TaxTMI 
TaxTMI 
2012 (2) TMI 624
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.... ( 2. ) All the appeals have been placed together by consent for hearing and final disposal and since the issues are common, they have been disposed of by this judgment. For convenience of reference it would be appropriate to refer to the parties as they appear in the arbitration petition under Section 9. ( 3. ) On 15 October 2009 a Media Rights Licensing Agreement was entered into between the Board of Control for Cricket in India (the Petitioner) and Nimbus Communications Limited (the First Respondent). Under the agreement, the Petitioner granted to the First Respondent during the period commencing from 1 April 2010 until 31 March 2014 inter alia television rights, radio rights, and licensee mobile rights on an exclusive basis in relation to the territory covered by the agreement. The agreement stipulated that the First Respondent would pay to the Petitioner an amount of Rs. 31.25 Crores for every match, be it a one day international, a test match or a 20/20 international match. The payment terms inter alia stipulated as follows : "Licensee specifically acknowledges that Licensor is in negotiations with the ICC and the Cricket Boards of various countries to finalise ....
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....d under the agreement inter alia to an entity which the First Respondent controlled by exercising more than 50% of the voting power in the equity capital. ( 6. ) After the execution of the agreement, on 15 October 2009 parties arrived at two addenda respectively on 21 October 2009 and 22 August 2011.. As permitted by the agreement between the Petitioner and the First Respondent, the First Respondent in turn entered into an agreement with the Second Respondent, called the Television Rights Agreement on 16 October 2010. The agreement stated that the First Respondent had been granted certain exclusive commercial and media rights by the Petitioner for all international cricket matches organised by the Petitioner in India under a Media Rights Agreement. By the agreement between the First and Second Respondents, the First Respondent granted to the Second Respondent, in consideration for a media rights free, broadcast rights for the territory to the events taking place during the term subject to the conditions set out in the agreement. The broadcast rights granted to the Second Respondent comprised solely of the exclusive right to broadcast the event in the territory by means of televi....
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....her direction to the Respondents to call upon the advertisers to deposit the amounts owed in this Court; (iii) In the alternative, an injunction restraining the Second Respondent from paying over any sum to the First Respondent with a further direction to deposit the amount in Court; (iv) A disclosure of the amounts already received or receivable from the advertisers; and (v) A direction to the First Respondent to furnish security in the form of a deposit in cash to secure the recovery and realisation of the dues payable by the First Respondent to the Petitioner. During the pendency of the arbitration petition, a Chamber Summons has been taken out for amendment. ( 10. ) The learned Single Judge by an ad interim order dated 19 January 2012 issued the following directions : "(i) Pending the hearing and final disposal of the arbitration proceedings and the implementation of the award therein, the respondents shall deposit all monies which they have already received from the advertisers as consideration for broadcast of advertisements on the television channel/s owned and operated by the respondents in relation to the 2011 cricket series under the MRLA in this Court. ....
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....al which is confined to the correctness of the order passed by the learned Single Judge on 19 January 2012. The learned Single Judge was of the view prima facie that an amount of Rs. 305 Crores is due and payable by the First Respondent to the Petitioner under the Media Rights Licensing Agreement dated 15 October 2009. The learned Judge held that (i) There were defaults in the payment of the outstandings by the First Respondent; (ii) The First Respondent is under financial distress; (iii) The Second Respondent is a wholly owned subsidiary of the First Respondent as stated by the First Respondent before this Court in a prior arbitration petition; (iv) The agreement between the First and Second Respondents was an internal commercial arrangement designed to implement the Media Rights Licensing Agreement between the Petitioner and the First Respondent; (v) The First Respondent has in fact averred in its arbitration petition that the broadcast business which is being conducted by the Second Respondent is the business of the First Respondent; (vi) The Petitioner is no longer secured by the bank guarantees because the banks have refused to pay; (vii) There is an admission of liability con....
