Bombay High Court
Deccan Chronicle Holdings ... vs Board Of Control For Cricket In ... on 18 October, 2012
Bench: R.D. Dhanuka
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ARBPL-1352.12
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
ARBITRATION PETITION (L) NO. 1352 OF 2012
Deccan Chronicle Holdings Limited having
its registered office at 36, Sarojini Devi Road,
Secunderabad 500 003 ... Petitioner
Versus
1. Board of Control for Cricket in India,
having its registered office at Holkar
Stadium, Khel Prashal, Race Course Road,
Indore 452 003
And
Board of Control for Cricket in India,
Cricket Centre, Wankhede Stadium,
"D" Road, Churchgate, Mumbai 400 020
2. Kamla Landmarc Real Estate Holdings
Pvt. Ltd. Having its office at Shanti Vimal,
Ground Floor, Sir P.M. Raod, Vile Parle (East),
Mumbai 400 057, Maharashtra ... Respondents
Mr. S.U. Kamdar, Sr. Counsel along with Mr. Zal Andhyarujina and Mr. Arcot
Chandrashekar i/by M/s. Dave Girish & Co. for the Petitioner.
Mr. Janak Dwarkadas, Sr. counsel with Mr. Nandkishore and Mr. Anjan
Dasgupta for HSA Advocate for intervener Ratnakar Bank.
Mr. Navroz Seerwai, Sr. Counsel, Mr. Rohan Cama, Mr. Ajay Vazirani, Mr.
Amey Nabar, Mr. S.S. Ghosh, Mr. Anirudh Hariani, Ms. Deeksha Dadwal, Mr.
Ameya Deosthale i/by M/s. Hariyani & Co. for respondent no. 2.
Mr. T.N. Subramanium, Sr. Counsel along with Mr. P.R. Raman, Mr. Viraj
Maniar, Ms. Akhila Kaushik, Ms. Misbah Dada and Mr. Nikhil Karnawat i/by
M/s. Maniyar Srivastava Associates for respondent no. 1.
CORAM : R.D. DHANUKA, J.
DATE : 18TH OCTOBER, 2012.
ORAL JUDGMENT:
1. By this Petition under section 9 of the Arbitration & Conciliation Act,
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1996 (hereinafter referred to as "Act"), the petitioner seeks stay of the
termination of Franchise agreement by letter dated 14 th September, 2012
and the subsequent decision of the Working Committee of the Board of
Control for Cricket in India (hereinafter referred to as "BCCI") dated 15 th
September, 2012 confirming the same. The Petitioner also seeks status
quo order against the parties and injunction against BCCI from acting upon
the tender notice issued on 14th October, 2012 and or providing any party
with the invitation to tender in respect of the franchise for the City of
Hyderabad.
2. The relevant facts in the matter are briefly set out hereunder :
In and around 2007, the BCCI conceptualised a tournament to be
called "Indian Premier League" which would involve competition between
various teams of Twenty-20 format of cricket. A sub committee of the
respondent known as Indian Premier League managed by a separate
governing council, was setup/established to oversee the operation of the
league, which in turn, ultimately reports to BCCI. The IPL/BCCI conceived
that private individuals/companies should establish and operate the teams as
franchisees in the league, as per the guidelines and regulations framed by
IPL/BCCI. The Deccan Chronicle Holdings Ltd. (hereinafter referred to as
"DCHL") was declared successful bidder for Hyderabad franchise of the
league and the franchise agreement dated 10th April, 2008 was thereafter
executed between DCHL and BCCI.
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3. On 14th September, 2012, BCCI terminated the franchise agreement
on various grounds. On 15th September, 2012, the DCHL filed Arbitration
Application (L) No. 1238 of 2012 in this court for seeking interim measures.
