The Delhi High Court held that the dispute between McDonald's India Pvt. Ltd and its estranged partner Vikram Bakshi has to be resolved through arbitration before London Court of International Arbitration.
A division bench of justices Badar Durrez Ahmed and Sanjeev Sachdeva set aside the decision of a single judge bench of December 22, 2014 restraining arbitration proceedings between the two as ordered by the Company Law Board (CLB).
McDonald's had terminated the contract of its franchise for North India to the Connaught Plaza Restaurants Private Limited, which was incorporated pursuant to the joint venture between Bakshi and the US-based fast food major.
Allowing the appeal of McDonald's by examining the issue, the division bench said, "There is now a mandate to refer the parties to arbitration unless the court finds that prima faice no valid arbitration agreement exists. This is clearly not the case here.
"Therefore, in any eventuality, in the facts and circumstances of the case and applying the principles, as indicated above, the single judge could not have restrained the appellant from pursuing the arbitration proceedings before the arbitral tribunal," it added.
The bench further said, "the finding of the single judge that the arbitration agreement in the present case is incapable of performance or inoperative because of the pendency of the proceedings in the CLB is clearly out of line".
It said that the single judge was of the view that there was a waiver or abandonment of the arbitration clause by the parties. "This finding is clearly erroneous," it added.
It said while courts here have the power to injunct arbitration proceedings, they should use this power rarely.
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