“Beyond Patent Illegality” – Bombay High Court Confirms Narrow Section 34 Review & Validates Mixed-Heads Damages in Arbitration Awards

1. Introduction

The judgment of Chagla J. in Board of Control for Cricket in India v. Kochi Cricket Pvt. Ltd. & Ors. (17 June 2025) is the latest chapter of the now-historic “Kochi IPL franchise” dispute. Two consolidated arbitration petitions (ARBP 1752 & 1753 of 2015) were filed by the Board of Control for Cricket in India (“BCCI”) to set aside two domestic awards dated 22 June 2015—one in favour of Kochi Cricket Pvt. Ltd. (“KCPL”) and the other in favour of the earlier unincorporated joint venture, Rendezvous Sports World (“RSW”).

The High Court was asked to examine:

whether multiple acts of BCCI (e.g. unilateral change of IPL format, stadium issues, and refusal to extend time for furnishing bank guarantees) constituted fundamental breaches or whether KCPL/RSW’s non-furnishing of a fresh bank guarantee justified termination;
whether the arbitral tribunal’s findings were so perverse or patently illegal that they must be set aside under Section 34 of the Arbitration & Conciliation Act, 1996 (“1996 Act”);
whether the tribunal erred in awarding both expectation (loss-of-profit) and reliance (wasted-expenditure) damages; and
whether the arbitration with RSW was itself non-maintainable because (a) Section 19(2)(a) read with Section 69 of the Partnership Act barred unregistered firms from “submitting disputes to arbitration”, and (b) one constituent (Filmwaves) had allegedly not authorised the reference.

2. Summary of the Judgment

After a mammoth record review (107 pages), the Court dismissed both Section 34 petitions, refused to interfere with the awards and permitted KCPL/RSW to withdraw the security deposits after six weeks. Key holdings were:

Scope of Section 34: The Court reiterated that “patent illegality” must be apparent on the face of the award; a “long-drawn analysis” of evidence or re-appreciation of facts is impermissible (Associated Builders, Reliance Infra v. Goa followed).
Waiver & Extension of Time: BCCI’s conduct showed it had waived strict compliance with the 22 March 2011 bank-guarantee deadline; its sudden demand on 17 September 2011 with only two working hours’ notice was unreasonable; termination was therefore wrongful and amounted to repudiation.
Mixed-Heads Damages: The tribunal’s “rough-and-ready” award of both general (loss-of-profits) and special (wasted expenditure) damages was permissible; prayer-clause language was broad, expert evidence had been considered, and arbitral discretion in quantification is rarely disturbed.
Partnership Act Objection: Section 69(3) does not bar arbitral references by unregistered firms; additionally, Filmwaves had not objected in the arbitration, so the Section 19(2)(a) argument failed on facts.

3. Detailed Analysis

3.1 Precedents Cited and Their Influence

Associated Builders v. Dda (2015 SCC 3 49) – leading exposition on Section 34 grounds; taken as the baseline for “patent illegality”, “fundamental policy”, and Wednesbury unreasonableness.
Delhi Metro Rail Corp. v. DAMEPL (2024) – cited by BCCI for the proposition that findings “based on no evidence” are perverse; Court distinguished it, holding the tribunal here had marshalled ample evidence.
Reliance Infrastructure v. State of Goa (2024 (1) SCC 479) – relied on by the Court to underscore that “patent illegality” must be visible without microscopic re-appraisal of facts.
McDermott International v. Burn Standard (2006 11 SCC 181) – authority that quantification of damages is in the province of the arbitral tribunal.
Kanchan Udyog Ltd. v. United Spirits Ltd. (2017 8 SCC 237) – invoked by BCCI to argue both expectation & reliance damages cannot coexist. Court held this was fact-specific and that Pollock & Mulla recognises mixed claims in “appropriate cases”.
Jagadish Chander Gupta & UP State Sugar Corp. – cited by BCCI on Section 69; Court read them narrowly and preferred Komal Kush Enterprises (Delhi HC) holding arbitral references are outside Sec 69(3)’s bar.

