Delhi High Court
Prasar Bharati vs Starcon India Limited & Anr. on 17 April, 2017
$~
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Reserved on: February 21, 2017.
Date of decision: April 17, 2017
+ O.M.P. 426/2008
PRASAR BHARATI ....Petitioner
Through: Mr. Rajeev Sharma with Ms.
Radhalakshmi R., Mr. T. Rajat Krishna and Mr.
Pratishth Kaushal, Advocates.
versus
STARCON INDIA LIMITED & ANR. ...Respondents
Through: Mr. Anish Dayal with Mr. Siddharth
Vaid, Advocates.
CORAM: JUSTICE S. MURALIDHAR
J U D G M E NT
% 17.04.2017
1. Prasar Bharati („PB‟) has, in this petition under Section 34 of the
Arbitration and Conciliation Act, 1996 („Act‟), challenged an Award dated
28th April 2008 passed by the sole Arbitrator in the disputes between the
Petitioner and the Respondent No.1 Starcon India Limited („SIL‟) and M/s.
Transworld International Inc. („TWI‟) Respondent No.2 arising out of an
agreement dated 19th February 2000 entered into between the parties as well
as a letter dated 18th February 2000 which, according to the Respondents
formed part of the said agreement.
2. PB i.e. the Broadcasting Corporation of India is a statutory body
OMP No. 426 of 2008 Page 1 of 35
incorporated under an Act of Parliament. PB was split into Doordarshan and
Akashwani for television and radio services respectively.
Background
facts
3. The background to the present petition is that in order to fully exploit the
broadcasting rights and to gain maximum viewership of the cricketing
events, including all international matches organised by it in India, the
Board of Control of Cricket in India („BCCI‟) entered into a broadcasting
licence agreement („BLA‟) dated 25th September 1999 with PB. Under the
said agreement, PB was inter alia granted exclusive rights for production
and broadcasting of cricketing events conducted by BCCI in the territory of
India for the period 1st January 2000 to 30th September 2004. PB, therefore,
acquired the whole bundle/package of rights which included television,
radio, internet and multimedia rights. PB then decided to split the bundle of
rights, it had acquired into various separate distinct and mutually exclusive
components and invited bids from various parties for the said rights.
4. The Respondents submitted their bid for exclusive global marketing rights
and other rights. By letter dated 4th February 2000, PB communicated to
Respondent No. 1 the acceptance of its bid for "global marketing including
radio rights for all territories outside Union of India (with exception of radio
rights outside UK) hereinafter „rights‟ in respect of cricketing events
conducted by BCCI in India for the period starting from 1st January 2000 to
30th September 2004." The details of the cricketing events in respect of
which the rights were granted to Respondent No.1 were set out in Annexure-
1 to Part I of the tender. The price at which the aforementioned rights were
awarded to Respondent No.1 which was the „Minimum Assured Revenue‟
was 43.75 million US dollars (USD). The letter set out the schedule for
making of the payment of the aforementioned sum. If there were going to be
additional One Day International („ODI‟) or Test Matches within the
contract period the net revenue in excess of the instalment of Minimum
Assured Revenue („MAR‟) would be shared in the ratio of 50:50.
5. Respondent No.1 was to furnish to PB on or before 15th February 2000
"an unconditional and irrevocable bank guarantee for 15% of the total bid
amount converted into Indian rupees at the exchange rate prevailing on the
date of furnishing of the bank guarantee and which was to be valid till 31st
December 2004." By another letter dated 18th February 2000, PB informed
Respondent No.1 that it had been decided to offer Respondent No.1 "rights
for the internet on a non-exclusive basis concurrent with the agreement for
the multimedia rights." This was subject to the conditions stipulated in the
letter. One of which was that PB "has exclusive and complete rights for
licensing the internet rights to an unlimited number of users." It is further
stated that the licensees of the internet rights shall be directed to approach
the Respondents for getting the multimedia rights for use on the internet on
such fees as may be prescribed by the Respondents. The additional revenue
generated through such licensing of multimedia rights to the internet
licencee/sub-licencee was to be shared by PB and Respondent No.1 in the
ratio of 50:50. This is to be over and above the MAR "as per the agreement
entered into with you by the Prasar Bharati."
6. The aforementioned arrangements were besides the official website which
would be developed and operated by TWI/Starcon for Prasar Bharati
without any financial or other liability to Prasar Bharati." The website would
contain the Doordarshan logo at the home page, PB's identity along with
Starcon/TWI nominated identity in the URL/homepage." The website was
to be promoted both by Doordarshan and TWI/Starcon across the broadcast
footprint by way of mentioning website address only on Live TV signal of
the matches as official DD website. This was, however, not to preclude PB
from developing and operating other cricket websites within the rights not
licensed by PB to the Respondents. On the said letter itself there was an
endorsement dated 19th February 2000 for and on behalf of Respondents 1
and 2 by way of acceptance.
Agreement dated 19th February 2000
7. This was followed by an agreement entered into between PB and the two
Respondents on 19th February 2000. In terms of the said agreement, the
Respondents were awarded the exclusive worldwide television rights
(except India) worldwide multimedia rights and the right to develop,
maintain and host the official Doordarshan cricket website. According to the
Respondents a collective reading of the latter agreement dated 18th February
2000 and the agreement dated 19th February 2000 granted the following
rights to the Respondents:
"(a) Exclusive rights for marketing live/delayed television
signal for all territories outside the Union of India for all forms
of television, including terrestrial broadcast, pay per view, cable
and satellite (free to air and subscription) [As per Clause 3.1 of
the Agreement dated 19.02.2000]
(b) Exclusive rights for marketing radio rights for all forms of
radio signals outside the territories of Union of India excluding
the territory of the United Kingdom. [As per Clause 3.2 of the
Agreement dated19.02.2000].
(c) Rights of marketing clippings and highlights of the matches
in all territories including India. [As per clause 3.3 of the
Agreement dated 19.02.2000].
