1 arbp978-10 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION ARBITRATION PETITION NO.978 OF 2010 World Sport Group (India) Pvt. Ltd. ] A company registered under the ] provisions of the Companies Act, 1956 ] having its registered office at #4-01, ] Corinthian, 370, Linking Road, Khar Road, ] Mumbai-400 052. ] ...Petitioner Versus The Board Of Control For Cricket In India, ] a society registered under the Tamil Nadu ] Societies Registration Act and having its ] office at Cricket Center, Wankhede Stadium, ] Mumbai-400 020. ] ...Respondents Mr.Aspi Chinoy, Senior Counsel with Mr.Sunip Sen, Mr.Zal Andhyarujina, Mr.Suhas Tulzapurkar, Mr.Nishad Nadkarni, Mr.Yogesh Chawak, Mr.Ashutosh Sampat and Mr.Vineet Shrivastava i/b Legasis Partners for the Petitioner. Mr.C.A. Sudaram, Senior Counsel with Ms.Aarti Musa, Ms.Akila Kaushik, Mr.Hetal Thakore i/b M/s.Thakore Jariwalla & Associates for the Respondents. CORAM : S.J. VAZIFDAR, J. DATE : 20TH DECEMBER, 2010. ORAL JUDGMENT : 1. This is a petition under section 9 of the Arbitration and Conciliation Act, 1996 for an order restraining the respondents from creating any third party rights in respect of the rights conferred upon the petitioner under an agreement dated 25.3.2009 or transferring, alienating or otherwise affecting any rights granted thereunder. The petitioner has also 2 arbp978-10 sought an order restraining the respondents from interfering with the implementation of the operations by the petitioner under the said agreement. 2. The respondents are a society registered under the Tamil Nadu Societies Registration Act. The IPL is a sub-committee of the respondents. One Lalit Modi was at the material time appointed by the respondents as the Chairman and Commissioner of the IPL. The Respondents own and control the commercial rights in respect of a cricketing event known as Indian Premier League (IPL). 3. In November, 2007, the respondents invited tenders to grant the media rights in relation to the IPL. 4(A). According to the petitioner, it required a broadcaster with the right to upload the signals from or to India. The petitioner therefore entered into a pre-bid arrangement dated 14.4.2008 with MSM Satellite (Singapore) Pte. Ltd. (hereinafter referred to as MSM). MSM, however, insisted on acquiring the rights directly from the respondents and not as a sub-licensee of the petitioner. (B). The petitioner submitted its bid. The tender was awarded to the petitioner. The petitioner thereby became entitled to the entire worldwide media rights in respect of the IPL for a period of ten years from 2008 to 2017. 5. In accordance with the pre-bid agreement that the petitioner had entered into with MSM, it ensured that the IPL media rights it became entitled to were distributed between MSM and itself. Accordingly, two agreements were entered into, both dated 21.1.2008, one between the 3 arbp978-10 petitioner and the respondents and the other between MSM and the respondents. A third agreement also dated 21.1.2008 was entered into between the petitioner and MSM. 6(A). By the agreement between the respondents and MSM, MSM was granted media rights to the IPL for the Indian sub-continent for the period 2008-2012. Under this agreement, a Rights Fee of US $275,400,000 (erroneously stated to be US $275,400,000,000) was payable by MSM to the respondents in varying installments each year and in accordance with the provisions of clause 7. Out of this amount, a sum of various amounts each year aggregating to US $ 46 million was payable contingent upon the average TAM rating of the season being greater than five GRP. (B) The agreement between the petitioner and MSM conferred upon MSM the option to acquire the Indian sub-continent rights for the period 2013 to 2017 through the petitioner for additional consideration. 7. By the agreement between the petitioner and the respondents, the petitioner was granted all other IPL media rights i.e. the Indian sub- continent rights for the period 20013 to 2017 and the rest of the world rights for the period 2008 to 2017. The agreement also provided that if the contract between MSM and the respondents was terminated for any reason, the respondents would negotiate the reversion of the Indian sub- continent rights for the un-expired part of the period 2008-2012 with the petitioner in good faith. Under this agreement, the petitioner was to pay the respondents, an aggregate Rights Fee of US$642,000,000 comprising: 4 arbp978-10 - in respect of Rights Period 2008-2012 a sum of US$30,000,000 and - in respect of the Rights Period 2013-2017, a sum of US$612,000,000. The amounts were payable in variable instalments each year and in accordance with the provisions of Clause 7. The petitioner was also to pay the shortfall, limited to US$ 35 million, on account of the amounts of US$ 46 million not being payable under the MSM–respondent agreement on account of the TAM rating not being met. 8. The first IPL tournament was held in April-May, 2008. 