4. On 1st October, 2012, this court disposed of the said arbitration petition
by passing a detailed order. In Para 6 of the said order, it has been
observed that admittedly DCHL failed to make payments as agreed to its
players, support staff, associations and overseas cricket boards which
became due on and from 1st May, 2012. In Para 42 and 43 this court held
as under :
"42. In the above circumstances I am of the view that BCCI has at all
stages acted in some haste in terminating the Franchise Agreement
with DCHL. Though BCCI had after issuing the termination notice on
14th September 2012, granted time to DCHL to cure the defects upto
5.00 p.m. on 15th September 2012, it would have been prudent on the
part of BCCI to take the decision of confirmation of termination of the
Franchisee Agreement after considering all the letters received from
DCHL or its Bankers on 15th September 2012. Instead, BCCI has, on
the same day at 5.30 p.m., without considering the letters received by it
by 5.00 p.m. or a little thereafter, taken the decision to confirm its
decision dated 14th September 2012 to terminate the Franchise
Agreement executed by and between BCCI and DCHL. Despite the
above, I do not attribute any motives to BCCI at this stage and, as
stated hereinabove, I am proceeding on the basis that the haste on part
of BCCI was due to the fear and anxiety expressed by their Learned
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Senior Advocate namely that the failure on the part of DCHL to fulfill
their contractual commitments may tarnish their image in International
cricketing circles. However such hasty termination, if after a detailed
adjudication by the Arbitrator is found to be incorrect will cause grave
loss and prejudice not only to DCHL but also to the Banks and financial
institutions which are backing DCHL with financial support, resulting in
complete destruction of DCHL which cannot be compensated in terms
of money. At the same time the Court whilst granting protective reliefs in
the above petition to DCHL, as submitted by the learned Senior
Advocate appearing for the BCCI, will also have to keep in mind the
interest of BCCI, the game and its players more particularly the image
of BCCI in the International Cricketing World. I have inquired from the
Learned Advocate for DCHL whether his clients are willing to furnish an
irrevocable and unconditional Bank Guarantee to BCCI in the sum of
Rs. 100 crores as security for the IPL Series VI, within 10 days from
26th September 2012 , the Learned Advocate after taking instructions
has responded in the affirmative. Though I find that the balance of
convenience is more in favour of DCHL, I am of the view that the
following protective orders will take care of the interest of both the
parties.
(i) DCHL shall furnish an irrevocable and an unconditional Bank Guarantee
of a Nationalized Bank in the sum of Rs. 100 crores (Rupees One hundred
crores) to BCCI on or before 9th October, 2012 which should be in force for a
period of one year.
(ii) DCHL shall bear all the expenses for IPL Series6 i.e. make payments to
BCCI towards Franchise fee, player and support team costs and in addition
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also bear the cost of match conduction and other expenses. In the event of
any default on the part of DCHL, BCCI shall be entitled to invoke the Bank
Guarantee to the extent necessary.
(iii) The representative of YES Bank who is present in Court, undertakes to
make wire transfer to the respective foreign parties on or before 3 rd October
2012 and upon presenting proof of such wire transfer, BCCI shall return the
demand drafts drawn in favour of the foreign parties by YES Bank to the
authorised representative of the said Bank.
(iv) BCCI shall forthwith disburse the demand drafts aggregating to
Rs.8,95,38,750/to the beneficiaries named therein.
(v) Upon DCHL furnishing the said Bank Guarantee in the sum of Rs.100
crores to BCCI and DCHL through its Bankers effecting the aforestated wire
transfers to the foreign parties, BCCI shall deposit the amount already due
and payable by BCCI to DCHL and payable in future to DCHL with the
Prothonotary and Senior Master of this Court which the Prothonotary and
Senior Master shall invest in a fixed deposit of a Nationalised Bank from time
to time until further orders of the Court.
(vi) BCCI shall, pending the arbitration proceedings and making of an Award
by the learned Arbitrator and for a period of 7 days thereafter if the Award is
in their favour, not act on the termination of the Franchise Agreement.
However, it is clarified that this order shall immediately cease to be in effect
in the event DCHL fails to furnish a Bank Guarantee of Rs. 100 crores as
provided in clause (i) above on or before 9 th October, 2012.
(vii) DCHL undertakes to pay IFCI Ltd. the balance installments as agreed in
the consent terms on its due dates. The undertaking is accepted.
(viii) DCHL shall pay the undisputed outstanding dues of Hotels, transporters
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etc. as regards the IPL Series V on or before 31st October 2012.
