Buddha Films Pvt. Ltd. vs Prasar Bharati
2001 Latest Caselaw 927 Del

JUDGMENT

Arun Kumar, J.

1. The respondent prasar Bharati Broadcasting Corporation of India (hereinafter to be referred as 'Prasar Bharati' for short) has made DD Sports Channel as na encrypted or any channel. Earlier to this it was free to air channel. This encryption of DD Sports Channel by Prasar Bharati has become cause of grievance to the appellant viz. Buddha Films Pvt. Ltd. According to the appellant this goes contrary to the agreement dated 17th February, 2000 entered into between appellant and Prasar Bharati as per which there was na assurance given to the appellant the DD Sports Channel would remain free to air channel. The controversy surrounds the following factual matrix:

The Board of Control for Cricket in India (for short 'BCCI') entered into contract dated 25th September, 1999 with Prasar Bharati. As per this contract Prasar Bharati was given exclusive and full terrestrial (free to air or encrypted) and satellite (free to air r encrypted) rights and licenses to telecast all domestic and international cricket matches played in Indian conducted by BCCI during the term of contract which is up to 30th September, 2004. In turn Prasar Bharati invited bids for marketing of air time in India and overseas of the criketing events conducted by the BCCI in Indian for the period from 1.1.2000 to 30.9.2004. The appellant also gave its bid. Bid of the appellant was accepted by Prasar Bharati vide letter dated 4th February, 2000. It culminated into formal agreement dated 17th February, 2000.

2. It is not in dispute that as per the recitals to the agreement dated 17th February, 2000, terms and conditions contained in bid documents i.e. Tender Enquiry were made part of this agreement between the parities. It is also not in dispute that the DD Sports Channel was free to air at the time when this agreement was entered into between the parties. In fact there is a specific mention thereof in the Tender Documents. By the agreement dated 17th February, 2000 Prasar Bharati has granted to the appellant the rights for exclusive marketing or air time in the Territory' in respect of all criketing events conducted by BCCI during the period 1.1.2000 to 30.9.2004. Territory is defined in the agreement to "mean and include within the Territory of Union of India". The agreement stipulates that domestic matches and test matches would be telecast live only on DD Sports (a satellite channel with a limited two hours live telecast of all test matches on DD-1 the National Channel which is both terrestrial and satellite). The highlights of the test matches shall also be telecast twice by Prasar Bharati on DD-1. In consideration for the award of the right for exclusive marketing of air time, the appellant is to pay to Prasar Bharati a minimum guaranteed revenue of Rs. 450 crores. Clause 8.1 while mentioning this consideration also stipulates the manner in which this amount is to be paid. It is also specified in this clause that if there are extra additional matches, bow net revenue in excess of Installments of Minimum Assured Revenue (MAR) is to be paid. Provision is also made for reducing the MAR in the event countries named in the said clause are not able to participate or the series is not played due to any reason. Thus genesis of the agreement is that appellant has to book advertisement by marketing air time and generate revenue there from. It has to pay MAR of Rs. 450 crores to the Prasar Bharati for this purpose.

3. It is submitted by the learned Counsel for appellant that when a particular channel is free to air, its viewership would be much more than when a channel becomes encrypted or pay channel. In a free to air channel, no money is paid the viewer/consumer when he actually catches the image by tuning to the said channel. On the other hand when a channel becomes encrypted or any channel, it is beamed throughout satellite but a viewer cannot view the signal without a decoder which decodes encrypted signals. The channel is encrypted/coded in order to ensure that only those viewers/cable operator who have decoder can decode the signals and are able to view the same. After the channel has become encrypted/pay channel, apprehension of the appellant is that the viewership would be affected thereby and in turn it would have adverse effect on the sale of air time to prospective advertisers which will reduce the revenue/income of the appellant. The appellant therefore sent representations to Prasar Bharati fort reviewing its decision to make DD Sports Channel as encrypted channel. The matter was also discussed with official of Prasar Bharati. However, when it did not yield any results and in the meantime the test matches with Zimbabwe were to start, the appellant approached this Court by filing petition under Section 9 of the Arbitration and Conciliation Act, 1996 (hereinafter to be referred as 'the Act' for short). In this petition the appellant alleged that disputes had arisen between the parties which were required to be settled by arbitration. The appellant prayed for an interim measure, namely, a direction to Prasar Bharati to telecast DD Sports Channel as a free to air channel. By impugned order dated 4th January, 2001 the learned Single Judge dismissed the aid petition under Section 9 of the Act filed by the Appellant. The learned Single Judge has come to the prima facie conclusion that it was permissible for Prasar Bharati to make DD Sports Channel as encrypted/pay channel and there was not representation or promise in the contract between the parties to the effect that this channel will continue to be free to air at all times during the subsistence of the contract. The contention f the appellant to the effect that Clause 1.2 of Par I of the tender enquiry which stipulated that DD Sports Channel was free to air was only a statement of fact prevailing as on that date and it did not contain any representation that this situation will continue for ever or that situation will not change. Therefore, Prasar Bharati was within its right to convert DD Sports Channel into an encrypted or pay channel.