(d) All other multi-media rights during the term including but
not limited to in-flight, home video, laser disk etc. However,
internet rights are excluded from the Agreement and are being
retained by Prasar Bharati. [As per Clause 3.4 of the Agreement
dated 19.02.2000].
(e) Direct Broadcast by Satellite Television (encrypted or free
to air). [As per Clause 3.5 of the Agreement dated 19.02.2000].
(f) Two way television and multi-media (any form) rights
(except all internet rights which have been retained by Prasar
Bharati). [As per Clause 3.6 of the Agreement dated
19.02.2000].
(g) All other broadcast media including non-theatrical
exhibition and closed circuit transmission rights and Video-on-
Demand. [As per Clause 3.7 of the Agreement dated
19.02.2000].
(h) The right to develop and operate the official Doordarshan
cricket website. The Respondent was obliged to include the
official website address in all full frame graphics during the live
coverage and telecast of the matches, not less than once per half
hour. [As per Clause 7.5 of Agreement dated 19.02.2000 and
Clause 3 of the letter dated 18th February, 2000].
(i) Non-exclusive internet rights. [As per letter dated 18th
February 2000 and the formal licence to the Claimants dated
22nd June 2000 (annexure4)]."
8. It must be mentioned here that Clause 15 of the agreement dated 19 th
February 2000 contained an arbitration clause.
Alleged breaches by PB
9. The case of the Respondents was that despite having fully performed their
part of the contract, PB continued to be in breach of its obligations
thereunder. One was regarding the non-display of the official DD address on
the live telecast of matches. The loss suffered by the Respondents as a result
of the breach was assessed by them to be at least 4.5 million USD. It was
submitted that without prejudice to the said claim for the loss suffered, since
PB had not in fact delivered the right for which the Respondents had paid,
the Respondents were entitled to reimbursement of the amount paid for the
said multimedia rights which was 4.465 million USD. This formed the
subject matter of Claim No.1.
10. The second breach complained of was regarding the spill over of
Doordarshan‟s signal beyond the territory of India and breach of exclusive
rights granted to the Respondents for the overseas territories. The loss
purportedly suffered was to the tune of 3.10 million USD, the
reimbursement of which was sought under Claim No.2 by the Respondents.
11. The third breach was regarding multimedia rights granted to Rediff.com
for carrying streaming audio commentary for cricket matches during India-
Australia Series 2001 despite the fact that the exclusive rights in that regard
had in fact been granted to the Respondents. The loss on this count was
estimated by the Respondent to be at least 500,000 USD and this formed the
subject matter of Claim No.3. The Respondents also sought reimbursement
to the tune of 0.39 million USD as "pro-rated cost of diminished value of the
radio rights for three series." This was the subject matter of Claim No.3.
12. The fourth breach alleged by the Respondent was the distribution of
decoders by the Petitioner through the Modi Entertainment Network
(„MEN‟) in territories outside India in order to receive the Doordarshan
telecast in contravention of the exclusive rights granted to the Respondents
for the overseas territories. The loss suffered in this score was estimated at
101 million USD and this formed the subject matter of Claim No.4.
Arbitration proceedings
13. By a letter dated 30th April 2001, the Respondents invoked the
aforementioned arbitration clause and sent a legal demand notice to PB.
Subsequently a formal notice dated 29th August 2001 for arbitration was
sent. PB on its part sent a notice dated 6th September 2001 to the
Respondents seeking payment of 9.84 million USD by 30th September 2001.
By a separate letter dated 17th September 2001, PB rejected the claims of the
Respondents.
14. In a petition filed by the Respondents under Section 11 of the Act, the
High Court by order dated 11th February 2002 appointed a former Chief
Justice of India as sole Arbitrator to adjudicate upon the disputes between
the parties. The said learned Arbitrator continued till early 2003 when he
resigned on account of his appointment as Chairman of the National Human
Rights Commission. He was succeeded by another former Chief Justice of
India as sole Arbitrator who entered upon reference on 7th July 2003.
15. During this time on behalf of the Petitioner Mr. L. D. Mandloi the then
Deputy Director General (Sports), Doordarshan was examined as a sole
witness. On behalf of the Respondents, three witnesses viz., Mr. Sidharth
Ray, Mr. Jeremy Cole and Ms. Ambika Srivastava were examined. The
cross-examination of all the witnesses concluded on 8th December 2004 and
the matter was listed for final arguments.
16. On 26th October 2005, the learned Arbitrator could not continue on
account of health reasons. The parties then approached the High Court for
him to be substituted. This was done by an order dated 10th November 2005
passed by the High Court. Another former Judge of the Supreme Court was
appointed as a sole Arbitrator who then proceeded to pass the final Award
dated 28th April 2008.
17. It must be mentioned at the outset that the following issues were framed
for determination by the learned Arbitrator:
"(1).Whether the respondent has acted in breach of the
agreement dated 19.2.2000 executed between the parties?
(2) Whether the claimants are entitled to their claims as detailed
in various clauses of para 25 of the Claim Petition?
(3) Do claims 1 & 3 not fall within the arbitration agreement
dated 19.2.2000?
(4) What amount, if any, are the claimants entitled to?
(5) Is interest payable on the amount found payable to the
claimants or on any part of it, and if so, at what rate and from
which date?
(6) In what manner are the costs to be appropriated?
(7) Relief."
The impugned Award
18. The said issues were answered as under by the learned Arbitrator in the
final Award:
"(1) Whether the respondent has acted in breach of the
agreement dated 19.2.2000 executed between the parties? - Yes.
(2) Whether the claimants are entitled to their claims as detailed
in, various clauses of para 25 of the Claim Petition? -
(i) Respondent has not committed breach of the Agreement
pertaining to overspill of signals in the Middle East.
(ii) Respondent has committed breach of the agreement
regarding non-display of URL but there is no evidence as
regards damages, if any, suffered by the claimants.
(iii) Claimant is entitled to loss of value of the rights suffered
by the claimants on account of selling the radio rights to
rediff.com which is Rs.17 lacs.
(iv) Loss suffered by the claimants on account of value of the
rights which could not be sold or exploited in Sri Lanka
Bangladesh, Nepal is US$ 791,700/-.