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....fied in the final directions that would be issued in the appeal. The principle issue that now remains for consideration relates to the direction that has been issued by the learned Single Judge calling upon the First Respondent to the arbitration petition to furnish security in the amount of Rs. 305 Crores by a deposit of a like amount in Court. ( 14. ) Learned Senior Counsel appearing on behalf of the First Respondent, Nimbus Communications Ltd., submitted that (i) Section 9(ii)(b) empowers the Court to grant an interim measure of protection to secure the amount in dispute in arbitration. However, the power which is exercised by the Court under Section 9(ii)(b) can be exercised only subject to the conditions which are spelt out in Order 38 Rule 5 of the Code of Civil Procedure 1908 in view of the judgment of the Supreme Court in Adhunik Steels Limited v. Orissa Manganese and Minerals (P) Ltd., 2007 7 SCC 125. (ii) The entire basis on which relief has been sought under Section 9(ii)(b) as spelt out in paragraph 9 of the arbitration petition is on the hypothesis that the First Respondent may secrete monies receivable from the advertisers in order to obstruct or ....
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....e Court has been moved under Section 9 for securing the amount in dispute is that there is an amount admittedly due and payable as a result of the fact that the matches in question were telecast and despite the clear terms of the agreement payment of Rs. 31.25 crores per match has not been effected. The First Respondent is in grave financial difficulty and it is on the record of the Court to state that the main source of revenue generation is the exploitation of the media rights which are traceable to the agreement with the Petitioner. The First Respondent is a chronic defaulter suffering from paucity of funds and an order under Section 9(ii)(b) is necessary in order to secure the claim of the Petitioner in arbitration; (iii)Even a bare perusal of the nature of the defence is sufficient to indicate that there is absolutely no substance in the contentions raised. ( 16. ) Section 9 of the Arbitration and Conciliation Act, 1996 enables a party to apply to the Court either before or during the arbitral proceedings or at any time after the making of an award but before it is enforced in accordance with Section 36. Clause (ii) enables a party to seek an interim measure of pro....
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....eing in regard to the conduct of the defendant, in that he is about to alienate his property or to remove it from the jurisdiction of the Court and the second, the intention of the defendant to obstruct or delay the execution of a decree that may be passed against him. Parliament in the provisions of Section 9(ii)(b) contemplated an interim measure of protection to secure the amount in dispute in the arbitration. The object underlying the conferment of the power upon the Court is to ensure that the fruits of an arbitral award which may eventually be passed against the defendant to the claim are not lost to the claimant by a dissipation of the property in the meantime. The issue as to whether the power which has been conferred on the Court under Section 9 is hedged in by the specific provisions of the Code of Civil Procedure 1908 came up before a Division Bench of this Court initially in National Shipping Company of Saudi Arabia v. Sentrans Industries Limited, 2004 2 BCR 1. The issue before the Court was whether the power exercisable by the Court under Section 9(ii)(b) of passing an interim measure for securing the amount in dispute in the arbitration was restricted by the condit....
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....ay controlled by the provisions of the Code but such exercise of power, obviously, has to be guided by the paramount consideration that the party having a claim adjudicated in its favour ultimately by the arbitrator is in a position to get the fruits of such adjudication and in executing the Award. While dealing with the application for direction to the other party to deposit the security of the amount in dispute in the arbitration, the Court also has to keep in mind the drastic nature of such order and unless a clear case not only on the merits of the claim is made out but also the aspect that denial of such order would result in grave injustice to the party seeking such protection order in as much as in the absence of such order, the applicant party succeeding before the Arbitral Tribunal may not be able to execute the Award. The obstructive conduct of the opposite party may be one of the relevant considerations for the Court to consider the application under section 9(ii)(b). The party seeking protection order under section 9(ii)(b) ordinarily must place some material before the Court, besides the merits of the claim that order under section 9(ii)(b) is eminently needed to be pa....
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....t in Adhunik Steels the Respondent had obtained a mining lease from the State Government of Orissa and had an agreement with the appellant for raising manganese ore on its behalf. The term of the agreement was ten years with an option to renew. The respondent issued a notice of termination calling upon the appellant to remove itself from the site contending that its contract was in violation of the Mineral Concession Rules, 1960. The appellant thereupon moved the District Court under Section 9 for an injunction restraining the respondent from terminating the contract and from dispossessing it at site. The District Court allowed the application under Section 9. The High Court in appeal upheld the contention of the respondent that the loss2.sxw if any that may be sustained by the appellant could be calculated in monetary terms and that in view of Section 14(3)(c) of the Specific Relief Act, an injunction could not be granted. In that view of the matter, the High Court did not consider it fit to enquire into the issue of the balance of convenience. Before the Supreme Court it was urged on behalf of the appellant that Section 9 was independent of Order 39 of the Code of Civil Procedure....