4. It also needs to be mentioned at this stage that after converting DD Sports Channel into pay channel, Prasar Bharati has entered into contract with M/s. Modi Enterprises giving it right of r marketing the encrypted channel/signal.

5. Assailing the impugned order of the learned Single Judge, Mr. Kapil Sibal, leaned Senior Counsel appearing for the appellant argued that the matter was not considered tin proper prospective. It was necessary to distinguish between 'signal' and 'air time'. BCCI was the owner of the signal which was sold by it to Prasar Bharati and it sis through this signal that the transmission is received. If the signal is free to air then any person can have access to the said signal. These are called satellite channels and are accessible to the viewers/cable operators without the installation of any decoder. No separate subscription is required to be paid by the viewers. On the other hand if the signal is to be paid for, the channel is beamed through satellite but a viewer cannot view the signal without a decoder which decodes the encrypted signal. Only those who pay for receiving the singles are provided with the decoders so that they can decode the signals and view the same. These are called pay channels or encrypted channels. However, the subject matter of the contact between the appellant and Prasar Bharati was sale of 'air time' and not 'signal'. Advertisements are booked by sale of the air time. It was submitted that when tender enquiry was floated, the appellant submitted its bid and quoted a particular price i.e. MAR keeping in view that the channel was free to air and ti would have more viewership which would result in advertisers purchasing the air time for purpose of advertisement. Following portion of Clause 1.2 of Part-I f Tender Enquiry was relied upon in support of this submission:

"All the matches will be telecast exclusively on Doordarshan Channels viz. DD Sports/Doordarshan Network in India. The test matches will be telecast live only on DD-Sports (A Satellite Channel) with a limited tow hours live telecast on DD-I (the National Channel which is both terrestrial and satellite). One hour of highlight of thee test matches will also be telecast on the National Channel, DD-I. One day International matches will be simulcast live on DD-I (National Channel) and DD-Sports Channel. Prasar Bharati at present has a reach of 70 million households. DD-I telecast are through the INSAT system of satellites free to air and the telecasts on the Sports Channel are through the PAS-4 satellite in digital mode and on INSAT system satellite in Analogue mode free to air".

6. Therefore, Clause 1.2 of Part-I was an assurance to the appellant that the channel would remain free to air. The learned Counsel referred to various clauses of the agreement between BCCI and Prasar Bharati as well as in the Tender Enquiry forming part of contract between the appellant and Prasar Bharati, in order to demonstrate that it was almost a representation/assurance held out be Prasar Bharati to the appellant that during the period of this agreement the DD Sports Channel would remain free to air. Otherwise, according to the appellant, it would not have given bid for such a high amount of MAR. The learned Counsel also referred to documents showing that there were complaints of red action in viewership after DD Sports Channel had become encrypted channel. No doubt, according to him, the viewership was increasing steadily as it has increased for 6 to 10 millions and then 12 to 13 million over a period of time, it was still much less than 70 millions the figure projected in the tender enquiry. It was submitted that the principle of Estoppel by representation applied and Prasar Bharati was estopped from converting the channel into encrypted channel. According to learned Senior Counsel, representation of fact that channel was free to air was a representation which would constituter estoppel within the mention of Section 115 of the Evidence Act. Reliance was placed on the judgment of Supreme Court in the case of Century Spinning and Manufacturing Company Ltd. and Another v. The Ulhasnagar Municipal Council and Another, .

