Magnum Films vs Motion Picuture Assoc. & Ors.
1998 Latest Caselaw 1115 Del

ORDER

M.S.A. Siddiqui, J.

1. By this order, I propose to dispose of IAs.7412 & 8907/1998.

2. The plaintiff has filed the application under Order 39, Rules 1 and 2 CPC (IA No. 7412/98) seeking ad interim injunction. IA No. 8907/98, is an application under Order 39 Rule 4 CPC filed by the defendants No. 2 and 3 seeking vacation of the ex parte injunction order dated 26.8. 1998. The defendants 2 and 3 have also filed an application under Section 9 of the Arbitration and Conciliation Act, 1996 seeking stay of the suit on the ground of pendency of dispute before the arbitral Tribunal.

3. The plaintiff has filed the present suit for declaration and permanent injunction. According to the plaintiff, on 27.7.1998, the plaintiff entered into an agreement with the defendant No. 2 whereunder the plaintiff acquired sole and exclusive rights of distribution and exhibition of Hindi feature film 'RAJAJI' for the territories of Delhi and U.P. circuits for a total consideration of Rs. 90 lacs. As per terms of the agreement, a sum of Rs. 5,01,000/- was to be paid immediately on signing of the said picture and a sum of Rs. 6 lacs was to be paid by the plaintiff to the defendant No.1 at the time of registration of the said picture to settle the claim of the defendant No. 3. On 27.7.1998, the plaintiff paid Rs. 5,01,000/- to the defendant No. 2 vide cheque No. 0217771 dated 27.7.1998. On the same day, the defendant No. 2 addressed a letter to the defendant No.1 intimating assignment of rights in favour of the plaintiff in respect of the said film. As regards the payment of Rs.6 acs, the defendant No. 2 intimated the plaintiff that a sum of Rs. 5 lacs was to be refunded to the defendant No. 3 on account of refundable advance of the Hindi feature film 'TARAZU', which was earlier produced by the defendant No. 2 and a sum of Rs. one lac was to be paid to the defendant No. 3, which was received as a token money against the film 'RAJAJI' from the said defendant as the earlier agreement between the defendant No. 2 and the defendant No. 3 in respect of the said film has since been mutually cancelled by the parties. Thereafter, on 27.7.1998, the plaintiff applied to the defendant No.1 for registration of the said film, which was opposed by the defendant No. 3 on the ground of its agreement with the defendant No. 2 in this regard. In the meantime, the defendant No. 3 offered some higher amount to the defendant No. 2 and they conspired to defeat the claim of the plaintiff in respect of the said film. Now, the defendant No. 2 and 3 are making concerted efforts to get the said film registered in the name of the defendant No. 3.

4. According to the defendants No. 2 and 3, by the agreement dated 24.1.1998, the defendant No. 3 had purchased the distribution and exhibition rights of the said film for the territories of Delhi, U.P. circuits for a consideration of Rs. 85 lacs on M.G. royalty basis for a period of 10 years. Pursuant to the said agreement, the defendant No. 3 has paid Rs.11 lacs to the defendant No. 2. It is alleged that in view of the agreement dated 24.1.1998, the defendant No. 2 was legally incompetent to assign distribution and exhibition rights to the plaintiff in respect of the said film, and so the agreement dated 27.7.1998, the entered into between the plaintiff and the defendant No. 2 is inoperative and ineffective. At the most, the plaintiff is entitled to claim refund of Rs. 5 lacs from the defendant No. 3. The said amount was tendered to the plaintiff but the plaintiff refused to accept the same.

5. It is pleaded by the defendants that the parties being members of the Motion Pictures Association (defendant No.1) are governed by the Memorandum and Articles of Association and bye-laws of the Association which contain an arbitration clause, according to which the disputes between the parties are to be resolved by arbitration. It is also alleged that disputes between the parties have been referred to the arbitration in terms of the arbitra-tion agreement and so the present suit is outside the cognizance of this Court and that the plaintiff has deliberately suppressed the said fact as a result whereof the plaintiff's suit is liable to be rejected on this count alone. The defendants have also filed an application (IA No. 8906/98) praying that trial of the suit be stayed.

