Bombay High Court
Board Of Control For Cricket In India vs Jaipur Ipl Cricket Private Limited on 14 December, 2010
Author: S.J. Vazifdar
Bench: S.J. Vazifdar
1 aral30742-10
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION
ARBITRATION APPEAL (LODGING) NO.30742 OF 2010
Board of Control for Cricket in India, a society ]
registered under the Tamil Nadu Societies ]
Registration Act, 1975 having its Head Office ]
at Cricket Centre, Wankhede Stadium, `D' ]
Road, Churchgate, Mumbai 400 020 ]... Appellants
Versus
Jaipur IPL Cricket Private Limited, a company
ig ]
incorporated and registered under the ]
Companies Act, 1956, having its registered ]
office at Shop No.2A, Shanti Nagar, SRA ]
Complex, Mahakali Road, Andheri (East), ]
Mumbai - 400 093. ]... Respondent
Mr.C.A. Sundaram, Senior Counsel with Mr.T.N. Subramaniam, senior
counsel, Mr.P.R. Raman, Ms.Akhila Kaushik, Ms.Rohini Musa, Mr.Sharan
Jagtiani, Ms.S.P. Arthi, Mr.Indranil Deshmukh, Mr.Rahul Mascarenhas and
Mr.Adarsha Saxena i/b Amarchand & Mangaldas & S.A. Shroff & Co. for
the Appellants.
Mr.Janak Dwarkadas, Senior Counsel with Dr.Milind Sathe, senior counsel
Mr.Ashish Kamat and Ms.Preeti Singh i/b Crawford Bayley & Co. for the
Respondent.
CORAM : S.J. VAZIFDAR, J.
DATE : 14TH DECEMBER, 2010.
ORAL JUDGMENT :-
1. Admit. With the consent and at the request of the parties, the appeal is heard finally.
2. This is an appeal under section 37 of the Arbitration and ::: Downloaded on - 09/06/2013 16:41:46 ::: 2 aral30742-10 Conciliation Act, 1996 (hereinafter referred to as the "said Act") against an order passed by the learned sole arbitrator dated 30.11.2010 in the respondent's application under section 17 of the said Act.
3. The respondent had filed Arbitration Petition No.1322 of 2010 under section 9 of the said Act in this Court. By an order dated 19.11.2010, the petition was disposed of in terms of the consent minutes of the order by which all the disputes and differences between the parties stood referred to the sole arbitrator and the pleadings before the court and the pleadings to be filed, were to be treated as the pleadings for the purpose of respondent's proposed application under section 17.
The respondent accordingly filed an application under section 17 before the learned arbitrator which was disposed of by the said order dated 30.11.2010. It is this order which is challenged in the present appeal.
4. Mr.Sundaram, the learned senior counsel appearing on behalf of the appellants submitted that the jurisdiction of a Court hearing an appeal under section 37 from an order of the arbitral tribunal under section 17 is wider than the jurisdiction of a Court hearing a challenge to an award filed under section 34. According to him, in an appeal under section 37 from an order of the arbitral tribunal under section 17, the Court is bound to consider the merits de-novo.
Considering the urgency in the matter and conscious that I must ensure that the parties have reasonable time to challenge any order that I pass, I decided to hear the matter afresh on all questions including of fact and of law. I have come to the conclusion that the order must be upheld on merits not merely for the reasons stated therein but on other ::: Downloaded on - 09/06/2013 16:41:46 ::: 3 aral30742-10 grounds and for other reasons as well. I, therefore, do not consider it necessary to decide the question as to the scope of the jurisdiction of a Court hearing an appeal under section 37 against an order of the arbitral tribunal under section 17. While confirming the order I have put the respondent on certain terms for the reasons and in the circumstances I will state later.
5. The appellant is a society registered under the Tamil Nadu Societies Registration Act, 1975. The Indian Premier League (IPL) consists of and is managed by a Governing Council which is a sub-
committee of the appellants.
On 27.12.2007, the appellants issued an invitation to tender, inviting persons/entities to bid for a franchise to own/operate a cricket team in the IPL.
One Manoj Badale, Suresh Chellaram and Lachlan K. Murdoch decided to bid for an IPL franchise.
6. On 19.1.2008, the respondent issued, inter-alia, the following clarifications to the prospective bidders:-
"58. Section 2.3 of the ITT ("Eligibility to Bid") mentions in the last line that "all Franchises will, for at least the first three years, be located in India". Does this mean that Bidders located outside India, will have to operate a subsidiary company in India or can we decide this structuring post the bid process.
Answer: All Franchises will play all their matches in India during the first three years at least, but Franchisees from overseas are entitled to bid for ownership of the Franchises. BCCI need to know the possible structures from which Franchisees based outside India. It is not a requirement of IPL that Franchisees operate an Indian subsidiary."::: Downloaded on - 09/06/2013 16:41:46 :::
4 aral30742-10 Question No. 60 and clarification given by the Respondent were as follows:"
60. Can a bidder form a new company after winning the franchisee rights to hold and better manage the franchise. (This new company would be a group company or a company controlled by the same promoter. This new company will meet all the bid criteria of the BCCI.) Answer: Yes this would be allowed subject to any parent company guarantees which may be required by BCCI."
7. The respondent's case, which I have accepted, is that the said Manoj Badale, Suresh Chellaram and L.K. Murdoch (hereinafter collectively referred to as the "owners") on 22.1.2008 submitted a bid in the form of a Letter of Eligibility, through Emerging Media (IPL) Ltd. "EMIPL", a company registered in UK.
Clause 1.1(b) of the LOE required the details of all the shareholders in the bidder to be stated. The name of the said Manoj Kumar Badale was mentioned therein. Mr.Sundaram submitted that the representation therefore, was that the EMIPL was the bidder and that the sole shareholder thereof was Badale. He contended that as ultimately the said Badale was not the only person in control of the respondent, there was a misrepresentation when the franchises agreement was entered into subsequently. The submission is incorrect, as I will demonstrate later.
Clause 1.1 (c) of the LOE required an organization chart of the group including the details of those persons who were the ultimate controllers of the bidder if the bidder formed a part of a group of companies. The LOE furnished the following chart:-
EM Founder Shareholders Australian Shareholders SI Shareholders | | | ::: Downloaded on - 09/06/2013 16:41:46 ::: 5 aral30742-10 | | | New Investment Co. New Investment Co. New Investment Co.
\ | /
\ | /
Bidco
Emerging Media (IPL) Ltd.
| 100%
|
Mauritian Holding Company
| 100%
|
Indian Operating Company
EMIPL was incorporated on 23.11.2007 in the name of Intercede 22/46 Ltd., which was changed to the present name on 11.1.2008.
Clause 1.1(d) stated that one Fraser Castellino was the CEO and said Badale and one Charles Mindenhall were the directors of EMIPL.
Clause 1.2 stated that EMIPL had paid the performance deposit of Rs.2.00 crores.
Where the bid was submitted by a consortium, clause 1.3 required the relevant terms of the consortium arrangement to be provided.
The LOE in this regard stated "NOT APPLICABLE". Mr.Sundaram stated that this was again a misrepresentation for the respondent's case today is that there was a consortium of the said owners viz. the said Manoj Badale, Suresh Chellaram and Lachlan Murdoch. This submission is also unfounded, as I will demonstrate later. In fact the appeal was argued on the basis that it was always represented that the said owners were involved in the process from the beginning.
8. On 24.1.2008, the respondent was declared to be the successful bidder and was awarded the Jaipur Franchise of the IPL. The ::: Downloaded on - 09/06/2013 16:41:46 ::: 6 aral30742-10 franchise agreement was signed by the appellants on 14.4.2008. It is however, convenient at this stage itself to set out the clauses thereof, which pertain to the basis on which the respondent terminated the agreement. The same read as under :-
"DEFINITION OF OWNER "Owner" shall mean any person who is the ultimate Controller of the Franchisee;
....................................
10. Sale of Franchise 10.1 ig The Franchisee has no right to assign or delegate the performance of any right or obligation under this Agreement. However, subject to the remainder of this Clause and to obtaining BCCI-IPL's prior written consent: (i) the Franchisee will have the right to sell the Franchise to any person; or (ii) any person who Controls the Franchisee will be entitled to effect or otherwise cause to occur a Change of Control of the Franchisee or a Listing (any of the events described in (i) and (ii) being an "Event" for the purposes of this Agreement). Any person who acquires the Franchise from the Franchisee shall be a "Purchaser" (which expression shall include any person who Controls the Purchaser) and any person who acquires Control of the Franchisee upon any Change of Control of the Franchisee from time to time shall be a "New Controller"
in each case for the purposes of this Agreement. Upon any Event occurring BCCI-IPL reserves the right to require a new franchise agreement to be entered into by way of replacement for this Agreement for the remainder of the Term, such agreement to be in the form of the standard agreement offered by BCCI-IPL to its Other Franchisees current at that time (the "Replacement Agreement") ::: Downloaded on - 09/06/2013 16:41:46 ::: 7 aral30742-10 10.2 The conditions required to obtain BCCI-IPL's written consent to any Event are as follows:
(a) no Event shall occur during the first three years;
(b) any proposed Purchaser and/or any New Controller shall meet BCCI-IPL's standards with respect to suitability, business experience, financial status and ability and the Franchisee shall procure the delivery to BCCI-
IPL of all such information relating to the proposed Purchaser and/or any New ig Controller as shall enable BCCI-
IPL to determine whether such standards have been met;
.............................
11. Termination 11.1 Either party may terminate this Agreement with immediate effect by notice in writing if the other party has failed to remedy any remediable material breach of this Agreement within a period of 30 days of the receipt of a notice in writing requiring it to do so which notice shall expressly refer to this Clause 11.1 and to the fact that termination of this Agreement may be a consequence of any failure to remedy the breach specified in it.
For the avoidance of doubt a breach by the Franchisee of its payment obligations under this Agreement or under Clause 22 shall be deemed to be a material breach of this Agreement for the purposes of this Clause.
11.2 Either party may terminate this Agreement with immediate effect by written notice if the other party commits or permits an irremediable breach of this Agreement or if it is the subject of an Insolvency Event.
::: Downloaded on - 09/06/2013 16:41:46 :::8 aral30742-10 11.3 BCCI-IPL may terminate this Agreement with immediate effect by written notice if:
(a) there is a Change of Control of the Franchisee (whether direct or indirect) and/or a Listing which in each case does not occur strictly in accordance with Clause 10;
(b) the Franchisee transfers any material part of its business or assets to any other person other than in accordance with Clause 10;
(c) the Franchisee, any Franchisee Group Company and/or any Owner acts in any way which has a material adverse effect upon the reputation or standing of the League, BCCI-IPL, BCCI, the Franchisee, the Team (or any other team in the League) and/or the game of cricket.
..........................
11.7 For the purposes of this Agreement "Control" means in relation to a person the direct or indirect power of another person (whether such other person is the direct or indirect parent company of the first mentioned person or otherwise) to secure that the first mentioned person's affairs are conducted in accordance with the wishes of such other person:
(a) by means of the holding of any shares (or any equivalent securities) or the possession of any voting power; or
(b) by virtue of any powers conferred on any person by the Articles of Association or any other constitutional documents of any company or other entity of any kind; or
(c) by virtue of any contractual arrangement and "Controlled" and "Controller" shall be construed accordingly and a "Change of Control" shall occur if (i) a person who Controls another person ceases to do so;
or (ii) a different person acquires Control of such other person (whether before or ::: Downloaded on - 09/06/2013 16:41:46 ::: 9 aral30742-10 after or as a consequences of any Listing);
or (iii) if any person acquires Control of another person in circumstances where no person previously Controlled such other person. For the purposes of this Clause 11.7 (and in connection with the use in this Agreement of the terms defined in this Clause 11.7) all of the members of any consortium, partnership or joint venture which has any interest (direct or indirect) in the Franchisee shall be deemed to be one person".
..............................
12.1 This Agreement (and the Regulations), constitutes the entire agreement between the parties in relation to the Franchise and supercedes any negotiations or prior agreements in respect thereof and;
(a) this Agreement clearly expresses the parties' requirements and intentions in connection with the matters contemplated hereby;
(b) in entering into the Agreement each party confirms that it has not relied on any warranties or representations which are no expressly set out in the Agreement; and
(c) the parties agree that the sole remedy for any breach of any of the warranties or representations included in this Agreement shall be a claim for breach of contract.
............................
20.9 References to a "person" shall include an individual, corporation, unincorporated association, firm or any other entity of any kind and references to the "termination" of this Agreement shall include its termination or expiration."
9. It would also be convenient at this stage to refer to the letter of termination dated 10.10.2010 which has been stayed by the learned arbitrator and Mr.Sundaram's further submissions in this appeal, before ::: Downloaded on - 09/06/2013 16:41:46 ::: 10 aral30742-10 referring to the fact of the case.
In paragraph 4 of the letter of termination, it is stated that the appellants had undertaken an internal investigation and found serious irregularities in the respondents corporate structure contrary to the proposed structure submitted in the LOE. The letter stated that EM Sporting Holdings Ltd., a company incorporated in Mauritian (EMSHL) and EMIPL held 9999 shares and 1 share respectively in the respondent. It was further stated that the shares of EMSHL were in turn held as under :-
Name No.of shares held
Emerging Media (IPL) Ltd.
ig 12,64,688
Tresco International Limited 17,23,008
Blue Water Estate Limited 4,58,320
Kuki Investment 4,56,500
It was accordingly stated that the corporate structure of the respondent was totally different from the one mentioned in the LOE ; that the Mauritian Holding Company was not a 100% subsidiary of EMIPL/the Bidco; that what was represented to the appellants was that there were three shareholders of the EMIPL viz. the said Badale, a New Australian company and another company as a Strategic Investor, but that no such structure was in place.
It was further stated that the presence of EMIPL as a 100% holding company of the Mauritian company, which was the basis of the structure had been violated. It was further alleged that there was a violation of clause 3.2 of the LOE and 13.3 of the franchise agreement and that the above breaches were irremediable which entitled the appellants to ::: Downloaded on - 09/06/2013 16:41:46 ::: 11 aral30742-10 terminate the franchise agreement.
The appellants stated that when the respondent was incorporated on 8.3.2008, there were only two shareholders viz. said Castellino and Barthakur, who held 5000 shares each. In other words, none of the owners were the shareholders of the respondent and no back ground was provided to suggest any connection between the Bidco/EMIPL and the shareholders. The transfer of Castellino's 5000 shares to EMSHL on 3.10.2008 caused a change of the controlling interest of the respondent.
On 27.1.2009, the said Barthakur transferred his 4990 shares to EMSHL and ten shares to EMIPL. According to the appellants, there was a change of control of the franchise within the meaning of that expression in clause 10 of the franchise agreement twice within three years of the franchise agreement unknown to the appellants.
Paragraph 10 of the letter of termination summarised the violations as under:-
"10. Hence, it is found that you have committed three violations viz.,
a) Violated the solemn declaration given in the letter of eligibility that the Emerging Media (IPL) Limited, UK (Bidco) would be the entity controlling the Indian Holding Company operating the Franchise though its wholly own Mauritian subsidiary.
b) Stepped into the shoes of the original bidder on the date of award of the Franchise i.e., 14.4.2008 without being a " group company or entity controlled by the bidder" and
c) Clear violation of the Franchise agreement, more particularly clause 10.1, 10.2(a) and 10.3".::: Downloaded on - 09/06/2013 16:41:46 :::
12 aral30742-10
10. On 24.1.2008, EMIPL was declared as the successful bidder for and was awarded the Jaipur Franchise of the IPL.
11. The respondent's case always was that from the beginning the franchise was to be owned, controlled and managed by EMIPL, the shares of which were to be held/controlled by the said owners; that they had initially decided to acquire the franchise through EMIPL, which was then controlled by the said Badale and that they had agreed between themselves that in the event of EMIPL succeeding in the bid, they would set up a new company, owned and controlled by them which would own the franchise and the IPL team.
The respondent's case is that for variety of reasons including tax related issues and constraints of time, in February, 2008, the owners decided to control the respondent, which was yet to be incorporated, through a Mauritian Holding Company and to eliminate the intervention of EMIPL. In other words, the corporate structure depicted in the LOE was to have one tier less by eliminating the Bidco/EMIPL.