7. Mr. Kirit N. Rawal, learned Additional Solicitor General appearing for Prasar Bharati raised certain preliminary objections to the maintainability of the petition under Section 9 of the Act. It was submitted that arbitration clause clearly provide for the conciliation as a pre-condition which was not resorted to before filing the petition under Section 9 of the Act. Further there was no seriousness or bona fides shown by the appellant to resort to arbitration as no steps in this direction were taken. There was no such urgency which could have compelled the appellant to file the petition without having conciliatory talks or invoking arbitration. If the appellant wanted, it could initiate arbitration proceedings and the Arbitral Tribunal was very well within its right to decide about the interim arrangement under the provisions of Section 17 of the Act. Therefore, no equitable relief should be given to the appellant under Section 9 of the Act. It was also pointed out that the whole attempt of the appellant was to get the MAR reduced. the real reason was reduction in viewership of the cricket matches because of match fixing scandals which was clear form letter dated 25th August, 2000 of the appellant itself. Further the appellant had not made payment of Rs. 15 crores due to Prasar Bharati and all this shows that the only attempt was to wriggle out of its liability to pay the dues under the contract. Adverting to the merits of the case, it was argued the primary reason for encrypting the Sports Channel was to improve the quality of transmission by introducing digital mode and not to harm the appellant. There were complaints about the quality of picture as compared to other Sports Channels and the steps taken by Prasar Bharati were in right direction and in public interest and for the benefit of public. The transmission was sought to be brought to international quality which all the sport channels have. It was also submitted that there was no negative covenant in the agreement between the parties that Sports Channel cannot become a pay channel during he currency of contract. Justifying the reasoning given by the learned Single Judge it was submitted that the learned Single Judge was right in opining that Clause 1.2 of Part-I of tender enquiry only state factual position as on that date there was no guarantee that such a position would not change. Viewership mentioned therein could increase of decrease which had no effect on increasing or decreasing the revenue. Likewise the channel which was free at that time as stated in this clause could become encrypted channel and there was no guarantee that this situation would remain static. In fact, according to him, there was no representation held out to the effect that the channel would remain free to air. Clause 1.2 only stipulated the factual position existing at that particular point of time i.e. channel was free to air. Therefore, the inference allegedly drawn by the appellant that the channel would remain free to air was incapable of being sustained.

8. Mr. Rawal argued that there is a difference between mere statement of fact as prevailing at the time of entering into the contract and averments which are to constitute representations which give rise to plea of estoppel. For a plea of estoppel there have to be specific and positive assertions, not something to be inferred from rentals in a contract. According to him in the present case there are not such assertions. There is no positive statement that a State of fact will continue to be so during the subsistence of the contract. He relied on judgment in the case of M/s. Urmila & Co. Pvt. M/s. J.M. Baxi & Co., AIR 1986 Delhi 336 and judgment in the case of Shree Ambarnath Mills Corporation, Bombay v. D.B. Godbole, Custodian of Evacuee Property and Another, AIR 1987 Bombay 119 (V.44 C 43 June).

9. We may state at the outset that we do not think that the petition under Section 9 is not maintainable and we do not agree with the preliminary objections raised by the learned Counsel appearing for Prasar Bharati. Correspondence between the parties amply demonstrates that the appellant had tried to persuade the respondent to reconvert the channel into free to air channel. It also demonstrates that there were discussions between the parties. Prasar Bharati did not agree and specifically rejected the request of the appellant by letter dated 25th September, 1999. Thereafter only the appellant filed the petition and, therefore, it cannot be said that the appellant did not attempt conciliation before resorting to arbitration. Insofar as the arguments of Prasar Bharati that appellant did not take serious steps for initiation of arbitration proceedings, we find that the appellant has already named its Arbitrator. Moreover, in Sundaram Finance Ltd. v. NEPC India Ltd., , it has been held by the Apex Court that initiation of arbitration proceedings would not be a pre-condition for filing petition under Section 9 of the Act. What is important is manifest intention to have the dispute referred to an Arbitral Tribunal. The Court further held that a situation may so demand that a party may choose to apply under Section 9 of an interim measure even before issuing a notice contemplated by Section 21 of the said Act. When such an application is made the Court is to satisfy itself that there exists a valid arbitration agreement and the applicant intends to take the dispute to arbitration. Once it is so satisfied the Court will have the jurisdiction to pass orders under Section 9 giving such interim protection as the facts and circumstance warrant. In any case it was always open to the Court to pass conditional order in Section 9 petition as is clear from the following observations in the said judgment:

"While passing such an order an in order to ensure that effective steps are taken to commence the arbitral proceedings, the Court while exercising jurisdiction under Section 9 can pass a conditional order to put the applicant to such terms as it may deem first with a view to see that effective steps are take by the applicant for commencing the arbitral proceedings. What is apparent, however, is that the Court is not debarred from dealing with an application under Section 9 merely because no notice has been issued under Section 21 of the 1996 Act."

10. Further the appellant could show the urgency in filing the petition under Section 9 as the cricket series with Zimbabwe was on the anvil. Insofar as outstanding payment of Rs. 15 crores is concerned the appellant has been able to offer explanation. According to the appellant the agreement itself envisages that MAR was to be reduced if a particular event as mentioned in the agreement does not take place. It was submitted that a sum of Rs. 55 crores was payable in case of a test series with Sri Lanka whereas it was Rs. 40 crores when the cricket series is with Zimbabwe. The cricket series with Sri Lanaka was cancelled and substituted by test series with Zimbabwe which resulted in reduction of payment by Rs. 15 crores (Rs. crores minus Rs. 40 crores). It would be ultimately decided in the arbitration proceedings as to whether this amount is due or not. It can be seen that at least the explanation is not sham or make belief but raises an arguable issue.

