The Delhi High Court has clarified that the interpretation of contractual terms is primarily for an arbitrator to decide. A court’s power to interfere under Sections 34 and 37 of the Arbitration & Conciliation Act is limited and does not extend to substituting its own view for a plausible view taken by the arbitrator.
The Court observed that an arbitral award may be set aside in part if the portion found to be invalid is clearly severable and not intrinsically intertwined with the valid portion of the award. An arbitrator commits a patent illegality by rewriting the terms of a contract, such as by introducing a new condition that was not part of the agreement between the parties.
Accordingly, a party is estopped from challenging the reasonableness of an interest rate awarded against it when it has claimed the very same rate of interest for itself in its own claims or counter-claims, added the Court, while concluding that the challenge to the upholding of this severable part of the Arbitral Award has no merit.
The Court clarified that the quantification of recoverable amount for these 7 days is calculable on basis of the Arbitral Award itself. As the Arbitral Award had held that the consideration payable under the Global Marketing Agreement was for 135 cricketing days, any shortfall therein will reduce the consideration on a pro-rata basis.
Therefore, for the 7 days, applying the pro-rata reduction in the consideration as mentioned by the Arbitrator and upheld by the Single Judge, the Court held that the Award remains enforceable against the appellant and in favour of the respondent.
The Division Bench comprising Justice Navin Chawla and Justice Madhu Jain upheld the finding that Prasar Bharati was obligated to provide 135 days of cricket. It observed that the Global Rights Agreement explicitly provided for 27 days per season for five seasons. The terms of the separate BCCI Agreement could not be imported to modify the express terms of the Global Rights Agreement. The Arbitrator’s conclusion was a matter of contractual interpretation and could not be deemed perverse.
On the India-Australia-New Zealand Triangular Series, the Bench agreed with the Single Judge that the Arbitrator’s exclusion of the 10 days of this series was patently illegal. The Bench noted a “contradiction in the Arbitral Award itself”, where the Arbitrator first held the list of series in the Annexure to be tentative but then excluded the Triangular Series for not being mentioned in it.
Emphasising that the Arbitrator’s introduction of a new term that a “series” must include Test Matches amounted to rewriting the contract, the Bench found no merit in Prasar Bharati’s argument that the consideration could not be entirely ascribed to international cricket. It pointed to Clause 9.4.2 of the agreement, which explicitly provides for a pro-rata reduction of “the consideration for the Rights” if fewer international matches are played.
On the rate of interest, the Bench rejected Prasar Bharati’s challenge to the interest rate. It noted that not only was this ground not specifically raised in the Section 34 application, but Prasar Bharati itself had claimed the same 18% interest rate on its counter-claims. Therefore, the Arbitrator did not err in awarding the same rate.
On Prasar Bharati’s Counter-Claims, the Bench upheld the Arbitrator’s rejection of all three counter-claims, finding the Arbitrator’s reasoning to be based on findings of fact and appreciation of evidence which were not perverse or patently illegal. Lastly, the Bench affirmed the power of the Single Judge to partially set aside the award.
Briefly, the dispute originates from a ‘Global Rights Agreement’ dated 19 February 2000, between Prasar Bharati (the Appellant) and Stracon India Ltd. (the Respondent). The Board of Cricket Control in India (BCCI) granted Prasar Bharati broadcasting rights for cricketing events from 1 October 1999 to 30 September 2004, guaranteeing 135 days of International Cricket over five years (a minimum of 27 days per cricket season). Before the Global Rights Agreement was executed, a 20-day India-New Zealand series had already been played in October 1999.
Prasar Bharati granted Stracon global marketing rights for cricket matches conducted by the BCCI from 1 January 2000 to 30 September 2004, for a consideration of USD 43.5 million. Clause 4(b) of this agreement stipulated that Prasar Bharati would provide a minimum of 27 days of international cricket in each cricket season. In 2003, a dispute arose when Stracon withheld a payment of USD 6.56 million due to uncertainty over future series. The matter was referred to a Sole Arbitrator who, in an award dated 31 August 2004, held that Stracon’s withholding of payment was premature. Subsequently, Prasar Bharati invoked bank guarantees and recovered USD 6.56 million.
By a consent order, all disputes were referred to a second arbitration. Stracon alleged a shortfall of two series and 17 cricketing days, seeking a pro-rata reduction in consideration. Prasar Bharati argued that the agreement was for a total of 115 days (135 less the 20 days already played) and not based on the number of series. The Sole Arbitrator held that deliverables were to be counted in days, not series. He found that Prasar Bharati was obligated to provide 135 days but only provided 118 days, resulting in a shortfall of 17 days. The Arbitrator excluded 10 days from the India-Australia-New Zealand Triangular Series, deeming it outside the agreement. Consequently, an award of USD 5,509,259 was passed in favour of Stracon, along with 18% per annum interest.
Prasar Bharati challenged the award under Section 34 of the Arbitration and Conciliation Act, and the Single Judge rejected Prasar Bharati’s contention that only 115 days were to be provided. However, the Judge found the Arbitrator’s exclusion of the 10-day Triangular Series to be “patently illegal” and set aside that part of the award. The Judge concluded that the actual shortfall was only 7 days and granted Stracon liberty to raise this claim in accordance with the law.
Appearances:
Senior Advocate Rajeev Sharma, along with Advocates Abhishek Birthray and Kartikeya Tripathi, for the Appellant
Senior Advocate Ashish Dholakia, along with Advocates Gautam Bajaj, Subhoday Banerjee, Akash Panwar, Meghna Jandu and Jasleen Kaur, for the Respondent
