'Patent Illegality' : Bombay High Court Sets Aside Arbitral Award Which Favoured BCCI In IPL Telecast Rights Dispute

Justice BP Colabawalla, while setting aside the July 2020 award, also observed that while challenge to an arbitral award was not equivalent to an appeal, one of the grounds to challenge a domestic arbitral award, even after the amendment of the Act in 2015, was that it suffered from a patent illegality.

"The Supreme Court has clearly held that a decision of the Tribunal which is perverse, while no longer being a ground of challenge under the "public policy of India", would certainly amount to a patent illegality appearing on the face of the Award. The Supreme Court has inter alia held that a finding in the Award based on no evidence or an Award which ignores vital evidence in arriving at its decision, would be perverse and liable to be set aside on the ground of patent illegality," Justice Colabawalla observed in his March 16, 2022 judgement.

The court was hearing WSGI's petition challenging an award passed in favour of BCCI by two of the arbitrator's of a three member tribunal. The members who passed the order in BCCI's favour are Retired SC Justices Sujata Manohar and Mukundakam Sharma, while the dissenting order was passed by another former SC Justice SS Nijjar.

The dispute pertained to BCCI's cancellation of an agreement with WSGI by which the telecast rights for the Indian Premier League matches for rest of the world (territories other than the Indian sub-continent) was assigned to WSGI in March 2009 for the period 2009-2017.

BCCI alleged discovery of a fraud allegedly played upon by WSGI by agreeing to receive Rs 425 crore from MSM Satellite (Singapore) Pvt Ltd (MSM) which had a broadcasting network in India and had the broadcasting right for the same matches for the Indian sub-continent for the same period – 2009-2017. The BCCI-MSM agreement too was signed in March 2009.

BCCI alleged that this Rs 425 crore should have come to the board and the fraud was discovered only April 2010. The MSM-WSGI arrangement for Rs 425 crore too was entered into in March 2009 itself.

WSGI argued that the BCCI could not have cancelled the agreement granting it Rest of the world telecast rights "in isolation" as the entire arrangement all the telecast rights for the period 2009-2017 involving BCCI, MSM and WSG was based on a comprehensive Deed of Mutually Agreed Termination (DMAT) executed between BCCI and WSGI before the telecast rights were granted.

The DMAT, WSGI argued, was a result of WSGI agreeing to terminate its rights for India telecast of IPL matches for the period 2013-2017 and another agreement for rest of the world telecast rights for the period 2008-2017 so that BCCI could renegotiate its telecast right deals based on the grand success of the first season of the IPL in 2008.

MSM was the Indian sub-continent telecast rights holder for the period 2008-2012 at that point. But the BCCI terminated this agreement soon after the success of the first season.

According to WSGI, the new arrangement enabled BCCI to earn Rs 1,791 crore more for the entire telecasting period 2009-2017. The new deal was worth Rs 4,791.89 crore instead of the earlier composite earnings from MSM and WSGI being close to Rs 3,000 crore. All the telecast rights were now granted to WSG for the amount of Rs 4,791.89 crore – Indian sub-continent rights to WSG Mauritius and rest of the world rights to WSGI.

However, since WSGM was not a broadcaster and was only a trader in media rights, and MSM was still interested in acquiring telecast rights for the Indian sub-continent, WSGM agreed to give up its rights so that MSM could enter into an agreement directly with BCCI. In return WSGM was to receive Rs 425 crore from MSM, which was also included as a clause in the new agreement for telecast rights for rest of the world between WSGI and BCCI – it was this agreement which was cancelled by the BCCI.

WSGI argued that the BCCI should have terminated the entire DMAT arrangement in toto and should have reverted to the position before the DMAT came into existence, instead of terminating just that one new rest of the word telecast rights agreement, since the entire arrangement was to bring benefit to the BCCI, amounting to Rs 1,791 crore. BCCI defended the action and also argued that the HC could not sit in appeal on an Arbitral Tribunals' award.

Justice Colabawalla, however, agreed with WSGI that BCCI could not be permitted to approbate and reprobate at the same time. "A party cannot be permitted to blow hot and cold, fast and loose or approbate and reprobate. When one party knowingly accepts the benefits of a contract, it is estopped by denying the validity and binding effect of that contract on him. Once a party takes advantage of any instrument, he must accept all that is mentioned in the said document," the court observed.

The court observed that the amount Rs 4,791.89 crore and Rs 1,791 crore did not even feature in the majority award, making it liable to be set aside on this ground alone. "In fact, all that the Majority Tribunal has done is that it sets out the argument of WSGI in part and thereafter gives the finding that the same does not appear to be convincing," the HC judgement reads.

The HC further observed that MSM had issued a press note in April 2010 setting out how the entire arrangement had come about, but the majority award failed to consider that document. The court further observed that BCCI's stand that it was unaware of the Rs 425 crore arrangement between MSM and WSGM till June 2010 was proved incorrect from the records produced before the tribunal that the new agreement for the rest of the world rights was available in the IPL Governing Council meeting of August 2009.

On most of the points the HC observed that the minority award referred to most of the issues, while the majority award did not. However, the court clarified – Once again, at the cost of repetition, I must emphasize that I haven't reproduced parts of the Minority Award to examine which view is correct but to only see whether material evidence, and which would go to the root of the matter, has been missed in the Majority Award. When one compares the Majority Award with the Minority Award, I have no hesitation in holding that huge chunks of important evidence are missed out and/or not even referred to in the Majority Award. Such an Award, with the greatest of respect to the Arbitrators who passed the Majority Award, cannot be allowed to stand.