IPL Contracts

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Indian Premier League IPL Contracts

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Indian Premier League

IPL Contracts

This report explains about the structure of IPL as a business model and various contractsinvolved in it i.e. between IPL-BCCI and various other parties involved. This report alsoexplains the cases involved.

By-Group 8

Ak ank sha Malhotra 10 HR 002

Chitti Bansal 10IB 025

Rajat Sethi 10IB 050

Pranshu Todaria 10DM 101

Parag Jain 10 FN 075

Rajat Jain 10DM 116




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Table of ContentsIntroduction ............................................................................................................................................ 2

A brief history of First, Second & Third Season: .................................................................................... 2

Fourth season ...................................................................................................................................... 3

IPL Composition....................................................................................................................................... 3

IPL Governing Council .............................................................................................................................. 4

IPL and Franchisee ................................................................................................................................... 4

Termination of contract ....................................................................................................................... 5

Franchises ............................................................................................................................................... 5

Rules for Franchises ............................................................................................................................. 6

Umpires & Referees: (On Field match officials) ........................................................................................ 7

Code of Conduct ...................................................................................................................................... 7

Broadcasting Rights: ................................................................................................................................ 8

Sponsorships: .......................................................................................................................................... 9

Franchisee and Players .......................................................................................................................... 11

Contract............................................................................................................................................. 11

Termination of contract ..................................................................................................................... 11

Auctioning of Players ......................................................................................................................... 11

Guidelines for replacements .............................................................................................................. 11

IPL and Taxation aspects ........................................................................................................................ 11

Live Cases .............................................................................................................................................. 12

Case 1: IPL-BCCI vs. Rajasthan Royals ................................................................................................. 12

Case2: Kochi Team Controversy ......................................................................................................... 13

IPL Business Model & Returns................................................................................................................ 15




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Introduction

The Indian Premier League (often abbreviated as IPL) is a professional league for Twenty20crick et competition in India. It was initiated by the Board of Control for Crick et in India

(BCCI) headquartered in Mumbai supervised by BCCI Vice President Chirayu Amin, current

chairman & commissioner of IPL, and CEO, Sundar Raman. It currently contested by 10 teams(franchises) consisting of players from different countries. It was started after an altercation between the BCCI and the Indian Crick et League(ICL).

In 2010, IPL became the first sporting event ever to be broadcast live on YouTube . Its brand

value was estimated to be around $4.13 billion the same year . According to global sports salariesreview, IPL is the second highest-paid league, based on first-team salaries on a pro rata basis,second only to the NBA. It is estimated that the average salary of an IPL player over a year

would be $3.84 million .The brand value of Chennai Super Kings (winner IPL 2010, finalist IPL2008 and semi-finalist IPL 2009) is estimated at USD 48.4 Million.

A brief history of First, Second & Third Season:

The inaugural season of the tournament started on 18 April 2008 and lasted for 46 days with 59matches scheduled, out of which 58 took place and 1 was washed out due to rain. The final was played in DY Patil Stadium, Nerul, Navi Mumbai. Every team played each other both at homeand away in a round robin system. The top four ranking sides progressed to the knockout stage of semi-finals followed by a final. Rajasthan Royals defeated Chennai Super Kings in a last ballthriller and emerged as the inaugural IPL champions.

The 2009 season coincided with the general elections in India. Owing to concerns regarding players' security, the venue was shifted to South Africa. The format of the tournament remainedsame as the inaugural one. Deccan Chargers, who finished last in the first season,were bigunderdogs, but came out as eventual winners defeating the Royal Challengers Bangalore in thefinal.

The third season opened in January 2010 with the auction for players. 66 players were on offer but only 11 players were sold. In this season, Deccan Chargers did not play at their preferredhome location of Hyderabad, India due to the ongoing political crisis in the Telangana region .The new bases for the champions this season were Nagpur, Navi Mumbai and Cuttack. Four teams qualified for the semi-finals. The first semi-final was won by Mumbai Indians whodefeated Bangalore Royal Challengers by 35 runs. Chennai Super Kings defeated DeccanChargers in the second semi-final. The final was played between Chennai Super Kings andMumbai Indians. Chennai Super Kings won by a margin of 22 runs.




