The Bombay High Court has overturned an arbitration award that ordered the Board of Control for Cricket in India (BCCI) to pay Deccan Chronicle Holdings, the owner of the Deccan Chargers franchise in the Indian Premier League (IPL), Rs 4,800 crore plus interest for the franchise's termination in 2012. Last year, a sole arbitrator of the Bombay High Court ordered the BCCI to pay DCHL Rs. 4,800 crores with interest for the alleged unlawful termination of the Hyderabad-based franchise in 2012. The Bombay High Court, however, has recently overturned the ruling in favour of the BCCI.
In the case of BCCI v. Deccan Chronicles Holdings Ltd, the Deccan Chargers franchise from Hyderabad was awarded to DCHL (“Respondent”) in 2012, and they signed a ten-year deal with BCCI (“Petitioner”). However, conflicts occurred between the Parties as a result of contractual defaults resulting from non-payment to the players and others, establishing charges on the assets, and the bankruptcy event. Previously, when the respondent had filed a petition, the Bombay High Court appointed former Supreme Court Judge Justice (Retd) C K Thakker as the sole arbitrator (“Arbitrator”) to decide the dispute.
In July, the sole arbitrator had passed an award in favour of the respondents in the previous case and ordered the petitioners to pay a compensation of Rs. 4,814.67 cr. including a 10% increase and legal fees. The Petitioner had illegally terminated its contract with the Respondent, the Hyderabad franchisee's owners, according to the Arbitrator. The Petitioner filed the current case under Section 34 of the Arbitration and Conciliation Act, 1996 (“Act”), which was granted by Justice Gautam Patel's single bench, which overturned the Arbitrator's Award.
Issue: Is the award subject to being set aside under Section 34 of the Act for perversity and patent illegality.
Decision and Analysis: The High Court concurred with the Petitioner's arguments and looked into the scope of Section 34 of the Act, explaining why the award should be set aside.
The Court looked into the limited scope of Section 34. The Court said that a challenge under Section 34(2A) of the Act may be made if the Award is impossible to make (by ignoring crucial evidence, or being based on no evidence, etc.) or to achieve (returning a finding that is not even possible). None of the three defaults—not paying players and others, putting charges on assets, and going bankrupt—were "convincingly proved to have been healed or not to exist," according to the judge. He found that the Chargers' contractual responsibility was not to "guarantee" that payments would be paid but to actually make them, and that player payments are not reliant on BCCI income. The court was dubious about the arbitrator’s findings and ignorant about evidence.
"In light of this situation, there was no issue of providing the Claimant additional time, and the action of terminating the Agreement on 14.9.2012 was legitimate and valid," according to the ruling.
The court also found the award computations, which the BCCI said were perverse, to be arbitrary and faulty to the point that DCHL's value assessment looked to emanate from them and was accepted without question. The court opined that the award lacked reasoning and ignored material evidence and took positions that were impossible.
The HC further stated that the arbitration tribunal awarded reliefs that the DCHL had "not even sought for" in awarding the sum of Rs 4,800 crore. The bench further stated that DCHL has been given an extra payment of about Rs 34 crore as an acknowledged amount owed under the franchise agreement. The BCCI will still have to pay the DCHL this sum, plus interest, according to the high court.
According to the HC, "This Petition has elicited no convincing response. It is successful. Except for the award in favour of DCHL for Rs 36 crores minus Rs.1.83 crores and interest on that sum, which is restricted. The award dated July 17, 2020, has been set aside”.
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