(3) Do Claims 1 & 3 not fall within the arbitration agreement
dated 19.2.2000? -
Claims 1 and 3 do fall within the arbitration agreement dated
19.2.2000.
(4) What amount, if any, are the claimants entitled to?
As stated in answer to issue No.2 above.
(5) Is interest payable on the amount found payable to the
claimants or on any part of it, and if so, at what rate and from
which date?
Interest is payable on the amount found so due @ 12% per
annum from 30.9.2004, the date of the expiry of the agreement
dated 19.2.2000 till the date of the award.
(6) In what manner are the costs to be appropriated?
Rs. 5 lacs payable to the claimants being limited to the share of
fee paid by the claimants for 20 hearings as the claimants have
succeeded in their claim partially.
(7) Relief.-
Claimants are entitled to Rs.3,33,68,000/- being damages/loss
of profit with interest amounting to Rs. l,43,48,240/- and Rs.
5,00,000/- totalling to Rs. 4,82,16,240/-."
19. The learned Arbitrator further directed as under:
"67. Accordingly I give my award in favour of the Claimant
and against the Respondent Prasar Bharti for Rs.3,33,68,000/-
being the amount to which the c1aimants are entitled with
interest at the rate of 12% per annum from 30.9.2004 till the
date of award amounting to Rs.l,43,48,240/- thus totalling
Rs.4,77,16,240/- with cost amounting to Rs.5,00,000/-.
68. Claimant shall further be entitled to interest @ 12% per
annum on the amount of Rs.3,33,68,000/- from the date of the
Award till payment. No interest from the date of' award would
however, be payable if the amount awarded is paid within three
months."
Submissions on behalf of PB
20. Mr. Rajeev Sharma, learned counsel appearing for the Petitioner
submitted as under:
(i) The dispute under Claim No.1 pertained to internet rates which were
subject matter of the agreement dated 18th February 2000. It did not pertain
to the agreement dated 19th February 2000 which concerned multimedia
rights. There was no arbitration clause in the agreement dated 18th February
2000. Hence this dispute was not arbitrable.
(ii) Clause 7.5 of the agreement dated 18th February 2000 did not specify
that the URL had to be displayed by the Petitioner. A joint reading of the
various clauses of the agreement dated 19th February 2000 showed that the
URL had to be displayed by the Respondents. In fact the URL could have
been inserted by the Respondents as well just as they were inserting
advertisements in the feed. Para 3 of the letter dated 18th February 2000
made it clear that the responsibility for inserting the URL was that of the
Respondents.
(iii) The Respondents had set up a fictitious agreement with Sports.com and
no such deduction as claimed was made by Sports.com.
(iv) Since the URL was for the benefit of PB since it was that of the official
website of PB, the non-display could not have caused any loss as such to the
Respondents. The documents filed by the Respondents showed that the
website was being maintained by the sub-contractors. Therefore, the
allegation that the Respondents lost an opportunity to licence the package of
the website multimedia rights for four years was incorrect. The Respondents
had made substantial earning from the exploitation of such rights and,
therefore, the claim for losses in that regard was untenable. In any event, the
Respondents could not produce proof of the actual loss. They withheld the
figures of earning and of the various contracts entered into by them pursuant
to the agreement dated 19th February 2000 and an adverse inference has to
be drawn against the Respondents.
(v) Between 11th December 2000 and 29th November 2001 an injunction
granted by the Delhi High Court against the display of the URL was in
force. This amounted to a force majeure situation for which PB could not be
held liable. The URL was in fact displayed during the earlier and subsequent
periods. Reliance is placed on the decision in Food Corporation of India v.
Surana Commercial Co. 2003 (8) SCC 636 where it was held that where the
original agreement and the supplementary agreement were different the said
agreements had to be treated as independent contracts.
(vi) The finding of the learned Arbitrator that Claim No.3 fell within the
arbitration clause was also contrary to the contract between the parties. The
said claim was traceable to Clause 2.3 of the agreement dated 18th February
2000 which did not contain an arbitration clause. The express language of
Clauses 3.4 and 3.6 of the agreement dated 19th February 2000 specifically
excluded internet right whereas Claim No.3 reiterated to audio streaming on
the internet. The dispute was, therefore, covered by Clause 2(iii) of the
agreement dated 18th February 2000.
(vii) Further CW-3, a witness on behalf of the Respondents stated in answer
to Clause No. 47 that the right to carry audio streaming on the internet was
an internet right. It could not, therefore, be said that the claim arose from the
Clauses 3.4 and 3.6 of the agreement dated 19th February 2000 which
excluded internet rights. Thus the findings recorded by the learned
Arbitrator were contrary to the agreement between the parties. Further there
was a document tendered and accepted as CW-1/R-4 which an earlier
agreement excluded between the parties in October 2000 which provided
that the internet rights would include live streaming of video, audio and text
recording. For some reasons, the learned Arbitrator did not refer to the said
document which was a material document.
(viii) Mr. Sharma also questioned the basic premise of the conclusion of the
learned Arbitrator in respect of Claim No.3 that caused audio streaming was
available on the internet, the value of the radio rights was destroyed. It is
submitted that the theory that the internet became a substitute for
commentary on the radio is too far-fetched and baseless.
(ix) Mr. Sharma also questioned the quantification of damages under Claim
No. 3 and submitted that it was based on no evidence whatsoever. The
damages awarded were contrary to the terms contained in Clause 2(iv) of the
agreement dated 18th February 2000 which provided that the revenue was to
be shared in equal proportion between the parties. The learned Arbitrator
having taken Rs.2.42 lakhs as the revenue for one month erred in awarding
the whole amount to the Respondents. In any event, the Award was not
based on the proof of actual loss.
(x) Further it is pointed out that the award of damages was granted for a
period even prior to the alleged breach. It is submitted that by entering into
the agreement dated 26th March 2001, PB had not committed breach. The
agreement was entered into between the parties on 19th February 2000 and
by 20th March 2001 one year had already gone by. In para 54 of the
impugned Award, the learned Arbitrator himself noted that the Respondents
had not adduced any evidence in regard to their attempts to licence the rights
and their failure to do so. Therefore, the award of damages was clearly
contrary to the fundamental policy of the Indian law which required
damages to be given only on proof of actual loss.