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Fourth season

On 21 March 2010, it was announced in Chennai that two new teams from Pune and Kochi will be added to the IPL for the fourth season. However, the bid around the Kochi franchisee turnedcontroversial resulting in the resignation of minister, Shashi Tharoor from the Central

Government and investigations by various departments of the Government of India into thefinancial dealings of IPL and the other existing franchisees. Later, Lalit Modi was also removedfrom IPL chairmanship by BCCI. On 5 December 2010, it was confirmed that Kochi will take part in the fourth season of IPL.

In October 2010, the Rajasthan Royals and Kings XI Punjab had their franchises terminated for breaching ownership rules. The new Kochi franchise was also issued a warning to resolve alltheir ownership disputes.

The addition of teams representing Pune and Kochi was to have increased the number of franchises from 8 to 10. The BCCI originally considered extending the tournament format used

in previous season to ten teams, which would increase the number of matches from 60 to 94.Instead, the round-robin stage of the tournament was to have been replaced by a group stage withtwo groups of five, limiting the number of matches to 74.

In December 2010, it was announced that Kings XI Punjab and Rajasthan Royals would take part in the 2011 edition of the IPL per court order.

IPL Composition

IPL

Franchises

Players, TeamOfficials

SponsorshipsTelevision

Rights

Umpires




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These are the basic 5 components of an IPL and there are many contracts between these parties.

IPL Governing Council

IPL Governing Council is a legal body that resolves internal issues of IPL. It consists of

following members:

Mr. Chirayu Amin, Interim Chairman, IPLMr. Shashank Manohar, President, BCCIMr. N Srinivasan, BCCI SecretaryMr. Niranjan Shah, IPL Vice- ChairmanMr. Inderjeet Singh Bandra, President, Punjab Cricket AssociationMr. MP Pandove, Honorary Treasurer, BCCIMr. Arun Jaitley, BCCI Vice-President and President, Delhi and District Cricket Association

Mr. Sanjay Jagdale, BCCI Joint SecretaryMr. Rajeev Shukla, Chairman, Media and Finance committee, BCCI

IPL and Franchisee

IPL invites offers to bid for franchises through auction process. The party to be selected for

franchise will be at the discretion of IPL body.

The winning party holds the franchisee for perpetuity unless the termination of contract takes place. The franchisee holding fee is paid in a period of 10 years.

Franchises¶ agreement is treated as contract based intangible asset and all the accounting and

evaluation rules are applicable to team owners.

The main terms and conditions of the contracts between IPL and franchises that define their

earning and expenses are:

Franchise can earn revenues through

y Broadcast rights (Franchise: IPL 80:20)

y Sponsorship (Franchise: IPL 60:40)

y Team sponsorship

y Gate receipts (Franchise: IPL 80:20)

y In-stadia Advertising

Main expenses Franchisees have to bear




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y Franchise fee to IPL

y Player Acquisition cost

y Stadium hire charges

y Team costs (Coach, travel, insurance, office, other expenses)

y

Mark

eting/ Promotion costs

Other legal aspects may include:

y The franchise must disclose its shareholding pattern to BCCI.

y Any changes in shareholding or transfer of ownership must be intimated to BCCI and

their consent is required.

y The number of players, domestic and foreign, that a franchise can own and the

composition of team to be formed should follw IPL guidelines.

