COVENTRY City Council's £14million bailout of the Ricoh Arena company is to be challenged in the High Court by the Sky Blues, the Telegraph can reveal. The football club wants a judge to rule whether the deal was a lawful use of taxpayers' money. Councillors unanimously agreed the highly confidential deal behind closed doors in January * to bail out the part council-owned stadium management company Arena Coventry Limited (ACL) by buying out its outstanding mortgage loan with Yorkshire Bank. The deal relieved financial pressure on ACL, allowing it to make smaller mortgage payments to the council at lower interest rates. Council officers * including the council's chief executive Martin Reeves and finance director Chris West, who are also ACL board members * had recommended councillors back the move. It was amid fears ACL could be heading for administration * after nearly a year of Coventry City Football Club refusing to pay its £100,000-a-month rent for using the stadium * which could have forced the sale of the Ricoh at a knock down price. After the deal was struck in January, council officers told the Telegraph the £14million had initially come from the council's “cash balances“ * money set aside for unspecified council spending. The plan was to replenish those funds with £14million of council borrowing at an unspecified later date, under a government-approved scheme called Prudential Borrowing. Now the Telegraph has learned Sisu-owned Coventry City Football Club (Holdings) Ltd last week served papers at the High Court and with Coventry City Council. The papers are seeking leave to appeal * meaning a judge will initially rule on whether the High Court challenge has enough merit to proceed to a full judicial review. The Telegraph understands the legal challenge partly concerns whether the council paid over the market value for the stadium company's mortgage, and could therefore be unlawful under `state aid' rules. It is just the latest manoeuvre in the long-running dispute between ACL, the football club and Sisu. One arm of the club's business, Coventry City Football Club Limited, was placed in administration last month by Sisu-related Cayman Islands-based hedge fund Arvo Master Fund * 24 hours before ACL sought to enforce administration in the High Court. With CCFC Ltd currently owned by administrator Paul Appleton, ACL and council leaders are backing a potential takeover of the club and half the stadium company by former Sky Blues directors Joe Elliott and Gary Hoffman * with possible financial backing from US property investor Preston Haskell IV. After the bailout deal was agreed on January 15, council leader John Mutton said they had been `forced' to protect a public asset for Coventry people, as well as taxpayer investment in the Ricoh. Councillors believed the football club's owners refusal to pay rent was an attempt to force ACL into administration * so they could pick up the stadium on the cheap. A war of words between the council, ACL and club chief executive Tim Fisher had been played out in the media for months, after talks over a lower rent deal and stadium ownership broke down.