6. The first point to be determined is : whether the plaintiff has made out a prima facie case for grant of temporary injunction. It is beyond the pale of controversy that the plaintiff and defendant No. 3 being members of the Motion Pictures Association (defendant No.1) are governed by the Memo-randum and Articles of Association and the bye-laws of the Association, which contain an arbitration clause, according to which the disputes between the parties are to be resolved by arbitration. On 24.1.1998, the defendant No. 3 had entered into a contract with the defendant No. 2, whereunder the defendant No. 3 acquired sole and exclusive rights of distribution and exhibition of the disputed film "RAJAJI" for the territories of Delhi and U.P. circuits for a consideration of Rs. 85 lacs. It is undisputed that by the agreement dated 27.7.1998, the plaintiff purchased the distribution and exhibition rights of the said film for the aforesaid territories for a consideration of Rs. 90 acs. It is also undisputed that on 27.7.98, the defendant No.3 and the plaintiff applied to the defendant No.1 for registration of the said film on the basis of agreements dated 24.1.1998 and 27.7.1998 respectively and that the disputes between the parties with regard to the validity of both agreements have been referred to the acquiring Sub-Committee constituted under the Memorandum and Article of Association.

7. At the outset, I may mention that learned counsel for the defendants No. 2 and 3 has fairly conceded that the disputes between the parties have not been referred to the arbitrator in terms of the arbitration agreement. It is also worth mentioning that under clause 16(i) of the Memorandum and Articles of Association, a member of the Association is not entitled to distribute/supply and/or screen any picture unless it is registered with the Association (defendant No.1). Admittedly, the disputed film 'RAJAJI' has not been registered by the Association (defendant No.1) in favour of the plaintiff and so the plaintiff is not entitled to distribute/supply and/or screen of the said film in the territories of Delhi, U.P. circuits. As noticed earlier, two agreements dated 24.1.1998 and 27.7.1998 have been executed in respect of the said film. It is the case of the plaintiff that the contract 24.1.1998 was mutually rescinded by the defendants No.2 and 3 and after confirming the said fact, the plaintiff entered into a contract with the defendant No.2 in respect of the said film. Thus, the Contract dated 27.7.1998 is the foundation of the present suit . On the contrary , defendants No.2 and 3 pleaded that the contract dated 24.1.1998 still survives and so the agreement dated 27.7.1998 is inoperative and ineffective.

8. Learned counsel for the plaintiff has invited my attention to the letters dated 27.2.1998, (at pages 26,27 and 29) written by the defendant No. 2 to show that the contract dated 24.1.1998 was mutually rescinded by the defendants No. 2 and 3. Letters (at page 27 and 29 of the paper book) have been written by the defendant No. 2 to the defendant No.1 giving intimation about cancellation of the earlier contract dated 24.1.1998 and assignment of distribution and exhibition rights of the disputed film 'RAJAJI' in favour of the plaintiff. It is pertinent to mention that admit-tedly no document was executed by the defendants No. 2 and 3 with regard to the alleged rescission of contract. The plaint is also conspicuous by the absence of the date on which the contract dated 24.1.1998 was alleged to have been rescinded by the defendant No. 2 and 3. On the contrary, learned counsel for the defendants has invited my attention to the letters dated 5 and 6th August, 1998(at pages 40,41,42,43, and 45 of part II of the paper book) to show that the plaintiff's allegations with regard to the alleged rescission of the contract dated 24.1.1998 are totally baseless. On 5.8.1998, the defendant No. 2 wrote a letter to the defendant No.1 for egistration of disputed film 'RAJAJI' in favour of the defendant No. 3. By the letters dated 6.8.1998, addressed to the defendant No.1, the defendant No. 2 had irrevocably confirmed that the distribution, exhibition and exploitation rights of the said film vests exclusively with the defendant No. 3 vide agreement dated 24.1.1998. These documents clearly go to show that the contract dated 24.1.1998 is still alive. Even the agreement dated 27.7.1998 (at page 26 of the paper book ) relied on by the plaintiff does not mention about the alleged rescission of the contract by the defendants No. 2 and 3. Viewing the aforesaid circumstances, it cannot be concluded that the contract dated 24.1.1998 was rescinded by the defendants Nos. 2 and 3. This circumstance alone swings the pendulum of equity in favour of the defendant No.3. In view of the contract dated 24.1.1998, the defendant No.2 was legally incompetent to assign any right to the plaintiff in respect of the disputed film 'RAJAJI' for the territories of Delhi and U.P. circuit. I, therefore, find and hold that the plaintiff has failed to make out a prima facie case for grant of the temporary injunction.

9. The balance of convenience also does not lie in favour of the plaintiff in as much a s the comparative inconvenience or mischief which is likely to arise from granting the temporary injunction will be greater than which is likely to arise from withholding it. The plaintiff is also not likely to suffer irreparable injury because it can be adequately compensated the damages.

10. For the foregoing reasons, the application (IA No. 7412/98) filed by the plaintiff is rejected and the application (IA No. 8907/98) filed by the defendants No. 2 and 3 is allowed. The ex-parte interim order dated 26.8.1998 is vacated. Before I part with this order, I would like to make it clear that nothing stated herein shall affect the rights of the parties that are being agitated in the suit.