(ix) This Order shall not preclude the BCCI from adding one more Franchisee
for IPL6 series and thereafter.
43. The above Arbitration Petition is accordingly disposed of with a
clarification that all the observations made herein are prima facie and the
Learned Arbitrator shall make his Award without being influenced by any of
the observations made herein."
5. On 9th October, 2012, the DCHL applied before this court for extension of
time to furnish bank guarantee as set out in para 42(i) of the order dated 1 st
October, 2012 upto 12th October, 2012, 5.00 p.m. The DCHL also applied for
permission to furnish a bank guarantee of ICICI Bank instead of a nationalized
bank. This court granted extension of time to furnish bank guarantee upto 12 th
October, 2012, 5.00 p.m. This court, however, directed the petitioner to take out
appropriate proceedings for seeking necessary modifications of the order dated 1 st
October, 2012 as sought by the petitioner. It is an admitted position that no such
application came to be made by the petitioner seeking substitution of bank
guarantee of nationalized Bank by ICICI Bank.
6. On 12th October, 2012 at 11.00 a.m., an oral application was made for
extension of time to furnish bank guarantee which has been admittedly declined.
The order passed by this court on 1st October, 2012 being self operative,
termination of the contract came into effect at 5.00 p.m., on 12 th October, 2012.
7. In the arbitration meeting held before the arbitral tribunal on 12 th October,
2012 which commenced at about 5.30 p.m., after directions were issued by the
arbitral tribunal, an application under section 17 of the Act came to be made for
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grant of status quo order passed by this court. The arbitral tribunal passed status
quo order on 12th October, 2012. The order passed by the arbitral tribunal granting
status quo has been set aside by this court by passing a separate order today. In
the meanwhile, BCCI issued a tender notice on 14 th October, 2012 inviting a new
premier league franchise. It is provided that bids must be submitted at 12.00 noon
of Thursday, 25th October, 2012. It is further provided that bids may be submitted
in respect of the cities such as Ahmedabad, Cuttack, Dharamsala, Indore,
Hyderabad, Kanpur, Kochi, Nagpur, Noida, Rajkot, Ranchi and Vizag.
8.
The Petitioners moved this petition under section 9 of the Act for seeking
stay of the termination of the franchise agreement by letter dated 14 th September,
2012 and confirmed by letter dated 15 th September, 2012 and for injunction against
the BCCI from acting upon the tender notice issued on 14 th October, 2012.
9. Mr. Kamdar, the learned senior counsel appearing for DCHL, Mr. N.A.
Seervai, the learned senior counsel for Kamla Landmarc Real Estate Holding Pvt.
Ltd. (respondent no. 2), and Mr. Janak Dwarkadas, learned senior counsel
appearing for Intervenor Ratnakar Bank, addressed this court in support of grant
of interim measures. The learned counsel made following submissions :
(a) IPL-6 would start in April, 2013. There are no existing liabilities of
DCHL towards BCCI. Ratnakar Bank one of the creditors is supporting
DCHL in applying for status quo of the termination order. DCHL has
already entered into agreements with players and the same are in
existence today. No prejudice would be caused to BCCI if DCHL is
permitted to go out of franchise and is allowed to sell its team to the
second respondent.
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(b) If termination is not stayed, several creditors including petitioners
would be seriously affected. The DCHL has invested about Rs. 600
Crores., which would be wasteful. There is no complaint made by any
players against DCHL regarding payments. DCHL has so far paid a
sum of Rs.237 Crores to BCCI. Whatever, fees is payable in future
under the Franchise Agreement would also be paid. After refusal of stay
by this court and stay of order passed by the arbitral tribunal in appeal,
there is change in circumstances which warrants grant of interim
measures by this court on this application under section 9 of the Act.
The learned counsel relied upon avermetns made in para 14 and 15 of
this petition which reads as under :
"14. The Petitioner states and submits that entering into MOU by the
Petitioner and the Respondent no.2 amounts to a significant change in
circumstance. The Petitioner states and submits that the said MOU was
arrived at on 11 th October, 2012 and has not been the subject matter of
any application made in the said Arbitration Petition.
