Delhi High Court
Dorling Kindersley (India) Pvt. ... vs Sanguine Technical Publishers & ... on 1 July, 2013
Author: Manmohan Singh
.* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment pronounced on: July 01, 2013
+ O.M.P. 856/2012 & I.A No. No.4567/2013
DORLING KINDERSLEY(INDIA) PVT LTD ..... Petitioner
Through Mr.Akhil Sibal, Adv. with
Mr.Sanjay S. Chhabra, Adv.
versus
SANGUINE TECHNICAL PUBLISHERS & ORS
..... Respondents
Through Ms.Nidhi Jain, Adv. for R-1 to 3.
Mr.Nikhil Rohatgi, Adv. for R-4.
Mr.Saurabh Kirpal and Mr.Gurmehar
S. Sistani, Advs. for applicant.
CORAM:
HON'BLE MR. JUSTICE MANMOHAN SINGH
MANMOHAN SINGH, J.
1. By this order, I shall dispose of OMP No.856/2012 filed by the
petitioner against the respondents seeking in the interim measures under
Section 9 of the Arbitration and Conciliation Act, 1996 (hereinafter referred
to as „the Act‟) pending the arbitration. The brief factual matrix of the matter
leading up to the filing of the present petition can be enunciated as under:
a) The petitioner namely Dorling Kindersley (India) Pvt. Ltd. claims to
be engaged in the business of publishing wide varieties of the books
and other educational contents under the name and style of the
"Pearson Education" (under license from Dorling Kindersley Ltd.,
UK). It is stated that the respondent No. 1 is a partnership firm having
its partners who are arrayed as respondent No. 2 to 4. It is however
stated that the respondent No.4 has resigned from the partnership
illegally which has affected the claims of the petitioner against the
respondent No. 1 firm.
b) It is stated in the petition that the petitioner and the respondents
entered into an agreement dated 14th December, 2009 where under the
petitioner was given the exclusive rights to publish and market the
engineering books or titles (including the present and future titles) of
which all rights and authorizations for publishing the said books
vested with the respondent No. 1. The petitioner has reproduced the
terms of the agreement in the petition which reads as under:
"Objective
1.1 Person and Sanguine hereby undertake to co-brand
the engineering titles, as mentioned under the Schedules
of this Agreement, with the limited objective of building
and developing the title for providing quality material to
the students.
1.2 The envisaged co-branding shall feature the titles
of the following kinds:
(a) The titles that are already published by
Sanguine („the present titles‟). A list of such
titles is attached to this Agreement as
Schedule-A.
(b) The titles that are being developed or will be
developed in the future („the future titles‟). A
list of such titles which are being developed is
being attached herewith to this Agreement as
Schedule-B.
Pearson shall have the exclusive right to publish,
market and sell the present and future titles as
educational editions for the territory, which shall be
published in terms of the provisions contained herein (the
present titles and the future titles are hereinafter
collectively referred to as "the titles")
1.3 Sanguine shall submit to Pearson, only those titles,
for which it has all rights and authorizations to do so and
shall refrain from submitting any titles that infringe on
any copyright or any other rights or other applicable laws
or regulations. The Titles so selected by Pearson shall
have to comply with the description and with the agreed
form, content and style as a result of which this
Agreement was entered into.
1.4 Sanguine shall ensure that the titles under this co-
branding program shall not conflict with any trade
distribution or publication arrangements that Sanguine
already has in place in India and the exclusivity of the
titles shall remain with Pearson.
1.5 Pearson shall purchase the existing inventory of
the present titles from Sanguine at a consolidated amount
of Rs.14,00,000/- (Fourteen lakhs) only, the details of
such existing inventory has been covered under
Schedule C of the Agreement.
Period
2.1 The term of this Agreement shall be for a period of
48 months from the date of execution of this Agreement,
which can be extended to 60 months.
Grant of Rights
6.1 Subject to the terms of this Agreement, the
copyrights in the Titles are and shall remain the property
of Sanguine. However, Pearson shall have the exclusive
publishing rights and the derivative rights in the titles, for
the terms of this Agreement.
6.2 All copies of the Titles shall have copyright
notices conspicuously placed thereon as may be decided
by Pearson. The copyright page shall feature Sanguine‟s
name.
6.3 Pearson shall have the rights to digitalize the titles.
6.4 Pearson shall have the right to export, market and
sell the titles globally.
6.5 Sanguine undertakes that Pearson shall have the
exclusive rights to the titles pertaining to Engineering
topics, to be brought in by Sanguine, during the term of
this agreement, and such titles shall be covered by
Schedules of this Agreement.
6.6. The rights mentioned in clause 6.1 hereof further
include the right for Pearson to publish or license the
publication of short extracts from the titles solely for the
purposes of publicity, promotion and review, without any
payment to Sanguine.
Exclusivity
7.1 Sanguine undertakes that the titles covered under
this Agreement shall be treated as exclusive and it shall
not get into any similar arrangement for the titles with
any other publisher or shall not publish such titles on its
own, during the term of this Agreement.
