Why HC ruled in favour of appointing arbitrator to resolve IPL franchisee’s shareholders’ dispute

Punjab and Haryana High Court | sssc.gov.in

Gurugram: The Punjab and Haryana High Court has appointed retired judge Harinder Singh Sidhu the sole arbitrator to resolve a shareholder dispute in K.P.H. Dream Cricket Private Limited (owner of IPL team Punjab Kings), and ruled that such corporate conflicts can be settled through arbitration, not through company law proceedings alone.

Karan Paul, a shareholder and director of the company, filed a petition seeking the appointment of an independent arbitrator to resolve disputes with other shareholders and directors. The main dispute between the shareholders centred on a company resolution regarding the rotational appointment of the chairman, as well as other issues.

K.P.H. Dream Cricket Private Limited is the parent company that owns and operates the Punjab Kings (formerly Kings XI Punjab) franchise in the IPL. According to the company’s records, K.P.H. Dream Cricket Private Limited was incorporated on 10 March 2008.

Its ownership is shared among prominent figures from the business and entertainment industries, with Mohit Burman, chairman of Dabur India Ltd, being the majority shareholder, with 48 percent stake; Ness Wadia, managing director of Bombay Burmah Trading Corporation (Wadia Group) with 23 percent stake; Preity Zinta, actor and entrepreneur with 23 percent share; and Karan Paul, chairman of the Apeejay Surrendra Group with 6 percent share.

The legal battle

Paul raised an arbitration clause (Clause 67) in the company’s ‘articles of association’, which states that disputes between the company and its members, or between members themselves, should be referred to arbitration, for settling the dispute over the rotational appointment of the chairman. When other shareholders rejected this approach, Paul approached the Punjab and Haryana High Court under Section 11 of the Arbitration Act.

The argument of the opposing shareholders before the high court was that the dispute was not suitable for arbitration, and Paul should instead file a petition for “oppression and mismanagement” under the Companies Act.

The court’s decision

Not convinced with the argument put forward by the opposing shareholders, Justice Jasgurpreet Singh Puri rejected their objections and appointed retired Justice Harinder Singh Sidhu the sole arbitrator. The high court ruled that when appointing an arbitrator, its role is simply to check whether an arbitration agreement exists between the parties, and not to conduct a detailed examination of whether the dispute can be arbitrated.

The high court ruled that questions about whether a dispute is suitable for arbitration should be decided by the arbitrators themselves, not by the court at the appointment stage. The court should not hold a “mini trial” on these issues.

The high court cited recent Supreme Court orders stating courts should only verify basic existence of an arbitration agreement and avoid unnecessary interference in arbitration proceedings. The judgment clarifies that corporate disputes between shareholders can be resolved through arbitration if an arbitration clause exists in the company’s governing documents, even when alternative remedies exist under company law.

The arbitrator will now examine the actual disputes and determine whether they fall within the scope of arbitration.

The arbitrator has been directed to complete proceedings within the timeline prescribed under the Arbitration Act and will set fees based on the monetary value of the claims once quantified.

(Edited by Viny Mishra)