Bombay High Court Holds Deccan Chargers Owner Liable For Breach of Contract

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Bombay High Court

Facts

A single-judge bench of Justice Gautam Patel passed this order under Section 34 of the Arbitration and Conciliation Act. This judgment set aside the decision of the sole arbitrator of the matter retired Supreme Court Judge C K Thakker, who had held that the BCCI had illegally terminated their contract with DCHL owners, in 2012. This decision had come out on July 17th, 2020.

Arguments before the Court

DCHL contended that BCCI should have given them 30 days to cure the default before the termination of the contract. In the resent case, however, BCCI issued a notice on August 16, 2012, and then terminated the agreement a day before the 30-day window could end. It further claims that there was no winding-up order against them as the issue with IFCI’s had been successfully ‘compromised.’ Thus, the sole Arbitrator, keeping this in mind had held that the issue of “insolvency” did not exist any longer when BCCI terminated the contract on September 14th, 2012. 

However, the court disagreed with this and held that the arbitrator had completely overlooked the fact that DCHL has undertaken to make payments in four installments to IFCI, and thus, a single default could revive the issue. Moreover, the winding-up petition was not disposed or dismissed, merely kept abeyance. 

Observations by the Court

Justice Patel observed that there seemed to be three main defaults by DCHL – failing to pay players and numerous others, creating charges on assets (mortgaging assets to different banks), and insolvency proceedings against the company. 

The court observed that while the first two defaults were curable, the third default resulted in immediate termination of the contract. It was noted that none of the defaults had been satisfactorily addressed by DCHL, and yet, the arbitral award was passed in their favour. 

“The award proceeded in places without reasons, in others by ignoring evidence, in yet others by wandering far afield from the contract, and in taking views that were not even possible.” 

The court said that by grating the arbitral award, the court was setting aside objection about insufficient pleadings.” and granted reliefs that were not even sought. 

Court’s Orders

The court thus held that from the above observations, it came to the end that, “Effectively, it rewarded the party(DCHL) is an unquestionable breach of its contractual obligations.” Justice Patel, however, upheld the arbitral award to the limited extent of Rs 34.07 crores with interest payable by BCCI to DCHL as per the contract. 

Case: Board of Control for Cricket in India v. Deccan Chronicles Holdings Ltd.

Click here to read the judgment

 

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