9. The validity of every agreement hereafter and assertion of the petitioner in regard thereto is denied by the respondents. The respondents case is that every agreement referred to hereafter is fraudulent, and was a result of the collusion between the said former Chairman and Commissioner of the IPL, Lalit Modi and the petitioner and its associate company. It was suggested that this is a peculiar case where the termination of the agreement between the parties is based on a fraud alleged by a third party viz. MSM respect of its contract with another party viz. WSG-Mauritius. This is incorrect. The allegations of impropriety and fraud have been raised not merely qua the agreement dated 25.3.2009 entered into between MSM and the WSG-Mauritius, but also with respect to the other agreements entered into between the parties herein and WSG- Mauritius and MSM. It is not as if the respondents have alleged that there was a fraud only with respect to the agreement dated 25.3.2009 between MSM and WSG-Mauritius. The respondents have, in effect, alleged a fraud 5 arbp978-10 on the part of both WSG-Mauritius and the petitioner in collusion with the said Lalit Modi in the entire matter. Indeed, it has also been the petitioner’s case that the three agreements are inter-related and part of a composite arrangement. 10(A). By a letter dated 14.3.2009, the respondents terminated the agreement dated 21.1.2008 between MSM and themselves. (B). On 15.3.2009, the petitioner and the respondents entered into negotiations regarding Indian sub-continent rights for the unexpired period 2009-2012. 11. An agreement was reached in the early hours of the morning prior to 3.00 a.m. on 15.3.2009. The petitioner agreed to a termination of the agreement between the respondents and itself. According to the petitioner, this was at the instance of the respondents and on the understanding between the parties that the respondents would subsequently enter into a similar agreement with it for rest of the worldwide rights on the same terms. The petitioner’s further case is that it relinquished its India media rights for the period 2013-2017 on the basis that the respondents would enter into an agreement with its associates World Sport Group (Mauritius) Limited, (WSG-Mauritius) for the media rights for the Indian subcontinent for the period 2009-2017 at the enhanced rate of ` 4791.89 crores in place of the existing ` 3091.60 crores i.e. an additional consideration of ` 1700.00 crores. (A). The petitioner, respondents and WSG-Mauritius entered into an agreement dated 15.3.2008 titled “Deed of Mutually Agreed Termination”. In this agreement, WSG refers to the petitioner and “SONY” to MSM. The 6 arbp978-10 relevant provisions thereof read as under :- “2. MUTUALLY AGREED TERMINATION OF WSG MEDIA RIGHTS AGREEMENT 2.1 The Parties acknowledge and agree that the BCCI has terminated the BCCI-Sony Agreement (i.e. the agreement dated 20.1.2008 between the respondent and MSM) and that given the proximity of the start of the 2009 IPL season, and its obligations to its stakeholders and to protect the interests of such stakeholders, the BCCI wishes to execute new media rights agreements for the period 2009-2017 on an expedited basis. 2.2 In order to facilitate this process, and for good and valuable consideration, the Parties have mutually agreed to terminate the WSG Media Rights Agreement (i.e. the agreement dated 21.1.2008 between the petitioner and the respondents) and to enter into the New WSG Media Rights Agreements. 2.3 The Parties shall have no liability to each other as a result of the mutually agreed termination of the WSG Media Rights Agreement.” (B). On 15.3.2009, the respondents and WSG-Mauritius entered into an agreement for the media rights for the Indian subcontinent for the period 2009-2017. The Rights Fee was enhanced by ` 1700.00 crores to ` 4791.89 crores payable in accordance with the provisions of Clause 7 for the Rights Period commencing on the date of execution of the Agreement by both parties until 31 December 2017. Under clause 8 7 arbp978-10 WSG-Mauritius was entitled to insert a maximum of 2,000 seconds of commercial time. Clause 13.1 and 13.5 are important and read as under:- “13. ASSIGNMENT AND SUB-LICENSING 13.1 Licensee shall not assign or purport to assign, sub-contract or otherwise part with the burden or the benefit of this Agreement or any part thereof or interest hereunder to any person without the prior written consent of Licensor such consent not to be unreasonably withheld except that Licensee shall be entitled to sub-licence this Agreement to a sub-licensee ("Sub-Licensee") within 72 hours of signature of this Agreement by both parties subject to the following terms and conditions: 13.5 The Parties acknowledge and accept that if Licensee fails to execute an SLA within 72 hours of execution of this Agreement that this Agreement shall automatically terminate and all of the terms of clause 11 hereunder (including without limitation all rights granted hereunder reverting automatically and without formality to Licensor) and Licensor shall have no liability to Licensee and Licensee shall have no liability to Licensor as a result of termination under this clause 13.5 the Parties shall thereupon mutually release and waive all rights and obligations to each other under this Agreement.” 