11. The controversy on merit, as also pointed out by the learned Single Judge is that whether Prasar Bharati is obliged to continue Sports Channel on a free to air basis or is entitle to convert this channel into an encrypted or pay channel during the currency of agreement dated 17th February, 2000 between the parties. The learned Single Judge has taken a view to the effect that Prasar Bharati had a right to converter the channel into pay channel. It has been clarified that nay expression of the view contained in he impugned order will not bind the Arbitral Tribunal. It is an admitted position that this question is to be finally answered by the Arbitral Tribunal as dispute comes within the ambit and scope of arbitration clause contained in the contract. We consider it appropriate to leave this matter for the decision of the Arbitral Tribunal as to whether there was any assurance given by the Prasar Bharati to the appellant to the effect that the Sports Channel which was free to air a the time of contract would remain free to air and would not be encrypted during the period of the contract and whether Prasar Bharati is estopped from converting the said channel into an encrypted channel. Expression of any opinion on merits of the controversy may in our view cause prejudice to either party during the arbitration proceedings.

12. In a petition under Section 9 of the Act we are to decide about the interim measures that can be made in the meantime. We have given our thoughtful consideration to this aspect. In fact after the arguments were concluded on 15th February, 2001 we had put to Counsel on both sides to suggest workable solution and even the matter was adjourned to 22nd February, 2001 for this purpose to enable the parties to discuss the matter again and suggest agreeable solution, if any. On 22nd February, 2001 we were informed that meetings had taken place between the parties. The learned Counsel for the appellant submitted that the appellant had given a proposal for settlement of the dispute by reducing the MAR. However, there was no positive response from the authorities in Prasar Bharati.

13. On the other hand it was submitted by learned Counsel for the respondent that making such an interim measure as suggested by the appellant would have serious repercussions. If the injunction was to be granted as prayer by the appellant, it would have impact on global contracts and it would be impossible to assess damages to be suffered by Prasar Bharati due to grant of such an injunction.

14. After considering all the material aspect, we feel that balance of convenience is not in favor of granting any such order as claimed by the appellant and the injury which is likely top be suffered by Prasar Bharati in the event such order is granted and Prasar Bharati ultimately succeeds in arbitration would be much more than if such an order is not granted. Our conclusion rests on the following:

(1) Prasar Bharati has admittedly entered into a contract with Modi Enterprises. Directing Prasar Bharati to make the channel free to air during the arbitration proceedings will have one definite consequence, namely, breach of contract between Modi Enterprises and Prasar Bharati.

(2) This will not only have the affect of losing the revenue as settle in the said contract, it will also attract claims by Modi Enterprises on Prasar Bharati of such a breach. This will lead to litigation between Modi Enterprises and Prasar Bharati as well.

(3) The respondents have filed the affidavit dated 19th February, 2001. Para 9 thereof reads as under:

"9. I further say that encryption of the DD Sport Channel cannot be reverse back to free to air digital channel. I say that the DD Sports Channel is not restricted to the cricketing events only but the said channel also telecasts various other sporting events both national and international. It is further state such encryption of the Sports Channel enables the respondent to bid for the contracts for Indian territorial rights for transmission of various international sports event in India".

Thus reversing the process at this stage would have adverse repercussions on the sale of foreign right and it may even invite claims by such foreign parties against Prasar Bharati thereby leading to further litigation. Even the image and goods will of Prasar Bharati may come to disrepute in international arena.

(4) The digital technology has definitely improve the picture quality of Sports Channel. The decoder is require for receiving the digital signals. It by adopting digital technology Prasar Bharati has also made it pay channel because of improved quality, its right to do so is difficult to question.

(5) Prasar Bharati has already made Sports Channel as encrypted or pay channel which is in vogue for quite some time.

(6) Judicial notice of the fact, as argued by learned Counsel for Prasar Bharati, that all other Sports Channels like ESPN, Star Sports etc. are paid channels can be taken. When all other Sports Channels are pay channels it is not prudent to direct Prasar Bharati to revert back to free to air channel, that too by way of interim measure and pending arbitration which would ultimately decide the respective rights of the parties under the contract.

15. Thus directing the Prasar Bharati to revert back to free to air channel will lead to more complications, chaos, unforeseen hardships and other difficulties including claims from various authorities on Prasar Bharati plus multiplicity of litigation. On the other hand if the channel is allowed to continue as encrypted channel and the appellant ultimately succeeds in the arbitration, the Arbitral Tribunal can suitable compensate the appellant. Considerations regarding balance of convenience and irreparable loss and injury persuade us not to pass nay order for interim relief. In the facts of the case we are confident that the Arbitral Tribunal will be able to ultimately do complete justice. At this stage no interim directions are called for.

16. For the aforesaid reasons, this appeal is hereby dismissed.

However, there shall be no orders as to costs.

17. Appeal dismissed.