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McDonald’s plea against NCLT show cause premature, observes HC

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The Delhi High Court today said that a plea by McDonald’s against a show cause notice issued to the fast-food major by the National Company Law Tribunal on a contempt plea filed by its estranged Indian partner was premature and reflected some paranoia.

McDonald's plea against NCLT show cause premature, observes HC
Bakshi has been at loggerheads with the fast-food chain over the management of CPRL after he was ousted from the post of MD of McDonald's franchisee in August 2013

According to a PTI report: The observations were made by a bench of justices Siddharth Mridul and Deepa Sharma while hearing the company’s appeal against a single judge’s decision to reject its challenge to the show cause notice.

The bench was of the opinion that the tribunal was only contemplating initiation of contempt proceedings and there has been no determination of contempt by the NCLT.

It suggested McDonald’s to reply to the show cause notice and to indicate before the NCLT that there has been no violation of the tribunal’s orders by the company.

“Issuance of show cause notice not a cause of action. Why should we entertain this plea at all,” the bench was quoted by PTI as saying and adding, “it is a little premature. There seems to be some paranoia.”

The single judge in his January 9 decision had dismissed the company’s plea saying the grievances raised by it were a result of “unfounded apprehensions” that the NCLT had prejudged the issue and that it “reflects paranoia rather than substance”.

During the proceedings, senior advocate Rajiv Nayar, appearing for McDonald’s, argued that even a show cause notice asking why contempt proceedings be not initiated can be challenged in the high court which would have the jurisdiction to hear it.

The bench, thereafter, asked the senior lawyer to show judgements which said that such orders, contemplating initiation of contempt, can be challenged in the high court and listed the matter for further hearing on February 6.

During the arguments, Nayar also told the bench that the show cause notice was sent to it by the lawyer for the other side but not by the NCLT registry, to which the court said that in such a situation, the company need not appear before the tribunal.

In its plea before the single judge, McDonald’s had contended that in the absence of rules for conduct of contempt action under section 425 of the Companies Act read with the Contempt of Court Act, such proceedings would deprive it and others of their fundamental rights.

It had argued that the NCLT ought not have entertained the contempt plea when they had already filed an appeal against its July 13, 2017, decision in the appellate tribunal (NCLAT).

Bakshi had moved the contempt plea alleging that the fast food major’s decision to terminate his franchise licence with regard to 169 outlets run by their 50-50 joint venture Connaught Plaza Restaurant Ltd () violated the NCLT order of July 13, 2017.

The NCLT by its July 2017 order had reinstated him as the managing director of CPRL and refrained the US-based food giant from interfering in its functioning.

Bakshi has been at loggerheads with the fast-food chain over the management of CPRL after he was ousted from the post of MD of McDonald’s franchisee in August 2013.

McDonald’s India had asked CPRL not to use its brand system, trademark, designs and associated intellectual property among other things, within 15 days of the termination notice, which had expired on September 6, 2017.

Bakshi had moved the NCLT following termination of the licence by McDonald’s India Pvt Ltd (MIPL).