12(A) The respondent was incorporated on 8.3.2008 with an initial share capital of Rs.1,00,000/- in which 10,000 shares of Rs.10/- each. The said Barthakur and Castellino held 5000 shares each, which constituted the entire issued equity share capital of the respondent.
(B). A franchise agreement between the appellants and the respondent was executed on 14.4.2008.
(C). The Mauritian Holding Company, EMSHL was incorporated on 5.5.2008. According to the respondent, the owners held shares in EMSHL as per the ratio indicated in the LOE through their respective investment ::: Downloaded on - 09/06/2013 16:41:46 ::: 13 aral30742-10 companies. The Bidco/EMIPL was controlled by the said Badale and Blue Water Estate Limited and Tresco International Limited were controlled by the said Lachlan K. Murdoch and Suresh Chellaram respectively. It will be evident a little later that the appellants were aware of the existence of each of these companies although Mr.Sundaram had denied the same.
13. Mr.Sundaram stated that for the purpose of this appeal he would proceed on the basis that the representation to the appellants always was that the said owners Manoj Badale, Suresh Chellaram and L.K. Murdoch would be in control of the Bidco/EMIPL and the franchisee.
14. In view thereof, it is not necessary to set out the myriad facts and circumstances which would establish the same. Suffice it to note that from the beginning the appellants always addressed the entire correspondence to each of the owners by name. This included a separate invitation to each of the owners for the opening ceremony for the first IPL season.
15 The learned arbitrator's finding that the correspondence suggested that the fact that the said three persons were the owners, was to the knowledge of the appellants cannot therefore be faulted.
16. It is difficult to imagine that the appellants were unaware of the shareholding pattern of EMIPL or the respondent when the LOE was submitted and the Franchise Agreement was executed.
The appellants acted not merely on the basis of the expertise of their own officers but on the advise and with the assistance of International Management Group (IMG), a sports management consultancy which provided legal and other services to the IPL. IMG admittedly co-
::: Downloaded on - 09/06/2013 16:41:46 :::14 aral30742-10 ordinated with the successful bidders for preparing the final documentation and carried on correspondence with them.
A lot appears to have transpired between the parties orally as is evident from the e-mails and from various other facts. For instance, though at the material time, there is no mention of each of the said owners and their precise interest in the entire matter, the correspondence was addressed specifically to each of them.
Mr.Sundaram constantly emphasised that control of the franchise and the owner of the franchise is of "paramount importance" for a variety of reasons which go beyond the contractual relationship between the parties and extends, inter-alia, to public and national interest. Looking to the nature of the IPL and the amount of money involved, I would presume he is right. It is difficult then to believe that the appellants would not even have made the elementary enquiry regarding the identity of the shareholders of the Bidco/EMIPL and the respondent.
Absent any indication to the contrary, it is a reasonable presumption that the appellants were fully aware of the owners participation in the matter and de-facto involvement in EMIPL and the respondent.
17. Mr.Sundaram contended that the basis on which the franchise agreement was executed was that the Bidco i.e. EMIPL would always be in the picture and would control the Mauritian Holding Company. He submitted that the reason why the corporate structure mentioned in the LOE was accepted was that EMIPL was registered in UK which would have enabled the appellants to obtain information regarding the company easily.
::: Downloaded on - 09/06/2013 16:41:46 :::15 aral30742-10 This, he submitted, would in turn enable the appellants to keep control over and know who they were dealing with. Mr.Sundaram also submitted that it was of vital importance that each tier of the corporate structure indicated in the LOE ought to have remained throughout. Mr.Sundaram further submitted that there was a misrepresentation by the owners at the time the LOE and the franchise agreement were entered into to the effect that the owners and not the said Barthakur and the said Castellino would be/were in control of the respondent, whereas in fact it is the said Barthakur and Castellino who held all the shares in the respondent.
18. The submissions are really, if not an after thought, raised in hindsight. Neither the invitation to tender nor the LOE even remotely indicated that it was a fundamental requirement of the appellants that the bidder ought to be registered in UK or in any other particular country or countries. If this was so crucial, it would have been mentioned in the IIT or the agreement which have been prepared in great detail and with considerable expertise.
In answer to Question 58 set out earlier, the appellants stated that it was not a requirement of IPL that franchisees operate an Indian subsidiary. If the place of registration of a foreign company was so important, the appellants would at least at this stage have stated so.
19. Nor is there anything in any document or otherwise which indicates that it was an important term of the contract that the corporate structure mentioned in the LOE ought to remain exactly as it was mentioned therein. The documents including the LOE are in fact to the contrary. The submission militates against what is stated in the LOE. From ::: Downloaded on - 09/06/2013 16:41:46 ::: 16 aral30742-10 the LOE, it is also clear that the entire manner in which the control by the owners of the franchise was to be exercised was kept open and subject to adjustments and changes. This is evident from the fact that the LOE itself stated that the details of the exact corporate structure were being finalized and the same would be subject to meeting the legal and local jurisdiction, controls and regulations. The diagramatic representation of the corporate structure was only an anticipated one - it was not final.
Neither the LOE nor the franchise agreement supports the submission either. If the corporate structure was to be frozen as per the LOE, it would have been so provided in the ITT, the clarifications issued or the franchise agreement. Each of them, in fact, suggest the contrary. At the cost of repetition, it was clearly stated that the corporate structure mentioned in the LOE was only anticipated, that the details were being finalized and would be subject to various factors.
20. The fact that the final mode of control by the said owners of the respondent was different from the one suggested in the LOE, is therefore of no relevance. It did not constitute a misrepresentation of facts by the Bidco/EMIPL, the respondent or the owners.
21. As will be evident hereinafter all this was not even the appellants' grievance at the material time. The respondent was aware of the mode of control of the franchise at all times prior to April, 2009 when, they now allege they became aware of the said breaches.
22. That the appellants themselves not only did not consider this to be so, is not only evident but virtually established not only by the exchange of correspondence I have referred to, but more important by the appellants' ::: Downloaded on - 09/06/2013 16:41:46 ::: 17 aral30742-10 conduct pertaining to the issuance of the parent company guarantee.
23. The exchange of correspondence regarding the parent company guarantee is of considerable importance in establishing that the respondent never considered the removal of any tier in the corporate structure indicated in the LOE to be of any significance or importance and that the appellants were aware that the respondent was ultimately held/controlled by EMSHL which, in turn, was held/controlled by the said owners through their respective investment companies.
24(A). By an e-mail message dated 23.5.2008, one Ms.Vandana Gupte, of IMG, called upon the respondent to furnish a corporate guarantee from EMIPL in respect of the respondent's obligations under the franchise agreement.
(B). The respondent by an e-mail message dated 4.6.2008 stated as under:-
"I would like to share some clarifications in relation to the corporate structure of the above franchise and obtain your consent prior to approving the attached corporate guarantee ("Guarantee").
As you are aware, Jaipur IPL Cricket Private Limited (the "Company") entered into the Franchise Agreement with the BCCI-IPL.
The first clarification we would like you to be aware of is that the Company is not owned by Emerging Media (IPL) Ltd. As indicated in your email below, but rather by a Mauritian parent company, Holding Limited (the "Parent Company") registered in Mauritius under number 080058/C1IGBL whose registered office is at 5th Floor, & R Court, 49 Labourdomats Street, Port Louis, Mauritius.
The second clarification we seek is whether the Guarantee can be entered into by the Corporate Company Jaipur IPL Cricket Private Limited, given that it is responsible for all operational and commercial ::: Downloaded on - 09/06/2013 16:41:46 ::: 18 aral30742-10 obligations of the franchise. Failing that, we will proceed to enter into the Guarantee with the Parent Company, but would seek your confirmation in either case."
