The Board of Control for Cricket in India (BCCI) has threatened to take three public sector banks Punjab National Bank, Union Bank of India and Indian Bank to court after they refused to honour guarantees to the tune of Rs 2,000 crore sanctioned to Nimbus Communications.
BCCI had invoked the guarantees after Nimbus failed to settle dues of Rs 305 crore to the board.
Nimbus had signed a four-year deal with BCCI valued at Rs 2,000 crore on October 15, 2009 to telecast all domestic and international matches played by India at home between April 1, 2010 and March 31, 2014. BCCI terminated the contract last Monday, citing regular defaults by Nimbus and its long-pending dues.
BCCI is understood to be ready to file suits in the next few days against the three banks. It will also file recovery claims from a clutch of 40 advertisers who owe Rs 150 crore to Nimbus. They (banks) have in writing refused to invoke the bank guarantee of Rs 2,000 crore and are officially refusing to inform us about the collateral they accepted, P R Raman, the boards counsel, told The Indian Express.
According to the Nimbus draft red herring prospectus filed in September last, the New Delhi-headquartered Punjab National
Bank sanctioned financial bank guarantee of Rs 700 crore on January 14, 2010, in favour of BCCI with respect to the media rights agreement of October 2009 after charging a 1.5 per cent commission and against telecast rights as collateral.
Indian Bank, on the other hand, sanctioned a one-time bank guarantee of Rs 500 crore, charging an interest of 1.5 per cent a year, but extracted the first charge on all fixed assets of Nimbus as security.
A chairman of a state-owned bank said that sanctioning guarantees against telecast rights was not common in India. In the eventuality, a bank should be able to encash the security provided by a company. So, there has to be a market for telecast rights.
Another banker said it also depends on whether the bank can legally sell the telecast rights without BCCIs approval.
In its December 14, 2011, letter to BCCI Treasurer Ajay Shirke, PNB said it was not in a position to honour the boards invocation of the guarantee.
The invocation letter is totally silent as to whether there is any failure on the part of Nimbus in paying the rights fee as per schedule and, if so, to what extent. Without