McDonald’s spat: supplier under pressure to resume supplies

Connaught Plaza Restaurants Pvt Ltd (CPRL), the joint venture between Vikram Bakshi and McDonald's India, could drag its logistics partner Radhakrishna Foodland to court for abruptly halting supplies to its stores, according to an Economic Times report citing sources.

Over 80 McDonald's outlets in north and east India have been hit by the cutoff in supplies by Radhakrishna Foodland due to alleged non-payment of dues, it was reported on Tuesday (See: Internal spat leads to closure of McDonald's across east, north).

''Under the contract, the vendor has to give 30 days' notice before terminating supplies, which was clearly not followed," a senior official privy to the development told ET.

"CPRL is planning to file a case against the supply chain partner for hurting the business as well as additional costs borne by them for backup logistics services," the person said.

Vikram Bakshi said nearly all outlets of the food chain in East India have been shut and several others in the north are on the brink of closure due to discontinuation of supplies by its logistics partner.

"My job is to run the company and get products back at the restaurants as soon as possible," he told ET. "We have roped in several logistics partners to make sure our restaurants carry the entire range."

Meanwhile, former Supreme Court judge G S Singhvi has written to Radhakrishna Foodland, the logistics partner of McDonald's in north and east India, to restore the supply chain services, Mint reports.

Justice Singhvi is an administrator appointed by the National Company Law Tribunal (NCLT) on the board of CPRL, the north and east India licencee of the American fast food chain. Radhakrishna Foodland, which manages the distribution network of CPRL in north and east India, had discontinued its services on 20 December.

CPRL operates 169 McDonald's restaurants across north and east India.

In two letters dated 24 December and 25 December, which Mint said it had reviewed, Singhvi said that the discontinuation of services has disrupted and jeopardised the business of CPRL and amounts to ''contravention of the orders of the Hon'ble NCLT and tantamount to contempt of the order of NCLT (dated 13 July 2017),'' according to which Singhvi has to ensure smooth functioning of CPRL restaurants.

''Therefore, you are advised to forthwith resume all the said supply services, so that all the restaurants operated by CPRL have a complete supply of all the products that they are supposed to sell and are able to continue to operate their daily businesses without any impediment,'' Singhvi said in one of the two letters.

Balasubramanian N Iyer, chief operating officer at Radhakrishna Foodland, confirmed that the company has officially replied to the letter and is waiting for Singhvi's response, without divulging details on the content of the response and restoration of services.

''They (Radhakrishna Foodland) have not resumed services. RKFL has replied to justice Justice Singhvi's letter. They claim it's a contractual matter and does not fall in the ambit of administrator's powers. If so, why did they not provide a 30-day notice enshrined in the agreement between CPRL and RKFL,'' said Bakshi, in a text message.

Bakshi and McDonald's have been involved in a prolonged legal battle over the control of the joint venture formed in 1995. The US firm ousted Bakshi as managing director of CPRL nearly four years ago. Bakshi challenged this before National Company Law Tribunal (NCLT).

The NCLT reinstated Bakshi to his position in July this year and appointed Justice Singhvi as the firm's administrator.

On 21 August, McDonald's India had terminated its franchise agreement with CPRL, according to which Bakshi was supposed to cease using McDonald's name, trademarks, designs, branding, operational and marketing practice and policies and food recipes and specifications from 6 September.

This termination was challenged by Bakshi before the NCLT for being in contempt of the earlier NCLT order, which had asked McDonald's Corp to refrain from interfering in the smooth functioning of CPRL. So far, Bakshi has continued to operate the restaurants.