Termination of contract

Contract can be terminated on the grounds of

y Breach of contract.

y Mutual consent of franchisee and IPL

Franchises

Franchise City Inception Owner(s)

Mumbai Indians Mumbai 2008 Mukesh Ambani(Owner of RelianceIndustries)

Royal ChallengersBangalore

Bangalore 2008 Vijay Mallya(UB Group)

Deccan Chargers Hyderabad 2008 DeccanChronicle group

Chennai Super Kings

Chennai 2008 India Cements(N.Srinivasan)

Delhi Daredevils New Delhi 2008 GMR Group

Kings XI Punjab Chandigarh 2008 Ness Wadia,Preity Zinta,Dabur, Apeejay




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Surendera Group

Kolkata KnightRiders

Kolkata 2008 Red ChilliesEntertainment

Rajasthan Royals Jaipur 2008 Emerging Media(Lachlan

Murdoch),Shilpa Shetty,Raj Kundra

Pune Warriors Pune 2011 Sahara

Kochi TuskersKerala

Kochi 2011 Kochi CricketPrivate Limited

Rules for Franchises

There are five ways that a franchise can acquire a player. In the annual auction, buying domestic players, signing uncapped players, through trading and buying replacements. In the tradingwindow the player can only be traded with his consent. The franchise will have to pay thedifference between the old contract price and the new contract price. If the new contract is worthmore than the older one then the difference will be shared between the player and the franchiseselling the player.

Some of the Team composition rules are:

y Minimum squad strength of 16 players plus one physio and a coach.y No more than 10 foreign players in the squad and at most 4 in the playing XI.y As this is domestic cricket so minimum of 8 local players must be included in each

squad.y A minimum of 2 players from the BCCI under-22 pool in each squad.

Some of the differences to international Twenty20 cricket:

y A difference to international cricket is a timeout. It gives the players an opportunity tostrategise and take a drink during the strict 2 minutes, 30 seconds time limit. Each team isawarded two timeouts per innings totalling to four timeouts for the whole game. The

teams can take the timeout when instructed, but is necessary to take it at the end of 9thand 16th over.y IPL is also known for having commercials during the game, hence there is no time limit

for teams to complete their innings. However, there may be a penalty if the umpires findteams misusing this privilege at their own choice.

The total spending cap for a franchisee in the first player auction was US $5 million. Under-22 players are to be remunerated with a minimum annual salary of US $20,000 while for others it is




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US $50,000. The most expensive players in the IPL to date is Gautam Gambhir of India fetchedthe highest price of $2.4 million from Kolkata Knight Riders at the auction for season 4

Umpires & Referees: (On Field match officials)

IPL has a standard set of rules called code of conduct for these match officials. It is a contract between the IPL committee and the official, and thus breach of contract can also happen.

In general if such a breach of contract is noted, then it can be reported to IPL by following

people:

1. The Team Manager 2. The Franchisee of one of the teams playing the match3. IPL Chairman4. However in case a referee finds a breach of contract involving umpire, then he can also

report the same to the IPL body.

In case of such breach of contract reported, a hearing is held By Commission in accordance with

the procedure set out in Operational Rules with IPL acting as claimant and the Umpire or referee

as Respondent.

Code of Conduct

1 Umpires and Referees shall not make any public pronouncement or media comment which is

detrimental to:

(a) The game of cricket in general, or

(b) Any particular Match between Teams in which any such Umpire or Referee is involved, or

(c) The League; or

(d) Relations between IPL, BCCI and any Team and/or Franchisee.

2 Umpires and Referees shall not disclose or comment upon any alleged breach of this Code of

Conduct or the Code of Conduct for Players and Team Officials or any hearing, report or decision arising from such a breach unless such disclosure is required under the provisions of

this Code of Conduct or the Code of Conduct for Players and Team Officials.

3 Umpires and Referees shall not engage, directly or indirectly, in betting or any conduct

described in the Appendix.




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4 Umpires and Referees shall not use or in any way be concerned in the use or distribution of

illegal drugs.

5 Umpires and Referees shall at all times observe and comply with the provisions of any

regulation of IPL which applies to Umpires and Referees including but not limited to the

Operational Rules.

6. Umpires and Referees shall not engage in any conduct which is prejudicial to the interests of

the game of cricket and/or the League.