(xi) The Respondents failed to produce records of sale of radio rights prior
and subsequent to the alleged breach. The amount of Rs.1 crore mentioned
in para 54 of the impugned Award was the internet licence fee payable by
the Respondents and not receivable by them.
(xii) Mr. Sharma submitted that the expression 'multimedia and internet
rights' was already spelt out clearly in the contract and, therefore, there was
no need to travel beyond the said documents to understand its meaning. It is
submitted that the finding recorded for Claim No.3 was based on no
material, was conjectural and contrary to law.
(xiii) As regards Claim No.4, it is submitted that there was no provision in
the agreement dated 19th February 2000 which was brought on account of
the separate agreement that PB had with the MEN. That agreement only
pertained to distribution of two encrypted channels namely DD Sports and
DD channel. On the contrary, the agreement dated 19th February 2000
entered into between the Respondents gave the Respondents multimedia
rights in certain cricketing events.
(xiv) In any event no loss was caused to the Respondents by the distribution
of the decoders in terms of the agreement between MEN and PB. It was not
as if the distribution of the decoders made signals available in Nepal,
Bangladesh and Sri Lanka. There was an eventuality of overspill of the
signals since admittedly a substantial overspill of the signals were freely
receivable in Nepal, Bangladesh, Sri Lanka etc. Thus the submission that the
distribution of decoders caused immense loss to the Respondents was
untenable.
(xv) The documents produced by the Respondents themselves showed that
the rights for the entirety of Asia stood sold to Pacific Century Convergence
India Ltd. („PCCIL‟). The MoU dated 15th September 2000 recorded that
the BCCI was the owner of the rights in respect of cricket matches organised
by BCCI "for the entire area of Asia." Therefore, the case of the
Respondents that they could not sell the rights for the aforementioned
territories was clearly false. PCCIL was neither a subsidiary nor a licencee
of Respondent No.1. CW-1 as well as CW-2 claimed ignorance of the
incorporation of PCCI. The award of damages for the territory of Nepal was
based on no evidence.
(xvi) During the arbitration, no offer for Nepal was produced and this in fact
demonstrated the falsity of the case of the Respondents. The letter dated 26th
March 2001 on the basis of which damages to the tune of US$ 500,000 was
awarded did not bear the name and address of the addressee. The document
was not even proved in the arbitration proceedings. In any event the letter
dated 12th June 2000 cannot be justified for the award of damages since at
that time the agreement with MEN was not in existence. Even after the MoU
dated 15th September 2001 is taken as an offer document it is significant that
one year after the distribution of decoders by MEN since the distribution of
decoders could have had no impact on the offer.
(xvii) The award of Rs. 3.3 crores as damages was based on unproved
documents. The period for which the damages were awarded was in excess
of the period of breach. CW-1 did state that the channel had been encrypted
with effect from 15th November 2000 and de-encrypted with effect from 15th
July 2003 after termination of the MEN‟s agreement in June 2003. He was
not cross-examined on this aspect and yet the learned Arbitrator proceeded
on the assumption that the agreement had continued up to 30th September
2004.
(xviii) There was no material on record which could demonstrate that the
population of Nepal, Bangladesh and Sri Lanka is one-sixth that of India. In
any event this was totally irrelevant for determining damages to be paid by
the Petitioner to the Respondents. The learned Arbitrator proceeded on the
assumption that 1/6th of the revenue receivable by PB under the agreement
with MEN should be payable to the Respondents. The agreement with MEN
was for the distribution of DD Sports and DD News Channels throughout
the year for a four year term whereas the agreement with the claimant was
for 27 days of cricket in a year. How could a year-long agreement be the
basis for determining of damages for 27 days of cricket? The Award was
conjectural and based on no evidence.
Submissions on behalf of the Respondents
21. In reply to the above submissions, Mr. Anish Dayal, learned counsel
appearing for the Respondents submitted as under:
(i) The scope of interference by this Court with an Award in exercise of its
powers under Section 34 of the Act is extremely limited. Unless the Award
is shown to be perverse or shocking to the judicial conscience it ought not to
be interfered with. It was not possible for the Court to re-appreciate the
evidence and interfere with the Award only because a different view is
possible of the same evidence. Relying on the decision in Associate
Builders v. DDA (2015) 3 SCC 49 and NHAI v. ITD Cementation (2015)
14 SCC 21 it was submitted that even in the matter of interpretation of the
contract the learned Arbitrator‟s view was final unless it was so improbable
so as to render it perverse.
(ii) On merits it is submitted that the learned Arbitrator has comprehensively
dealt with each of the issues raised on behalf of PB in the present petition.
The factual findings have not been shown to be perverse or contrary to the
record.
(iii) It is submitted that the agreement dated 18th February 2000 was
"concurrent" with the main agreement dated 19th February 2000. Clause 7.5
of the agreement dated 19th February 2000 finds a reflection in the letter
dated 18th February 2000 showing concurrency and overlap. At least one of
the two witnesses of PB accepted that the two agreements were not
independent of each other and that the agreement dated 18th February 2000
would not have been effected in the absence of the agreement dated 19th
February 2000. It is submitted that there was a subsequent letter dated 22nd
February 2000, which was referred to by the learned Arbitrator, and which
mentioned that the letter dated 18th February 2000 as a side letter to the
agreement dated 19th February 2000.
(iv) Claim No. 3 arose out of the breach of the exclusive multimedia rights
given to the Respondent under Clauses 3.4 and 3.6 of the agreement dated
19th February 2000. Thus the Claims 1 and 3 were indeed arbitrable.
(v) As regards Claim No.4, it is submitted that the learned Arbitrator
referred to the public notice given by PB and held that it was "completely
determinative of the fact that the audio streaming right was a multimedia
right for which the Respondents had to be approached by a potential licensee
and did not form part of the internet rights." Further various letters
addressed to PB by the Respondents as regards the rediff.com were not
responded to by PB.
