Delhi High Court
Sporty Solutionz Pvt. Ltd. vs Badminton Association Of India ... on 7 February, 2020
$~
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Reserved on: 30th January, 2020
Pronounced on: 07th February, 2020
+ O.M.P. (COMM) 316/2017
SPORTY SOLUTIONZ PVT. LTD.THROUGH ITS CHIEF
EXECUTIVE OFFICER MR. ASHISH CHADHA ..... Petitioner
Through : Mr.Sanjeev Anand and Mr.Suresh
Khadav, Mr.Varun K.Bala,
Advocates.
versus
BADMINTON ASSOCIATION OF INDIA
THROUGH ITS PRESIDENT & ANR. ..... Respondents
Through : Mr.Nalin Kohli, Ms.Vishakha
Ahuja and Ms.Nimisha Menon,
Advocates for respondents No.1
and 2.
+ O.M.P.(I) (COMM.) 362/2017
SPORTY SOLUTIONZ PVT. LTD. ..... Petitioner
Through : Mr.Sanjeev Anand and Mr.Suresh
Khadav, Mr.Varun K.Bala,
Advocates.
versus
BADMINTON ASSOCIATION OF INDIA
AND ANOTHER ..... Respondents
Through : Mr.Nalin Kohli, Ms.Vishakha
Ahuja and Ms.Nimisha Menon,
Advocates for respondents No.1
and 2.
CORAM:
HON'BLE MR. JUSTICE YOGESH KHANNA
OMP(COMM) 316/2017 and OMP(COMM) (I)362/2017 Page 1 of 38
YOGESH KHANNA, J.
O.M.P. (COMM) 316/2017
1. This petition is filed under section 34 of the Arbitration and
Conciliation Act, 1996 (hereinafter referred as 'the Act') challenging the
award dated 08.05.2017 passed by the sole arbitrator.
2. The brief facts as alleged by the petitioner are:-
a) Respondent no.2 approached the petitioner for itself and on behalf
of respondent no.1 to associate the petitioner in holding annual
badminton tournaments in the country on a modest scale. The petitioner
offered to respondent no.2 and respondent no.1 through respondent no.2
the Indian Badminton League (IBL) format, agreed to develop an
organized Indian Badminton League (IBL) with all commercial rights
with the petitioner against payment of rights fee to the respondent No.l
and respondent no.2 with a condition the intellectual property rights of
the Indian Badminton League (IBL) shall vest exclusively in the
petitioner for perpetuity, to which respondent no.l and respondent no.2
agreed;
b) On 22.10.2012 a memorandum of understanding (MOU) was
signed between the Petitioner and the respondents No.1 & 2 on the lines
of the approved draft and the agreement arrived at between them, with
regard to the initiation, development and organizing of the Indian
Badminton League. On 10.11.2012 a formal tripartite agreement was
executed between the petitioner and respondents No.1 & 2 assigning role
and obligation of the parties. On 09.11.2012, 04.12.2012 & 20.07.2013
the petitioner applied for registration of trademark and logos "Indian
Badminton League" and "IBL" in its name.
c) On 16.07.2013 new agreement was entered into between the
petitioner and the respondents. Under this agreement, interalia:-
(i) the petitioner was granted rights to (a) develop and organize IBL;
(b) concept, format and structure of IBL.
(ii) during the subsistence of the agreement, all (following) commercial
rights in or in relation to IBL shall vest in the petitioner.
(iii) in terms of Clauses 4 & 5 of the agreement Rights fee was to be
paid by the petitioner to the respondents.
(iv) under clause 9.3 the respondents have undertaken that no other
professional/amateur tournament/ sports event similar to or competing
with IBL shall be initiated, started, entertained or sanctioned by the
respondents.
(v) under clause 9.4 the respondents· have undertaken to fully protect
and promote the rights and interest of the petitioner and IBL without
exception and not to take any steps or actions that could dilute or
detract from the value, exclusively or goodwill attaching to IBL.
(vi) under clause 11.2 the respondents could terminate the agreement
only by giving 90 days advance notice in writing to the petitioner and
also if the petitioner has committed any breach of any of the terms of
the agreement and the said breach has not been remedied within 30
days of the receipt by the petitioner of written notice given by the
respondents requiring it to do so.
(vii) Under Clause 12, after the period of 10 years, the respondents
were obligated to first offer renewal of the agreement for a term of ten
years to the petitioner on the terms to be agreed between the parties
and only if the parties failed to agree on the terms of renewal the
respondents were free to contract with the third parties;
d) The first IBL was held between 14.08.2013 to 31.08.2013. It
emerged as the greatest badminton tournament in the history of the sport
across the globe. The Petitioner earned its goodwill with the name
"Indian Badminton League" and the same became synonymous in the
sport of badminton as IBL with the petitioner's efforts. The BAI
announced the IBL 'Season 2' would be held between 30.09.2014 to
15.10.2014.
e) On 22.04.2014 the respondent No.1 cancelled IBL altogether in
the year 2014 (30.09.2014 to 15.10.2014 - The dates fixed for the IBL)
and the next tentative dates fixed were January-February, 2015 without
any prior notice or consultation with the Petitioner.
f) On 24.04.2014 the petitioner protested to the aforesaid change of
dates and requested the respondent no.l to stick to the dates earlier
announced and also requested for convening a meeting of the Governing
Council at the earliest. The Petitioner also pointed out currently IBL was
still a loss - making exercise for the company as profits could be
expected only after a gestation period of three years.
g) The respondent no.l vide in its e-mail dated 26.04.2014 replied to
the petitioner's above e-mail dated 24.04.2014 and stated that it had no
time till 2nd June and was busy in World Badminton event and general
election to be held in the country. Merely, for the reason the petitioner
had made a statement earlier that it had made a loss in IBL-1 and were
also foreseeing loss in 2nd & 3rd IBL, without any complaint or any
allegation whatsoever against the petitioner, asked the petitioner to give a
Bank Guarantee of `50 crores.
h) Governing Council meeting was held which is alleged to have
resolved to amend Clause 8 of the Agreement dated 16th July, 2013 by
invoking Clause 27 of the said agreement, providing for petitioner to give
Bank Guarantee of `50 crores or lesser amount to the satisfaction of
respondent No.1. It is claimed by the respondents that it was resolved at
the said meeting that the petitioner shall furnish bank guarantee of ` 50
crores within 15 days of the said meeting. The petitioner submits no such
resolution was tabled in the meeting and there was no voting on any such
resolution to furnish bank guarantee at the meeting of Governing Council
dated 20.09.2014.
i) On 31.01.2015 the petitioner issued a letter to the Respondent
No.1 i.e. BAI requesting them to announce dates of IBL season 2 by
10.02.2015, else they will be forced to take legal recourse. The
respondent No.1 responded, vide e-mail dated 01.02.2015 stating therein
the Petitioner would have to deposit a bank guarantee of `50 crores, else
the agreement dated 16.7.2013 would be terminated. It was alleged in the
said letter the alleged "Governing Council" in its meeting dated
20.09.2014 had approved of the demand for the bank guarantee from the
petitioner.
j) The petitioner vide email dated on 10.03.2015 agreed to furnish
bank guarantee of Rs.15.00 Crores with request to convene the
Governing Council meeting to approve the petitioner's proposed payment
schedule for bank guarantee in the following manner as under:
(a) six crores within three weeks of the acceptance of the proposal; and
(b) nine crores for the players contact fee, two weeks prior to the IBL
players auction.
k) on 21.04.2015 instead of responding to the petitioner's aforesaid
email dated 11.03.2015 and convening a Governing Council meeting, on
21.04.2015, the Respondent no. 1 sent a formal letter terminating the
contract dated 16.07.2013 in complete violation of natural justice and
committed breach of contract by illegally terminating the contract.
l) On 29.05.2015 petitioner filed a petition being OMP No.285/2015
under Section 9 of the Act for interim measures challenging the
termination letter dated 21.04.2015 and prayed for the respondents to
announce the IBL Season-2 dates and for restraining the respondents
from entering into contracts with any other party for conducting IBL
Season-2. This Court vide order 29.05.2015, in view of the statement
made by the Counsel for the respondent no.l that the original schedule for
Season-2 had lapsed and fresh schedule, was yet to be announced, was of
the view that no interim relief could be granted at that stage to the
petitioner and accordingly dismissed the petition with liberty to the
petitioner to agitate the issue before the appropriate forum. On
30.09.2015 respondent no.l announced the conducting of IBL Season-2
from January 2 to 17 of 2016 and auction of the six franchisee teams
were scheduled for 20.09.2015.
m) On 30.10.2015 petitioner filed an application under Section 9 of
the Act in this Court for restraining the respondents from conducting the
same. As, simultaneously, arbitration agreement had been invoked by the
petitioner and the respondent no.l had appointed Mr. Justice V.N. Khare,
Former Chief Justice of India as the sole arbitrator to adjudicate the
dispute between the parties, pursuant to the orders passed by this Court,
the said Section 9 petition was treated as application under Section 17 of
the Act to be heard by the said Arbitral Tribunal.