15. The Petitioner states and submits that subject to the consent of
the Respondent No. 1 under the terms of the MOU, the Respondent No.
2 will perform all obligations in respect of the Deccan Chargers
Franchise for IPL-6. This is a marked contract to the position before the
Ld. Judge in the said Arbitration Petition and the basis of the
circumstances under which the Orders dated 1 st October, 2012 and 12th
October, 2012 came to be passed. The record clearly bares out that
these orders were passed on the basis that in fact the Petitioner would
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continue to run the Franchise and to meet all obligations of the Franchise
to the Respondent No. 1 and its players in IPL-6."
(c) MOU has been already entered into between DCHL and Kamla
Landmarc Real Estate Holdings Pvt. Ltd. (respondent no. 2), by which
DCHL has agreed to go out of the franchise and proposed to sell its
team to the 2nd respondent for consideration. All the liabilities of the
DCHL have been agreed to be taken over by the proposed purchaser.
My attention is invited to various provisions under the said MOU dated
11th October, 2012 including the financial terms recorded by and
between the parties thereto. It is submitted that in terms of Clause 10.1
of the Franchise agreement, DCHL has already applied for prior
consent of BCCI by letter dated 11 th October, 2012 enclosing copy of
MOU dated 11th October, 2012 to BCCI and the said permission is
awaited.
(d) BCCI instead of permitting DCHL to auction its team to an
outsider is adamant to sell its team with an intention to make huge profit
and put DCHL to tremendous loss which loss cannot be compensated in
terms of money. No prejudice would be caused if the termination is
stayed and an opportunity is given to DCHL by introducing a party who
is willing to purchase the team of DCHL and save DCHL from this
situation.
(e) This Court has made various observations in the order 1 st October,
2012 in favour of DCHL and against BCCI about conduct of BCCI in
terminating the contract.
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10. The learned senior counsel Mr. T.N. Subramanium on the other hand submits
that:
(a) the order passed by this court on 1 st October, 2012 staying the
termination on various conditions is self operative The conditions not
having been complied with, the termination came into effect at 5.00 p.m.,
on 12th October, 2012. Once the respondent's application for extension
of bank guarantee came to be rejected by this court at 11.00 a.m., on
12th October, 2012, an application was made without prior notice before
the arbitral tribunal for continuation of stay. It is submitted that this court
has rightly stayed the operation of status quo order granted by the
arbitral tribunal. It is submitted that once extension was refused by this
court and this court having stayed the operation of the status quo order
passed by the arbitral tribunal, this petition again seeking stay of
termination is not maintainable.
(b) The orders passed by this court on 1 st October, 2012, 12th
October, 2012 and 13th October, 2012 have not been challenged by
the respondents. All these orders are binding on the parties. It is
submitted that four winding up petitions filed against the petitioner
company were pending on the date of filing earlier petition under
section 9 of the Act. M/s. Tata Capital has filed recovery
proceedings against the petitioner wherein an injunction order has
been passed from selling assets of petitioner. The learned senior
counsel invited my attention to clause 2.1(b) of the Franchise
agreement which empowers the BCCI to grant to the franchise a
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right to be the only team in the league whose home stadium is
located in the territory during a period of not less than the first three
seasons.
(c) Under clause 10.1 of the franchisee agreement, the
franchise has no right to assign or delegate the performance of
any right or obligation under that agreement without prior written
consent of BCCI. It is submitted that in view of the DCHL not
having remedied the material breach pointed out by BCCI, the
BCCI was justified in terminating the contract. It is submitted
that the insolvency event as defined under clause 11.6 of the
Franchise agreement had occurred.
(d) The learned senior counsel also invited my attention to
various clauses in the MOU entered into between DCHL and the
second respondent. It is submitted that the application for prior
consent made by DCHL under clause 10.1 of the agreement is
under consideration of BCCI. The learned counsel invited my
attention to clause 2 of the MOU which provides that the net
realisation under the franchise would be INR 1250 Crores in
aggregate be discharged and payable in the manner set out
therein. It is proposed that the cash pay out of INR 350 Crores
payable by the purchaser in 10 years in equal installments payable
starting from the 30th day of December of the calender year
pertaining to the closing date more particularly set out in Annexure
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I. It is provided that the first pay out shall be made not later than
30 December, 2013. My attention is invited to clause 3 which
records various conditions precedent for consideration of
transaction of sale of the franchise in terms of the said MOU.
