An anti-arbitration injunction by the Bombay High Court restraining invocation and continuation of arbitration proceed-ings is yet another instance of increasing judicial intervention in arbitration processes. The facts relate to BCCI’s agreement with Sony for the Indian Subcontinent Media rights (MRLA), for bro-adcasting the IPL matches.
BCCI simultaneously floated a tender and awarded Global Media rights to the World Spo-rts Group (WSGM), and executed a separate MRLA on the same day, January 21, 2008. On 14th March 2009, BCCI purported to rescind Sony’s agreement. Sony filed a Petition before the Bombay High Court under Section 9 of the Arbitration & Conciliation Act, 1996 (Act) based on the arbitration agreement in the MRLA and obtained a stay of the termination. BCCI side stepped the stay by entering into a new MRLA with WSGM.
An out of court settlement was brokered by WSGM, with Sony agreeing to pay WSGM an amount of Rs 42.8 crores in restoring the rights Sony already had under its previous MRLA. This was the infamous “Facilitation Deed”.
Then there was the turn of events which effectively placed Lalit Modi in the doghouse, and BCCI on the warpath issuing a show cause notice questioning WSGM’s locus standi, alle-ging that the contract bet-ween BCCI and WSGM, was nothing but a conduit for siphoning the Facilitation Fee to Modi. BCCI informed Sony that WSGM had no locus standi to enter into the Deed and any monies for these rights were payable only to BCCI.
Sony filed a suit (First Suit) against WSGM, its Indian affiliate for having been fraudulently induced to enter into the contract and part with the money. In the meanwhile as more worms crept out of the wood work by way of additional information, with BCCI issuing show cause notices to Modi, Sony filed the Second Suit, whereupon WSGM invoked ICC arbitration Second Suit, based on the arbitration agreement in the Facilitation Deed, under Section 45 of the Act, the Single Judge referred the dispute to arbitration holding that even if the contract stood rescinded or established to be induced by fraud, the arbitration Clause would survive. Sony went in Appeal and the Division Bench dismissed WGSM’s application and allowed the appeal.
The law, whether Section 15 or 8 mandates Judicial authorities to refer parties to dispute resolution in enforcing their Arbitration Agreement, permitting intervention only when such authority arrives at a finding that the arbitration agreement is null and void, inoperative or incapable of performance.
In the present case, the provision was deemed to be treated as covered by Part I of the Act, and Section 5 made applicable, which did not make out any fresh ground for intervention. But the precedent had already been created by the Supreme Court earlier this year in considering an appeal from a Section 8 Petition in the mat-ter of Radhakrishnan vs Maestro Engineer. The disputes involved allegations of fraud, collusion and financial malpractices against Radhakrishnan aris-ing out of a partnership agreement.
The Apex Court while holding that the subject matter of the dispute was within the Arbitrator’s jurisdiction, ruled that in view of the seriousness of the allegations, the court would be the more appropriate forum for adjudicating the disputes.
The Court in the present matter has relied on the above judgement to hold that the reference to arbitration would be against public interest and therefore public policy of India, basing itself on an earlier classification by the Supreme Court of BCCI as “not a State or other authority within the meaning of Article 12 of the Constitution, but discharging public duties which are in the nature of state functions” (sic).
The Court did not hold, as it could have that the agreement was null and void, incapable of performance and there-fore not refer it to arbitra-tion, or do so, and allow the Tribunal determine its own jurisdiction.
The consistent erosion of party Autonomy cannot be assuaged by the erudition of the reliance Russell on Arbitration on interim injunctions when the statute does not contemplate such intervention. The Act has to be strengthened and Tribunals given powers of enforcement through Courts, to make ADR an attractive, feasible and reliable option.
Kumkum Sen is a Partner in Rajinder Narain & Co. and can be reached at kumkumsen@rnclegal.com