3.2 Court’s Legal Reasoning

a) Waiver / Forbearance to Sue

Repeated extensions, acceptance of franchise fee, and payments by BCCI after the original deadline, constituted unequivocal conduct amounting to waiver. Clause 21.5’s “variation only in writing” was overridden by estoppel created through conduct; moreover, BCCI’s last-minute conditional extension (3 days if KCPL gave up legal rights) was unreasonable and contrary to commercial good faith.

b) Reasonableness of Notice

The demand on a Saturday morning forcing compliance within two hours, despite an 18-month old relationship and an extant guarantee valid until 27 September 2011, was held to violate Section 55 of the Contract Act’s concept of “reasonable time” for performance when time is no longer of the essence.

c) Damages: Expectation + Reliance

The tribunal:

First adopted a “rough & ready” approach: 50 % of two years’ franchise fee as net profit reasonably expected by any IPL investor;
Then considered abundant vouchers proving marketing, player, and operational expenses to grant special damages;
Held that Clause 20 (limiting liability) could not protect BCCI because its breach was fundamental/repudiatory and outside contractual limitation.

The High Court endorsed each step, noting that Victoria Laundry and commentary support additional loss recoverability when special circumstances (here: wrongful termination, lost subsequent seasons) are within the breaching party’s knowledge.

d) Section 69 & Authority to Arbitrate

The objection collapsed because (i) Filmwaves never objected, (ii) the reference was by consent, and (iii) modern precedent treats arbitration clauses as severable commercial arrangements not captured by Sec 69(3)’s bar on “proceedings to enforce a right arising from a contract”.

e) Scope of Section 34 Review

Chagla J. repeatedly reminded parties that the Court does not sit in appeal; factual findings, contractual interpretation and quantum are sacrosanct unless shocking or unsupported—none of which were demonstrated by BCCI.

3.3 Impact of the Judgment

For Arbitration Law: Confirms emerging trend post-Reliance Infra—courts will not probe “long-drawn” factual controversies under the guise of patent illegality.
On Damages Jurisprudence: First Indian High Court decision expressly approving concurrent award of expectation and reliance losses when pleaded broadly and proved—likely to be cited in future commercial arbitrations.
Sports & Franchise Agreements: Reinforces that governing bodies cannot unilaterally curtail contractual benefits (match numbers, stadium rights) and later rely on technical defaults to terminate franchises.
Partnerships & Section 69: Clarifies that arbitral references are not “instituting suits” and therefore unregistered joint ventures can arbitrate, reducing procedural hurdles in project-specific consortiums.

4. Complex Concepts Simplified

Patent Illegality: An error so obvious on the face of the award that it jumps out without deep investigation (e.g. granting relief expressly barred by statute).
Waiver vs. Forbearance to Sue: Waiver = intentional relinquishment of a known right; forbearance = temporary decision not to enforce. Continuous conduct (extensions, acceptance of money) often converts mere forbearance into waiver.
Expectation vs. Reliance Damages: Expectation seeks the profit position as if contract performed; reliance reimburses costs wasted in reliance on the contract. While usually alternative, both may coexist if facts justify (as here).
Section 69(3) Partnership Act: Bars unregistered firms from filing suits to enforce contract rights, but courts increasingly hold it doesn’t oust consensual arbitration.
Section 34, 1996 Act: Mechanism to set aside awards on limited grounds—incapacity, invalid agreement, procedural unfairness, excess jurisdiction, conflict with public policy, or patent illegality (in domestic awards).

5. Conclusion

The Bombay High Court’s decision is a comprehensive reaffirmation of arbitration-friendly jurisprudence. It:

Re-anchors Section 34 within its narrow statutory boundaries, discouraging “appeal by stealth”.
Recognises conduct-based waiver and “reasonable notice” as practical commercial doctrines overriding formalistic clauses.
Endorses tribunals’ discretion to award mixed heads of damages when pleaded and evidenced.
Resolves lingering doubts on Section 69’s application to arbitration references.

For practitioners, the judgment is a valuable precedent on drafting franchise arrangements, handling bank-guarantee obligations, framing damages claims, and resisting expansive Section 34 challenges. For Indian arbitration law, it is another brick in the pro-enforcement wall envisioned by the 1996 Act.