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...
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. The learned Arbitrator also observed that BCCI held KCPL guilty of breach of the agreement due to the non-furnishing of bank guarantees.
Court's Analysis:
The bench observed that the learned Arbitrator in the impugned KCPL Award and RSW Award has considered the issue of BCCI not insisting on furnishing the bank guarantee by KPCL by 2nd March 2011. The jurisdiction of the Section 34 Court is not that of the Court of First Appeal. BCCI wants this Court to indulge in an exercise pertaining to re-appreciating the record and accepting competing interpretations of the various clauses of the agreements governing the parties. This endeavour of BCCI would be in the teeth of the scope of grounds available u/s 34 of the A&C Act. The Court cannot revisit the tribunal's findings after appreciation of evidence and documents on record or interfere with the Award on the ground that the contract was not correctly interpreted.
After considering the material facts and documents on record as well as the recorded evidence, the tribunal observed that the non-furnishing of bank guarantee by KCPL by 22nd March 2011 constituted an "irremediable material breach." BCCI did not claim any breach between April 2011 and 17th September 2011, when BCCI terminated the KCPL-FA.
Various extensions were granted pertaining to unresolved issues between the parties, and there were payments made by BCCI to KCPL under Article 9.3 (a) of the KCPL-FA in April and July 2011, respectively. Furthermore, BCCI accepted payment by KCPL after the stipulated deadline for furnishing the bank guarantee, i.e. on 22nd March 2011.
Based upon these material findings, the tribunal held that BCCI had waived off the requirement under Clause 8.4 of the KCPL-FA for the furnishing of bank guarantee for the 2021 season. BCCI did not terminate the KCPL-FA on the expiry of the deadline to furnish the bank guarantee but performed the KCPL-FA.
The KCPL's request for an extension of three business days was within the expiry of the claim period under the existing bank guarantee issued by RSW (for the 2011 season), which was valid until 27th September 2011. Therefore, no prejudice could have been caused to BCCI if an extension of three working days time from 17th September 2011 had been granted.
Therefore, the tribunal's findings that BCCI wrongfully invoked the bank guarantee, which amounted to a repudiatory breach of the KCPL-FA, do not warrant an interference u/s 34 of the A&C Act. Subsequently, the Court dismissed the two petitions as the same were devoid of merits.
Case Title: Board of Control for Cricket in India v. Kochi Cricket Private Limited and Anr.
Case Number: ARBITRATION PETITION NO. 1752 OF 2015 and ARBITRATION PETITION NO. 1753 OF 2015
Counsel for Petitioner: Mr. Rafiq A. Dada, Senior Advocate and Mr. T. N. Subramanian, Senior Advocate a/w Mr. Aditya Mehta, Ms. Shivani Garg, Mr. Agneya Gopinath and Mr. Dhruv Chhajed i/b Cyril Amarchand Mangaldas, Advocates
Counsel for Respondent: Mr. Vikram Nankani, Senior Advocate a/w Mr. Sajal Yadav, Mr. Rohan Rajadhyaksh, Mr. Sumeet Nankani, Mr. Anukula Seth, Mr. Aayushya Geruja and Ms. Vineetha Khandelwal i/b Mr. Gurdeep Singh Sachar, Advocates for Respondent in ARBP/1752/2015.
Mr. Vikram Nankani, Senior Advocate a/w Mr. Sumit Nankani and Mr. Rohan Rajadhyaksh i/b Ms. Nipa S. Gupte, Advocates for Respondent Nos. 1, 2, 3, 5 and 6 in ARBP/1753/2015.