I will assume as correct Mr.Sundaram's contention that the clarification is no different from what was stated in the LOE, as the mere fact that the Mauritian Holding Company, EMSHL was stated to be the parent company would not indicate that EMIPL was no longer in the picture. He submitted that it was so understood by the appellants as is evident from the appellants' e-mail message in reply on the same day which reads as under:-
"To answer your queries, firstly, a guarantee is always given by a third party to secure the financial obligations of another. Therefore in order to secure the financial obligations of the Jaipur Franchisee, it is imperative that a corporate guarantee is given by its parent company and not by the Jaipur Franchisee itself. Secondly, in this case, though we understand that the Mauritian company is the holding company of Jaipur (IPL) Cricket Pvt. Limited, we would like the UK company which, as per information furnished to us earlier, is the ultimate parent company of the Jaipur Franchisee, and also the biding company, to furnish a corporate guarantee."
25. The subsequent e-mail messages however could have left no room for doubt in the appellants' mind regarding the elimination of EMIPL in the structure proposed in the LOE. The respondent's e-mail message of 4.6.2008 reads as under :-
"Thank you for your swift response. I think it would be valuable if we had a telephone conversation to discuss the arrangement we had in place and where we are now in terms of the corporate structure. However, for the avoidance of doubt, what I would say now is that the Mauritian holding company is the only ultimate parent holding company of the Jaipur Franchise."
The last sentence in the e-mail message is clear. It leaves no ::: Downloaded on - 09/06/2013 16:41:46 ::: 19 aral30742-10 room for doubt. In the structure indicated in the LOE, the Mauritian Holding Company was in turn to be held by EMIPL. If the Mauritian Holding Company was now the "only" ultimate parent holding company of the respondent, there could be no question of it in turn being held by EMIPL.
26. Faced with this, Mr.Sundaram submitted that although this e-
mail message indicated that the EMSHL was no longer held by EMIPL, it did not suggest a disappearance of EMIPL. He suggested that the e-mail message still suggested that EMIPL was "somewhere in the picture".
27. I fail to understand where in the picture, where in the corporate structure mentioned in the LOE, EMIPL could find a place in view of this e-
mail message. He suggested that the appellants may have thought that there was a reversal of positions to wit EMIPL was now held by EMSHL.
I am afraid the submission cannot be accepted at all. Neither the appellants nor IMG have even suggested anything to this effect.
Even if they so speculated or presumed, it would be contrary to the corporate structure suggested in the LOE. If this structure was to remain frozen, as is now contended by Mr.Sundaram, even such a presumption would have evoked an objection from the appellants.
28. The doubt, if any, is set at rest by two further e-mail messages dated 5.6.2008 and 10.6.2008 addressed by the respondent to the appellants and by the appellants to the respondent respectively.
(A) The e-mail dated 5th June, 2008, reads as under :-
"Many thanks for your time in speaking to me today, I think we had a useful call and you asked if I would summarise our discussion.::: Downloaded on - 09/06/2013 16:41:46 :::
20 aral30742-10 I gave a brief background to the process in which the same group of shareholders that have currently invested in the Mauritius parent company ( Holding Ltd.), provided funds to the UK entity, Emerging Media (IPL) Limited, to merely facilitate making payment of the initial deposit of US$ 5m as part of the ITT. This step was deemed necessary since we were concurrently in the process of incorporating both the Mauritian Parent and the Indian Subsidiary that entered into the Franchise Agreement.
Once the companies were incorporated, the same respective shareholders hold their direct investment through the Mauritian parent company and are obligated to meet all funding requirements of the Indian subsidiary. Therefore, as discussed, I believe it makes sense for the Mauritian parent to provide the guarantee and not the UK Company Emerging Media (IPL) Ltd."
(B) In fact the said Ms.Vandana Gupte's response of 10.6.2008, indicates that the appellants understood that EMIPL was no longer in the picture and accepted the same. The e-mail message dated 10.6.2008 reads as under :-
"Thanks for summarizing the corporate structure of the Jaipur Franchisee. Based on the discussions had with you, we are okay with the Mauritian parent company to provide the required guarantee. Please let me know if you have any further queries."
The e-mail message of 5.6.2008 proves the fact that the respondent informed the appellants inter-alia that the initial deposit of US $ 5 million was only routed through EMIPL as the owners were in the process of incorporating the Mauritian Holding Company viz. EMSHL and the respondent company and that once they were incorporated, the owners would hold their investments in the respondent 'through the Mauritian parent Company". In other words, the respondent informed the appellants that the owners no longer held the respondent through EMIPL. It is for this reason that the respondent informed the appellants that "it makes sense for ::: Downloaded on - 09/06/2013 16:41:46 ::: 21 aral30742-10 Mauritian parent company to provide the guarantee and not the UK company Emerging Media (IPL) Ltd." The appellants understood the purport of the correspondence correctly. They had no doubt in their mind.
The doubt now sought to be created is not warranted. It is clear beyond doubt at least at this stage therefore that the corporate structure indicated in the LOE was tentative and subject to such changes that the owners desired to bring about in the same. The same however, was subject to the owners retaining control within the meaning of that expression in the franchise agreement of the franchise and the holder thereof i.e. the respondent.
29. Mr.Sundaram submitted that the entire order passed by the learned arbitrator is vitiated on account of two patent errors apparent on the face of the order. Firstly, he submitted that the learned arbitrator had wrongly come to the conclusion that the relevant date was the date of the franchise agreement and not the date of the LOE. Secondly, he submitted that the learned arbitrator wrongly observed that there was admittedly no change in the control after the date of the franchise agreement.
I will assume as suggested by Mr.Sundaram that the relevant date is the date of the LOE and not the date of the franchise agreement. I will also assume that the learned arbitrator has wrongly observed that there admittedly was no change in the control after the execution of the franchise agreement. In the facts of this case, it would make no difference whatsoever.
30. It is not the respondent's case that there was a change in the control at any stage, at any point of time even prior to the LOE. The ::: Downloaded on - 09/06/2013 16:41:46 ::: 22 aral30742-10 respondent's consistent stand throughout was that it was the said owners, who were and who continued to be in control of the franchise and the respondent. The learned arbitrator has in fact considered this aspect of the matter in detail.
On facts, I find the respondent's case in this regard to be well founded and established at least at this stage. There is nothing on record that suggests the contrary.
31. Mr.Sundaram further submitted that although the representation prior to the execution of the franchise agreement was that the said owners would own the franchise and control the same, they were not even the shareholders in the respondent, when it was incorporated on 8.3.2008.
32. As I observed in my judgment dated 8.3.2010 in KPH Dream Cricket Pvt. Ltd. versus Board of Control for Cricket in India, Arbitration Petition (Lodging) No.1303 of 2010, control is a matter of substance and not of form. A person can hold shares without any control over them or the voting rights in respect thereof. Conversely, a person can exercise control over shares, including the voting rights in respect thereof without being a registered holder thereof. The question therefore is whether the said owners in fact controlled the shares of the respondent at all material time. I believe they did. I also believe that the appellants knew and accepted the fact that they did it.
33. One must remember that the appellants had engaged the services of the IMG and that events transpired rapidly in a short period of time. We have today the benefit of hindsight. If we were to take ourselves ::: Downloaded on - 09/06/2013 16:41:46 ::: 23 aral30742-10 back in time to when it all began a few important aspects would be obvious. The appellants and the bidders may well have been positive about the success of the IPL but could not have been sure of the same. They obviously had not assessed or even have had a reasonable idea about the extent of the IPLs success. This is evident, inter-alia, from the fact that whereas the franchises were first auctioned in the year 2008 for between US $ 65 million and US $ 75 million, Mr.Sundaram himself stated that two new franchises were recently auctioned for an average of US $ 345 million.
The appellants floated the tender on 27.12.2007. The clarifications were issued to the bidders on 19.1.2008. The bids were submitted on 22.1.2008.
The first IPL season was to commence in April, 2008 i.e. within about three months. The LOE, therefore, understandably recorded that what was stated therein was only a possible structure and was subject to change. It is in this background that the manner in which the owners conduct themselves must be examined. Considering the above facts, I am inclined to accept, as did the learned arbitrator, the respondents case about the manner in which the final corporate structure was arrived at and that it was in conformity with the bid and the Franchise Agreement.
34. Mr.Dwarkadas's submission that the said Castellino and Barthakur held the shares merely as agents and nominees on behalf of the said owners, is well founded for more than one reason.