12. On 15.3.2009, MSM filed Arbitration Petition No.215 of 2009, challenging the respondents’ termination of the agreement dated 21.1.2008 entered into between the respondents and itself. An ex-parte, ad-interim injunction was passed restraining the respondents from creating any third party rights till 17.3.2009. 13. At the same time, MSM approached WSG-Mauritius to discuss 8 arbp978-10 the possibility once again of obtaining the media rights for the Indian subcontinent. According to the petitioner, it informed WSG-Mauritius that it was negotiating with other broadcasters for the same but that it was willing to negotiate with MSM as well. 14. On 16.3.2009, MSM’s application for ad-interim reliefs in Arbitration Petition No.215 of 2009 was heard. The respondents admittedly informed the Court that they had already approved certain broadcasters. The reference was obviously to the said agreement dated 15.3.2009 between the respondents and WSG-Mauritius. 15. It is pertinent to note that the agreements dated 15.3.2009 have also been challenged inter-alia in paragraphs 5 and 18 of the affidavit in reply. In paragraph 5, it is stated that the respondents’ practice in keeping with prudent management had been to call for tenders while deciding the award of rights of value. Notwithstanding this practice, the said Lalit Modi entered into an agreement dated 15.3.2009 in the early hours of the morning (2:45 AM) with the petitioner’s associate/sister concern WSG- Mauritius. In paragraph 18, the respondents have not accepted either of the agreements dated 15.3.2009 as genuine. In fact it is expressly contended that they were entered into in fraudulent circumstances. 16. I am conscious of the fact that these agreements have been acted upon thereafter for over a year. However, the fact remains that there is nothing on record which establishes the respondents having participated in the formation of the agreement dated 15.3.2009 or the execution thereof. The mere fact that the respondents were in the picture, would not establish 9 arbp978-10 the respondents acceptance of the said agreements or even of their having acquiesced in the same. 17. There are aspects about the agreements dated 15.3.2009 which, if not curious, require an explanation. The MSM-respondent agreement dated 21.1.2008 was terminated on 14.3.2009. The agreements dated 15.3.2009 were arrived at at 2:45 AM. The circumstances and the facts leading to the termination notice dated 14.3.2009 and the execution of the 15.3.2009 agreements have not been stated. There are certain very important questions which require an answer in view of the fact that the new agreements of 15.3.2009, which involved an additional consideration of `.1700 crores and a grant of the very valuable media rights for the Indian subcontinent for the period 2009-2013, were entered into within much less than twenty four hours of the termination of the MSM-respondent agreement. It is difficult to imagine such contracts having been negotiated, concluded and drawn up within such a short period of time. The basic questions that would arise in anyone’s mind are obvious. At what time was the MSM-respondent agreement dated 21.1.2008 terminated by the letter dated 14.3.2009? At what time did MSM receive the notice of termination? When was the petitioner informed by the respondent/the said Lalit Modi of the termination? Was it before or after the termination? Who participated in the negotiations for the fresh agreements dated 15.3.2009? When did negotiations take place between the parties? The petition does not suggest that the respondents/Lalit Modi informed the petitioner/WSG-Mauritius that it intended terminating the agreement. Presumably, therefore, they were informed of the termination on 14.3.2009. How then were such complex 10 arbp978-10 and high-value transactions concluded within just a few hours? 18. I do not suggest that there cannot be a plausible acceptable answer to these questions. But, they must be answered for in the absence thereof, it is difficult to accept at the interlocutory stage that there will be nothing to be said in favour of the respondents at the trial of an action in appropriate proceedings. 