(vi) It is denied that Rs.4.5 lakhs being the value of the deal between PB and
the rediff.com for licensing of audio streaming was used by the learned
Arbitrator as a benchmark for the minimum potential value that this right
could have. The loss was calculated initially on the basis of the minimum
benchmark. The fact that there was agreement was sufficient to determine
that there was a breach committed by PB. The letters by the Respondents
relating to various offers from neighbouring countries were merely
indicative of the failed opportunities of the Respondents.
(vii) The method of quantification of the damages under Claim No. 4 was on
the basis of the potential values as projected by the Respondents and taking
Nepal as 1/6th that of Bangladesh. A comparison of two separate methods of
calculation, one based on PB‟s documents and the other on the basis of the
Respondents‟ documents explains how the Arbitrator arrived at the
calculation. There was nothing improbable in the said determination.
Scope of the powers under Section 34 of the Act
22. Before commencing the examination of the above submissions, it is
necessary to recapitulate the legal position regarding the scope of the Court's
powers of judicial review of an arbitral Award under Section 34 of the Act.
In Associate Builders v. Delhi Development Authority (supra), the Supreme
Court summarised what constituted the fundamental policy of Indian law. In
that process, it extracted certain passages from the earlier decision in ONGC
Ltd. v. Western Geco International Ltd. 2014 (9) SCC 263. In para 40 of
that judgment, it was observed as under:
"40. It is neither necessary nor proper for us to attempt an exhaustive
enumeration of what would constitute the fundamental policy of
Indian law nor is it possible to place the expression in the straitjacket
of a definition. What is important in the context of the case at hand is
that if on facts proved before them the arbitrators fail to draw an
inference which ought to have been drawn or if they have drawn an
inference which is on the face of it, untenable resulting in miscarriage
of justice, the adjudication even when made by an Arbitral Tribunal
that enjoys considerable latitude and play at the joints in making
awards will be open to challenge and may be cast away or modified
depending upon whether the offending part is or is not severable from
the rest."
23. A reference was also made in Associate Builders v. Delhi Development
Authority (supra) to the decisions in Kuldeep Singh v. Commissioner of
Police (1999) 2 SCC 10 and P.R. Shah, Shares & Stock Brokers (P) Ltd. v.
B.H.H. Securities (P) Ltd., (2012) 1 SCC 594, where it was reiterated that
the Court does not sit in appeal over the Award of an Arbitral Tribunal by
reassessing or re-appreciating the evidence. It was reiterated that the Award
could be challenged only on the grounds mentioned under Section 34(2) of
the Act. Inter alia it was observed that "an Arbitral Tribunal must decide in
accordance with the terms of the contract, but if any arbitrator construes a
term of the contract in an unreasonable manner, it will not mean that the
Award can be set aside on this ground. Construction of the terms of a
contract is primarily for an arbitrator to decide unless the arbitrator construes
the contract in such a way that it could be said to be something that no fair-
minded or reasonable person could do." It was further reiterated that "once it
is found that the arbitrator's approach is not arbitrary or capricious, then he
is the last word on facts." The Supreme Court also reiterated that "an award
can be said to be against justice only when it shocks the conscience of the
Court." The Court observed that it is settled law that where a finding is
based on no evidence, and the AT takes into account something irrelevant to
the decision which it arrives at, or ignores vital evidence in arriving at its
decision, such decision would be termed as perverse.
24. In Associate Builders v. Delhi Development Authority (supra), the
Supreme Court has emphasised that on questions of fact, the view of the
learned Arbitrator would be final. The following observations in the said
decision are relevant:
"It must clearly be understood that when a court is applying the
"public policy" test to an arbitration award, it does not act as a
court of appeal and consequently errors of fact cannot be
corrected. A possible view by the arbitrator on facts has
necessarily to pass muster as the arbitrator is the ultimate master
of the quantity and quality of evidence to be relied upon when he
delivers his arbitral award. Thus an award based on little evidence
or on evidence which does not measure up in quality to a trained
legal mind would not be held to be invalid on this score. Once it is
found that the arbitrator‟s approach is not arbitrary or capricious,
then he is the last word on facts. "
25. In NHAI v. ITD Cementation India Limited (supra) it was observed as
under:
"25. It is thus well settled that construction of the terms of a contract
is primarily for an arbitrator to decide. He is entitled to take the view
which he holds to be the correct one after considering the material
before him and after interpreting the provisions of the contract. The
court while considering challenge to an arbitral award does not sit in
appeal over the findings and decisions unless the arbitrator construes
the contract in such a way that no fair minded or reasonable person
could do."
Arbitrability of disputes
26. One of the first questions to be addressed was whether the dispute
pertaining to internet rights was an arbitrable dispute. As noted by the
learned Arbitrator there are in fact two agreements-one dated 18th February
2000 and the other dated 19th February 2000. The case of the Respondents
was that both these documents constituted one agreement.
27. The learned Arbitrator has undertaken a detailed analysis of both the
letters dated 18th February 2000 and the agreement dated 19th February
2000. Reference in particular has been made to Clause 7.5 of the agreement
dated 19th February 2000 which talks of the official Doordarshan/TWI-
Starcon website URL address which would be included in all full frame
graphics for the coverage of the matches. In fact the agreement dated 19th
February 2000 was not meant to deal with internet rights at all. It is strange
how the said clause has been inserted. The letter dated 18th February 2000
appears to have been drawn up more or less simultaneously with the letter
dated 19th February 2000. The acceptance of the letter dated 18th February
2000 by the Respondents by appending their signature on 19th February
2000 is significant.
28. Mr. Mandloi did answer the Arbitrator's question as to the effect that the
19th February 2000 agreement had on the agreement dated 18th February
2000 effective. That answer clearly indicated that both these documents
were to be read in continuation. The interpretation placed by the learned
Arbitrator on a collective reading of both documents cannot be said to be so
improbable as to render it impossible for any reasonable person to arrive at
the same conclusion. It has been reasoned out by the learned Arbitrator that
the letter dated 18th February 2000 is supplementary to the agreement dated
19th February 2000 and that the said letter "has no meaning or relevance on
its own and its plain reading suggest that it was concurrent with the
19.2.2000 letter/agreement."