35. Firstly, as I held earlier, the appellants themselves considered the said Manoj Badale, Suresh Chellaram and Lachlan K. Murdoch to be the bidders and owners of the franchises. The appellants always presumed and proceeded on this basis. There is no other explanation for the entire ::: Downloaded on - 09/06/2013 16:41:46 ::: 24 aral30742-10 correspondence having been addressed specifically to them by name. The correspondence was indeed also addressed to the said Castellino for he was stated in the LOE to be the C.E.O. of EMIPL. I find it difficult to accept that the appellants especially with the assistance of IMG never bothered to ascertain who the respondent's shareholders were. It is reasonable to presume that they did. It is significant that IMG has not filed a single affidavit either in this Court or before the learned arbitrator to show that they never even bothered to find out in whose names the respondent's share were held.
36. As rightly pointed out by Mr.Dwarkadas, even after the respondent was incorporated, the appellants dealt with the said owners recognizing them to be the owners of the franchise and in control of the respondent.
37. That the said owners were in fact in control of the respondent and that the said Bathakur and Castellino held shares on their behalf, is also evident from the fact that it is nobody's case that even the initial deposit of US$. 5 million was made to any extent by the said Bathakur and Castellino. It is the owners who had put up the security deposit of US$. 5 million with the bid. The amount fixed for the first year was US$ 6.7 million.
The security deposit of US$ 5 million was adjusted against the same. A substantial part of the balance of US $ 1.7 million i.e.,a rupee equivalent of Rs.3,29,40,000/- was paid by EMSHL. The said Bathakur and Castellino had never laid claim on the said shares. Their conduct has in fact been consistent with the appellants' case. On 29.9.2008, the said Castellino transferred his 5000 shares held by him in the respondent to EMSHL. On ::: Downloaded on - 09/06/2013 16:41:46 ::: 25 aral30742-10 27.1.2009, of the 5000 shares of the respondent held by him, the said Bathakur transferred 4990 to EMSHL and 10 shares to EMIPL as a nominee. If indeed the said Castellino and Barthakur were also the beneficial owners of the said shares, it is difficult to understand why they would virtually gift the same to the said owners.
38. With these transfers the modified corporate structure contemplated by the owners in February 2008 to control the respondent through the Mauritian Holding Company EMSHL directly and eliminating the Bidco/EMIPL was complete.
39. Before the learned arbitrator, an agency agreement was sought to be relied upon by the respondent in support of the contention that the said Bathakur and Castellino held the shares only as the agents/nominees and on behalf of the owners. Mr.Sundaram submitted that the agreement is fabricated as is evident from the fact that it had not been signed by the said Castellino but has been signed only by the said Bathakur, allegedly on behalf of the respondent.
40. It is not necessary to consider this documentation for in any event the company cannot without authority bind a shareholder. Thus even assuming that this agreement was genuine, it at the highest bound the said Bathakur who signed the same but not the said Castellino. The fact that the said Badale signed the same for and on behalf of the respondent would make no difference. It is difficult however, at this stage to say that the document is fabricated. I will however, in the present appeal ignore the document altogether as in any event the other facts and circumstance establish the respondent's case in regard to the nature of the shareholding ::: Downloaded on - 09/06/2013 16:41:46 ::: 26 aral30742-10 of the said Barthakur and Castellino.
41. In the circumstances, I am in respectful agreement with the learned arbitrator that the respondent's case in this regard ought to be accepted. The termination on the ground that there was change in the control after the franchise agreement was entered into is unsustainable.
42. In this view of the matter, I do not consider it necessary to refer to or deal with certain clarifications which were sought by the respondent and furnished by the appellants regarding their entitlement to sell the shares. Suffice it to note that the appellants confirmed that so long as the owners retained control, it would not trigger an event within the meaning of that expression in clauses 10 and 11 of the franchise agreement.
43. I do not consider important, the fact that the LOE in paragraph 1.3 stated that the terms of the consortium arrangement were not applicable. The respondent obviously stated the same to be in-applicable only because the bid was formally submitted in the name of a company viz.
EMIPL.
44. Equally unfounded is the contention that the representation in the LOE was that the Bidco i.e. EMIPL would be controlled solely by Badale. The chart in the LOE of the corporate structure itself indicated the contrary. The Bidco/EMIPL only happened to have at that time the said Badale as the sole shareholder. (The law in UK permitted a single shareholder.) The chart in fact indicated that the Bidco/EMIPL would be held by others as well. In fact Badale was shown to have only a 36.70% share in the respondent through his company depicted in the chart "Founder New Company" which companies shares were to be held by "EM ::: Downloaded on - 09/06/2013 16:41:46 ::: 27 aral30742-10 Founder Shareholders".
45. It was also evident to the respondent from the LOE itself that Badale was never to be the sole owner of the franchises. Nor was he to be the only person to participate in the matter. The structure stated in the LOE establishes beyond doubt that the Bidco/EMIPL was to be controlled by the three owners through their respective corporate entities and also that the Bidco/EMIPL would thereafter control the Indian operating company i.e. the respondent. It is inconceivable that the appellants and their consultants, IMG, were led astray by anything contained in the LOE in this regard.
46. This brings me to Mr.Sundaram's submission that the appellants discovered only during the hearing before the arbitrator last month that the shares of the Mauritian Holding Company, EMSHL are held by "some three un-known entities" viz. Blue Water Estate Limited, Tresco International Limited and EMIPL. He stated that the appellants knew nothing about Blue Water Estate Limited and Tresco International Limited till the respondent relied upon the alleged shareholders agreement dated 29.5.2008 entered into between the EMIPL, Blue water Estate Limited, Tresco International Limited and EMSHL in the application under section 17 before the learned arbitrator.
47. This contention on facts is established to be incorrect. As Mr.Dwarkadas rightly pointed out, the appellants were at all material times aware of the existence of each of these entities including Blue Water Estate Limited and Tresco International Limited and recognized the same and acted upon the basis of their interest in the respondent. The question of suppression in this regard therefore, does not even arise.
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48. Firstly, in paragraph 11 of Arbitration Petition (Lodging) No. 1303 of 2010, the respondent averred that it had been agreed between the owners that the said Badale, Murdoch and Chellaram would hold 36.70%, 13.30% and 50% respectively in EMSHL through their respective investment companies viz. EMIPL, Blue Water Estate Limited and Tresco International Limited. In paragraph 17 of the affidavit in reply, the appellants stated that it was irrelevant whether or not the respondent was promoted, incorporated, owned and controlled by the alleged owners or not. In other words, there was nothing specifically stated and no surprise expressed about the reference to Blue Water Estate Limited and Tresco International Limited.
49. What is even more important however, is the correspondence which establishes the appellants' knowledge at least from 3.3.2009 about the existence and involvement of Blue Water Estate Limited and Tresco International Limited in the respondent.
50. On 2.2.2009, one Raj Kundra, though his investment company Kuki Investments Limited acquired 11.70% of the equity shares in EMSHL.
The appellants were obviously aware of the same as by an e-mail message dated 11.2.2009, addressed to the respondent, they stated that they had heard that there was a change in the ownership structure of the respondent and offered their congratulations. The appellants requested the respondent to send a revised ownership structure and to confirm the terms of the sale of the said shares.
The respondent by an e-mail message dated 12.2.2009 thanked the appellants for the felicitation. A few more e-mail messages ::: Downloaded on - 09/06/2013 16:41:46 ::: 29 aral30742-10 were exchange between the parties.
By an e-mail message dated 27.2.2009, the respondent informed the appellants about Kuki Investments Limited having acquired the said shares in EMSHL describing EMSHL to be "the parent company of the franchise owner, Jaipur IPL Cricket Pvt. Ltd.".
What is of vital importance and as noted by the learned arbitrator is that by a further e-mail message dated 3.3.2009, the respondent furnished the following details regarding the shareholding pattern before and after the transaction with Kuki Investments Limited:-
Shareholder Number Shares Shares Shares
of sold issued post deal
shares
Emerging 1376250 (111562) 1264688
Media (IPL)
Ltd.
Tresco 1875000 (151992) 1723008
International
Ltd.
Blue Water 498750 (40430) 458320
Estate Ltd.
