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HC asks MCA for Rs 150-cr bank guarantee on row over SPCL dues

The Bombay High Court has ordered the Maharashtra Cricket Association (MCA) to furnish a bank guarantee of Rs 150 crore, pending arbitration proceedings in the cricket body’s dispute with a private company over Rs 172.32 crore dues for a stadium built by it in Pune.

The company, Shapoorji Pallonji & Co Ltd (SPCL), built the Subrata Roy Sahara Stadium (now called Maharashtra Cricket Association Stadium) at Gahunje on Pune’s outskirts.

A single bench of Justice Amjad Sayed last week directed the MCA to furnish the bank guarantee for an amount of Rs 150 crore in favour of the high court registrar.

The court also referred the matter to the arbitral tribunal, to be heard and decided through arbitration.

Justice Sayed was hearing an application filed by MCA challenging an order passed by a Pune court on January 20 this year, directing the cricket body to deposit Rs 172.32 crore in any nationalised bank, in an account of joint names of MCA and SPCL, pending hearing of the case.

The Pune court had allowed an application filed by SPCL under the Arbitration Act seeking payment of the outstanding dues.

In February 2010, the MCA had issued a work tender to SPCL and a contract agreement was drawn upon.

In October 2012, a project manager of MCA issued a virtual completion certificate to the stadium following which in March 2013 the SPCL issued a final bill of Rs 234.10 crore.

The project manager, however, certified and approved the final bill for an amount of Rs 225 crore and also recommended that Rs 3.31 crore be witheld from the final bill on account of certain works in the stadium which have not allegedly been executed by SPCL.

In January 2015, the MCA informed the SPCL that it was unable to make payment as the same is subject to funding from the BCCI, which had not been able to release funds since it could not hold its annual general meeting as it had been stopped by the Supreme Court.

According to SPCL, the MCA paid Rs 150.43 crore towards the final bill, but had later unlawfully witheld payment of the remaining amount and failed to clear it following which the company approached the Pune court.

The SPCL, in its application before the Pune court, claimed an amount of Rs 172.32 crore, which includes the pending dues and an interest at 18 per cent per annum.

MCA’s counsel Vineet Naik argued that the work of the stadium was to be completed by April 2011. However, the SPCL could not complete it on time.

“The completion of the project in the stipulated time period was the essence of the contract. Upon completion of the project and work of the stadium, the MCA was to get an amount of Rs 207.95 crore towards naming rights from Sahara Adventure Sports Limited,” Naik said.

He said by the time the project was completed, the Sahara Group was in trouble as financial restrains were put by the Supreme Court and Sahara chief Subrata Roy was arrested.

“The MCA could not get the amount from Sahara and arbitration proceedings for the same are on,” Naik said.

After hearing the arguments, the high court noted that the MCA had recently availed a loan of Rs 107.96 crore from a consortium of banks. The MCA has also sought fresh funding to which the banks have agreed.

“Considering the facts of the case and looking at the conduct of MCA in having agreed to clear the dues of SPCL and thereafter raising belated claim for damages only reflects the intention of MCA to delay and obstruct the payment of dues to SPCL,” Justice Sayed said in a 30-page judgement last week.

“In these circumstances, the apprehension averred by SPCL that there is a strong possibility of the assets and funds being dissipated or being transferred or diverted by MCA before an award (order) is passed in the proposed arbitration proceedings cannot be said to be unfounded,” the judge said.

The high court also that the SPCL’s interest is required to be protected till the dispute is adjudicated in arbitration.

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