29. Further Clauses 3.4 and 3.6 have made reference to all other multimedia
rights. Whole of Clause 3 is significant in this regard and reads as under:
"3. RIGHTS
The rights (hereinafter called "the Rights'') granted by Prasar
Bharti to TWI-Stracon hereunder are as follows:-
3.1 . Exclusive rights for marketing live/delayed television
signals for all territories outside the Union of India for all forms
of television including terrestrial broadcast, pay per view, cable
and satellite (free to air a[ld subscription).
3.2 Exclusive rights for marketing radio rights for all forms of
radio signals outside the territories of Union of India excluding
the territories of the United Kingdom.
3.3 Rights .of marketing clippings and highlights of the matches
in all territories.
3.4 All other multi-media rights during the term including but
not limited to in-flight, home video, laser disk etc. However,
internet rights are excluded and are being retained by Prasar
Bharti
3.5 Direct Broadcast by Satellite Television (encrypted or free
to air).
3.6 Two way television and multi-media (any form) rights
(except all internet rights which have been retained by Prasar
Bharti).
3.7 All other broadcast media including non-theatrical
exhibition and closed circuit transmission rights and Video-on-
Demand."
30. Then there is Clause 7.5 which spells out the obligation of the Petitioner
carrying the website URL address.
31. The Court concurs with the finding of the learned Arbitrator that if the
contention of the Petitioner was that the letter dated 18th February 2000 had
no connection with the agreement dated 19th February 2000 was accepted it
would render Clauses 7.5, 3.4 and 3.6 of the agreement dated 19th February
2000 pass through.
32. The above analysis of the clauses of both the letters dated 18th February
2000 and the agreement dated 19th February 2000 by the learned Arbitrator
is certainly a plausible view to take and the Court finds no reason to
interfere with the above analysis under Section 34 of the Act.
Claim 3
33. Now turning to the merits of the claims, it must be noticed at the outset
that while the learned Arbitrator disagreed with PB as regards the
arbitrability of Claim No. 1 he did not award any amount under Claim No.1
as he came to the conclusion that the Respondents had not adduced any
proof regarding damages. This part of the Award has not been challenged by
the Respondents.
34. Likewise as regards Claim No.2, the learned Arbitrator disagreed that
there was any breach by the Petitioner as regards the overspill of signals.
Further it was found that "what loss claimant suffered ultimately has not
been made known by any concrete evidence." Consequently, Claim No. 2
was also rejected.
35. Therefore on merits the challenge in the present petition is to the award
of Claim Nos. 3 and 4 by the learned Arbitrator. To recapitulate, Claim No.3
pertained to the multimedia rights which according to the Arbitrator related
to Clauses 3.4 and 3.6 of the agreement dated 19th February 2000. He
disagreed with PB that the rights given to rediff.com were not multimedia
rights and he agreed with the Respondents that they had been deprived of an
opportunity of earning revenue. Despite holding that the Respondents had
not adduced any evidence regarding their attempts to licence the rights he
awarded Rs.17 lakhs by way of damages by taking the amount of Rs.4.25
lakhs as the amount that could have been earned for one year.
36. It must be noticed at this stage that even before beginning to discuss the
merits of the claims, the learned Arbitrator made certain general
observations in para 22 of the Award as follows:
"...Nothing has been brought on record to show the state of
affairs from the filing of the claims up to the time the agreement
expired. Both the claimants are the limited companies and must
be keeping books of accounts in the regular course of their
business. Two types of claims have been made in respect of
each of the four breaches mentioned in the statement of claim.
One is the alleged actual loss suffered during the period prior to
filing of the claim petition and second, which is in the
alternative, for a breach of obligation which the claimants
themselves quantified? How these figures have been arrived at
midstream of the agreement is ·not clear. In support of the
second type of claim it would appear that the claimants have
examined Ms. Ambika Srivastava as an expert witness. Apart
from her statement, claimants have not shown if their estimate
of the value of loss was ever reflected in their books of accounts
or ever brought to the notice of the respondent Prasar Bharti at
any time earlier to filing of the claim petition or ever referred to
in any of the correspondence exchanged between the parties. In
the absence of· any concrete facts, it is difficult to accept the
proposition of the estimated value of the rights, e.g. multimedia
rights. As regards the first part of the claim for loss during the
working of the agreement and the resultant loss/profit after the
conclusion of the agreement it would perhaps be more
appropriate to refer to the following statement in the statement
of claim relating to breach regarding non-display of official
Doordarshan Cricket website on the live telecast of the
matches:
The Claimants' sub-contractors/agents/partners who have been
involved in the operation, development of the website have also
been repeatedly threatening to claim monies from the Claimants
on account of the lack of promotion of the website and further
claims/losses may be imminent The Claimants therefore fully
reserve their right under law to add, amend or consolidate their
claim on account of losses incurred and damages resulting on
account of the breach by the Respondent"
23. Claimants have not sought to amend their claim after
conclusion of the agreement."
37. The above observation is significant because the running theme of the
Award is the lack of evidence adduced by the Respondents to substantiate
their claims for damages. The learned Arbitrator further observed in para 26
as under:
"26. Claimants have not indicated/stated what would have been
the profit, which would have been reasonably foreseeable at the
time the agreement was entered. Losses suffered on account of
alleged lost opportunities have not been proved with any degree
of certainty."
38. When it came to the specific claims, the position was no better. The
Court takes up in seriatim Claim Nos. 3 and 4 in order to examine whether
the approach of the learned Arbitrator attracted any of the grounds on
invalidation spelt out under Section 34 of the Act.