New 303984 152516 456500
Investor
3750000 - 152516 3902516
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51. It is now established beyond doubt that at least as on 3.3.2009, if not earlier, the appellants were fully aware of the fact that EMSHL was the parent/holding company of the respondent and that the shareholders of EMSHL included Blue Water Estate Limited and Tresco International Limited. In other words, the appellants did not come to know about the existence and involvement of the Tresco International Limited and Blue Water Estate Limited for the first time only when the said shareholder agreement dated 29.5.2008 was sought to be relied upon in the application under section 17 before the learned arbitrator.
52. What is also significant as submitted by Mr.Dwarkadas is the fact that the appellants not only made no grievance about but congratulated the respondent regarding the transaction with Kuki Investments Limited. The appellants were obviously aware of the involvement of the Blue Water Estate Limited and Tresco International Limited for had they not been so aware, they would immediately have responded to the e-mail message dated 3.3.2008 raising a query about the same. Their silence from 3.3.2009 upto the date of the termination of the agreement by the said letter dated 10.10.2010, has not been explained.
The only logical inference is that the appellants had accepted the fact that there was no change in the control and that the said owners continued to be in control of the respondent through their shareholding in EMSHL and that their holding in EMSHL was through their investment companies EMIPL, Blue Water Estate Limited and Tresco International Limited.
53. Mr.Sundaram then submitted that there are various ::: Downloaded on - 09/06/2013 16:41:46 ::: 31 aral30742-10 inconsistencies in an alleged shareholding agreement dated 29.5.2009. He stated for instance that the agreement referred to the Mauritian Holding Company and not EMIPL to be the Bidco. This, he submitted, is contrary to the LOE. Further he stated that there was a reference to Illyrig Pty. Ltd.
Moreover he stated that the agreements had apparently been executed by or on behalf of certain other companies in turn on behalf of Tresco International Limited.
54. Mr.Dwarkadas rightly submitted that these contentions ought to have been pleaded. I do not intend being technical. However, it was necessary for the appellants to have raised such contentions firstly on pleadings and secondly before the learned arbitrator. It would be unfair to the respondents in the absence thereof to permit them to be raised in an appeal under section 37. Moreover, these contentions have not even been taken in the appeal. There could well be several obvious explanations, I however do not intend speculating the same in the absence of pleadings.
55. By April, 2009, the respondent had participated in the first two IPL seasons without any objection from the appellants including on the ground that the respondent had not answered the requisitions raised in the appellants' e-mail message dated 31.3.2008. It is significant that Ms. Gupte of IMG, by an e-mail dated 31.3.2008 thanked the respondent's officer for his response and stated that they would put in the details accordingly. The response was obviously to the appellants earlier e-mail dated 31.3.2008.
56(A). By an e-mail dated 10.7.2009, the appellants requested the confirmation of the shareholding list as on 1.4.2008 and on 31.3.2009 and ::: Downloaded on - 09/06/2013 16:41:46 ::: 32 aral30742-10 the movements during the year either as transfer of shares or by issuing fresh capital.
(B). The respondent by an e-mail message dated 17.7.2009 forwarded as an attachment thereto, the full share register of "parent company EM Sporting Holdings Limited upto 31.3.2009". The attachments through inadvertence remained to be annexed to the appeal at pages 440 and 441. The appellants are granted leave to amend the appeal by adding the same as pages 440 and 441. It was further stated that the details regarding the respondent would be forwarded the same day or the next day. The attachment gives the details of the holdings of the shareholders, including Tresco International Limited, Blue Water Estate Limited and EMIPL. It also gives the details of the transfers of the shares.
(C). The respondent addressed a further e-mail dated 18.7.2009 to the appellants attaching this time the details regarding the respondent's share register.
57. Thus in any event by July, 2009, all the details, as requested by the appellants, were forwarded to the appellants. The appellants did not raise any further queries regarding the further shareholding of the shareholders including of Tresco International Limited and Blue Water Estate Limited. This further establishes that the appellants were fully aware of the existence and involvement of all the shareholders of the respondents prior to the arbitration proceedings.
58. The impugned order passed by the learned arbitrator read as a whole makes it clear that the respondent's stand throughout has been that it is the same owners, who have been involved in the entire transaction ::: Downloaded on - 09/06/2013 16:41:46 ::: 33 aral30742-10 throughout. It was never the respondent's case that there was a change in the owners or a change in the control at any time prior to the LOE or thereafter. A solitary sentence in the order that there was admittedly no change in the control after the franchise agreement, must be read in this contest. Even otherwise, it would make absolutely no difference to the merits of the respondent's case in view of the finding of fact both by the learned arbitrator and in this appeal, that there was no change in the control or change in the owners at any stage.
59. Thus on merits, the respondent has made out more than just a strong prima-facie case.
60. In view of the conclusions I have reached on the merits of the case, it is not necessary for me to consider Mr.Dwarkadas's submission that the appellants had in any event waived the objections and have forfeited their right to terminate the agreement. The submission was based on the fact that even after April 2010, when according to the appellants, they became aware of the facts of this case, the appellants by their various acts and conduct confirmed the agreement. For instance, the appellants invited the respondent to a meeting on 24.6.2010 and the respondent even participated in the IPL-3 where its team "Rajasthan Royals" won.
61. The only question is whether despite this finding the respondent is entitled to the reliefs sought. I am in respectful agreement with the learned arbitrator who has answered this in the affirmative. To the reasons furnished by the learned arbitrator, I would add a few of my own.
62. By my judgment dated 8.3.2010 in KPH Dream Cricket Pvt.
Ltd. versus Board of Control for Cricket in India, Arbitration Petition ::: Downloaded on - 09/06/2013 16:41:46 ::: 34 aral30742-10 (Lodging) No.1303 of 2010, I held that petitioner therein had made out a strong prima-facie case. I also considered Mr.Sundaram's submissions that despite the same specific performance ought not to be granted. The same contentions have been raised in the present case. What I have said in my judgment KPH Dream Cricket Pvt. Ltd. vs BCCI, would also substantially apply in this regard to the present appeal. I will therefore deal with the same only briefly.
63. Mr.Sundaram submitted that in view of clause 21.6 of the franchise agreement, the respondent in any event can never gets specific performance of the contract. I do not agree. With respect to this submission I would only reiterate what I held in KPH Dream Cricket Pvt. Ltd. as under:-
51. Mr. Sundaram submitted that in view of clause 21.6, the Petitioner can never get specific performance of the contract. Clause 21.6 reads as under:-
"21.6 BCCI-IPL (but not the Franchisee) shall have the right to bring an action seeking injunctive or other equitable relief before the Courts of Mumbai if it reasonably believes that damages may not be an adequate remedy for any breach by the Franchisee of this Agreement."
52. This clause does not oust the jurisdiction of a court or tribunal to consider a case for injunction or other equitable relief, including for specific performance. It only confers a specific right upon the Respondent.
Prima facie, at least, it confers a benefit upon the Respondent to seek such reliefs if the Respondents themselves reasonably believe that damages may not be an adequate remedy for any breach by the franchisee. Even assuming that the clause does not make it obligatory on a court or tribunal to grant such reliefs, merely on the belief of the Respondent, a reasonable belief by the Respondent would be entitled to considerable weightage at least as a question of evidence. It is a clause which confers a benefit upon ::: Downloaded on - 09/06/2013 16:41:46 ::: 35 aral30742-10 the Respondent.
53. A view to the contrary would render the words "if it reasonably believes" otiose. For, the mere belief by a party that damages may not be an adequate remedy would not be at all relevant in the absence of such words. The bracketed words only have the effect of excluding such benefit in the event of the franchisee's reasonably believing that damages may not be an adequate remedy for any breach of the agreement. I do not, however, read it to exclude the jurisdiction of the courts to grant such reliefs or the franchisees rights to claim the same. If the intention was to deny the franchisees equitable relief absolutely, the clause would have been worded entirely differently.
It would have stated to categorically. There would have been no need to refer to the Respondents right to such
64. reliefs for it is in any event entitled to the same in law.
Mr.Sundaram submitted that damages would be an adequate relief and can be easily computed inter-alia in view of clause 4.3 of the franchise agreement. It would be difficult to compute damages on the basis of the previous earnings of a franchisee or a comparison of the earnings of other franchisees. The franchises' right to enjoy the good-will is an important aspect, as once the good-will is diluted, it would take a long time for it to be regenerated, even if the franchisee succeeds in the arbitration. Similarly, the observations regarding the balance of convenience, would also apply to the present case.