n) On 03.12.2015 all of a sudden in breach of the Agreement dated
16.07.2013, the respondent no .1 issued press statements that it had
decided to "rechristen the Indian Badminton League (IBL) as Premier
Badminton League (PBL), which will be held from January 2 to 17,
2016. As per the said press release the Premier Badminton league (PBL)
was to commence on 02.01.2016 in Mumbai. The Learned Arbitral
Tribunal vide order dated 28.12.2015 decided the said application but
refused to grant the injunction prayed for. The said order of the Learned
Arbitral Tribunal was confined/ limited to, as to whether the respondents
should be injuncted from conducting the IBL Season-2 during
02.01.2016 to 17.01.2016. The sole basis of the Learned Arbitral
Tribunal passing this order dated 28.12.2015 as recorded in it, was that
enormous money has already been spent for organizing the tournament
which is to start from 02.01.2016. Respondent no.1 proceeded to
organize and hold badminton tournaments under the name Premier
Badminton League (PBL) during January 2 to January 17, 2016 and
irreparable loss and damage was caused to the Petitioner.
o) On 08.01.2016 the petitioner filed its Statement of Claim on
08.01.2016 in the arbitration proceedings seeking declaration qua the
termination of the Agreement dated 16th July, 2013 by the Respondents as
null and void. The petitioner claimed specific performance of the said
agreement and order of restraining the respondents from holding any
badminton tournament under the name of 'Premier Badminton League' or
'PBL' or any other name. The petitioner claimed Rs.21,26,57,871/-
towards the expenses incurred by it during the financial year 2012-13,
2013-14 & 2014-15 and interest thereon @ 24% per annum and
Rs.18,335 lacs towards loss of profit which the petitioner would have
earned during 10 years contractual period. On 01.05.2016 the
respondents filed their reply to the statement of claim along with counter
claim.
p) The petitioner came across a news item published on http://www.
televisionpost.com/news/bai-awards-longterm- rights-of-premier-
badminton-league-tosportzlive/ dated 16.09.2016 announcing that the
respondent no.l has awarded long term rights of its franchise based Indian
Badminton League (IBL) which was rechristened as Premier Badminton
League (PBL) for year 2017. The petitioner immediately filed an
application under Section 17 of the Act on 24.10.2016 and prayed for
interim measures. Vide order dated 14.11.2016 the learned Arbitrator
rejected the petitioner's said application under Section 17. The petitioner
filed an appeal ARB.A.(COMM.) 43/2016 challenging the same. This
Court vide its order dated 23.03.2017 held there is no occasion at this
stage for the Court to observe anything or pass any orders in that regard
as pointed out by the respondent that the next PBL would be held by the
end of this year and outer limit for passing arbitral award is 13.05.2017.
q) On 08.05.2017 the learned Arbitral Tribunal made the Award
wherein it is held the termination of the Agreement dated 16.07.2013 the
respondents vide notice dated 21.04.2015 although, not in terms of
Clause 11 of the 2013 agreement, subject to the Respondent No.1 paying
compensation of Rs.2.5 crores to the Petitioner within a period of three
months from the date of delivery of the award. It is alleged vide the said
Award, the learned Arbitral Tribunal wrongly held the 2013 agreement
was no longer subsisting between the parties and had rejected all other
reliefs/claims sought by the petitioner in the statement of claim. Vide the
said award the learned Arbitrator has also rejected the counter claims
filed by respondent no.l, hence this petition.
3. The learned counsel for the petitioner has referred to the tripartite
agreement dated 16.07.2013 executed between the petitioner and the
respondents No.1 & 2 wherein all the rights qua the events were given to
the petitioner for holding events for ten years and to commercially
exploit the events by earning revenue in every possible way through
banners, media, advertisements etc and in turn they were bound to pay
fees which was, initially, for the first year at Rs.1.00 Crores and later was
subject to increase.
4. A few relevant clauses of the contract run as under:-
"1. Definitions and Interpretation
―Commercial Rights‖ means the right to access, control, exploit,
market, promote, advertise, transfer, acquire and sub-license including
without limitation all public exhibition rights to property for a period
of 10 years commencing from 2013 and ending the year 2022.
―IBL‖ shall mean the annual domestic badminton tournament,
organized in various Indian Cities, under the name of Indian
Badminton League.
―Governing Council" means the supreme committee of the Indian
Badminton League established by BAI to establish and oversee the
operations of the league. The Governing Council shall consist of 11
members, out of which 6 members shall be of BAI including the
President, BAI, who shall be the Chairman of the Governing Council
and out of the remaining members 3 would be from SSPL and 2 will be
of MBA.
"Term" means the period of 10 years commencing from 2013 and
expiring at the end of the year 2022.
"Territory" means the entire world.
In this Agreement, unless otherwise specified:
a. the list of contents and headings are for ease of reference only and
shall not be taken into account in construing this Agreement;
2. Grant of Rights
2.1 In consideration of the payment of Rights Fee, BAI and MBA
hereby grants to SSPL during the TERM the following rights,
throughout the TERRITORY.
2.1.1. Develop and Organize IBL
SSPL shall have the sole and overall right to conceptualize, develop
and organize IBL.
2.1.2. Concept, format and structure of IBL SSPL shall have the sole
right to determine the concept, format and structure of IBL. SSPL shall
have right to modify, amend or alter the format and structure of IBL
from time to time, as SSPL may deem fit, subject to Clause 7.1.
2.1.3 Franchise and Teams
2.1.7 Boarding, Lodging and Transportation
2.1.8 Commercial Rights
During the subsistence of this Agreement, all commercial rights in or in
relation to IBL shall vest in SSPL.
SSPL shall have the following rights;-
a. Rights to earn revenues and fees in the process of recruitment of
players, appointment of franchises, issue of entry tickets to match
venues and any all earning opportunities arising from on in relation to
the organization and holding of IBL matches
b. Broad-casting, Television, Radio, Mobile, Internet and Web Rights
in relation to images, photos, audio, video, audio-video, cinematograph
content in relation to IBL or in relation to any match comprised in IBL
or in relation to another event or element that relates to IBL or to the
matches conducted under. IBL or in relation to the name and likeness
of any Franchise, Team and Player.
2.1.9 Intellectual Property Rights
During the subsistence of this Agreement, SSPL shall own following:-
a) SSPL shall solely decide and determine other names, marks, logos,
slogans, brands etc. to be associated with IBL.
b) SSPL shall solely decide and determine the names, marks, logos,
slogans, brands etc. to be associated with each annual tournament
and/or each match and/or each even of IBL.
c) SSPL shall solely decide and determine the names, marks, logos,
slogans, brands etc. to be associated with each Franchise.
d) SSPL shall be entitled to enter into co-branding arrangements with
sponsors, suppliers, Franchises etc.
e) SSPL shall exclusively be entitled to register the names, marks,
logos, slogans, brands etc. to be associated with IBL, any tournament,
matches or events of IBL
f) SSPL shall own exclusive copyright an all footage and feed,
including still images, video, audio-visual, text of the matches and
event in the IBL.
4. RIGTHS FEE AND PAYMENT SCHEDULE
4.1. In consideration of grant of the exclusive rights SSPL shall pay the
Rights Fee, in the Designated Account of BAI MBA equally in
accordance with the below payment schedule specified in Clause 5.
5.PAYMENT SCHEDULE
5.1 It is agreed between the parties that SSPL shall pay rights fee on
yearly basis. Out of the 100% of the rights fee as detailed below, the
SSPL shall pay 50% of the agree amount before 30 days of the start of
first match of IBL and remaining amount of 50% of the rights fee
within 60 days of the completion of the annual league season.
Date Amount in lacs to be paid to BAI:
2013 100
2014 150
2015 150
2016 200
2017 200
2018 200
2019 300
2020 500 or 50% of the profit as determined by the
Governing Council whichever is higher.
2021 750 or 50% of the profit as determined by the
Governing Council whichever is higher.
2022 1000 or 50% profit as determined by the Governing
Council whichever is higher.
8. SSPL'S GENERAL OBLIGATIONS
8.1 SSPL shall make timely payment to BAI.
8.2 SSPL shall be responsible for the management of the event.
8.3 SSPL shall endeavour to find out franchisees for the purpose of this
agreement however, the selection of the Franchisees shall be subject to
approval of the Governing Council.
8.4 Licensing of Media and other rights in relation to IBL, its
tournament, matches, events etc. shall be done solely by SSPL.
8.5 SSPL shall endeavour to get all possible sponsorships.
8.6 SSPL undertakes to plan tournament scheduling and re-scheduling
in consultation with the Governing Council.·
8.7 SSPL shall make all necessary arrangement for players boarding
and lodging.
8.8 All events related press conferences will be arranged and
organized by SSPL.
8.9 All sale and distribution or tickets shall be done exclusively by
SSPL.
8.10 All disciplinary action if any against the Franchise shall be done
by SSPL provided that where it involves an issue relating to rules and
regulations of the BAI, the disciplinary action shall be taken in
consultation with the Governing Council. Further all disciplinary
action if any against the players etc shall be done by BAI/MBA, as the
case may be.
9. BAI AND MBA'S GENERAL OBLIGATIONS
9.3. BAI and MBA undertake that no other professional/ amateur
tournament/sports event similar to or competing with IBL shall be
initiated, started, entertained, permitted or sanctioned by BAI and/or
MBA.
9.4 BAI and MBA undertake to fully protect and promote the rights and
interest of SSPL and IBL without exception and to take any steps or
actions that could dilute or detract from the value, exclusivity or
goodwill attaching to IBL.
11. TERMINATION
11.2 BAI and MBA may at any time by giving 90 days advance notice in
writing to SSPL, terminate this Agreement in any of the following
events:
a. if SSPL commits any breach of any of the terms, conditions and
warranties contained herein and such default or breach is not remedied
within 30 days of receipt by SSPL of written notice requiring it to do
so; or
b. xxxx.
26. Governing Law
26.1 This Agreement shall be governed by and construed in
accordance with the laws of India.
26.2 Before resorting to arbitration under clause 26.3, parties shall
attempt in good faith to amicably resolve any dispute arising out of
relating to this Agreement promptly by good faith negations for a
period of ten (10) days from date of issuance of written notice that a
dispute has arisen by any party to the other parties.
26.3 All disputes and differences of whatsoever nature, whether
existing or which shall at any time, arise between the parties hereto
touching or concerning the agreement, meaning operation or effect
thereof or to the rights and liabilities of the parties or arising out or in
relation thereto whether during or after completion of the contract or
whether before after determination, foreclosure, termination or breach
of the agreement ( other than those in respect of which the decision of
any is by the contract, expressed to be final and binding) shall be
referred to arbitration by a sole arbitrator to be appointed by the
President, BAI and proceedings will be in accordance with the
Arbitration and Conciliation Act, 1996 as amended from time to time.
The place of arbitration shall be New Delhi, India. The language of
arbitration shall be English.
26.4 In relation to matters within jurisdiction of courts consistent with
the Arbitration and Conciliation Act, 1996 parties shall submit to the
exclusive jurisdiction of the courts at New Delhi.
27. EMERGENCY POWER OF THE GOVERNING COUNCIL OF
IBL:
Notwithstanding anything contained in this Agreement the Governing
Council of IBL shall have unfettered and unrestricted right, power/
authority to alter/modify any of the clause of this agreement, which
shall be binding on the parties. Further, in case of any dispute or
difference between he parties as to the interpretation of any Clause of
this Agreement, decision/opinion of the President, BAI shall be final
and binding on the parties.‖
5. It is alleged by the learned counsel for the petitioner the first event
of IBL was held from 14.08.2013 to 31.08.2013 and it was a grand
success. However, later though the dates for the second IBL were
announced by the respondent No.1 from 30.09.2014 to 15.10.2014, but
were cancelled and further dates in January 2015 and February 2015
were given, despite it was to be held on annual basis yet again the said
dates were cancelled. The petitioner protested claiming interalia it had
entered into various agreements with dealers, advertisers, broadcasters,
vendors etc. so if it not to be made an annual event it would suffer losses
and sent an email dated 24.04.2014 to the respondents in this regard.
The relevant portion of said email is:-
―e) Yonex - Sir, as you are aware, the league was a loss making
exercise for us in year One. In year two and three too, we do not
foresee the league making money. We would consider the league a
success even if we are able to break even with our operational costs.
We are ready to sit with Yonex under your guidance and iron out any
issues amicably. Our only request is that the relationship should not
question the commercial viability of the league and should not be one
way.‖
6. The respondent No.1 replied vide its email dated 26.04.2014 and
it noted:-
―Further, in response to the other contentions of your email under
reply we have to say that we are shocked and deeply bothered and
concerned over your statement that you have made loss in IBL 1 st and
you are foreseeing the loss in IBL 2nd and IBL 3rd as well, and in this
regard the following points are relevant:-‖
7. The learned counsel for the petitioner argued it was never a term of
contract which may authorise the respondents No.1 & 2 requiring
petitioner to pay a sum of Rs.50.00 Crores and it put a great financial
burden upon it. The learned counsel for the petitioner referred to
annexure P-30 (page No.548) written by the respondent No.1 to the
President of the Badminton World Federation wherein the respondent
No.1 rather stated as under:-
―.......Badminton World Federation should look into this event with a
lenient and different view granting discounts in Financial
consideration and extend their whole hearted support Because this is
the first experiment of its kind in World Badminton wherein a lots of
commercial interest and financial risks are at stake. The prospective
sponsors still have reservations to entirely look at Badminton as
"Potential Sport of Commercial interest".
And another email dated 25.12.2015 sent by respondent No.2 to
respondent No.1 note:-
―Thereupon we decided to approach the professional event
Management companies and explored the possibility of commercial
success of this proposed IBL. The companies approached were Total
Sports Asia, Mumbai, Percept, Mumbai one sports logistics company
from Delhi and Sporty Solutionz, Mumbai/Delhi/Singapore. Though no
one has come forward on their own except Sporty Solutionz.
Considering all the above facts and luke warm response received, we
decided to go ahead with Sporty Solutionz who, we found to be quite
competitive to deliver.‖
8. It is argued by the learned counsel for the petitioner firstly the
respondent No.1 changed the date of the event unilaterally and secondly
asked the petitioner to furnish a bank guarantee for a sum of Rs.50.00
Crores, per minutes of an alleged meeting of the Governing Council on
20.09.2014. It is argued the minutes of the said meeting are forged and
fabricated; the petitioner neither attended the said meeting nor signed its
minutes. In the said minutes the respondents No.1 & 2 amended initial
agreement dated 16.07.2013 and rather added clause No.8.1.1. The
minutes dated 20.09.2014 note:-
―The Governing Council in order to protect and safeguard the interest
of players, officials, franchisees, BAI and other stake holders of IBL
and also to save the existence of brand IBL resolved to invoke its
emergency powers as envisaged under Clause 27 of the agreement
dated 16.07.2013 and to alter / modify the existing Clause 8 of the
agreement dated 16.07.2013, which stipulates the SSPL's general
obligations/ to the following effect: -
"8.11 SSPL shall furnish to BAI a bank Guarantee of Rs.50,00,00,000/-
(Rupees Fifty Crores Only) or of any lesser amount to the satisfactions
of BAI duly issued by only nationalized bank.‖
9. It was argued the said minutes are nothing but a sham document.
10. The learned counsel for the petitioner argued the resolution dated
20.09.2014 (Annexure P-12) is a forged document though stated to have
passed in the presence of six people, including Mr.Ashish Chadha, CEO
of the petitioner. However, it was argued though Mr.Chadha was present
in the meeting, but the proposal of payment of Rs.50.00 Crore or its
equivalent bank guarantee was never passed in his presence and neither
there was any emergency to invoke powers under clause No.27 of the
agreement dated 16.07.2013. It is alleged a decision qua non-furnishing
of bank guarantee of Rs.50.00 Crores within 15 days from 20.09.2014
would be construed as a serious breach of the terms and conditions of the
agreement dated 16.07.2013, was never taken.
11. The learned counsel for the petitioner also pointed to Annexure P-
11, an email dated 26.04.2014 sent by Dr.Vijay Sinha to the petitioner
wherein he demanded of his own an amount of Rs.50 Crores and it rather
noted such decision was taken on 26.04.2014 and not on 20.09.2014 - on
which date the resolution is stated to have been allegedly passed.
Reference was made to Annexure P-26 a letter dated 08.10.2014 wherein
the respondent had asked the petitioner to furnish Bank Guarantee of
Rs.50.00 Crore within 15 days per decision dated 20.09.2014. However,
vide Annexure P-17 viz letter dated 01.02.2015 (email) the demand was
brought down to Rs.15.00 Crore, payable within 15 days. The said letter
inter alia notes :-
"In view of your repeated requests and persistent deliberations to re-
consider the matter, the BAI, in the larger interest of the game of
badminton and also to save the IBL, reconsidered the matter, granted
relaxation in the amount of the bank guarantee and agreed to your
offer that the SSPL shall furnish a bank guarantee of INR 15 Crores
issued by some nationalised bank on the format of the bank guarantees
as provided by the BAI. Thereafter, a format of bank guarantee was
emailed to you by the undersigned. However, instead of furnishing the
bank guarantee you have again started making highly unwarranted
communications to anyhow run away from your responsibility.‖
However, it was argued the petitioner never agreed to it voluntarily
and alleged when a decision to reduce the guarantee to Rs.15.00 Crore
was taken and by whom was never mentioned in the letter. However,
admittedly, a letter dated 10.03.2018 (Annexure P-18) was sent by the
petitioner wherein it agreed to pay Rs.15.00 Crores in two trenches i.e.
Rs.6.00 Crores and Rs.9.00 Crores. The learned counsel also referred to
the email (Annexure P-16) sent on behalf of the petitioner to the
respondent No.2 on 31.01.2015 which inter alia note:-
I still remained optimistic that good sense will prevail. I shared all my
feelings with you. Your moral ,support to my logical and Justified
approach gave me ,confidence, I did try and negotiate with Dr Akhilesh
Das Gupta on possibilities of allowing the IBL Season 2 to happen. I
again convinced myself to yet again quietly surrender to another
unwarranted and unlawful demand for saving the league that I have
created and cared for like the baby. I was prepared to bear anything
possible and walk any length possible to save my baby. This emotional
connect forced me to accept Dr Akhilesh Das Gupta'S revised demand
for INR 90,000,000 (rupees nine crore) guarantee money for ensuring
timely payment to players. I felt all hurdles are cleared and it's time to
work smoothly for the second season of IBL on yet again revised dates
of April 5 to 22, 2015."
12. Hence, it was argued the guarantee was imposed upon the
petitioner without any resolution being tabled in the meeting or without
any voting on it. Qua the emergency power per Clause No.27 (supra),
the learned counsel for the petitioner argued one needs to exercise such
powers only in an emergent situation, but here it was none. It was argued
right from filing of the statement of claim the petitioner has been
agitating the resolution is a forged one, but no decision has been given by
the learned Arbitrator on it and award was passed presuming the
resolution is valid. It is argued since there was no meeting of minds on
payment of Rs.50.00 Crores and since there was no discussion and since
in its pleadings the petitioner has denied such resolution dated
20.09.2014, so also in its admission-denial; the learned Arbitrator ought
not to have relied upon the same; more so when though the resolution
was exhibited as Ex.RW1/N, but the respondent did not produce its
original till the end despite order dated 06.02.2017 of the learned
Arbitrator for its production.
13. The learned senior counsel for the petitioner also referred to letter
Ex.P27 dated 08.10.2014 to say it contains various other decisions,
allegedly, taken in the meeting dated 20.09.2014, but such decisions were
never included in annexure P-12, hence is forged.
14. Let us see as to how the learned arbitrator has dealt with this
argument in impugned award viz.:-
―8.30
Lastly, Mr.Anand argues that the minutes of the GC meeting
dated 20th September, 2014, whereby sub - clause 11 was incorporated
in Clause 8 of the 2013 Agreement, are fabricated and false. To
substantiate the said argument, Mr. Anand relies upon the letter dated
08th October, 2014 written by SAL to the Claimant. The relevant part
of said letter is reproduced as under:-
"In this regard, it is to remind the issues regarding
representatives of SSPL in the Governing Council has already
been discussed in length in the meeting of Governing Council
dated 20.09/2014 at the instance of Mr.Ashish Chadha when
he produced a copy of the resolution passed in the meeting
dated 18.08.2014 if the Board of Directors of Sporty So1utionz
Pvt Ltd appointing Mohammad Azharuddin and Mr.Pradeep
Kumar as representatives of SSPL along with Mr. Ashish
Chadha and it was resolved that only those persons can
represent the SSPL in the governing Council who are
directors or stake holders at SSPL:"
It is argued that the said discussion and' resolution, which took place in
the meeting dated 20th September, 2014, and are acknowledged by the
Respondents themselves find no mention at all in the minutes of
meeting produced by the Respondents before the Tribunal. It is also
argued that despite the Tribunal's directions the Respondents have
been unable to produce the Original Copy of the minutes of meeting
dated 20th September, 2014. Mr.Anand has also relied upon the cross
examination of the witnesses of SAI as well as MBA, to highlight the
inconsistencies with respect 'to the attendance of the Claimant's
representatives in the meeting, and whether unanimous resolutions
were passed, if at all. Further, Mr.Anand submits that Mr. T. P.S Puri -
BAI's witness, is not the general secretary of the Governing Council
and as such cannot have personal knowledge as to the preparation and
safe keeping of the minutes. In such circumstances, Mr.Anand submits
that these minutes cannot be relied upon, as they do not portray what
actually transpired at the meeting. Being a fabricated document, these
ri1ihutes do not obligate the Claimant to produce the Bank Guarantee,
due to the non furnishing of which, the 2013 Agreement has been
terminated.
8.31 Mr.Mittal in reply to the Claimant's contention as to fabrication
of minutes, states that the copy of these minutes have been relied upon
by the witness for Respondent No.1, Mr.T.P.S.Puri and have been
exhibited as Ex.RW1/N. The relevant paragraph from the Affidavit of
Evidence of Mr.T.P.S.Puri is being reproduced as under:-
26. I further state that the Minutes of the Meeting dated 20.09.2014
were circulated by hand by Dr.Vijay Sinha Member Secretary, IBL
Governing Council immediately after the meeting and the same
were also passed by all the members of the Governing Council
present in the meeting without any objection. The Minutes of the
said Meeting are being exhibited as Ex.RW1/N.'
Mr. Mittal further draws the attention of the Tribunal to the
Examination in Chief of the said witness by way of which the said
Minutes, according to Mr. Mittal have been proved. The relevant
paragraph from the Examination in Chief of the witness Mr.T.P.S Puri
is reproduced as under:-
"Document referred to in Paragraph 26 of my affidavit is in my
knowledge and I am acquainted with this document. It is marked as
Exhibit RW1/N.'
8.32 Mr. Mittal submits that an objection to the admissibility of a
document is of two kinds: first, an objection that the document itself is
inadmissible in evidence, and second, when the objection is not
towards admissibility, but to the mode of proof. Mr.Mittal states that
the Claimant's objection to these minutes is towards the mode of proof.
Although in case of the former, an objection as to admissibility of a
document can be taken at a later stage, in the case of a latter, if a
document is tendered and marked as an exhibit, the objection as to
mode of proof cannot be taken subsequently. It amounts to waiver of
objection, Mr. Mittal places reliance on the case of R.V.E.
Venkatachala Gounder v. Arulmigu Viswesarasami & V. P. Temple,
(2003) 8 SCC 752. The relevant paragraph is reproduced as under:
20. The objections as to admissibility of documents in
evidence may be classified into two classes: (i) an objection
that the document which is sought to be proved is itself
inadmissible in evidence; and (ii) where the objection does not
(dispute the admissibility of the document in evidence but is
directed towards the mode of proof alleging the same to be
irregular or insufficient. In tile first case, merely because a
document has been marked as "an exhibit" an objection as to
its admissibility is not excluded and is available to be raised
even at a later stage or even in appeal or revision. In the latter
case, the Objection should be taken when the evidence is
tendered and once the document has been admitted in
evidence and marked as an exhibit, the objection that it should
not have been admitted in evidence or that the mode adopted
for proving the document is irregular cannot be allowed to be
raised at any stage subsequent to the marking of the document
as an exhibit.'
8.33 Mr. Mittal further submits that the Claimant is estopped from
raising any challenge to the minutes of meeting dated 20.09.2014, as
the same have been referred to and relied upon by BAI in numerous
communications exchanged with the Claimant. However, the Claimant
has only disputed these minutes for the very first time before this
Hon'ble Tribunal. Mr. Mittal also relies upon Q 161 of the Cross
examination of Mr. T.P.S Puri. The said Question and its answer is
reproduced as under:-
Q - 161 - I put it to you that Shri Ashlsh Chadha did not agree
to the furnishing of the bank guarantee by SSPL and opposed
the same.
A. That is not Correct. As far as my knowledge is concerned
he did not oppose to the said resolution passed in the said
meeting.
Mr. Mittal submits that the very question suggests that the Claimant
admit that Mr.Ashish Chadha was present in the meeting dated 20th
September, 2014.
8.34 Mr. Mittal further submits that due to an impending dispute
between BAI and its Secretary, the original records have not been
produced. The Authorised Representative for BAI has made a statement
before this Tribunal that the Secretary, who has the entire records is
presently behind bars.
8.35 xxx xxx
8.36 xxx xxx
8.37 This letter also makes specific reference to the minutes, and to the
fact that the CEO of the Claimant, Mr.Ashish Chadha was present in
the said meeting. It is pertinent to mention that this document has been
produced by the Claimant itself. Further, in the letter dated 10 th March,
2015 in which the claimant seeks to respond to this letter on the aspect
of the bank guarantee of Rs.15 Crores, the minutes referred to in the
aforesaid letter are not disputed by the
Claimant. It is the same position in the termination letter dated
21.04.2015. The Tribunal finds that there is no communication by the
Claimant disputing the validity of the said minutes, prior to such
objection having been taken before this Tribunal. Accordingly, the
Tribunal holds that the objection now raised by the Claimant for the
first time as to the fabrication of the minutes is a clear after-thought,
and deserve to be rejected.
8.38 In addition, the Tribunal finds force in the argument of Mr.
Mittal, as to the waiver of the objection to mode of proof, which is
fortified by the case of R.V.E. Venkatachala Gounder (Supra). The
Tribunal finds that the Claimant's objection as to the mode of proof
was not taken at the relevant and proper time, that is, during the
admission of the said document. Hence, the Claimant cannot be
allowed to raise such an objection at any stage subsequent to the
marking of the document as an exhibit. Keeping in view the entirety of
the facts and circumstances in this regard, the Tribunal holds that the
challenge to the minutes of meeting dated 20th September, 2014 fails
and is rejected.
8.39 For the reasons aforesaid, the Tribunal holds that the
incorporation of sub-clause 11 in Clause 8 of the 2013 Agreement is
legal and valid, and that the said demand of the Bank Guarantee made
upon the Claimant is enforceable.
8.40 Having held that the introduction of sub - clause 11 in Clause 8 of
the 2013 Agreement as legal and valid, the Tribunal shall now consider
the facts of the case to decide whether the Claimant is in breach of the
2013 Agreement.
Issues 3(b) and 3(c)
8.41 Addressing the issue of breach, Mr.Anand relied upon the various
communications exchanged between the parties in this regard:·
o 26.04.2014 - The letter vide which the first demand was made
by BAI for a Bank Guarantee for the amount Of Rs. 50 crores.
According to Mr.Anand, the said letter does not constitute a notice
within the meaning of Clause 11 of the 2013 Agreement as the
Governing Council had only incorporated the Sub- Clause 11 to
Clause 8 of the 2013 Agreement on 20.09.2014.
o 29.09.2014 - The Governing Council in its meeting passed the
resolution and made a demand to the Claimant for the Bank Guarantee
of Rs.50 Crores within 15 days thereof.
o 08.10.2014 - Notice by BAI to Claimant stating that the
Claimant must furnish BG worth Rs.50 Crores within 15 days of the
receipt of that notice.
o 01.02.2015 - By way of this letter, BAI reduced the demand
from 50 crores to Rs. 15 crores. Mr, Anand submits that this constitutes
a fresh demand and in such circumstances, the letter dated 8.10.2014
becomes irrelevant, and the demand for Rs.50 crores becomes non-
existent. Mr.Anand also submits that this demand of Rs. 15 crores is
unilateral, and that there is no agreement between the parties to arrive
at such an amount further by way of this letter, the Claimant cannot be
held to be in breach as the entire issue of Rs.50 crores became non-est
and has been waived by the Respondents.
o 10.03.2015- By way of this letter, the claimant agreed to pay
to the Respondents Rs.15 crores in two tranches subject to approval by
Governing Council. As per Mr.Anand, no response has been received
to this counter-offer and thus there has been no agreement between the
parties as to bind the claimant to furnish the Bank Guarantee of Rs.15
crores.
o 21.04.2015- The termination letter from BAI to the claimant
Mr.Anand submits that even though the 2013 Agreement provided for a
90 day notice. BAI by its termination letter terminated the agreement
forthwith, directing the claimant to withdraw with immediate effect,
and cancelling all rights and privileges of the claimant with respect to
the 2013 agreement.
8.42 Mr. Anand submitted that in addition to his challenge as to the
illegality of Clause 8.11, it is clear from the facts of the case that the
Respondents waived their demand of the bank guarantee, thus not
requiring the claimant to furnish the same. Mr. Anand submits that BAI
by its own subsequent demand of Rs.15 crores vide its letter dated 1 st
February, 2015, nullified the earlier demand of Rs.50 crores. Further,
he submits that the reduced demand of Rs.15 crores had been made
unilaterally, inasmuch as there was no agreement between the parties
to this effect. Further, the counter-offer of the Claimant was not
accepted by the Respondents, and hence there was no binding
agreement between the parties obligating the Claimant to furnish the
said Bank Guarantee."
15. Now the main challenge to the impugned award is on three counts,
a) resolution being forged; b) agreement was never amended; and c) the
document Ex.RW1/N ought not to have been exhibited.
16. The learned counsel for the petitioner submitted that not only the
resolution is forged but there was no occasion for exercise of such
emergency power and it could have been exercised only for amending the
agreement and not for requiring the petitioner to deposit bank guarantee
of Rs.50.00 crores or Rs.15.00 Crores. The learned Arbitrator ignored the
source of power for asking of the bank guarantee i.e. the agreement and
as there was no amendment to the agreement, the respondent could not
have asked for the bank guarantee and the correspondences between the
parties show clause No.8.11 which was inserted in the minutes of the
meeting dated 20.09.2014 by the respondents later, as is evident from
letters dated 08.10.2014 and 01.02.2015, as in both such letters the
respondent had insisted the petitioner to provide for the bank guarantee,
but never mentioned addition of clause No.8.11 in the tripartite
agreement and it was only for this reason the learned Arbitrator vide its
order dated 06.02.2017 had directed the respondent to make available all
the original minutes of the meeting, which were never provided.
17. It was argued the letters dated 08.10.2014 and 01.02.2015 of the
respondent only speak about the approval of the governing council for
asking the petitioner to provide for the bank guarantee which the
Governing Council could have only asked if there was an amendment.
Hence, the respondents forged the minutes to insert clause No.8.11 in
minutes dated 20.09.2014 but then again did not provide for its originals
to the Arbitrator.
18. Secondly, it was argued per clause No.11.2(a) of the agreement if
the petitioner had committed any breach of the terms, the respondent
ought to have given 30 days notice to remedy such breach. It is
submitted vide letter dated 01.02.2015 the respondents were asked to
deposit the bank guarantee of Rs.15.00 Crores by 16.02.2015 and on
default the petitioner was to give 30 days' notice per clause No.11.2(a)
to remedy such breach and only thereafter the respondents could have
given termination notice of 90 days. No such notice was ever given hence
the termination is bad.
19. The learned counsel for the petitioner also referred to the cross-
examination of respondent no.1 witness Mr.T.P.S. Puri, Vice President
(Administration) of respondent no.1:
―Q.34 Is it correct that the Governing Council of IBL also had its
meetings?
Yes.
Q.36 Were the Minutes of Meetings of these Governing Council of IBL
maintained?
A. I will check and come back to the Tribunal.
Q.37 Can you tell who were the representatives of MBA on the
Governing Council of IBL?
A. I will verify and come back to the Tribunal.
Q.39 Is it correct that the record of the meetings of the General Body of
BAI and of the meetings of the Governing Council of IBL was
differently maintained?
A. I will verify and come back to the Tribunal. The witness undertakes
to produce the record of relevant years also.
Q. 70 Please see questions No. 34, 35, 36, 37, 38 and 39, 40, 42, 43,
and their answer in your deposition dated 15th December, 2016. Can
you now give answers the questions No.35, 36, 37, 38, 39, 40, 42, 43?
A. I will check and come back to the Tribunal after a week when I will
be able to get the record.
Q. 115 Can you tell now how many meetings of Governing Council of
IBL were held during the period 2013-14?
A. We had only one formal meeting held on 20th September, 2014.
Besides that we had informal meetings for which there is no record.
Q. 174 Please see para 23 of your affidavit. Is it correct that in this
para you are referring to only one meeting of the Governing Council
dated 20th September, 2014?
A. Only one formal meeting was held and I am referring only to that.
Q. 175 I put it to you that no minutes of the meeting dated 20th
September, 2014 were either prepared or circulated on 20th
September, 2014 at the venue as claimed by you.
A. I deny.
Q. 195 I put it to you that you are deposing falsely.
xxxx Mr. Sanjeev Anand before closing the cross-examination stated
that the Respondent have filed Photostat copy of the Minutes of
Meeting dated 20th September, 2014 and as much as not admissible in
evidence.
Counsel for Respondent submits that the said document has already
been exhibited as Exhibit RW-1/N at the time of Examination-in-Chief
dated 15.12.2016 and no objection as to mode or manner of proof or
any other objection qua this document was taken by the Claimant at
that stage, therefore, the said objection as to mode and manner of proof
cannot be raised at this stage, especially since also the stage for
inspection of documents is already over.
Per Tribunal
Under similar circumstances and similar objection taken this Tribunal
passed an order on 15.10.2016 whereby the parties were directed to
make available the originals at the time of hearing of the arbitration
proceedings in view of the fact that the Evidence Act, is not applicable
in the arbitration proceedings and to be fair to both the parties I direct
that the Respondent shall make available originals of the Minutes of
Meeting dated 20th September, 2014 at the time of hearing of this
matter.‖
20. The learned counsel for the petitioner argued the proceedings need
to be fair to each of the parties per Section 18 of Arbitration and
Conciliation Act, 1996 and could not have ignored original minutes dated
20.09.2014 and could not have said since those were lying with a jailed
employee, were not required to be seen.
21. He referred to various paragraphs of his statement of claims and
how the arbitrator dealt with such objections in its award, more
specifically, in paras 8.53 to 8.77 as under:
―8.70 The most fundamental question that arises for consideration
before the Tribunal, is that where the breach of the 2013 Agreement by
the Claimant has been established but in the notice of termination of
the 2013 Agreement there is no advance notice of 90 days, what
happens to such termination of the 2013 Agreement. On other issues,
this Tribunal has inter-alia, recorded a finding that the Claimant is not
entitled to the relief of specific performance in view of the fact that it
has not averred in the statement of claim and proved, that it was, arid
still continues to be, ready and willing to perform its part of the
contract that the Claimant has no financial capacity to furnish bank
guarantee of Rs.15 crores and that the Claimant has committed breach
for not furnishing the bank guarantee within the time provided to it by
BAI. Further, the Claimant's Counsel Mr.Anand has stated that the
Claimant has not sought any relief for damages in lieu of relief of
specific performance having been refused to him. The Claimant's
counsel himself admitted that for additional damages under Claim
no.6, there is no standard by which the claim can be quantified in terms
of money.
8.71 The Tribunal finds that none of the decisions cited by the parties
deal with the present situation, where the breach is established, but the
notice for termination is not in terms of class 11 of the 2013
Agreement, inasmuch as it fails to provide 90 day advance notice to
the Claimant. However in view of the facts and circumstances of the
case as noted in paragraph above, in the Tribunal's view, the decision
in the case of Indian Oil Corpn. Ltd. v. Amritsar Gas Service, (1991) 1
SCC 533, may be usefully. referred to In Indian Oil Corpn (Supra), the
corporation could upon the happening of certain events, terminate
forthwith, the contract with Amritsar Gas Service as per clause 27 of
the Agreement. In addition the parties mutually could terminate the
contract by giving one month's notice as per clause 28 of the
Agreement. The Appellant corporation exercised its right to terminate
the agreement forthwith under Clause 27, as in its opinion, certain
events had taken place to justify the said decision. The dispute as to
termination was referred to an Arbitration. The award declared the
termination as invalid, as according to the Tribunal, no event had
taken place to justify the termination forthwith under clause 27. In
addition, the Tribunal awarded specific performance of the Agreement
to Amritsar Gas Service. In Appeal, the Supreme Court first held that
the Agreement, being determinable, could not be specifically enforced
Secondly the Court held that in a case where either party could
mutually terminate the agreement by giving 30 days notice under
clause 28, Amritsar Gas Service would only be entitled to loss of
earnings for 30 days.
8.72 Applying the ratio of Indian Oil Corpn (Supra) to the present
matter, it is seen that the 2013 Agreement is determinable under Clause
11, which provides that either party can terminate the 2013 Agreement
by giving advance notice of 90 days upon the other- party committing
breach of the terms of the 2013 ,Agreement. The Tribunal has already
held that the Claimant was in breach. Since such breach entitled the
BAI to terminate the Agreement by giving a 90 day advance notice the
Tribunal is of the opinion that the Claimant would be entitled to
compensation only for the 90 day period that it was otherwise entitled
to as notice period under the 2013 Agreement.
8.73 The next question that arises for consideration is the quantum of
compensation the Claimant is entitled to for the notice period of 90
days. Tile Tribunal finds that there is no way to ascertain or compute
the compensation in the facts of the present case for such period of 90
days. Admittedly, IBL is a loss making proposition for the first three
four years. Further, in such period of 90 days, there is no other event
taking place from where the Claimant may be able to earn any profit.
The Tribunal is aware, that BAI is an authority to promote the game of
badminton in India. However the Tribunal is surprised to find how BAI
overlooked the requirement of law of giving advance notice of 90 days
while terminating the 2013 Agreement. For that reason, they must be
made to suffer by way of compensating the Claimant. With this end in
view, the Tribunal deems it appropriate to refer to Claim No. 6 of the
Claimant in the Statement of Claim under the said Claim, the Claimant
has prayed for grant of loss of profits, that it would have earned if the
2013 Agreement was performed by tile parties for its entire tenure, i.e.,
10 years, although it is not a correct way to ascertain the compensation
in the present case.
8.76 Accordingly, the Tribunal awards the Claimant compensation for
the notice period of 90 days to the tune of Rs.2.5 crores (Rs. Two
crores fifty lakhs only) to be paid by Respondent No.1 within a period
of three months from the date of the award. Further, being mindful of
the decision rendered in Indian Oil Corp (Supra), the Tribunal 11olds
that the 2013 Agreement is not subsisting between the parties.‖
22. The learned counsel for the petitioner then referred to Oil and
Natural Gas Corporation Ltd. vs. Western Geco International ltd. (2014)
9 SCC 263 in which the Court held:
―34. xxxxx What is for public good or in public interest or what would
be injurious or harmful to the public good or public interest has varied
from time to time. However, the award which is, on the face of it,
patently in violation of statutory provisions cannot be said to be in
public interest. Such award/judgment/decision is likely to adversely
affect the administration of justice. Hence, in our view in addition to
narrower meaning given to the term "public policy" in Renusagar
case10 it is required to be held that the award could be set aside if it is
patently illegal. The result would be-award could be set aside if it is
contrary to:
(a) fundamental policy of Indian law; or
(b) the interest of India; or
(c) justice or morality, or
(d) in addition, if it is patently illegal.
Illegality must go to the root of the matter and if the illegality is of
trivial nature it cannot be held that award is against the public policy.
Award could also be set aside if it is so unfair and unreasonable that it
shocks the conscience of the court. Such award is opposed to public
policy and is required to be adjudged void.
39. No less important is the principle now recognised as a salutary
juristic fundamental in administrative law that a decision which is
perverse or so irrational that no reasonable person would have arrived
at the same will not be sustained in a Court of law. Perversity or
irrationality of decisions is tested on the touchstone of Wednesbury's
principle of reasonableness. Decisions that fall short of the standards
of reasonableness are open to challenge in a Court of law often in writ
jurisdiction of the Superior courts but no less in statutory processes
where ever the same are available.
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. The above judgment was followed in Associate Builders vs. Delhi
Development Authority (2015) 3 SCC 49. The learned counsel for the
petitioner also referred to K.P. Poulose vs. State of Kerala and Another
(1975) 2 SCC 236 to show if the relevant documents are not considered
by the arbitrator it would amount to misconduct.
24. In Gopal Krishnahi Ketkar vs. Mohamed Haji Latif and Ors.
(1968) 3 SCR 862, the Court held:
―Even if the burden of proof does not lie on a party the Court may
draw an adverse inference if he withholds important documents in his
possession which can throw light on the facts at issue. It is not, in our
opinion, a sound practice for those desiring to rely upon a certain state
of facts to withhold from the Court the best evidence which is in their
possession which could throw light upon the issues in controversy and
to rely upon the abstract doctrine of onus of proof.‖
25. Similarly in Pradip Buragohain vs. Pranati Phukan (2010) 11
SCC 108, the Court held:
―28. Non-production of the documents admittedly available with the
appellant that would lend credence to the version set up by the
appellant that the incident of corrupt practice was reported to him
and/or to his election agent would give rise to an adverse inference
against the appellant that either such complaints were never made or if
the same were made they did not contain any charge regarding the
commission of corrupt practices by the respondent in the manner and
on the dates and the places alleged in the petition.
29. We may in this regard refer to illustration (g) to Section 114 of the
Evidence Act which permits the Court to draw an adverse presumption
against the party in default to the effect that evidence which could be
but is not produced would, if produced, have been unfavourable to the
person who withholds it. The rule is contained in the well-known
maxim: omnia praesumuntur contra spoliatorem. If a man wrongfully
withholds evidence, every presumption to his disadvantage consistent
with the facts admitted or proved will be adopted.‖
26. Further, in R.V.E. Venkatachala Gounder vs. Arulmigu
Viswesaraswami & V.P.Temple & Anr. (2003) 8 SCC 752, the Court
held:
―5. xxxxx The objections as to admissibility of documents in evidence
may be classified into two classes:- (i) an objection that the document
which is sought to be proved is itself inadmissible in evidence; and (ii)
where the objection does not dispute the admissibility of the document
in evidence but is directed towards the mode of proof alleging the same
to be irregular or insufficient. In the first case, merely because a
document has been marked as 'an exhibit', an objection as to its
admissibility is not excluded and is available to be raised even at a
later stage or even in appeal or revision. In the latter case, the
objection should be taken before the evidence is tendered and once the
document has been admitted in evidence and marked as an exhibit, the
objection that it should not have been admitted in evidence or that the
mode adopted for proving the document is irregular cannot be allowed
to be raised at any stage subsequent to the marking of the document as
an exhibit. The later proposition is a rule of fair play. The crucial test
is whether an objection, if taken at the appropriate point of time, would
have enabled the party tendering the evidence to cure the defect and
resort to such mode of proof as would be regular. xxxxx‖
27. In Narbada Devi Gupta vs. Birendra Kumar Jaiswal & Anr.
(2003) 8 SCC 745, the Court said the mere production and marking of a
document as exhibit is not enough and its execution has also to be proved
by admissible evidence. But however where the documents produced are
admitted by the signatories and then marked as exhibits, held no further
burden to lead additional evidence to prove the writing and its execution
survives.
28. Then in Life Insurance Corporation of India & Anr. vs. Ram Pal
Singh Bisen (2010) 4 SCC 491, the Court held:
―28.It is also worthwhile to mention here that one of the complainant
Rattan Lal who was examined as witness during the departmental
Inquiry was not cross-examined by respondent as he was not afforded
proper opportunity in this regard.‖
29. Reference was also made to Union of India vs. M/s. Mehta Teja
Singh and Co., New Delhi AIR 1983 Delhi 297 wherein the Court held:
―8. We find ourselves in full agreement with the learned single judge.
The whole claim of the Union of India rested on the technical
examiner's report. The report was thus a vital document without
looking at which no award could be made. The action of the arbitrator
in making an award without himself looking into the said document and
without allowing the contractor inspection thereof clearly amounted to
misconduct of the arbitration proceedings.‖
30. Further it was argued per clause No.27 (supra) the power was only
to alter/modify any of the clauses of the contract, but nowhere had it
provided addition of any clause, viz 8.11 (supra). In National Fertilizers
vs Puran Chand Nagia (2000) 8 SCC 343 the Supreme Court noted:-
"23.We may also state that under the general law of Contracts, once
the contract is entered into, any clause giving absolute power to one
party to override or modify the terms of the contract at his sweet will
or to cancel the contract -even if the opposite party is not in breach, -
will amount to interfering with the integrity of the contract....."
31. Lastly it was argued mere acceptance of Rs.2.50 Crore towards the
termination period, would not waive of the right of the petitioner to
challenge other breaches, as set out in the petition itself.
32. Heard.
33. Admittedly, the petitioner earlier filed OMP(C) No.293/2017
challenging the impugned award. However, on 16.11.2017 the petitioner
made a statement before this Court to withdraw the said petition and
accepted release of Rs.2.50 Crores as awarded by the learned Arbitrator
qua waiving of three month's notice period by the respondent for
termination of the contract. The petitioner accepted the compensation
awarded by the learned Arbitrator unconditionally without prejudice to
its rights to claim interest upon such amount as per law. Since the
petitioner had accepted damages qua waiver of the notice period, hence is
now estopped to challenge the award or claim interest.
34. Award can be challenged, primarily, on grounds viz being patently
illegal; or opposed to public policy; or in violation of fundamental policy
of Indian law. Section 34(2) (b) (ii) with explanation 2 and 2A of the Act
are:-
―34 Application for setting aside arbitral award. --
(1) xxx.
(2) An arbitral award may be set aside by the Court only if--
(a) xxxx
(b) the Court finds that--
(i) xxx
(ii) the arbitral award is in conflict with the public policy of India.
Explanation 2. -- For the avoidance of doubt, the test as to whether
there is a contravention with the fundamental policy of Indianlaw shall
not entail a review on the merits of the dispute.
2A An arbitral award arising out of arbitrations other than interntional
commercial arbitrations, may also be set aside by the Court, if the
Court finds that the award is vitiated by patent illegality appearing on
the face of the award:
Provided that an award shall not be set aside merely on the ground of
an erroneous application of the law or by re-appreciation of evidence.
28 Rules applicable to substance of dispute. -
(1) and (2) xxx
(3) While deciding and making an award, the arbitral tribunal shall, in
all cases, take into account the terms of the contract and trade usages
applicable to the transaction.‖
A bare perusal of the above provisions would show the petitioner
cannot claim a review on merit and neither the erroneous application of
law nor re-appreciation of evidence can be a ground of appeal. Per
Section 28(3) of the Act the Arbitrator shall take into account the terms
of the contract. This is at variance with the earlier law viz Section 28(3)
of the Act, prior to amendment, wherein the arbitrator was to decide the
dispute in accordance with the terms of the contract and hence the
interpretation of the contract is within the domain of the Arbitrator alone.
35. Thus the law as it stands today is examining the terms of the
contract is exclusively within the jurisdiction of the learned Arbitrator.
The Arbitrator alone has the power to interpret the terms of the contract
and to examine the dispute purely in accordance with such terms. Now, if
two views are possible on such terms, the view the learned Arbitrator has
taken, ought to be followed until and unless there is patent illegality in it.
This Court cannot sit in appeal under Section 34 of the Act to impose its
own views if the view taken by the arbitrator is correct but even second
view is possible. In Ssangyong Engineering and Construction Company
Limited vs National Highways Authority of India 2019 SCC OnLine SC
677 it was held:-
―26. Insofar as domestic awards made in India are concerned, an
additional ground is now available under sub-section (2A), added by
the Amendment Act, 2015, to Section 34. Here, there must be patent
illegality appearing on the face of the award, which refers to such
illegality as goes to the root of the matter but which does not amount to
mere erroneous application of the law. In short, what is not subsumed
within ―the fundamental policy of Indian law‖, namely, the
contravention of a statute not linked to public policy or public interest,
cannot be brought in by the backdoor when it comes to setting aside an
award on the ground of patent illegality.
27. Secondly, it is also made clear that re-appreciation of evidence,
which is what an appellate court is permitted to do, cannot be
permitted under the ground of patent illegality appearing on the face of
the award.
36. Admittedly, contract dated 16.07.2013 was entered into between
the parties and it superseded the earlier contract. Now, clause No.8.11
was added to this contract dated 16.07.2013 by the Board's resolution
dated 20.09.2014, which meeting and addition of such clause 8.11 is now
being disputed by the petitioner. Another important clause is No.11 of the
contract and it says 90 days advance notice in writing need to be given to
either party to terminate the agreement lest damages need to be paid.
Admittedly, learned arbitrator has awarded damages of Rs.2.50 Crore to
the petitioner herein which he has readily accepted, as noted in the order
dated 16.11.2017 passed in OMP (C) No.293/2017. Clause No.22 of the
agreement dated 16.07.2013 notes it is the final agreement superseding
the earlier agreement. The emergency powers are given in clause No.27
of the agreement dated 16.07.2013 as under:-
27. EMERGENCY POWER OF THE GOVERNING COUNCIL OF
IBL:
Notwithstanding anything contained in this Agreement the Governing
Council of IBL shall have unfettered and unrestricted right, power/
authority to alter/modify any of the clause of this agreement, which
shall be binding on the parties. Further, in case of any dispute or
difference between he parties as to the interpretation of any Clause of
this Agreement, decision/opinion of the President, BAI shall be final
and binding on the parties.‖
37. It was only per clause No.27 above Rs.50.00 Crore bank guarantee
was demanded from the petitioner herein which he himself requested it to
bring to Rs.15.00 Crores. The confusion was triggered only due to the
email dated 24.04.2014 sent by the petitioner wherein it showed its
concern in delay of event to June 2015 instead of September, 2014 and
hence alleged losses. The email notes:-
―e) Yonex-Sir, as you are aware, the league was a loss making exercise
for us in year one. In year two and three too, we do not foresee the
league making money. We would consider the league a success even if
we are able to break even with our operational costs. We are ready to
sit with Yonex under your guidance and iron out any issues amicably.
Our only request is that the relationship should not question the
commercial viability of the league and should not be one way.‖
This email caused confusion/panic and hence on 26.04.2014 the
respondent replied showing its concern qua its brand name and it may not
be put to loss and debts etc. The email dated 26.04.2014 noted:-
―e) However, it is clarified that although this matter would be discussed
in the Governing Council but the final decision in this regard will only
be taken by the BAI.
Further, in response to the other contentions of your email under reply
we have to say that we are shocked and deeply bothered and concerned
over your statement that you have made loss in IBL 1 st and your are
foreseeing the loss in IBL2nd and IBL 3 rd as well, and in this regard the
following points are relevant:-
(i) You, Sporty Solutionz (P) Ltd is a Private Limited Company
(Business House) whereas BAI is a charitable organisation and
therefore, BAI assigned you the responsibility to develop, organize and
market the IBL. The commercial rights in relation to the IBL were also
given to you by the BAI so that you can access, market, promote and
develop the event of IBL in the best possible manner.
(ii) xxx
(iii) The BAI even helped you in getting the sponsors and
franchisees from the market.
38. Because of these developments a meeting of Governing Council
was convened. Admittedly, notice of the meeting to be held on
20.09.2014 was sent to various stake-holders, including the petitioner
herein and hence the petitioner had a fair warning and due to knowledge
of reasons for addition of clause No.8.11 in the Joint Venture Agreement
dated 16.07.2013.
39. Qua the validity of clause No.8.11 of the agreement, an email
dated 26.04.2014 of the respondent show the agenda for the discussions
to be held by the Governing Council in a meeting was sent. The aforesaid
email categorically noted:-
―Further, due to above and in order to secure and guarantee the
following, the BAI is constrained to require the Sporty Solutionz (P)
Ltd. to furnish a Bank Guarantee of Rs.50,00,00,000/- (Rupees Fifty
Crores Only) from a nationalised bank before the meeting of
Governing Council is convened to take a decision regarding the dates
and schedule of IBL and other relevant issues:-
A. To secure and guarantee the Prize Money to the respective
players, within time.
B. To secure and guarantee the payments to the players by the
respective franchisees (at the moment 6 franchises) within time.
C. To secure and guarantee the payments of expenditures of the
venues etc.
40. Such meeting of the Governing Council of IBL was held at Hotel
Le Meridian, New Delhi and minutes dated 20.09.2014 noted the
member representatives of all the three parties, BAI, MBA and SSPL
were present in such meeting, the agenda of which was circulated in
advance to all the members of the Governing Council. The minutes noted
the member representatives of the BAI had expressed deep concern qua
serious complaints being received from various quarters relating to
mismanagement in organising IBL. Taking note of all these
developments, the members of the Governing Council expressed their
deep concern about the success and representation of the IBL and about
frivolous and vexatious contentions raised by the petitioner viz the league
was a loss making exercise in year one and would be so in year two and
year three also and the petitioner does not foresee the league making
money in near future, hence the Governing Council demanded bank
guarantee of Rs.50.00 Crore from the petitioner herein to which the
petitioner never responded and alleged it need to refer the matter to the
Board of Directors and only then such amount could be promised. The
minutes of the meeting recorded:-
―g. WHEREAS, the BAI consistently with and in furtherance of its
objects and constitution as well as the agreement dated 16.07.2013 and
the larger good of the game of badminton, has justified
Rs.50,00,00,000/- as the amount of Bank Guarantee .......‖
41. One may here refer to an email dated 31.01.2015 of the petitioner
wherein the petitioner duly acknowledged the demand of Rs.50.00 Crores
as resolved in the Governing Council meeting. After negotiations, vide
email dated 10.03.2015 the petitioner agreed to the revised demand for
Rs.15.00 Crores - bank guarantee for ensuring timely payments to the
players, per concern of the respondent noted in its email dated
01.02.2015 stating interalia the bank guarantee is necessarily required to
secure the timely payments to national and international players per their
auction price money and against costs/expenses/charges of
venues/stadium/ reservations etc and hence the petitioner was required to
furnish bank guarantee of Rs.15.00 Crores within 15 days from the date
of the receipt of the letter, lest Agreement dated 16.07.2013 would be
terminated.
42. On 10.03.2015, the petitioner rather sent an email in a positive
frame of mind to pledge bank guarantee of Rs.15.00 Crores as warranted
viz Rs.06.00 Crores not later than three weeks from the acceptance of this
proposal. However, it did not happen and then vide notice dated
21.04.2015 on failure of the petitioner to furnish the bank guarantee, the
contract dated 16.07.2013 was terminated.
43. The petitioner took all the pleas before the learned Arbitrator but
those were brushed aside by the reasoned award and I need not repeat the
contents of the award yet again. Admittedly, there is a limited scope for
interference of this Court under section 34 (2) of the Act. In J.G.
Engineers Private Limited vs. Union of India and Another (2011) 5 SCC
758 it was observed an award could be set aside if it is so unfair and
unreasonable that it shocks the conscience of the Court, as then it would
be opposed to public policy. The Court held that only when award can
shocks the conscience of the Court, it can be treated as patently illegal.
In Associate Builders vs DDA (2015) 3 SCC 49 the Court even went a
step ahead to say the illegality must go to the root of the mater and
cannot be of trivial nature. It was further held:-
―An Arbitral Tribunal must decide in accordance with the terms of the
contract, but if an arbitrator construes a term of the contract in a
reasonable 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.‖
44. Patent illegality has been clarified by the Arbitration and
Conciliation (Amendment) Act, 2015 by the proviso to sub-section 2A of
Section 34 of the Act as stated above. Further explanation 2 to Section
34 of the Act says the test is if there exists a contravention of the
fundamental policy of Indian policy. It shall not entail the review on
merits of the dispute.
45. In Ssangyong Engineering & Construction Co. Ltd. vs. National
Highways Authority of India 2019 SCC OnLine SC 677 while
interpreting the amended Section 34, the court held as follows:-
26. Insofar as domestic awards made in India are concerned, an
additional ground is now available under sub-section (2A), added by
the Amendment Act, 2015, to Section 34. Here, there must be patent
illegality appearing on the face of the award, which refers to such
illegality as goes to the root of the matter but which does not amount to
mere erroneous application of the law. In short, what is not subsumed
within ―the fundamental policy of Indian law‖, namely, the
contravention of a statute not linked to public policy or public interest,
cannot be brought in by the backdoor when it comes to setting aside an
award on the ground of patent illegality.
27. Secondly, it is also made clear that re-appreciation of evidence,
which is what an appellate court is permitted to do, cannot be
permitted under the ground of patent illegality appearing on the face of
the award.
28. To elucidate, paragraph 42.1 of Associate Builders (supra),
namely, a mere contravention of the substantive law of India, by itself,
is no longer a ground available to set aside an arbitral award.
........
29. The change made in Section 28(3) by the Amendment Act really
follows what is stated in paragraphs 42.3 to 45 in Associate Builders
(supra), namely, that the construction of the terms of a contract is
primarily for an arbitrator to decide, unless the arbitrator construes
the contract in a manner that no fair-minded or reasonable person
would; in short, that the arbitrator's view is not even a possible view to
take.―
46. In Steel Authority of India Ltd. vs. Gupta Brother Steel Tubes Ltd.
(2009) 10 SCC 63, the court held as follows:-
"18. ... Suffice it to say that the legal position that emerges from the
decisions of this Court can be summarized thus:
(i) xxx
(ii) An error relatable to interpretation of the contract by an arbitrator
is an error within his jurisdiction and such error is not amenable to
correction by Courts as such error is not an error on the face of the
award.
(iii) If a specific question of law is submitted to the arbitrator and he
answers it, the fact that the answer involves an erroneous decision in
point of law does not make the award bad on its face.‖
(iv) to (v)
(vi) If the conclusion of the arbitrator is based on a possible view of the
matter, the court should not interfere with the award.
(vii) It is not permissible to a court to examine the correctness of the
findings of the arbitrator, as if it were sitting in appeal over his
findings."
47. In Swan Gold Mining Limited vs Hindustan Copper Limited
(2015) 5 SCC 739, the Court held:-
―12. It is equally well settled that the arbitrator appointed by the
parties is the final judge of the facts. The finding of facts recorded by
him cannot be interfered with on the ground that the terms of the
contract were not correctly interpreted by him.
19. ... the interpretation of the contract is matter of the arbitrator, who
is a Judge chosen by the parties to determine and decide the dispute.
The Court is precluded from reappreciating the evidence and to arrive
at different conclusion by holding that the arbitral award is against the
public policy.‖
48. In State Trading Corporation of India Limited v. Toepfer
International Asia PTE Limited 2014 7 HCC (Del) 504, this Court held:-
―18. If we were to start analysing the contract between the parties and
interpreting the terms and conditions thereof and which will
necessarily have to be in the light of the contemporaneous conduct of
the parties, it will be nothing else than sitting in appeal over the
arbitral award and which is not permissible.‖
49. In HRD Corporation vs GAIL (India) Limited (2018) 12 SCC
471 the court noted making it clear that the construction of the terms of
the contract is primarily for the arbitrator to decide unless it is found
that such a construction is not a possible one.
50. Proving or disproving the validity of an allegedly forged
document requires leading of detailed evidence and therefore once it has
been duly considered and rejected by the learned Arbitrator, the same
cannot be re-agitated in a proceeding with limited scope of enquiry such
as the present petition under section 34 of the Act.
51. In view of the law discussed above, the present petition is not
maintainable, more specifically in the light of order dated 16.11.2017 in
OMP (C) No.293/2017 wherein the petitioner without any reservations
accepted Rs.2.50 Crores, hence is now, even otherwise, estopped from
challenging the award. A person who accepts cost payable under the
award or any other benefit under the award dehors the claim on merits
cannot repudiate part award detrimental to him because the order is to
take effect in its entirety. See Sri Tushar Kanti Roy v. The Eighth
Industrial Tribunal, Kolkata and Ors. 2013 (2) CLJ (CAL) 620; Cauvery
Coffee Traders vs Honor Resources (2011) 10 SCC 420 and Rajasthan
State Industrial Development & Investment Corpn. v. Diamond & Gem
Development Corpn. Ltd., (2013) 5 SCC 470.
52. Qua the challenge to the validity of the minutes of the meeting
dated 20.09.2014 viz those being forged, has been dealt with by the
learned Arbitrator and such argument of petitioner having been rejected
as afterthought. The minutes were referred to in various communication
exchanged between the parties and the petitioner never disputed such
minutes in its correspondences and had challenged it for the first time
before the learned Arbitrator. The petitioner did not dispute such minutes
and rather acquiesced to the validity of such minutes by expressly
acknowledging those in its subsequent communications and even agreed
to furnish bank guarantee of Rs.15.00 Crores on 10.03.2015. It is settled
law that burden lies on a person who makes specific allegations and/or
averments and such allegations must be supported by material particulars,
per Royal Palms (India) Pvt. Ltd., Mumbai v. Neeta Jignesh Parikh 2016
(6) Mh L J 214. Rather in Shin-etsu Chemical Co. Ltd. v. Aksh Optifiber
Ltd. and Anr. (2005) 7 SCC 234, the Court went ahead to say if such
defences were to be allowed, it would necessarily require full fledge trial
(oral evidence) at pre reference stage.
53. The petitioner had due knowledge as to why such meeting dated
20.09.2014 was convened and the reasons for addition of clause No.8.11
to clause No.8 of the Joint Venture Agreement dated 16.07.2013. It was
only after the meeting, clause 8.11 was added to the aforesaid agreement
per decision of the Governing Council vide its resolution dated
20.09.2014. After the Governing Council meeting, as observed earlier,
the petitioner itself had acknowledged vide its email dated 31.01.2015 the
demand of bank guarantee of Rs.50.00 Crores by respondent as resolved
in the said Governing Council meeting and after negotiations vide its
email dated 10.03.2015, the petitioner itself had committed to submit the
bank guarantee for a reduced amount of Rs.15.00 Crores. Thus, the
argument of the petitioner challenging the validity of clause No.8.11 of
the agreement is contrary to its conduct and not substantiated by any
cogent evidence. The learned Arbitrator has aptly dealt with the validity
of clause No.8.11 adopted by the Governing Council in exercise of its
emergency power under clause No.27 and had rightly rejected the
challenge of petitioner to the minutes of meeting dated 20.09.2014. Even
the award includes a detailed discussion on validity of the emergency
clause No.27 and insertion of clause No.8.11 at pages No.42 to 57 of the
award and I need not to repeat it again.
54. The essence of the contract was timely payment to be made by the
petitioner to BAI and such obligations were outlined in the agreement
and hence, any breach thereof would entail the termination of the Joint
Venture Agreement and was completely justified.
55. In the circumstances, there is no patent illegality in the findings of
the learned Arbitrator. The petition is bereft of any merits and
accordingly is dismissed. Pending applications, if any, also dismissed.
Parties to bear their own costs.
O.M.P.(I) (COMM.) 362/2017
56. In view of above order, this petition also stands disposed of.
Needless to say the petitioner is at liberty to seek execution of the award
in his favour. Pending applications are also disposed of.
YOGESH KHANNA, J.
FEBRUARY 07, 2020
AT