39. On the merits of the breach complained of under Claim No.3, the learned
Arbitrator observed that the stand of PB that the rights given to rediff.com
under the agreement dated 21st March 2001 were not multimedia rights does
not appear to be correct. The expert witness Ms. Ambika Srivastava made
the following statement specific to the rights that were given to rediff.com
where inter alia she stated:
"The marketing of audio rights to rediff.com clearly comes
under delivery of multimedia rights. Given that audio streaming
on the internet cuts across geographical segments, this would
have resulted in erosion of the audio rights in the international
territories too, considering that it was available
free of cost."
40. Ms. Ambika Srivastava was cross-examined but was unable to be
persuaded to change her view. The relevant portion of the cross-examination
reads as under:
"Question 46: I put it you that right to carry streaming of audio
and video is a internet right?
Ans. In my knowledge audio streaming can be done not just
through the internet but through other medias as well.
Question 47: I put it to you that to carry audio streaming on the
internet is an internet right?
Ans. I think you may be correct."
41. Although learned counsel for PB urged before the learned Arbitrator that
the above answers made it clear that carrying on audio streaming on internet
is an internet right, the learned Arbitrator observed, and rightly, that the
public notice given by PB stated that if licence holder of an internet right
desires to have audio streaming then he would have to approach the
Respondents for multimedia rights. In fact the relevant portion of the public
notice in this regard reads as under:
"If the licence-holder further desires to have live/delayed
streaming audio/video after obtaining the internet rights from
Prasar Bharti, he would then have to approach the rights-holder
for multi-media rights to get the streaming rights from the
multi-media rights holder."
42. It was for this reason that the learned Arbitrator held that "the agreement
entered into by Prasar Bharati with rediff.com is clearly in breach of rights
granted by the claimant."
Estimate of loss
43. The difficulty was in estimating the alleged loss suffered by the
Respondents as a result of the breach. To the question that the valuation of
5,00,000 USD as the loss suffered is conjectural, Mr. S. Ray the witness for
the Respondents stated that the figure of 3 million USD was his „estimate as
expert‟. While PB failed to produce its agreement with rediff.com, the
learned Arbitrator wondered why in terms of the said agreement PB agreed
to charge Rs.4.25 lakhs from rediff.com whereas the public notice fixed the
annual fee as Rs.25 lakhs. Then the learned Arbitrator acknowledged that "it
remains difficult job to ascertain the loss occurred to the claimants on
account of the agreement between Prasar Bharti and rediff.com." It was also
observed by the learned Arbitrator that "merely by stating that their rights
have been jeopardized altogether claimants have not brought on record any
evidence in support of that. The evidence would have been in the shape of
their attempts to license of multimedia rights to internet licensees/sub-
licensees and their failure to do so. There is no index to calculate the value
of multimedia rights sold to internet licensees/sub-licensees. Moreover, the
claimants were to get annual fee not exceeding Rs. 1 crore per annum for all
users of internet rights as may be prescribed by Prasar Bharti. Prasar Bharti
has not prescribed any such fee. If for one year share of multimedia rights
could be 4.25 lakhs, for 4 years it would be Rs. 17 lakhs, to which amount
claimants would be entitled to."
44. To the Court it appears that the learned Arbitrator has adopted the easy
route of surmises and conjectures despite all the above observations making
it abundantly clear that there was no credible evidence to go by. It was
wrongly observed in the above paragraph that the sum of Rs.1 crore was to
be received by the Respondents. That in fact was the internet licence fee that
had to be paid by the Respondents. Therefore, that was not any reasonable
yardstick to go by. The next factor which seems to have been completely
overlooked is that the agreement with rediff.com was only for one year from
21st March 2001. The Respondents failed to adduce any evidence as regards
their licence to rights and their failure to do so. In that view of the matter,
projecting a figure of Rs.4.25 lakhs for four years was plainly erroneous and
not supported by any evidence whatsoever. While the finding about PB
being in breach of its obligations under the agreement by granting rediff.com
audio streaming rights for one year cannot be said to be contrary to the
evidence on record, the determination of Rs.17 lakhs as the loss suffered by
the Respondents which has to be compensated was wholly unsupported by
any evidence whatsoever. Consequently, this part of the impugned Award
based on surmises and conjectures and not on evidence which could be
considered to be credible, is opposed to the fundamental policy of Indian law
and cannot be sustained.
Claim 4
45. Turning to Claim No.4 awarding the exclusivity of the rights to mark
television broadcasts for all territories outside India, the question was
whether by the agreement dated 16th July 2000 appointing MEN as the sole
and exclusive distributor and promoter for DD Sports channel and thereby
distributing television signal decoders which could allow viewership in Sri
Lanka, Bangladesh and Nepal to receive an encrypted DD Sports channel or
any deliberate breach committed by the Petitioner. The learned Arbitrator
analysed the agreement dated 6th July 2000 entered into between the
Petitioner and MEN. The learned Arbitrator found that the BCCI organised
international cricket events having been given the prime position. It was then
concluded that "to enter into such an agreement covering the countries of Sri
Lanka, Bangla Desh and Nepal for which exclusive TV rights vested with
the claimants, was itself a wrongful act on the part of the Prasar Bharti." The
agreement did value the rights of the claimants.
46. Whatsoever PB earned from this agreement would lawfully belong to the
claimants. The case of PB is that prior to 15th September 2000 the signals of
the DD Sports channel were transmitted in a coded format. Prior thereto the
said channel was free to air. There was a substantial overspill of signals. It
was noted that the channels were freely available in Nepal Bangladesh and
Sri Lanka. This inevitability of overspill was accepted by the learned
Arbitrator in dealing with Claim No.3. Thus it was not as if that the decoders
submitted to MEN made available the signals in Nepal, Bangladesh and Sri
Lanka. As a result of the encryption only the free availability of signals got
restricted.
47. However, the Court is not satisfied of the bonafides of the action of PB
in entering into such an agreement with MEN and distributing the decoders
which would enable the receipt of encrypted DD Sports channel in Nepal,
Bangladesh and Sri Lanka etc., when in fact the exclusive television rights
for those territories were granted to the Respondents. Therefore, as regards
the commission of breach of the agreement by PB is concerned, the finding
of the learned Arbitrator cannot be said to be erroneous. It was a view
supported by the evidence brought on record.
