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2010 Supreme(Bom) 1739
High Court of Judicature at Bombay
THE HONOURABLE MR. JUSTICE D.Y. CHANDRACHUD & THE HONOURABLE MR. JUSTICE ANOOP V. MOHTA
Board of Control for Cricket in India
Versus
KPH Dream Cricket Private Limited
APPEAL (LODG.) NO.881 OF 2010 IN ARBITRATION PETITOIN (LODG.) NO.1303 OF 2010
Decided on: 15-12-2010
For the Appellant:C.A. Sundaram, Senior Advocate with T.N. Subramaniam, Senior Advocate, P.R. Raman, Ms. Akhila Kaushik, Ms. Rohini Musa, Sharan Jagtiani, Ms. S.P. Arthi, Indranil Deshmukh, Rahul Mascarenhas & Adarsh Saxena i/b Amarchand Mangaldas & S.A. Shroff & Co., Advocates.
For the Respondent:D.J. Khambata, Senior Advocate with Shyam Mehta, Arif Doctor, S.V. Doijode, Ms. Deeksha Kakar, R.H. Daulat, Ms. Amodi Borkar, Ms. Priyanka Kothari i/b Doijode Associates, Advocates.
The main legal point established in the judgment is that a party can seek interlocutory relief under Section 9 of the Arbitration and Conciliation Act, 1996, if damages would not provide an adequate remedy, and that contractual terms should be construed to give business efficacy to the commercial understanding between the parties.
Headnote:
Arbitration and Conciliation Act - Termination of Franchise Agreement - Clause 11.7, Clause 21.6 - Summary of Acts and Sections: Arbitration and Conciliation Act, 1996 - Section 9, Clause 11.7, Clause 21.6
Fact of the Case:
The Board of Control for Cricket in India (BCCI) terminated a franchise agreement with a cricket team, alleging irremediable breaches by the franchisee. The franchisee sought interlocutory relief under Section 9 of the Arbitration and Conciliation Act, 1996, claiming that damages would not provide an adequate remedy.
Finding of the Court:
The court found that the termination was based on erroneous factual grounds and that the franchisee had established a strong prima facie case for interlocutory relief. The court granted an interim order staying the termination, subject to stringent conditions, to prevent irreparable harm to the franchisee.
Issues: The issues included the validity of the termination, the interpretation of Clause 11.7 and Clause 21.6 of the franchise agreement, and the availability of interlocutory relief under Section 9 of the Arbitration and Conciliation Act, 1996.
Ratio Decidendi: The court held that the franchisee had established a strong prima facie case for interlocutory relief, as damages would not provide an adequate remedy. The court also interpreted Clause 11.7 to include both direct and indirect control, and declined to read Clause 21.6 as prohibiting the franchisee from seeking injunctive relief under Section 9.
Final Decision: The court dismissed the appeal, upholding the grant of interlocutory relief to the franchisee and emphasizing the need for fairness and good faith in the exercise of power by BCCI.
Oral Judgment: (Dr. D.Y.Chandrachud, J.)
1. This Appeal arises from an order of a learned Single Judge of this Court by which a petition under Section 9 of the Arbitration and Conciliation Act, 1996 was allowed. By the order of the learned Single Judge the Appellant, the Board of Control for Cricket in India, has been injuncted from acting on the basis of a termination of 10 October 2010 of a franchise agreement entered into between the parties on 10 April 2008. The order of the Learned Single Judge is subject to several conditions including amongst them (i) That the Respondent shall furnish an unconditional bank guarantee of a nationalized bank to secure the payment of players ’ dues initially in the sum of US $18 million; (ii) The furnishing of an unconditional guarantee of a nationalized bank in the amount of US $3.5 million; (iii) The filing of unconditional personal undertakings guaranteeing the due payment of any amount as may be found on adjudication by any court or tribunal, in the event that the termination is upheld; (iv) A restraint on the disposal of shares of certain companies. In order to appreciate the challenge to the order of the learned Single Judge a reference to the factual background would be in order.
2. In 2007 the Board of Control for Cricket in India (‘BCCI’) set up the Indian Premier League (‘IPL’) a domestic twenty overs per side cricket format based on the international T20 model. Each team was to be owned and operated by private persons / corporations / entities. A franchise to operate the team was to be given to a franchisee who was the successful bidder for each team. The IPL was to consist of eight teams which would play each other between April and May every year. Eight IPL teams were identified from different States and regions in India.
3. On 27 December 2007 an invitation to tender was issued by BCCI inviting bids for IPL franchises. The terms of the tender stipulated that a franchise would be granted to operate a team for so long as the League would continue. In consideration each franchisee was required to pay to IPL a franchise fee for the first ten years, payments being distributed in annual installments.
4. On 24 January 2008 a letter of eligibility was submitted by Ms. Preity Zinta. The letter disclosed that on winning the bid a new company would be formed in which the individuals participating would be Preity Zinta, Ness Wadia, Karan Paul and Mohit Burman. The terms of tender required each bidder to pay a performance deposit of Rs.20 Crores at the time when the bid was submitted. The members of the consortium agreed to pay Rs.20 Crores distributed amongst Preity Zinta (Rs.10 Crores), Mohit Burman (Rs.5 Crores) and Karan Paul (Rs.5 Crores). On 24 January 2008 the consortium was declared as a successful bidder for the Mohali franchise. The first season of IPL was to commence in April 2008. A franchise agreement was signed on behalf of the consortium by Ms. Zinta on 4 April 2008 and on behalf of BCCI on 10 April 2008.
5. By the agreement BCCI granted to the franchisee, the Respondent herein exclusive rights for a period of three seasons to be the only team in the League whose home stadium was located in the territory. The territory was defined to mean ‘ ’ an area within a radius of fifty miles of the Mohali stadium. Clause 3 of the agreement stipulated that it would continue for so long as the League continues subject to termination, suspension or renewal as provided by its terms. Clause 10.1 contained a provision for sale of the franchise and stipulated that the franchisee has no right to assign or delegate the performance of any right or obligation under the agreement. However, with the prior written consent of BCCI the franchisee was entitled to sell the franchise to any person. Similarly, any person who controlled the franchisee was entitled to effect or otherwise cause to occur a change of control of the franchisee. This was subject to the condition, in Clause 10.2 that
