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Oct 12, 2010, 10.10 AM IST | Source: CNBC-TV18

BCCI may have legal grounds to expel IPL teams: Lawyer

In an interview with CNBC-TV18, Ayaz Memon, senior sports journalist, and Hitesh Jain, Partner, ALMT Legal gave their perspective on the legal options that the franchisees have and the fate of IPL4.

Ayaz Memon, senior sports journalist

There is more drama at the Indian Premier League. A day after the Board of Control for Cricket in India or BCCI scrapped the Rajasthan Royals and Kings XI Punjab teams, the chief executive of Rajasthan Royals Shawn Morris has hit back. He defended his team saying there has been no violation of shareholding rules. In an exclusive interview to CNBCTV18, he argued that ownership structure has been transparent from day one.

Meanwhile, BCCI Secretary and President-Elect N Srinivasan denied sending any SMS to IPL team owners threatening them to fall in line with the BCCI. Speaking to CNBC-TV18 Srinivasan says his phone had been hacked into.

In an interview with CNBC-TV18, Ayaz Memon, senior sports journalist, and Hitesh Jain, Partner, ALMT Legal gave their perspective on the legal options that the franchisees have and the fate of IPL4.

Below is a verbatim transcript. Also watch the accompanying video.

Q: Itís very likely that both these teams are going to be taking the legal remedial route against the BCCI order. What are the options before Rajasthan Royals and Kings XI Punjab?

Jain: The option, according to me, is that there are two issues that need to be answered. Whether the termination of the franchisee agreement is legal and second, what are the consequences of such termination?

As regards the termination of franchisee agreement, it appears that the franchisee agreement has been terminated basically on the ground that the bid was submitted by one party and the agreement was signed with another party. There is also a defence that when the bid was submitted it was said that the details were given and in the end the word Ďothersí was added. So, basically on that basis it may be possible for the franchisee to contend that the other names were added.

But if the bid terms clearly provide that you have to provide the clear details of the consortium or the shareholders and if the bid documents have been submitted by a different party and the agreement has been signed with another party then that is one issue.

So this is a point that there may be some grounds as regards the legality of the termination. But the real effect is what the consequence of such terminations is because under the law, the legal position in India consistently has been upheld by the Supreme Court that as far as franchisee agreements are concerned, they are agreements where you cannot seek a specific performance of this agreement.

Once terminated, the remedy for the aggrieved party lies only for damages because these are contracts which are of determinable nature and a party cannot seek a specific performance of the franchisee agreement.

So according to me the real worry for the franchise owners will be that assuming they are able to prove that whether that the termination was not legal and it was complete illegal. But the problem will be what will be the consequence and the remedy they are going to eventually get from the court.

Q: If you can just explain that to us, you are saying that if the franchise does indeed prove that whether the termination was illegal or not valid, all he can actually get is some sort of compensation?

Jain: Yes because there has been a consistent judgement of the Supreme Court which has said that the franchise agreements are of determinable nature. So as I put it across let us take the first issue. Suppose the first issue that needs to be answered is whether the franchisee agreements were terminated illegally. I will assume for the sake of argument that the franchisee agreements are illegal and if the court has to eventually grant a remedy, the court will have to consider as to whether the court should grant a specific performance of the agreement and ask the BCCI to restore the franchisee agreement or they can pass an eventual remedy of damages.

So in this case the law has been that the only remedy they will be entitled to will be for the damages. As I read in the newspapers today where it is said that the BCCI has earmarked certain sum of money which may eventually if the courts decide it may be required to earmark for the portion of damages.

Q: The president of BCCI says in both these cases the initial bit was made by one company but the agreement with the IPL was entered into with another company. Why is it that the BCCI has woken up to this discrepancy three years after these auctions actually took place?

Memon: Thatís one of the big mysteries of how the IPL has been functioning over the three years because if so many things, so many sins of omission and commission were discovered after the third year, then obviously a lot of people were sleeping or apathetic when things were going wrong in the first couple of years certainly. So I think to hang everything on one person, perhaps that person is responsible, but what were all the other people doing?

Q: Was it a case where the ownership of these companies were just not known to the larger governing council of the IPL? Is that the inference that one can draw?

Jain: That is one issue that the IPL or the BCCI will have to answer as to whether the BCCI was in fact aware. I mean what can be argued on behalf of the franchisee is that there is a doctrine of indoor management. As far as that is concerned Mr. Modi was aware and therefore we will take the position that the BCCI was aware.

But it is possible for the BCCI to take the contention that in fact even if Modi was aware, the BCCI was not aware. They can draw a distinction between Modi and BCCI. Since the BCCI can take the contention that BCCI was always kept in the dark or the IPL was kept in the dark, and no proper procedure was followed on the agreements.

If they are able to prove that at this stage they have been able to discover all these facts, this is going to be a critical factor as to when did the BCCI get the knowledge of the entire thing. So this is going to be a critical factor. However, it is possible for the BCCI to state that since ED (Enforcement Directorate) and Income Tax authorities and everybody were investigating the case and these authorities have brought to the notice of the BCCI about the violation and that is how the BCCI decided to act. So it is possible for them to make a distinction between Modi and BCCI.

Q: As a former BCCI lawyer you were talking about that enforcement directorate investigation that is currently and there has been no final ED report at least not in the public domain. There has been a lot of speculation on whether thatís actually prompted the BCCI action or not, we also understand that the BCCI has actually gotten a legal opinion from the Attorney General and on that basis has decided to go ahead. How strong on the basis of the fact that the publicly know of is the BCCI case looking?

Jain: You donít need to have a formal report of Enforcement Directorate also because what is important is that whether you have got a knowledge about the violation and if the BCCI decides to do its own investigation and upon its own investigation comes to the conclusion that there has been indeed a violation, proper procedure was not followed and the contracts were not awarded properly certainly the BCCI can revisit all the issues and can come to the conclusion that they have conducted the investigation and now that they have got the knowledge that there has been a violation, we are taking the action, and according in that basis they will justify that actions.

Q: A tough question, do you think IPL 4 will happen? The owners of Rajasthan Royals and Kings XI Punjab seem to have valid (check) support of other team owners who have also expressed their displeasure over the way the BCCI has acted in this case. Is it going to affect that tournament?

Memon: It is a very difficult question to answer. I am sure that both the team owners and promoters will go in for legal remedy. You can go in for fast track courts and ensure that, because at the end of the day remember that Punjab was wanting to sell off a stake or the entire team. So this stalls that attempt also. Rajasthan Royals is in a bit of a problem, with the ownership shareholding pattern there. There have been some talks going on about it, maybe they also wanted to sell some stake which has not happened. So, both have commercial interests to kind of protect.

The other is that suddenly the IPL 4 canít be of 7 teams or 6 teams because that would give a blow to the broadcasters and everybody else associated with it. So there has to be a minimum quorum I feel of 8 teams. Even if Punjab and Rajasthan are knocked off, they have got Sahara at 7 and they will hope that Kochi can get there act together and make it 8.

Having said that, if two teams are knocked out like that I wouldnít be very happy if I was a franchise owner. I would just be wondering what the hell is going on.

READ MORE ON  Hitesh Jain, ALMT Legal, Ayaz Memon

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