 7 (d) and re-election for 17 long years would not leave any manner of doubt that parties understood that clause 7 of J.V. Agreement is a part of Articles of Association. Therefore, we do not fee! persuaded to accept the submissions made on behalf of respondents 2 to 4 and have no hesitation to reject the same. 31. Article 36 by specifically incorporating paragraph 7(d) of the JV Agreement provide for the remuneration of the managing Director. In pursuance of the aforesaid Article 36 & 36, the parties have appointed Mr. Vikram Bakshi as the Managing Director from the inception upto the year 2013, In other words, the provisions of Article 35 & 36 read with para 7 of the Joint Venture Agreement have been acted upon for the last more than 17 years, It is well settled that if the parties have understood the contents of a contraclidocument by acting upon it in particular manner, then it is not possible to accept any contrary interpretation or proposition 32. On the issue of interpretation, it was suggested 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 130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 Section 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 Bakshi alongwith petitioner No. 2 which his own company has fifty percent shareholding in Connaught Plaza. The position of Managing Director is linked with Mr. Bakshi in such a manner that if he looses his status as Managing Director he may also loose his shareholding by virtue of provisions of clauses 26 and 32 of JV Agreement. Accordingly, in pursuance of clauses 26 and 32 of the Agreement Respondents No, 2 may exercise call option virtually ousting petitioners from Connaught Plaza, The argument, therefore, on the face of it is absurd and we reject the same. 34. We are also not impressed with the submission that commercial contracts are outside the scope of Section 397, 388 and 402 of the Companies Act, 1956 because such an argument in the facts and circumstances is not attracted and applicable. We have referred to para 7 of the JV Agreement read with Articles 36 and 36 of the Articles of Association and we have regarded it as a part of Articles of Association as had already been held. We have referred to clauses {tk _26 and 22 of the JV Agreement for the purposes of showing oblique motives35. 36. 37. 38. and malafide intentions of Respondents 2,3 & 4. Therefore, whole gamut of Section 397 read with Section 402 of 1958 Act would come in play to protect a party from oppression by exercising just and equitable jurisdiction under Section 402 of the 1956 Act. Therefore, we find the argument without substance and the same is rejected. We are aiso not impressed with the submission that there is mis-statement as we do not find any such material misrepresentation. Respondent No. 8 filed an application being C.A. No, 134(PB)/2017 on 03.05.2017 bringing on record an order passed by The Institute of Company Secretaries of India exonerating him from the allegations made by Mr. Vikram Bakshi. Accordingly, he has been found ‘not guilty of professional or any other misconduct’. It is appropriate to mention that Mr. Vikram Bakshi has labelled various allegations against Mr, ‘Devinder Jain-respondent No. 8 alleging that respondent No. 8 had filed Form-32 on 27.08.2013 without any copy of signed minutes of meeting. Accordingly, we take the order dated 08.04.2017 on record as passed by The Institute of Company Secretaries of India without making any further observation. it shall not however acts to the prejudice of any of Mr. Vikram Bakshi Likewise, another application has been filed by one Mr. Deepak Khosla 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 We have heard Mr. Khosta at a considerable length who has urged that Mr. t Vikram Bakshi is liable to be prosecuted. 13239. Having heard the leamed 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. Allother 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:- (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 nulified 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 leamed Administrator, (i) All steps taken in pursuance of non-election of Mr. Vikram Bakshi as Managing Director, are also declared illegal, unlawful, unjust and malicious. (iil) 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-110016 to act as Administrator with all the 133,powers including the power to vote in the Meetings of Board of Directors. The Administrator shall settle his own fee. (iv) The Administrator shall ensure that all resolutions in respect of Connaught Plaza are passed to advance the interest of the Connaught Plaza and none of the two groups is oppressed. The agenda for re-election of Mr. \ Vikram Bakshi as a Managing Director shall be taken up with the prior approval of the Administrator. No agenda should be placed before the i Board of Directors without the prior approval of the learned Administrator (v) The Administrator may consider the possibility of even altering the Articles of Association so as to avoid any ugly situation to oust Mr. Vikram Bakshi as Managing Director unjustly and unfainly. (vi) Respondent No. 5 is restrained from interfering with the smooth functioning of Connaught Plaza and all its 154 restaurants open id the assigned territory of North/East India. i (vil) The petitioners are held entitled to costs which we quantified at ‘Rs. 10 lacs. The cost shall be paid by McDonald India-Respondent No. 2 to the petitioners. 42. The petition stands disposed of in the above terms. (CHIEF JUSTICE M.M.KUMAR) PRESIDEN’ (S.K. MOHAPATRA) MEMBER(TECHNICAL) 13.07:2017 Vineet 134