Payment
8.1 Pearson shall pay to Sanguine the following
royalty based on the sum received on the copies sold in a
calendar year:
Upto 7000 copies of each title: Twenty Eight percent
(28%)
7001 and above copies of each title: Thirty Three Percent
(33%)
8.5 Pearson shall pay a sum of Rs.14,00,000/-
(Fourteen Lakhs) only towards taking over the existing
inventory of Sanguine titles, as mentioned under
Schedule C.
Arbitration
15.1 Any dispute or difference of any kind whatsoever
which arises or occurs between the parties in relation to
anything or matter arising under, out of, or in connection
with this Agreement shall be referred to arbitration under
the Arbitration and Conciliation Act, 1996. The seat of
arbitration shall be New Delhi and the parties shall bear
this own costs."
By placing the reliance upon the terms of the agreement, the
petitioner implied that the representations were made to the petitioner
that all the titles and authorizations of the works which were the
subject matter of the publishing arrangement vest with the respondent.
The petitioner also stated that it was the respondent no. 1‟s
responsibility under the agreement to ensure that the exclusivity of the
rights shall be maintained with the petitioner.
c) It is stated by the petitioner that the term of the agreement was for the
period of 48 months from 14th December, 2009 and the same was
extendable uptil 60 months. It is further stated in the petition that the
respondents full cooperated with the petitioner uptil January, 2012
and in between provided further titles for the publishing, the details of
which are mentioned in the petition.
d) The petitioner has stated in the petition that on 13th February, 2012,
the petitioner received a communication from Respondent No. 3
informing that the Respondent No. 4 has resigned from the
partnership firm/ Respondent No. 1 w.e.f. 11th February, 2012. It was
further informed in the said communication that the copyright of the
books authored/ co-authoried by the respondent No. 4 would no
longer be available with the respondent No. 1. Therefore, the
petitioner was called upon to exhaust the existing stocks of the books
and not to publish the titles in any manner related to Respondent No.
4 as the said respondent No. 4 was no longer the partner of the
respondent No. 1 firm.
e) The petitioner has stated that the said communication was responded
by it on 22nd February, 2012 by pointing out the terms and conditions
of the agreement and it was informed that the respondents are under
obligation to full their part of the commitments during the subsistence
of the agreement. The respondents were also called upon to provide
the agreements which had been entered on the basis of which the
representations were made to the petitioner that the titles are the
exclusive property of the respondent No. 1 and it was obligatory on
the respondent No. 1 to maintain exclusivity. It is contended by the
petitioner that there is an express stipulation and representation under
the agreement that the copyrights in titles are and shall remain the
property of the respondent No.1 as per Clause 6.1. It was also the
stipulation under the agreement that the respondent No. 1 would not
enter into any such similar arrangement with any other publisher and
shall not publish such titles in order to maintain exclusivity.
Therefore, the petitioner called upon the respondents to provide the
agreements.
f) The petitioner has stated that the respondent No. 1 replied to the
communication dated 22nd February, 2012 by way of letter dated 1st
March, 2012, when the respondent No. 1 informed the petitioner that
as the respondent No. 4 has resigned from the respondent No. 1 firm,
therefore, the copyright in the works authored or co-authored by the
respondent cannot vest in the respondent No. 1 firm.
g) Thereafter, as per the petitioner, there were talks of resolving the
matter amicably by negotiating for settlement but the matter could not
be resolved. It is further mentioned that the despite the repeated
requests made by the petitioner, the respondents refused to divulge the
understanding arrived at between the respondent No. 1 to 3 and
respondent No. 4 in the form of the agreement at the time when the
respondent No. 4 exited from the respondent No. 1 firm.
h) The petitioner has stated in the petition that the petitioner has incurred
huge sums of Rs. 14 lacs at the time of entering into the contract to
acquire the existing inventory of the titles before publishing the same.
The petitioner has also spent a sum of Rs. 1 crore towards
promotional expenses in order to popularize the titles under the
agreement.
i) ]It is submitted that the respondents are trying to wriggle out of the
subsisting and legal agreement dated 14th December, 2009 by
committing the intentional breach of the terms and conditions. The
respondents are causing the impediments in the working out of the
agreement by issuing communication not to publish titles when under
the agreement, the respondents are required to facilitate the petitioner
to maintain the exclusivity of the titles.
j) The petitioner has contended that it has learnt that there are titles like
Field theory of which the respondent No. 4 is the co-author which is
forming subject matter of the agreement dated 14th December, 2009
has been sold by the another publisher namely Elsevier and likewise
there is another book namely "The 8051 Microcontrollers" has also
been published by the same publisher in the market which forms
subject matter of the exclusive arrangement with the petitioner. These
are the titles which as per the petitioner are authored/co-authored by
the respondent No. 4, for which the allegation in the petition is that
the respondents are facilitating the said breach of the agreement.
