Acquiescence To Termination Notice Of Agreement Bars Interim Relief U/S 9 Of Arbitration Act: Bombay High Court

The Bombay High Court bench of Chief Justice Alok Aradhe and Justice M.S. Karnik has held that when a party is aware of a termination notice issued by the other party and conducts itself on the assumption that the termination has taken effect, it cannot later seek interim relief under Section 9 of the Arbitration and Conciliation Act, 1996 (Arbitration Act) on the ground that the other party is proceeding to assign the subject matter of the contract to a third party and should therefore be restrained. Brief Facts: In February 2018, Mumbai Cricket Association (MCA) launched the T20 Mumbai League for the Mumbai, Navi Mumbai, and Thane regions. Bids were invited for operating a team in the first five editions. A letter of intent was executed between Probability Sports (India) Pvt. Ltd. and a consortium of Juniper City Developers Ltd.(JCDIL) and Cosmos Prime Projects Ltd. (CPPL), confirming them as the winning bidders for the Mumbai South Central team. On 9th March 2018, a novation agreement was signed, substituting Jupicos as the winning bidder.' The second edition of the T20 Mumbai League took place in May 2019 with eight teams, including Jupicos Entertainment Private Limited (Jupicos). Jupicos claims it incurred heavy losses despite receiving a minimum guaranteed income of ₹3.15 crore from Probability Sports, which it alleges was fully transferred back to Probability Sports as participation fee. A participation agreement dated 9th March 2018 was executed between Jupicos and Probability Sports under which Jupicos had the right to operate the team “Shivaji Park Lions” (“the team”) for the first 5 editions of the League. Jupicos states that it incurred expenses of ₹5.61 crore but earned only ₹3.71 crore (including GST). On 22nd November 2019, Probability Sports issued a notice alleging Jupicos defaulted on ₹35.17 lakh as participation fee for the second edition and failed to deposit TDS of ₹68.44 lakh for FY 2017-18 and 2018-19 related to the first edition. Probability Sports by a letter dated 24th January 2020 terminated Jupicos's rights under the agreements. Contentions: The Appellant submitted that MCA is estopped from asserting that the termination notice was acted upon. The continued recognition of Jupicos as the team owner, including its participation in subsequent meetings, demonstrates that the termination notice was never intended to be enforced. It was further submitted that the arbitrary and unequal treatment meted out to Jupicos compared to other team owners by MCA in discharge of its public functions is contrary to the decision of the Supreme Court in BCCI vs. Netaji Cricket Club. It was further contended that despite pendency of this Appeal, third party rights are created and MCA proceeded with the auction. The stand of MCA that the participation agreement was a mere conducting agreement is ex facie illegal. Observations: The court at the outset noted that prima facie, there is merit in the submission of the learned Senior Advocate for MCA that the agreement between Jupicos and Probability Sports does not suggest an agency relationship with MCA. Instead, it appears to be an independent, principal-to-principal contract. It further added that the Single Judge's observation that the agreement merely permitted Jupicos to operate a team—without conferring ownership or vested rights—seems plausible. The agreement also appears to be inherently determinable, as evidenced by its termination clause. The court further opined that Probability Sports had the right to terminate the agreements between Jupicos and Probability Sports and that MCA had no role to play in such termination. The agreements were inter se between Jupicos and Probability Sports. The court further said that the termination notice dated 24th January 2020 was issued under Clause 1(g) of the supplementary agreement due to Jupicos's default and failure to deposit TDS, with the approval of MCA. It further added that notably, Jupicos did not challenge the termination and instead stated it was willing to clear dues after resolving its grievance over unpaid sponsorship amounts. While the termination notice remains undisputed, Jupicos's participation in meetings held in 2021 suggests that the termination was not acted upon. The court further observed that in these circumstances, there is merit in the submission of the learned Senior Advocate for MCA that there was no waiver of the termination notice, and even Jupicos appeared to acknowledge that it had been acted upon. The termination was issued after the second edition of the League, while Jupicos made outstanding payments for the first two editions only on 16th January 2024. It further held that although Jupicos was allowed to attend meetings post-2021, this alone does not imply that the termination was not enforced. In fact, Jupicos's request to Probability Sports to ...

Acquiescence To Termination Notice Of Agreement Bars Interim Relief U/S 9 Of Arbitration Act: Bombay High Court

Mohd Malik Chauhan

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