19. There is yet another aspect which has not been satisfactorily met by the petitioner. While the MSM-respondent agreement of 25.3.2009 provided an enhancement in the rights fee by `.1700 crores, there is no enhancement of rights fee under the 25.3.2009 agreement between the petitioner and the respondents. The respondents, in paragraph 8 of the affidavit in reply made a point of this and also the fact that when the agreement was entered into, six hundred additional seconds were available for free commercial time. It was contended, therefore, that the loss of revenue to the respondents on this count would be enormous. In the affidavit in rejoinder, the petitioner stated that whilst the agreement with MSG-Mauritius was a new agreement, the agreement between the petitioner and the respondents was a continuation of the earlier existing agreement and was, at the highest, a novation. The petitioner also denied that the rights fee in the agreement dated 25.3.2009 was enhanced only due to the additional six hundred seconds free commercial time, or otherwise. Mr.Chinoy had, in fact, submitted that the agreements dated 15.3.2009 were entered into at the respondents insistence and on the understanding that the respondents would subsequently enter into a similar agreement with the petitioner for the rest 11 arbp978-10 of the world rights on the same terms. 20. Mr.Chinoy admitted that there was nothing in the agreements which indicated that the agreements dated 15.3.2009 were executed on the alleged understanding that the respondents would subsequently enter into a similar agreement with the petitioner for the rest of the world rights on the same terms. The submission is, in fact, contrary to the express terms of the tripartite agreement dated 15.3.2009 and in particular clause 2 thereof which expressly provided that the parties shall have no liability to each other as a result of the mutually agreed termination of the earlier agreements dated 21.1.2008. The submission is, therefore, contrary to the agreement. I can hardly place greater weightage on this alleged oral understanding than on the express terms of a contract, even assuming that the same is genuine. This is, therefore, another aspect which raises a serious question and cannot be answered in the petitioner’s favour in an application for interlocutory reliefs. 21. This brings me to Mr.Chinoy’s submission that the respondents were, at all material times, aware of the agreement dated 25.3.2009. 22. This next stage involves the working of the agreements dated 15.3.2009 even assuming them to be genuine and enforceable. 23. The period of seventy two hours for appointing a broadcaster under clause 13.5 of the agreement dated 15.3.2009 between the respondents and WSG-Mauritius would have ended at 3.00 a.m. on 18.3.2009. However, the respondents by a letter dated 17.3.2009 stated that they understood that WSG-Mauritius was in an advanced stage of 12 arbp978-10 negotiations with other parties including MSM/Sony for a sub-license of the television rights in India; that the hearing before this Court had concluded and that the matter had been reserved for judgment, which was expected shortly. With a view to ensuring that no prejudice is caused to both the parties to the legal action and/or the rights under the agreement are not affected, the respondents agreed to the request of WSG-Mauritius to extend the seventy two hours period upto 3.00 a.m. on 21.3.2009. It was clarified that the extension was subject to the orders that would be passed by this Court and that if the Court granted an injunction, the extension would not be effective. 24. MSM was one of the parties WSG-Mauritius was negotiating with. The petitioner’s case is that the terms of a new agreement between WSG-Mauritius and MSM had been finalized on 19.3.2009. It is alleged that MSM again insisted on a direct contract with the respondents which it would not have been able to obtain as long as the agreement dated 15.3.2009 between WSG-Mauritius and the respondents subsisted. The petitioner contends that it was therefore, agreed in principle that WSG- Mauritius would relinquish its rights/allow them to lapse and ensure that MSM was granted a license in respect of the media rights for the Indian subcontinent by the respondents for the period 2009-2017. MSM, in turn, agreed to pay the respondents an increased amount i.e. ` 1700.00 crores which WSG-Mauritius had agreed to pay the respondents under the agreement dated 15.3.2009 between the respondents and WSG-Mauritius. In addition thereto, MSM agreed to pay WSG-Mauritius in installments, a “facilitation fee” of ` 450.00 crores, which was subsequently reduced to ` 13 arbp978-10 425/- crores. 25. Mr.Chinoy, the learned Senior Counsel appearing on behalf of the petitioner stated that the sum of ` 425.00 crores comprised of ` 115.00 crores (equivalent to US $ 25 million) being the option fee payable under the agreement dated 21.1.2008 between the petitioner and MSM in the event of MSM exercising the option for the increased term from 2013-2017 for the media rights for the Indian subcontinent, ` 160.00 crores (equivalent to US $ 35 million) towards the agreed TAM rating incentive under the agreement dated 21.1.2008 between the respondents and MSM and ` 150.00 crores being the consideration for the petitioner and WSG-Mauritius relinquishing/surrendering the media rights of the Indian subcontinent for a period 2013-2017. 