Terminating CSK and RR is BCCI's only viable option

The Justice Lodha Committee has posed some serious obstacles to the future of the IPL. The committee, empowered by the Supreme Court of India to delve into the nature of governance and integrity breaches within the IPL, found malfeasance in its first report not just at the level of the individuals under scrutiny - Chennai Super Kings official Gurunath Meiyappan and Rajasthan Royals owner Raj Kundra - but also found the two franchises to be at fault, suspending them for two years effective immediately.

The faults likely stem from breaches of the IPL operational rules, the IPL regulations, the IPL anti-corruption code, the IPL code of conduct for players and match officials, and critically, the franchisee agreements.

The BCCI is now faced with limited options for the future of the two franchises, and in fact for the league itself. While it appears to be mulling over numerous short-term options, there really is only one real option - it has to terminate both franchises effective immediately.

The franchise, through its key personnel, committed acts that brought the game and the IPL into disrepute, and this finding severely affects the franchise's ability to retain ownership of the team. The franchise agreement signed by both parties was extremely one-sided in favor of the BCCI, and because it was a take it or leave it opportunity at that time, it can safely be assumed that no modifications were made in the document.

Since both the court and the committee concluded that unethical activities took place, there is little doubt that the BCCI has the ability to terminate both franchises with immediate effect in accordance with Clause 11.3 (c) of the agreement for breach of contract. The clause states:

"BCCI-IPL may terminate this Agreement with immediate effect by written notice if: the Franchise, any Franchisee Group Company and/or any owner acts in any way which has a material adverse effect upon the reputation or standing of the League, BCCI-IPL, the Franchisee, the Team (or any other team in the League) and/or the game of cricket."

This can be interpreted widely. Not only that, a clear breach of contract occurs even when a team official - and not the franchise as a whole - has committed an act that goes against the tenets of proper conduct as stipulated in the IPL regulations and code of conduct. Vicarious liability principles extend to every aspect of the current scenario.

There are strict obligations imposed on the franchises, the most relevant of which is the operational obligation where the franchise represents and warrants that it - "shall and shall procure that all players and Team officials and/or employees and any other person acting for or on behalf of the Franchisee and/or the Team comply with the Regulations during each Season and that the Team complies with the Laws of Cricket during any Matches." Even the most optimistic and proactive member of either of the two franchises will find it difficult to see a silver lining mitigating the obvious breaches of contract. Further, multiple breaches of the IPL regulations have already been noted by the Justice Mudgal IPL probe Committee, the Lodha committee, and the court.

The agreements are stacked in the BCCI's favor, so there is no doubt it can justifiably terminate both franchises, and defend the termination in any court that has jurisdiction over the matter.

And, given how unfavorably the Supreme Court views the BCCI and the IPL in the present scenario, there is absolutely no doubt that a termination for cause will be supported and in fact encouraged by the court and its appointed committees. In fact, only the BCCI-IPL is empowered to terminate the franchises as per the Agreement - a contractual arrangement that the court and the committees may be loath to interfere with.

From the Supreme Court's perspective, the maximum possible intervention it could make under the BCCI-IPL's regulations was sanctioning and suspending the individuals and franchises, which it already has ordered. Rather than act as the commercial arbitrator on individual business decisions, it is far more likely and adverse to the BCCI's interests, that the court through its committees may recommend the suspension of the league altogether, in the interest of preserving and perpetuating the sanctity of cricket. It would be an extreme step, but if as in the past the BCCI doesn't act proactively and authoritatively this time, the suspension of the IPL could well be the eventual outcome.

The commercial risks are of course significant for the BCCI, and that is why it likely has dragged its feet on this. There is a real risk that the valuations of existing franchises may plummet. This would in turn drop the bid prices for new franchises to levels lower than when the league first started. It wouldn't be a shock if the going price for a new franchise is in the USD 40-60 million range, a far cry from the hallowed USD 300 million and above for Kochi and Pune.

Immediate termination of the Chennai and Rajasthan franchises will be a clean break that should stand the legal test. The two existing franchises should be retired, and their intangible goodwill (if any remains) be assigned to two new franchises that don't carry the liabilities and baggage of the previous ownerships. There are no assets that exist except for the intellectual property of the teams, therefore it will be prudent to dissolve the two teams and instead allocate the players contracted to the erstwhile franchises to the new franchises, with an option by the players to accept or decline.

If ever the BCCI wanted to send a strong signal that it was righting the course and intent on bringing strict accountability to its commercial entities, this would be it. It would be important, however, to ensure that both franchises are treated equally and not subjectively. So, provided the board acts unilaterally towards both franchises, the best move would be this, and not any stopgap measures that aesthetically appease but substantively fail the integrity test.