65. What I held in favour of the petitioner in KPH Dream Cricket Pvt. Ltd., regarding the petitioner's entitlement to have the contract specifically enforced would apply with equal, if not marginally greater force to the respondent in this case. This is for the reason that the respondent had in fact won the previous IPL. Paragraphs 54 of the judgment with respect to that issue, reads as under :-
::: Downloaded on - 09/06/2013 16:41:46 :::36 aral30742-10 "54. It can hardly be even suggested that the franchise agreements entered into by the Respondent are not unique. It is nobody's case that similar agreements can be entered into easily or even otherwise. The term of the agreement continues so long as the league continues subject to termination, suspension or renewal as provided in the agreement. The Respondent has participated in the IPL matches for three seasons. It is reasonable to presume that over this period of time, it has expended large amounts of money, time and effort in creating the brand "Kings-XI Punjab". Mr. Khambatta submitted with considerable force that if an injunction in these circumstances is not granted and the Petitioner ultimately succeeds in the arbitration, it would suffer irreparable harm and injury. It would lose the momentum it has gained, and its value would stand considerably diluted and eroded on account of its inability to participate in the next season or two.
Further, admittedly, contracts are entered into between the franchisees and the players for a period of two years extendable at the franchisee's option by another year. Thus, if the Petitioner ultimately succeeds it would lose the benefit of entering into agreements, either directly or by participating in the player auction. Contracts are entered into and can be entered into with sponsors of equipments, souvenirs etc. Apart from the losses incurred during the course of proceedings, if an injunction is refused, the effect thereof would continue for at least some time even after the award is passed."
66. In the circumstances, I would uphold the order passed by the learned arbitrator not only on the grounds mentioned in the order but even otherwise.
67. Mr.Sundaram stated in this case as he did in KPH Dream Cricket Pvt. Ltd. v. Board of Control for Cricket in India that there are several investigations being carried out by the Enforcements Directorate and the Income Tax Authorities, inter-alia, regarding the shareholding pattern of the franchises. However, as in that case, so in this appeal he has not produced any report from such authorities. I would reiterate what I observed in that case viz. that if there is any information relevant to the ::: Downloaded on - 09/06/2013 16:41:46 ::: 37 aral30742-10 matter from such authorities or otherwise, the appellants not only may but ought to act upon the same including by moving the Court or the arbitral tribunal for appropriate orders. However, in the absence of any evidence whatsoever, it would be unfair to deny the respondent the relief merely because investigations are being conducted in respect of the franchisees. I would have dealt with this aspect of the matter in greater detail, as more was said in this matter than was said in the other. I do not do so, as Mr.Subramaniam, the learned Senior Counsel appearing on behalf of the appellants assured the court in the rejoinder that there was no intention on the appellants' part to place the burden on the Court or the arbitrator regarding the possibility of investigations unearthing anything in future without first producing the necessary, relevant material before the Court or the learned arbitrator. There is indeed, in that event, nothing that prevents any authority or the respondent from taking any action against the franchisees, including the respondent in accordance with law despite the order passed by the arbitral tribunal and this order.
68. The only aspect that remains for consideration is one that was not raised before the learned arbitrator. It is whether the termination of the Franchise Agreement ought to be stayed unconditionally or must be subject to certain conditions.
69. Two questions arise in this regard.
The first is whether it is open to the appellant to raise this issue in appeal the same not having been raised before the arbitral tribunal. I would answer the question in the affirmative.
Sections 34 and 37 of the Act read as under: -
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34. Application for setting aside arbitral award.--(1) Recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with sub-section (2) and sub-section (3).
(2) An arbitral award may be set aside by the Court only if
--
(a) the party making the application furnishes proof that--
(i) a party was under some incapacity; or
(ii) The arbitration agreement is not valid under
the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or
(iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or
(iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration:
Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or
(v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or
(b) the Court finds that--
(i) the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or
(ii) the arbitral award is in conflict with the public policy of India.::: Downloaded on - 09/06/2013 16:41:46 :::
39 aral30742-10 Explanation.--Without prejudice to the generality of sub-
clause (ii), it is hereby declared, for the avoidance of any doubt, that an award is in conflict with the public policy of India if the making of the award was induced or affected by fraud or corruption or was in violation of Section 75 or Section 81.
(3) An application for setting aside may not be made after three months have elapsed from the date on which the party making that application had received the arbitral award or, if a request had been made under Section 33, from the date on which that request had been disposed of by the arbitral tribunal:
Provided that if the Court is satisfied that the applicant was prevented by sufficient cause from making the application within the said period of three months it may entertain the application within a further period of thirty days, but not thereafter.
(4) On receipt of an application under sub-section (1), the Court may, where it is appropriate and it is so requested by a party, adjourn the proceedings for a period of time determined by it in order to give the arbitral tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the opinion of arbitral tribunal will eliminate the grounds for setting aside the arbitral award.
37. Appealable orders.--(1) An appeal shall lie from the following orders (and from no others) to the court authorised by law to hear appeals from original decrees of the Court passing the order, namely:--
(a) granting or refusing to grant any measure under Section 9;
(b) setting aside or refusing to set aside an arbitral award under Section 34.
(2) An appeal shall also lie to a court from an order of the arbitral tribunal--
(a) accepting the plea referred to in sub-section
(2) or sub-section (3) of Section 16; or
(b) granting or refusing to grant an interim
measure under Section 17.
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40 aral30742-10
(3) No second appeal shall lie from an order passed in appeal under this section, but nothing in this section shall affect or take away any right to appeal to the Supreme Court."
70. I will presume that the parameters for the exercise of jurisdiction under section 34 to challenge the findings in an award are the same as those to challenge an interim order of the arbitral tribunal passed under section 17. Even so by its very nature a petition under section 34 to set aside an award is different from an appeal under section 37 (2) (b) to challenge an order of the arbitral tribunal under section 17. The former is a final adjudication of the reference whereas the latter is a step in or in aid of the final adjudication. While a court exercising jurisdiction cannot, except in a limited manner, substitute its order for that of the arbitral tribunal it can do so in an appeal under section 37(2)(b). This follows the fact that once a reference is made to arbitration it is the arbitral tribunal alone and not the court that can decide the disputes and differences between the parties.
The Court has only the power to set aside the award on the grounds stated in section 34. The power is circumscribed by section 34. Section 34 (2) opens with the words: "An arbitral award may be set aside by the Court only if........". On the other hand the legislature has conferred the power of granting interlocutory relief's upon both-the court under section 9 and the arbitral tribunal under section 17.
71. The nature and scope of an appeal whether under sub-section (1) of section 37 or under sub-section (2) thereof is the same. The language of the two sub-sections in this regard is the same. Sub-section (2) does not place any restrictions as to the scope of an appeal thereunder, ::: Downloaded on - 09/06/2013 16:41:46 ::: 41 aral30742-10 which is absent in sub-section (1). A court, while considering an appeal under section 37 (2), is entitled to exercise the same powers or place upon itself the same restrictions as it would while considering an appeal under section 37 (1).
72. An appellate court can always uphold an interlocutory order subject to modifications, including imposing conditions thereon or in respect thereof. I see no reason why a court cannot do the same in an appeal under section 37 (2)(b). A court has far greater discretion under section 37 (2)(b) qua orders passed by the arbitral tribunal under section 17 than it has under section 34.
73. Having said that normally a point ought not to be allowed to be raised in an appeal under section 37 (2) (b) if it was not raised before the arbitrator. However there is no bar to the jurisdiction of the court permitting the same if the facts and circumstances of the case so warrant.
74. The next question then is whether I ought to permit the appellant to raise this aspect in the present appeal. I am inclined to permit the appellant's to do so for more than one reason.
75. Firstly imposing conditions subject to which an interlocutory order is passed or upheld is not in the strict sense a new point in every case. It relates not to the merits of the disputes per-se but to the court moulding the relief depending upon the facts of the case. A party may oppose the grant of an interim relief absolutely. The court may grant the same but in its discretion impose conditions in respect thereof upon the other side.
