Vikram Bakshi v.

McDonald India Private Limited

Introduction
This case involves the concept of Oppression and Mismanagement that can be
found u/s 241 of Companies Act, 2013 while in Companies Act, 1956 it was
provided u/s 397(1).

Section 241 of the Act of 2013 allows in

 Companies having share capital-Not less than 100 members or

1/10th of total members, whichever is less or Any member/members
holding not less than 1/10th of issued capital subject to no dues in
respect of those share held

 Companies not having share capital-Not less than 1/10th of total

members, to file an application before the National Company Law
Tribunal in case the affairs of the company are being conducted in ways
that is prejudicial to – public interest, to a particular party, or interest of
the company.

Any change or alteration in the management of the company like an alteration

in board of directors or ownership in shareholding pattern that is prejudicial or
oppressive to any party or class of shareholders is also recognized unfer the
provisions of this section.

Development of Concept of Oppression and Mismanagement

In case of Needle Industries (India) v. Needle Industries Newey (India)1, the

Supreme Court for the first time defined the term “Oppression”.

The meaning of the term “oppression” as explained by Lord Cooper in the

Scottish case of Elder v. Elder & Watson Ltd2, was cited with approval by
Wanchoo J. of the Supreme Court of India in Shanti Prasad Jain v. Kalinga
Tubes3.

1
AIR 1981 SC 1298
2
1952 SC 49
3
1965 AIR 1535

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They looked upon the requirements for case of oppression and mismanagement.
There needs to be a conduct amounting to misconduct by majority towards the
minority and this conduct needs to be continuous in nature.

Facts:
The case of Vikram Bakshi v. McDonalds4 India gained a lot of attention in
recent years and is first major case involving oppression and mismanagement
that NCLT has looked into.

1. Vikram Bakshi and McDonalds India Private Limited entered into a Joint
Venture Agreement by which both of them held 50% of equity shares in
Connaught Plaza Restaurants Private Limited, appointed as the primary
franchise for a period of 25 years and had the right to manage all franchises in
Northern parts of India.

2. The agreement specified having four board of directors, two from both the
parties involved and the board was to appoint a managing director for a period
of two years. (he had to be resident of the national capital region and he had to
have at least 50% of the shares of the joint venture)

3. Clause 32 of the agreement further stated that if Mr. Bakshi was not the MD,
then McDonalds have option to purchase his shares as per fair market value
determined by the formula in the agreement.

4. In 2007-08 McDonalds offered to purchase his shares at $5 million, however

on the basis of fair market value Bakshi demanded $100 million. This led to Mr.
Bakshi’s termination, blocking his re-appointment as MD for allegations of
diversion of funds and mismanagement.

5. Mr. Bakshi contended that this act of out casting him as director was done
with malafide intention of purchasing his shares in the company. His
contentions relied upon the history of prejudice and oppression shown against
him by the respondents.

6. The contentions presented by the respondent was that NCLT lacked

jurisdiction to decide the case at it was a case of private contract and also that
MIPL had the right to block such re-appointment as Mr.Bakshi violated the
terms of the Joint Venture Agreement by acting against interest of MIPL and
CPRPL.
The clause in the agreement provides that if any dispute arises, it shall be
resolved through arbitration.

4
2014

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The NCLT after looking into the facts and issues of the case, held the case in
favour of Mr. Bakshi. NCLT held that it had jurisdiction in deciding the case as
the joint venture agreement was incorporated under the AoA of the company.
While rejecting the arguments of the respondents it said that there was no
mismanagement in the company as it was financially healthy and no case of
diversion of funds was found. I also held that the acts done by the nominee
directors were of MIPL of blocking re-appointment of Mr. Bakshi was an act of
oppression and done with malafide and pre-meditated intention in relation to
their right to purchase his shares on his termination. These actions by the
directors of MIPL was prejudicial to the interest of public as several employees
of the franchise suffered their employment, owing to the decision to terminate
the franchise agreement. NCLT held it to be a continuous act of oppression
against Mr. Bakshi and therefore reinstated him as MD of CPRPL.

Analysis:
The provisions in the case deal with the Act of 1956, but the Act of 2013 has
borrowed a lot of provisions from the old Act with regard to Oppression and
Mismanagement.
The facts of the case make it clear that the court’s decision in favour of Mr.
Bakshi is just and appropriate. The court has held here that this was a
continuous act of oppression by the directors of MIPL towards Mr. Bakshi
which is also held in several other cases like in the case of Kalinga tubes.
While stating that it had jurisdiction in the matter the court made it clear that
contracts incorporated under the AoA of the company would fall within the
jurisdiction of NCLT and also it can deal with any matter that is relating to the
protection of rights of any member of the company from oppression and
mismanagement.
The Joint Venture Agreement between both the parties had a arbitration clause,
this case made it clear that the clause would not be enforceable when the matter
is being dealt by the NCLT.
The case and its judgment makes it clear that oppression should be established
through facts of the case and clear malafide intentions must be established too.
This was an extension to the rights provided to the shareholders by protection of
minor shareholding rights.
One of the drawbacks was failure to enforce the arbitration clause which would
be a problem in the future when foreign companies would want to consider
investing in India as majority of the companies prefer going for arbitration in
resolving a dispute rather than going through the long judicial process of
resolving disputes.