Broadcasting Rights:

Broadcasting rights were sold to its current owners SONY, WSG after a proper auction (offer toinvitation). On 15 January 2008 it was announced that a consortium consisting of India's Sony

Entertainment Television network and Singapore-based World Sport Group secured the global

broadcasting rights of the Indian Premier League. The record deal has duration of ten years at a

cost of US $1.026 billion. As part of the deal, the consortium will pay the BCCI US $918 million

for the television broadcast rights and US $108 million for the promotion of the tournament.

A proper contract was created for the same with all the terms and conditions defined. This deal

was challenged in the Bombay High Court by IPL, and got the ruling on its side. After losing the

battle in court, Sony Entertainment Television signed a new contract with BCCI with Sony

Entertainment Television paying 8,700 crore (US$1.93 billion) for 10 years. One of the reasons

for payment of this huge amount is seen as the money required subsidizing IPL's move to South

Africa which will be substantially more than the previous IPL.

The contract was challenged on basis of following breaches:

1. Obstructive commercialization

2.

Excessive Advertising3. Poor broadcast quality




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Sponsorships:

Sponsorship rights in IPL can be given to interested parties for a particular fee, but it is also

subject to:

± IPL sponsorship guidelines

± Governing body rules (IPL Governing Council)

± General Laws (e.g. limitations on alcohol and tobacco advertising)

Some of the sponsorship rights given in IPL are as follows:

± Rights to hospitality company

± Rights to individual player appearances and endorsements.

± Rights to player images

± Rights to use logos and sponsorship designations

± Promotional and advertising rights across media

±

Right to display logo on team and replica apparel

± Right to name the team or event (DLF IPL)

± Right to branding and visibility at venues

± Right to match tickets

± Rights to in-stadium hospitality

± On air rights etc.




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MAJOR-DEALS clinched by IPL are

The IPL signed up Kingfisher Airlines as the official umpire partner for the series in a

106 crores (US$23.53 million) (approximately £15 million) deal. This deal sees the Kingfisher

Airlines brand on all umpires' uniforms and also on the giant screens during third

umpire decisions.

India's biggest property developer DLF Group paid US$50 million to be the title sponsor of the

tournament for 3 years from 2008 to 2010.

Other year sponsorship agreements include a deal with motorcycle maker Hero Honda worth

$22.5-million, one with PepsiCo worth $12.5-million.

Major sponsors of IPL




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Franchisee and Players

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Players are treated as intangible assets for franchises. When a franchise bids for certain players,

it wins a µRight to Play¶ of such players during the tournament.

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IPL and Taxation aspects

Service tax: for providing service to sponsors to put advertisement on the clothes of the players.




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Entertainment Tax: tax payable to local government. Rather than sports event, it is considered

as an entertainment event.

CapitalGain (Transfer value- Acquisition value): on transfer of capital assets (players).

Income Tax: India has signed Double Tax avoidance agreement (DTAA

s) with New Zealand,Australia and South Africa.

Live Cases

Case 1: IPL-BCCI vs. Rajasthan Royals

On 10th Oct., 2010, BCCI decided to expel Rajasthan Royals from IPL Season 4. According to

show cause noticed by BCCI, it took the step of expelling on the grounds that the contract between IPL and the franchisee had been terminated because of the breach of contract by

Rajasthan Royals. According to BCCI, Rajasthan Royals changed its ownership structure in

March 2008 and Jan 2009. A new consortium, i.e., Emerging Pvt. Ltd. had been formed by the

winners of the franchise during IPL franchise auction. However, it did not have any shares in

Jaipur IPL cricket Pvt. Ltd. which was the original owner of Rajasthan Royals.

Rajasthan Royals filed a case of Suit for Injunction against the decision of BCCI in Mumbai

High Court that was adjourned till 15th

Nov 2010, by Mumbai High Court and later, by both the

parties.

Later, both the parties mutually agreed to go for Arbitration under section 17 and informed the

Mumbai High Court the same. Justice B N Srikrishna was requested to be the arbitrar of the case.

After 3 days of hearing, Justice penned the case in favor of Rajasthan Royals. According to him,

prima facie, the termination of the contract was ³illegal . In his words, ³It appears that the

Respondent (BCCI) was very much aware of who the original bidders were, who the ultimate

controllers were, and the fact that the Applicant (Jaipur IPL) was a part of the group companies

or entity controlled by the original bidders. The protestations to the contrary appear to be

contrived and too facile to cut ice.´ In his view, BCCI showed its acceptance by the

communication with the franchise for 3 years since its inception and accepting the guarantee money from it.

A temporary injunction against the termination, i.e., for a period of 6 weeks was granted to the

franchisee. Rajasthan Royals was allowed to participate in the auction process and it was allowed

to retain its marquee players. Also, BCCI was not allowed to change the rules as they might go

against Royals.




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BCCI filed a case against the decision given by the arbitrar in Mumbai High Court. It plead that

in case of injunction, there should be fiscal riders attached to it. Rajasthan Royals objected to

this argument.

In its judgement, Mumbai High Court upheld the stay on the termination of Rajasthan Royals.

However, it also modified the order by adding few conditions like:

Court asked to disclose the role of the three companies that were the part of consortium. Also,

the court asked the owners to disclose the shareholding pattern.

The franchisee, i.e., Rajasthan Royals was asked to provide a bank guarantee from a nationalized

bank. The franchisee was directed to deposit $2.83 million as a guarantee amount with the

BCCI for the contract and another $18 million as bank guarantee for the players.

Case2: Kochi Team Controversy

This is a well known controversy as it involved IPL chairman Mr. Lalit modi and Mr. Shashi Tharoor,

minister of state of external affair. Mr. Shashi Tharoor is the man, who is said to be instrumental in

bringing the Kochi franchise together and bid for the IPL team. It was alleged by Mr. Shashi Tharoor

aide that Mr. Modi wanted to remove Kochi as the IPL franchise in favour of some of the other cities like

Nagpur or Ahmedabad. This was in retaliation to Mr. Modi¶s tweet on Twitter that revealed the

shareholding pattern of the Kochi franchise, something that was in direct contrast to the confidentiality

clause in the contract.

The BCCI has asked Mr. Modi to not talk about this in public. In turn, the Indian opposition party, theBJP, has also cried out for action against Mr. Tharoor, whereas Mr. Tharoor has seeked intervention from

the PMO to look into the matter.

The CEO of the Kochi franchise, Mr. Shailendar Gaekwad, claims that Mr. Modi offered them 50 milliondollars to sell the team. A sign, says Mr. Gaekawad, that Mr. Modi desperately wanted a new IPL

franchise in another part of the country instead of Kochi.

Mr. Modi in a series of tweets, alleged that the details of exactly who owns the team are unclear; he alsosaid that Ms. Sunanda Pushkar, a friend of the Minister of State for External Affairs, Shashi Tharoor, has been gifted equity worth 70 crores. The owners do not deny this. They describe Ms. Pushkar's share as

"sweat equity" saying it's in lieu of a salary for her Marketing experience. The Kochi team owners haveformally complained to the Board of Control for Cricket in India (BCCI) that Mr. Modi has violatedconfidentiality agreements. In turn, the BCCI has reprimanded Mr. Modi and summoned a specialmeeting to discuss the controversy.

The BJP, which has demanded that Mr. Tharoor be sacked for inappropriate links to the owners, says thatMs. Pushkar has no earlier link to either Kerala or cricket. It alleges that Ms. Pushkar is a front for Mr.Tharoor, who is being rewarded for his successful lobbying for an IPL team for his home state.Mr. Modi asserted that It is his job as Chairman of IPL to seek details and authenticate the shareholding




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of every franchise as how would otherwise I know where the money is coming from.Also in regard to all other eight franchises, It was clear of who are the owners and stakeholders .In regardto Kochi, there were some question marks about stakeholders. In fact, the people who presented the biddocument themselves did not know who they were , that's why the issue has came up.

Mr. Tharoor was of the view that Mr. Modi is targeting Kochi because the IPL commissioner wanted the

franchise bid to be won by "a different team". The reference is to Mr. Modi's alleged preference for anIPL team from Ahemedabad.

Team Kochi was bought with the second highest bid, i.e. of Rs. 1533.32 crores by Rendezvous Sports

group.

± The shareholding pattern of KTK defined was:

� Rendezvous Sports group (26%)

� Parinee Developers (26%)

� Anchor Earth (27%)

� Film waves (12%)

� Anand Shyam (8%)

� Vivek Venugopal (1%)

± Of 26% held by Rendezvous Sports Group, the shareholders were :

� Gaekwads (10% sweat equity + 1% paid)

� Sunanda Pushkar (5% sweat equity)

� Brand Ambassador (10%)

� Dispute in consortium, i.e. Rendezvous and co-partners due to

± 26% sweat equity share held by Rendezvous

± Transfer of equity to ³unknown´ partners.

� IPL Governing Council invoked clause 12(1) and gave 30 day notice to:

± Remedy the disputes in the consortium.

± Provide details of unknown party by Rendezvous

± The revised structure of agreement submitted to BCCI officials.




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In case they don¶t remedy these disputes in the 30 days, the franchise would stand cancelled on the 31st

day.

After a seesaw battle, Indian Premier League (IPL) franchisee, Kochi, got the green signal from the BCCIto participate in the fourth edition of the cash-rich event. The decision was taken after hours long Board's

Governing Council meeting in Mumbai. With that the franchisee also became the eighth team to participate in the next edition of the IPL.

It was told that the Rendezvous Sports World to hold only 5% paid and 5% sweat equity. It was also saidthat the firm would have just one member in the teams' cricket operations.

The Board's nod to the Kochi-based side arose from the fact that it was already concerned over pursuingfurther litigation.The Board was also concerned about the ten-team format for the next IPL season as that

could be difficult to fit in the fixed window provided to the cash-rich event.

� The new shareholding pattern agreed upon :

± Anchor Earth (31.4%)

± Parinee developers (30.6%)

± Film Waves combine (13.5%)

± Anand Shyam (9.5%)

± Vivek Venugopal (5%)

± Rendezvous Sports World (10%)

IPL Business Model & Returns

Unlike its counterparts such as EPL or NBA, the major source of revenue for IPL is not stadium

ticket sales but media rights. Other sources of revenue for IPL are title sponsorship, the sale of

franchises and licensed merchandise and products. A part of the revenues so raised are

retained by the BCCI, a part distributed as prize money and the remaining is divided equally

among the franchises based on a pre agreed model.

BCCI inflow: The biggest source of revenue for the BCCI so far has been the proceeds

from franchise bids amounting to a total of $1.42bn. Another major source of revenue is

media rights that were awarded to Sony for $1bn for a period of 10 years and starting

from IPL-3, an undisclosed amount for media streaming rights awarded to Youtube .

Title sponsorships (DLF, Coca Cola etc.) form another big chunk of the revenues.




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Finally, proceeds from stadium tickets, merchandise sales etc. complete the list of major

sources of revenues for IPL.

BCCI outflow: Apart from the revenues generated from the bidding of franchises, almostall other revenues are shared with the franchises in different proportions

The ones with the least to lose are the gentlemen at the BCCI. Legally, the IPL is a

sub-committee of the BCCI, and it has already guaranteed itself close to $1.75 billion in

television rights and franchise sales figures.

The title sponsorship for the inaugural IPL tournament, and the commission from the

player auctions - each of the eight franchise teams can "buy" up to four foreign cricketers

through IPL - will earn it more.

Of course, two-thirds (64 per cent, to be precise) of the central rights money - television and titlesponsorship, for example - will have to be shared with the franchisees/clubs. Even so, by the

simple expedient of sanctioning a new product, Twenty20 cricket, the BCCI/IPL has earned

the cheapest billion in Indian history.




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Documents

IPL Contracts