Clause 3(a)(c ) and (e) are relevant and are as under :
"(a) The seller shall procure and obtain all consents,
approvals, no objections, permissions of its Lenders, its
shareholders, BCCI and the High Court of Bombay including
any other authority for consummating the sale of the
Franchise to the purchaser free of any lien, charge and
encumbrance and for execution of the Definitive Agreements
and all other documents and writings as may be necessary to
give effect to the sale.
(c ) The Seller shall settle in full all the liabilities of the
Franchise up to the Closing date only (i.e. the date when the
Sale and Transfer of the Franchise shall be effected in favour
of the Purchaser and which shall be a date not later than 31
March, 2013 or a mutually extendable date) (including but not
limited to player amounts due for IPL 2010 season or any of
the previous seasons, amounts due to Cricket associations,
amounts due to each Bought-out player, amounts due to
BCCI, Support Staffs, etc.) and also undertake to take over
and keep the Purchaser harmless from all liabilities and claims
pertaining to the Franchise that have arisen upto the Closing
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date or arise (at any time thereafter) due to any event or
cause of action pertaining to or taken place on or prior to the
Closing Date.
(e) Execution and satisfactory delivery of Definitive
agreements between the Seller and the purchaser no later
than 31 March, 2012 or a mutually extendable date."
(e) It is submitted that if reliefs as claimed by the petitioner in
this petition
are granted, it would amount to setting aside the
termination under section 9 of the Arbitration and Conciliation Act,
1996 which is not permissible. It is submitted that the order passed
by this court on 1st October, 2012 was an equitable and protective
order considering the interest of both the parties. The petitioner
not having complied with the conditions imposed by this court in
that order, cannot once again apply for stay of termination.
(f) It is submitted that though this court had granted liberty to
apply on 9th October, 2012 for modification of the order dated 1st
October, 2012 and to furnish bank guarantee of ICICI bank in place
of Nationalized Bank with a rider that it would be considered on
merits, no such application was made. It is submitted that the draft
of the bank guarantee forwarded to BCCI by DCHL was not in
accordance with the interim order passed by this court on 1 st
October, 2012. It is submitted that the agreements entered into with
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players would come to an end on 31 st December, 2012. If the
agreement is not continued, the players would be free to act for
other teams and would be available for auction. It is submitted
that any stay as sought by DCHL would not be in the interest of
BCCI, players, in the interest of the game and may tarnish the
image of BCCI in international cricketing circle. It is submitted that
in recent past BCCI had granted an opportunity to DCHL to
auction its team. The auction was held on 13 th September, 2012.
Only one bid was received by DCHL and was not accepted by
DCHL.
11. From the backgrounds of the facts narrated aforesaid, it is clear that
the order passed by this court on 1 st October, 2012 was an equitable order
considering the interest of both the parties. In Para 42 of the said order, it
is recorded that this court had enquired from the learned counsel for DCHL
whether his clients were willing to furnish irrevocable and unconditional bank
guarantee to BCCI in the sum of Rs. 100 Crores as security for IPL series 6
within 10 days from 26th September, 2012. The learned counsel after
obtaining instructions from the client had responded in the affirmative. It was
therefore, recorded that balance of convenience though was in favour of
DCHL, protective orders came to be passed which would take care of
interest of both the parties. It was also observed that this court did not
attribute any motives to BCCI at this stage. It is observed that the court was
proceeding on the basis that the haste on the part of BCCI was due to fear
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and anxiety expressed by their learned senior counsel that the failure on
the part of DCHL to fulfill their obligation may tarnish their image in
international cricketing circles. In my view the order passed by this court on
1st October, 2012 being self operative order, termination of the contract
came into effect at 5.00 pm on 12 th October, 2012. The validity and legality
of the same would be the subject matter of arbitration before the arbitral
tribunal. This proceedings are not by way of an appeal against the order
passed by this court on 1st October, 2012. I can not sit in appeal on the order
passed by this court on 1st October, 2012 and 12th October, 2012.