76. Secondly, in the present case Mr.Sundaram stated that in view ::: Downloaded on - 09/06/2013 16:41:46 ::: 42 aral30742-10 of the stand taken by the learned counsel appearing on behalf of the respondents before the arbitrator he did not consider it necessary to raise this issue at all. He relied upon the written submissions tendered on behalf of the respondents which was strongly opposed by Mr.Dwarkdas. I do not intend dealing with this controversy relating to a reference to the written submissions. I would accept for this purpose, Mr.Sundaram's word that he genuinely did not consider it necessary to raise the question before the learned arbitrator as he perceived that the respondent had limited the scope of the application. In a normal case I may have left it to the appellant's to make an application in this regard to the learned arbitrator.
However in the facts of the case I am not inclined to do so. I am inclined to consider the application myself. One of the reasons is the extreme urgency expressed by both sides for deciding this appeal. The matter brooks no delay as the next crucial step for the next IPL season is the bidding for players from the player's auction pool, which is to take place in the first week of January next year i.e. within less than 3 weeks from today.
Moreover the application is based on general considerations without the necessity of any further evidence or pleadings as will be evident from what follows.
77. The conditions I imposed in the other matter and which I intend imposing in this case with modifications pertained to three possible monetary claims which may arise in the event of the respondent losing in the arbitration proceedings ultimately.
78. Mr.Sundaram submitted that two franchises were auctioned recently for an average price of US$ 345 million. The amount is payable in ::: Downloaded on - 09/06/2013 16:41:46 ::: 43 aral30742-10 ten equal annual installments. He did not categorically assert that the appellant's would auction the franchise in the event of the petitioner not being granted an injunction. The respondent would, in any event, be entitled to US$.6.70 million per annum from the appellants. Further Mr.Sundaram did not deny the assertion that if in fact more matches are played the appellant's would generate further income. Mr. Sundaram submitted that thus under a possible new contract, the appellants would receive US$.34.50 million per annum whereas under the present contract, the appellants receive only US$.6.70 million per year. He submitted, therefore, that the appellants ought to be protected qua loss of interest on the difference between US$.34.50 million and US$.6.70 million i.e. on US$.
27.80 million.
79. After weighing various factors, I determined in the other matter the security to be provided by the petitioner on account of the possibility of the respondent going out of the IPL and the appellant's for that reason auctioning the franchise/another franchise. By adopting an ad hoc rate of interest of 10% per annum, I directed the petitioner in the other case to deposit a sum of US$ 3.50 million for the first year with liberty to the respondents therein i.e. the appellants here, to approach the learned arbitrator for further orders in this regard in the event of the award not being made by 31.12.2011. I would impose the same condition in the present matter except that I ought to calculate interest on US$.27.80 million being the remainder after deducting from US$.34.50 million, US$.
6.70 million.
80. Mr.Sundaram then submitted that as a result of the injunction ::: Downloaded on - 09/06/2013 16:41:46 ::: 44 aral30742-10 the respondents would be entitled to enter into contracts with various players including Marquee players and the players for whom it bids at the auction. There is a limit of US$ 9 million per year that can be spent by a franchisee towards players fees. Mr.Sundaram submitted that in the event of the arbitral award being against the respondent it is imperative that the players fees are protected. I agree.
81. Although the appellants are not bound to pay the players fees in the event of the respondents failing to do so, I am inclined to accept Mr.Sundaram's submission that it is necessary to protect the same nevertheless. Although the appellant's have not guaranteed the players fees a default on the part of a franchisee would adversely reflect upon the appellant's and be detrimental to the interests of the IPL league itself. The injunction without safeguards/conditions can adversely affect the rights of parties who are not before the court viz. the players whom the respondent would bid for at the auction. Such players cannot refuse to play for the highest bidder. In any event I cannot see how the respondent can resist the players dues being secured for admittedly the respondent would be bound to pay the same every year in two installments. All that the respondent would lose is the guarantee commission. Considering the stakes involved a franchisee can hardly be heard to say that it is not in a position to furnish a guarantee for the players fees.
82. Lastly Mr.Sundaram stated that complaints had been received from various boards about the players not having been paid their fees by the respondent in the past. Mr.Dwarkdas on the other hand stated that one of the reasons for the same was that the appellant's had failed to pay the ::: Downloaded on - 09/06/2013 16:41:46 ::: 45 aral30742-10 respondents dues. Mr.Subramaniam in rejoinder fairly stated that the admitted amounts due to the respondent were far more than the amounts due and payable by the respondent to the players. He made a statement that the appellants would pay the outstanding dues of the respondents on or before 25.12.2010 and that the respondents would utilise the same in the first instance only for the payment of the amounts due and payable to the players immediately upon receipt of the amounts. The statements are accepted and it is so ordered.
83. To test the bona-fides of the respondent and the said owners about the owners being in control of the respondent and the benefits of the franchise agreement, I directed the same queries to the respondent in this appeal as I did to the petitioner in KHP Dream Cricket Pvt. Ltd. v. Board of Control for Cricket in India. In other words, I wanted to be satisfied that the said owners are, in fact, in control of their respective investment companies EMIPL, Blue Water Estate Limited and Tresco International Limited.
84. Mr.Dwarkadas submitted that this would be going beyond the scope of the present proceedings as the question of control over the Blue Water Estate Limited, Tresco International Limited and EMIPL was never raised or put in issue including in this appeal. To that extent, he is right. He further submitted that unlike as in that matter, none of the owners in this appeal are Indian residents. He understandably therefore was reluctant to specify the mode of control across the bar without proper instructions though the issue was raised on 10.12.2010.
However, an injunction being a discretionary relief, I think it ::: Downloaded on - 09/06/2013 16:41:46 ::: 46 aral30742-10 necessary that the bona-fides of the respondent and the said owners are established. Thus, although the order passed by the learned arbitrator is upheld, one of the conditions ought to be a disclosure regarding control.
The appellants in any event are entitled to call for the same under the franchise agreement.
85. In the circumstances the following order is passed: -
The order passed by the learned arbitrator dated 30.11.2010 is confirmed, subject to the following: -
i). The respondent furnishing security in the form of an unconditional bank guarantee of a Nationalized Bank to the satisfaction of the Prothonotary & Senior Master, for payment of the players' dues, initially in the sum of US $ 18 million or in the event of the necessary permissions not being available at present, the rupee equivalent thereof, calculated at `46/- per dollar on or before 3.1 2011.
Liberty to the appellants to apply under section 9 or 17 for similar security with respect to the players dues for the period commencing December, 2012, if the arbitration proceedings are not concluded by then.
Liberty to the respondent to apply under section 9 or under section 17 for reduction of the above amounts, in the event of the amounts due under the players' contracts being less or as and when payments are made under the IPL Players Contracts with the players.
ii). The respondent furnishing in the first instance and on or before 3.1.2011, an unconditional guarantee of a Nationalized Bank to the satisfaction of the Prothonotary & Senior Master in a sum of US $.2.78 million or in the event of the necessary permissions not being available at ::: Downloaded on - 09/06/2013 16:41:46 ::: 47 aral30742-10 present, the rupee equivalent thereof, calculated at `.46/- per dollar.
Liberty to the respondent to apply to substitute this guarantee alone, with security to the satisfaction of the arbitral tribunal or to the satisfaction of the Prothonotary & Senior Master.
Liberty to the appellants to apply for further security in this regard in the event of the arbitration not concluding before 31.12.2011.
iii). The above guarantees and/or security, as the case may be, shall be valid for a period of twelve weeks after the award is made and served on the appellants.
iv).
The respondent causing the owners viz. the said Badale, Chellaram and Murdoch to file an affidavit in this court on or before 3.1.2011 confirming the statement made by Mr.Dwarkadas in Court to the effect that the owners are in control of their respective investment companies along with resolutions of the Board of Directors of the said companies also viz. EMIPL, Blue Water Estate Limited and Tresco International Limited confirming the same. The affidavit shall also furnish the details of the mode of such control. The parties are thereafter at liberty to take steps as they desire, in accordance with law.
v). The above order is subject to the award and any further orders that may be passed during the course of the proceedings.
The appeal is, accordingly, disposed of. There shall, however, be no order as to costs.
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