The BCCI has suffered its second legal setback in consecutive days with a division bench of the Bombay High Court dismissing its appeal against the court's order staying the termination of Kings XI Punjab.
The order, which comes a day after a similar High Court decision favouring Rajasthan Royals, allows Punjab to continue being part of the tournament and to participate in next month's player auction.
In its ruling, the bench - comprising Justice D Y Chandrachud and Justice Anoop Mohata - said the entire basis of the letter of termination issued by the BCCI to the Mohali franchise was "erroneous and flawed".
"It is abundantly clear that BCCI wanted to terminate the contract on the basis of what was factually incorrect," it observed. "Termination was anything but fair and was wholly arbitrary."
The order was welcomed by Kings XI Punjab. "We have been on the right side since 2008," co-owner Ness Wadia, said. "We have declared everything." Another co-owner, the Bollywood actress Preity Zinta, called it a vindication of the franchise's stand. "I feel happy. It's good that things worked in our favour."
The BCCI had appealed against the interim stay issued by the High Court on December 8, which allowed the team back into the IPL subject to certain conditions, including retaining its shareholding pattern, fulfilling pending player payments and paying the BCCI guarantee money in case the final judgement goes against them.
Justice S Vajifdar, who had issued the interim stay, said at the time that "prima facie" Punjab had a strong case against the expulsion and the "interim injunction" was only just.
As part of his conditions for the stay, he also said that the four main owners - Wadia, Zinta, Mohit Burman and Karan Paul - needed to hold no less than 51% of the shares in KPH Dream Cricket Pvt. Ltd - the rights-holding company of the franchise - until the final judgement.
Punjab will also have to clear its pending payments to its players, an amount running up to Rs.35 crore ($7.77 million), guarantee an amount of $18 million over the next two years (at the rate of $9 million per year) to protect player payments in case the franchise participates in the league, and $3.5 million to the BCCI as security towards any damage incurred by the board in case the final verdict goes against Punjab.
The verdict comes a day after the High Court upheld the arbitrator's stay on Rajasthan's expulsion from the IPL, with the judge stating clearly that the facts were in the franchise's favour.
The decisions continue the trend of setbacks suffered by the BCCI in the courts as they attempt to block the two teams from being part of the 2011 tournament. The board still has the option of appealing the verdict to the Supreme Court.
In October the BCCI had terminated Punjab and Rajasthan, holding the franchises guilty for violating the franchise agreement on three counts, including changes of ownership that went unreported to the board.