k) Likewise, the petitioner has also stated in the petition that the
respondents wrote another email dated 5th September, 2012 whereby it
has been informed that two of the authors namely Dr. Uma Rao and
Dr. Andhe Pallavi of three of the titles which are forming the subject
matter of the publishing agreement have also expressed their
unwillingness to associate themselves with the respondent No. 1 for
publishing any new books/ editions in future. This instance has been
relied upon by the petitioners to state that the conduct of the
respondents is improper as the said respondents are doing the breach
of the agreement through this indirect route of withdrawal of the
permission by the authors which has not been contemplated under the
agreement.
l) Feeling aggrieved by the actions of the respondent, the petitioner has
filed the application under Section 9 of the Arbitration and
Conciliation Act, 1996 seeking interim prayers as contained in the
prayer clause of the petition pending the arbitration. The matter came
up before this court on 12th September, 2012, when this court passed
an ex-parte ad interim injunction to the following effect:
"1. The background to the present petition under
Section 9 of the Arbitration and Conciliation Act, 1996
(„Act‟), is that the Petitioner under the name and style
„Pearson Education‟ („Pearson‟) entered into an
agreement dated 14th December 2009 with Respondent
No.1 partnership firm (hereinafter „Sanguine‟) having its
registered office at Bangalore, Karnataka of which
Respondent Nos.2 to 4 are partners. In terms of the said
agreement, Pearson and Sanguine undertook to co-brand
the engineering (book) titles, as mentioned under the
Schedules to the agreement for providing quality material
to the students. A list of titles of books published by
Sanguine were set out in Schedule-A to the agreement.
The titles that were being developed or were to be
developed in future were set out in Schedule-B. An
additional list of titles was also appended, a copy of
which is at page 15 of the documents.
2. According to the Petitioner, the agreement
subsists. It is for a period of 48 months and can be
extended up to 60 months. Clause 15.1 of the agreement
provides for arbitration to be held in Delhi under the Act
and Clause 16.1 states that the parties will submit to the
jurisdiction of the Courts in Delhi.
3. The Petitioner states that on 13th February 2012, it
received a communication from the Respondent No.3
stating that Respondent No.4 had resigned from the
partnership firm two days earlier and that he would no
longer be interested in getting the books/titles for which
he was an Author/co-Author published under the
agreement. The Petitioner protested pointing out that this
was in breach of the agreement. It sought copies of the
author agreements signed with Respondent No.1.
However, the Respondent No.1 claimed that this could
not be divulged. It is stated that despite several rounds of
meetings, the issues that arose could not be resolved.
4. Meanwhile, the Petitioner discovered that titles
which were listed in Schedule-A to the agreement, are
now being published by another publication house viz.,
Reed Elsevier India Private Limited („Elsevier‟). The
Court has been shown three publications, one under the
title „Field Theory‟ by Respondent No.4 Dr. D. Ganesh
Rao published by Pearson in 2011 and another
publication under the same name published subsequently
in 2012 by Elsevier by the same author. It is pointed out
that the book subsequently published by Elsevier is
virtually the same except a few additional chapters.
Likewise, another title „The 8051 Microcontrollers;
Architecture, Programming & Applications‟ by Dr. K.
Uma Rao and Dr. Andhe Pallavi published by Pearson in
2011, appears to have been published in 2012 under more
or less the same title by Elsevier with the same authors.
There is another book „Network Analysis‟ published by
Elsevier, as a near verbatim copy of the book „Network
Theory‟ published by Pearson.
5. In the circumstances, it is prayed by the Petitioner
that the Respondents should be restrained from
committing further breach of the agreement.
6. Issue notice to the Respondents, returnable on 3 rd
December 2012. Dasti in addition.
7. Till the next date the Respondents, their agents,
servants, nominees, assignees, attorneys or their
representatives are restrained from publishing/printing,
marketing, selling any of the titles/books of the authors
vested under the agreement dated 14th December 2009
with or without modification in the nomenclature of the
title with same contents in addition to the titles
mentioned at page 15 of the paper book, till further
orders. The Petitioner will also send the Respondents
within ten days, a notice invoking the arbitration clause
and within four weeks thereafter take the next logical
step for the appointment of an arbitral Tribunal in terms
of the agreement.
8. The Petitioner prays for the appointment of Local
Commissioners („LCs‟) to visit the locations mentioned
in the petition and make an inventory of the
books/publications of the titles/books of the authors listed
in Schedules A and B to the agreement which are
apprehended to have been printed through some other
publication house and are stored or being sold by the
Respondents and to seize the same.
9. Accordingly, this Court appoints three LCs to visit
the following addresses:
(i) Mr. Anil Verma, Advocate (Mob.
9958014454) will visit:
(a) Reed Elsevier India Pvt. Ltd.
C/o Agility Logistics Pvt. Ltd.
Khasra No.7/17/1
18/1, Village Safiabad
Narela, Sonepat Road
Sonepat, Haryana-131001.
(d) Empire House,
Phase-II,
Sector-19, Gurgoan, Haryana.
(ii) Ms. Swati Gupta, Advocate (Mob.
9711566266) will visit:
(b) A-14, Industrial Area,
Moti Nagar, New Delhi
(c) 2/14, Near Happy School,
Ansari Road, