Venky's had tried to avoid paying £2.25million to their former manager who won the 1995 Premier League with Rovers as a player, but a High Court judge rejected their argument
Rovers’ owners Venky’s had argued that managing director Derek Shaw lacked the authority to agree the compensation terms, but the judge at Manchester Civil Justice Centre dismissed their argument and also ruled that the club should pay interim costs of £20,000.
The judge also refused them permission to launch an appeal due to the "unrealistic" possibility of success, however Venky’s are still able to pursue the matter at the Court of Appeal.
Berg won the 1995 Premier League title with Rovers and was appointed as manager in December, in place of former assistant manager Eric Black who had been in charge following the resignation of Steve Kean.
The Norwegian went on to win just one of his ten games in charge, with the club falling from 5th to 17th place before he was sacked and replaced by Michael Appleton, who was in turn sacked after 67 days.
Blackburn’s 1-1 draw at home to play-off contenders Crystal Palace on Sunday under caretaker manager Gary Bowyer looks to have secured their Championship status in their penultimate fixture.