48. The difficulty as regards Claim No.4 is not so much as the finding of
breach by PB but the consequential determination of the alleged loss
suffered by the Respondents as a result thereof. It is here that the learned
Arbitrator appears to have again indulged in an entire exercise of surmises
and conjectures. In this regard, the following observations in para 64 of the
impugned Award became significant. In the first place, the learned
Arbitrator considered it to be "reasonable to assume" that the agreement
with MEN "worked its full tenure" up to 30th September 2004. The learned
Arbitrator went by the projected revenue in Annexure II to the said
agreement with MEN as Rs.2080.50 lakhs. The learned Arbitrator then
proceeded in the following manner:
"This will be for whole of India and Sri Lanka, Bangla Desh
and Nepal. Population of these countries is almost 1/6th of that
of India. Earning of both Prasar Bharti and MEN from the
agreement with- MEN for these countries would therefore be
1/6th of Rs.2080.50 lakhs and would come to approximately
Rs.3.46 crores. First I was drawing the idea that claimants
would be entitled to the earnings made by Prasar Bharti under
the agreement with MEN. But then why should claimants
should have been paid for the earnings of MEN. Thus the total
earning under the agreement of Prasar Bharti with MEN would
rightfully belong to the claimants and this amount is Rs.3.46
crores."
49. The Court is unable to understand the true purport of the last three
sentences. First, the learned Arbitrator appears to have proceeded on the
basis that the Respondents would be entitled to all the earnings of the
Petitioner under the agreement with MEN. The sentence "But then why
should claimants should have been paid for the earnings of MEN" does not
appear to logically flow from ending that has been discussed before the said
sentence. The sentence that follows "Thus the total earning under the
agreement of Prasar Bharti with MEN would rightfully belong to the
claimants" also does not flow from what has been discussed earlier in the
said paragraph.
Damages on surmises
50. It is not understood how merely on the basis of population it could be
presumed that 1/6th of the total projected revenue would be that of India.
The logic gets even more curious in the next paragraph when the learned
Arbitrator observed as under:
"65. Since I have adopted the principle of population in respect
of the countries, the population of Nepal is 1/6th of that of
Bangla Desh. It could well be equal to that of Sri Lanka. It is a
bit surprising when the complainant say that population of
Nepal is same as Bangla Desh. Since the value of TV rights for
Bangla Desh in MOU aforesaid, is given as US$250,000.00, I
will take 1/6th of figure for Nepal which would come to US$
41.7 thousand if I total all these figures of Bangla Desh (US$
250,000.00), Sri Lanka (US$500,000.00) and Nepal (US$ 41.7
thousand), it would be US$ 791.700 thousand. In terms of
Indian rupees the exchange rate would be as on the date of the
award. If I take exchange rate of 1 US$ = Rs.40/-, in terms of
Indian rupees US$ 791700 would be equal to Rs.3,16,68,000/-
quite similar to the earnings under the agreement dated
6.7.2000 between Prasar Bharti and MEN. I would therefore,
accept loss suffered by the claimants on account of this
agreement between Prasar Bharti and MEN as US$791700."
51. The entire discussion in this regard appears to be again based on
surmises and conjectures where the learned Arbitrator has simply linked up
the population figures with the possible earnings as a result giving away all
broadcast rights on television. How this could be even a rational yardstick is
unable to be understood.
52. There are no answers from the Respondents to the point urged by PB that
the stand of the Respondents about being unable to sell rights for the
territories of Nepal, Bangladesh and Sri Lanka stood falsified by the MoU
dated 15th September 2001 entered into by the Respondents with PCCIL in
terms of which the rights for the entirety of Asia stood sold to PCCIL. As
wrongly presumed by the learned Arbitrator, PCCIL was not a subsidiary or
licensee of Respondent No.1. When CW-1 was asked about PCCI he
claimed not to know anything about it. Likewise, CW-2 also denied any
knowledge of PCCIL. Therefore, the observation of the learned Arbitrator
that PCCIL was a subsidiary/licensee of Respondent No.1 was based on no
evidence at all. The long and short of it was that no evidence was placed by
the Respondents to show that they were unable to sell the rights for Nepal,
Bangladesh or Sri Lanka. It is not possible to accept the approach of the
learned Arbitrator in linking up the population figures with the possible
earnings as a result of television broadcast rights for these territories.
53. Reference was also made to a letter dated 12th June 2000, which as
pointed out by learned counsel for the Petitioner, appears to be doubtful.
There was no rational basis for the Award of a substantial sum of Rs.3.3
crores as damages. This part of the Award is based on no evidence and
cannot, therefore, be sustained in law. It is opposed to the fundamental
policy of Indian law thus attracting invalidation under Section 34(2)(b)(ii) of
the Act.
Conclusion
54. The net result of the above discussion is that the impugned Award dated
28th April 2008 is upheld to the extent that it finds the Petitioner in breach of
the agreement dated 19th February 2000 regarding non-display of URL and
in breach of the exclusivity clause regarding territories outside of India by
entering into the agreement dated 6th July 2000 with MEN. However, the
impugned Award to the extent it awards the Respondents Rs.17 lakhs
towards loss suffered as a result of non-display of URL and 791700 USD on
account of the territorial rights which could not be sold or exploited in Sri
Lanka, Bangladesh or Nepal is hereby set aside. Therefore, the question of
paying any interest on the said sums is also hereby set aside. As far as
apportionment of costs is concerned, the Respondents having fact succeeded
partially with that part of the Award is not interfered with.
55. As a result the impugned Award to the extent it entitled the Respondents
to Rs.3,16,68,000 from Petitioner together with interest @ 12% per annum
from 30th September 2004 till the date of Award and further interest @ 12%
per annum on the said sum till the date of payment are hereby set aside. The
Award to the extent it grants the Respondents costs of Rs.5 lakhs limited to
the share of fee paid by them for 20 hearings is left undisturbed.
56. The petition is disposed of in the above terms but in the circumstances
with no order as to costs.
S. MURALIDHAR, J
APRIL 17, 2017
dn