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....ing of minerals with any other entity until conclusion of the arbitral proceedings, there was no justification in preventing it from carrying on the mining operations by itself. ( 22. ) The judgment of the Supreme Court in Adhunik Steels has noted the earlier decision in Arvind Constructions which holds that since Section 9 is a power which is conferred under a special statute, but which is exercisable by an ordinary court without laying down a special condition for the exercise of the power or a special procedure, the general rules of procedure of the court would apply. Consequently, where an injunction is sought under Section 9 the power of the Court to grant that injunction cannot be exercised independent of the principles which have been laid down to govern the grant of interim injunctions particularly in the context of the Special Relief Act 1963. The Court, consequently would be obligated to consider as to whether there exists a prima facie case, the balance of convenience and irreparable injury in deciding whether it would be just and convenient to grant an order of injunction. Section 9, specifically provides in sub clause (d) of clause (ii) for the grant of an interim i....
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....itration petition should not be issued merely on the merits of the claim, unless a denial of the order would result in grave injustice to the party seeking a protective order. The obstructive conduct of the party against whom such a direction is sought was regarded as being a material consideration. However, the view of the Division Bench of this Court that the exercise of power under Section 9(ii)(b) is not controlled by the provisions of the Code of Civil Procedure 1908 cannot stand in view of the decision of the Supreme Court in Adhunik Steels. ( 23. ) In a recent judgment of a learned Single Judge of the Delhi High Court in Steel Authority of India Ltd. v. AMCIPTY Ltd., 4 O.M.P. 417/2011 decided on 1 September 2011., the judgment of the Division Bench of this Court in National Shipping Company was relied upon. The Delhi High Court observed that the provisions of Order 38, Rule 5 would serve as a guiding principle for the exercise of the jurisdiction while dealing with a petition under Section 9 requiring the respondent to furnish security and the basic consideration is that the Court should be satisfied that the furnishing of security is essential to safeguard the interest o....
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....ach match. The agreement recognises that the Petitioner was in negotiations with the ICC for bilateral cricket tours of the Indian National Team for April 2010 and changes were likely to be made in the schedule of matches. Recognising the possibility of a change in schedule, the agreement postulates that to the extent to which matches were increased or reduced, the right fee payable under the agreement would be modified on a proportionate basis. The contention of the First Respondent based on the cancellation of the Indo Pak cricket series would therefore prima facie be in the teeth of the specific contractual provision which parties incorporated. The First Respondent has also sought to set up the plea in its letter dated 29 December 2011 that the Petitioner failed to perform its contractual obligation by not selecting some of the leading players for the West Indies series. Reliance has been placed on clause 9.3(c)(iv) to the effect that the Petitioner represented and warranted that subject to the ICC future tours programmes commitments, the Petitioner shall procure the strongest possible Indian player representation in each bilateral BCCI event and use its best endeavours to procu....
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.... context that the Petitioner has submitted in the arbitration petition that the First Respondent is unable to fulfill its obligations due to a paucity of funds and is likely to utilise the funds which it receives from advertisers. Ultimately it has been submitted that the First Respondent may utilise the funds which it receives from the Second Respondent with a view to obstruct, defeat or delay the claim of the Petitioner as also an arbitral award that may be passed in its favour. As the learned Single Judge noted it was necessary to assess the claim of the Petitioner having regard to the distinct possibility of the Respondents facing a financial crisis in the event that they do not succeed in the disputes with the Petitioner. The submissions which have been urged on behalf of the Petitioner in the arbitration petition must be juxtaposed in the context of the case of the First Respondent in its arbitration petition (Arbitration Petition (Lodg.) No.1425 of 2011) before this Court. Counsel appearing on behalf of the Second Respondent has stated before the Court that at present 89% of the share holding of the Second Respondent is held by the First Respondent directly or directly. The ....