12. In my view the petitioner having failed before this court, obtained an
order of status quo from the arbitral tribunal by filing application which was
not maintainable. The arbitral tribunal acted without jurisdiction and granted
status quo order which was stayed by this court by passing order on 13 th
October, 2012. In my view, filing of another application under section 9 of the
Act for staying termination of the impugned order is in the teeth of the order
passed by this Court on 1st October, 2012, 12th October, 2012 and 13th
October, 2012 and is a gross abuse of process of law.
13. It is clear that when the petitioner applied for extension of time to
furnish bank guarantee at 11.00 a.m., on 12 th; October, 2012, even
according to the petitioner, MOU was already entered into on 11 th October,
2012 itself between DCHL and second respondent. In this respect reference
to the pleadings filed by the BCCI in Civil Application in the appeal would be
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relevant. In Para 5 of the Civil Application dated 13 th October, 2012 in
Arbitration Appeal, it is averred by the BCCI that at around 11.00 a.m., on
12th October, 2012 this court expressly refused DCHL's request for further
extension of time to furnish bank guarantee which request has been made
on the ground that negotiations for the sale of Hyderabad Franchise were
in progress. DCHL has filed affidavit in reply to this Civil Application on 16 th
October, 2012. These averments made in Para 5 of the Civil Application are
not denied by the petitioner in the affidavit in reply. In any event on the
date of making of the application for extension of time to furnish bank
guarantee at 11.00 a.m., on 12th October, 2012, MOU which is now being
relied upon by DCHL was already in place. Inspite of the said fact, this
court had refused to extend time for furnishing the bank guarantee. In
my view thus there is no change in the circumstances which warrants
exercise of the powers of this court under section 9 in this application.
14. Even otherwise, perusal of the MOU entered into between DCHL and
the second respondent indicates that the said transaction is made subject to
execution and delivery of satisfactory definitive agreements containing
various conditions. It is subject to consent of Lenders, BCCI, High Court,
Bombay and such other approvals as may be required by the seller from any
other authority. Clause 3 provides for various conditions precedents required
to be complied with before any final agreement can be arrived at. It is
stated in clause 3(c) that the seller shall settle in full all the liabilities of the
Franchise upto the closing date which shall be the date not later than 31 st
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March, 2013 or a mutually extendable date. The financial obligation recorded
in the said MOU indicates that cash pay out of INR 350 Crores payable by
the purchaser i.e. respondent no. 2 in 10 years in equal installments
starting from 30th day of December of calender year and has to be not latter
than 30 December, 2013.
15. In my view, while exercising power under section 9 of the Act, this
court can not supervise compliance of any conditions agreed upon by
DCHL and second respondent. Various permissions, consents, approvals,
no objections are required to be obtained by DCHL from its lenders,
shareholders, BCCI and the High Court of Bombay, and other authority for
consummating the sale of the Franchise to the purchaser free of any lien,
charge and encumbrance and for execution of the Definitive Agreements and
other documents. It is not possible for this court to direct any of these
authorities to grant its consent, approval or no objection in favour of the
DCHL proposing to auction its team to the second respondent. In my prima
facie view, if reliefs as claimed by the petitioner are granted, this court will
have to first set aside the termination order dated 14 th September, 2012 and
then grant specific performance of the MOU entered into between DCHL
and second respondent and then to direct BCCI to accept such assignment.
In my view such recourse is not permissible under section 9 of the
Arbitration Act, 1996.
16. In my view, no case is made out for ad interim relief. The respondents
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are directed to file affidavit in reply on or before 1 st November, 2012.
Rejoinder, if any to be filed on or before 20 th November, 2012. The matter
tobe placed on board for final hearing on 29 th November, 2012. It is made
clear that this court has not expressed any views on the on the validity or
legality of the termination order.
(R.D. DHANUKA, J.)
