Bombay High Court Upholds Arbitral Award Against BCCI, Directs Payment Of ₹538.9 Crore To Defunct IPL Franchise Kochi Tuskers Kerala

The Bombay High Court has upheld an arbitral award granting damages amounting to 538.9 crore to Kochi Cricket Private Limited ("KCPL”), the parent company of defunct IPL franchise Kochi Tuskers Kerala.It was held that the Court cannot act as a Court of First Appeal and delve into a fact-finding exercise by revisiting and re-appreciating the record and accepting competing interpretations of the various clauses of the agreements between the parties by invoking the ground of perversity. The bench of Justice Riyaz Iqbal Chagla observed that the Arbitrator adjudicated the core issue, i.e., whether Board of Control for Cricket in India (“BCCI”) has wrongfully invoked the bank guarantee furnished by Rendezvous Sports World (“RSW”) and whether this amounted to a repudiatory breach of KCPL's Franchise Agreement (“KCPL-FA”), by considering the material facts and documents on record as well as the evidence recorded. Factual Matrix: In 2010, BCCI issued an Invitation to Tender (“ITT”) inviting bids for two more franchises for the Indian Premier League (“IPL"). RSW was the successful bidder for the franchise and entered into an Unincorporated Integrated Joint Venture Agreement ("UJV Agreement"). Subsequently, issued a bank guarantee of ₹153.34 crores, as envisaged by the ITT. The franchise Agreement entered by BCCI and RSW governed the relationship between BCCI and the Kochi franchise until the final Franchise Agreement between BCCI and KCPL ("KCPL Agreement") was signed. KPCL issued various letters to BCCI requesting a reduction of the franchise fee, which was categorically denied by the BCCI. The KCPL Franchise Agreement was entered into by BCCI and KCPL, being cognizant that KCPL's request for a reduction of the franchise fee has already been rejected. Subsequently, KPCL was required to deliver the bank guarantee as contemplated by the KCPL Agreement to BCCI, and the representative of RSW/KCPL kept assuring BCCI that the process of obtaining the requisite bank guarantee was underway and the same would be furnished at the earliest. Due to the failure of KCPL to furnish the bank guarantees, BCCI, vide letter dated 19th September 2011, terminated the KCPL Agreement/the RSW Agreement. On 4th August 2012, RSW invoked arbitration, and the Arbitrator in June 2015 passed an Award dismissing BCCI's counter-claim and directed BCCI to pay KCPL ₹384.84 crores with 18% interest. The Arbitrator held that the BCCI wrongfully encashed the RSW's bank guarantees and directed BCCI to pay RSW an amount of ₹153.34 crores. Subsequently, BCCI challenged the KCPL and RSW awards on 16th September 2015, and filed an Arbitration Petition Nos. 1752 of 2015 and 1753 of 2015 u/s 34 of the A&C Act. Submissions: The petitioner made the following submissions: Concerning issues about the furnishing of the bank guarantee and the extension of time in relation thereto, the Arbitrator proceeded on an unsustainable and incorrect legal basis qua basic and elementary legal principles such as waiver and forbearance to sue, thereby causing the very basis of such findings to warrant interference of this Court u/s 34 of the A&C Act. Clause 8.4 of the KCPL Agreement places an unconditional obligation on KCPL to furnish the bank guarantee. The tribunal's finding pertaining to the process of furnishing the bank guarantee was delayed on account of the pendency of Mr Venugopal's transfer request as a back-to-back counter-guarantee by Mr Venugopal/Playon was needed, is perverse, and cannot be sustained. Furthermore, the finding that the time for submission of the bank guarantee was deemed to be extended is contrary to the terms of the KCPL Agreement.Clause 8.4 of the KCPL Agreement deems the non-furnishing of the bank guarantee to be a fundamental breach of the agreement. Furthermore, Clause 12.2 does not require BCCI to give any notice to KCPL prior to issuing the letter of termination. The respondent made the following submissions: The fulcrum of BCCI's termination of KCPL-FA was the failure to provide the bank guarantees, which, in their opinion, constituted a fundamental breach of KCPL-FA and RSW-FA. BCCI did not press upon furnishing the bank guarantees before 22nd March 2011 and kept granting extensions to furnish the same because of various unresolved issues. The BCCI waived Clause 8.4 of KCPL-FA's requirement for furnishing the bank guarantee for the 2012 season on or before 22nd March 2011. In fact, BCCI did not claim any breach between April 2011 and 17th September 2011, i.e., the date of BCCI's wrongful termination of KCPL-FA. Furthermore, at no point in time did BCCI call upon RSW to renew the said bank guarantee or contend that RSW was in breach of RSW-FA. KCPL's challenge to BCCI's termination of KCPL-FA was entirely premised on BCCI's wrongful invocation of the bank guarantee, which in turn amounted to BCCI being in repudiatory breach of KCPL-FA. ...

Bombay High Court Upholds Arbitral Award Against BCCI, Directs Payment Of ₹538.9 Crore To Defunct IPL Franchise Kochi Tuskers Kerala

Mohd Talha Hasan

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