26. Although it is not relevant in the ultimate analysis, Mr.Chinoy’s break-up of the facilitation fee of ` 425.00 crores is not entirely correct. A sum of ` 115.00 crores (equivalent to US $ 25 million) is correctly stated to be the amount that would have been payable by MSM under the agreement dated 21.1.2008 between the petitioner and MSM if it opted to acquire the media rights for the Indian subcontinent for the period 2013-2017. There is no quarrel about the amount of ` 150.00 crores which is a direct consideration for the petitioner/its associate WSG-Mauritius relinquishing the rights for the period 2013-2017. I would add to this the sum of ` 160.00 crores (equivalent to US $ 35 million) as being the payment for the same purpose viz. consideration for the petitioner/its associate WSG-Mauritius, relinquishing the rights for the period 2013-2017. This is for the obvious reason that in view of the tripartite 14 arbp978-10 agreement dated 15.3.2009, all rights and liabilities under the agreement dated 21.1.2008 stood terminated. This would include the right thereunder to receive the sum of US $ 35 million. Thus the additional consideration for this alleged oral agreement was at least `.150.00 crores plus `.160.00 crores aggregating to `.310.00 crores. 27. There is, however, nothing to indicate that the respondents were aware of the oral agreement allegedly arrived at on 19.3.2009. There is, on the other hand, evidence to the contrary. I will be referring in detail to three e-mail messages dated 23.3.2009 addressed by the said Lalit Modi to various broadcasters, the petitioner, WSG-Mauritius and MSM. Suffice it to note at this stage that the first e-mail dated 23.3.2009 expressly stated:- “Friends BCCI will close with one rights holder by 8 pm tonight. The courts have allowed us to do the same with anyone, any deal. This is for your information. Warm regards Lalit Modi Chairman and Commissioner IPL.” The petitioner’s case is that it had already arrived at an arrangement with MSM on 19.3.2009. If it was so, surely MSM and WSG- Mauritius / the petitioner would have responded by referring to the same in such a matter. They did not do so. It is for this reason that it is significant to note that the e-mail message was addressed to the petitioner/WSG- Mauritius and MSM. This indicates at the very least that it would be necessary for the petitioner to establish the alleged oral arrangement 15 arbp978-10 between MSM and the petitioner/ WSG-Mauritius of 19.3.2009. 28. Mr.Chinoy relied upon a sentence in paragraph 5 of the affidavit in reply to contend that the respondents were aware that the negotiations had resulted in a contract between WSG-Mauritius and MSM as the broadcaster within the extended period i.e. prior to 3.00 a.m. on 24.3.2009. It is however, appropriate to also read two sentences that precede the sentence relied upon by Mr. Chinoy and one that follows it. The four sentences read as under :- “This agreement with WSGM provided the licensee should find a broadcaster within 72 hours failing which the rights would revert back to the BCCI. On the 16th of March, 2009, the Hon’ble Court was informed by the respondent that even before MSM had moved the petition for interim relief, the fresh agreement with WSG Mauritius PTE Ltd. had been entered into and therefore the petition filed by MSM had become infructuous. On 22-03-2009, Mr.Lalit K. Modi informed the IPL Governing Council that MSM had settled the dispute since they had offered to match the same amount that was offered by WSGM. The next day, however, this Hon’ble Court was not informed of such a settlement and proceeded to give its verdict rejecting the petition of MSM for interim relief.” [emphasis supplied] The underlined sentence is the one relied upon by Mr.Chinoy to contend that the respondents were aware of the alleged understanding arrived at between MSM and WSG-Mauritius. While the assertion may well be established at the trial in an appropriate action, I do not think that the pleadings establish the same. The sentence relied upon by Mr.Chinoy could well refer to a settlement between MSM and the respondents qua 16 arbp978-10 the respondent’s termination of the agreement dated 21.8.2008. The sentence could well suggest that the said Modi informed the respondents that MSM had offered an amount equivalent to the offer by WSG-Mauritius to the respondents in settlement of the dispute relating to the respondents termination of the agreement dated 21.1.2008. This is also a possible interpretation of the averments. At this stage, I would not read the averment to clearly establish the petitioner’s contention that the respondents were aware of, much less accepted the alleged oral understanding finalized on 19.3.2009. 29. The respondents were obviously aware of the fact that the negotiations were in an advanced stage between the petitioner/WSG- Mauritius and the broadcasters. This is evident from a letter dated 20.3.2009, which is identical to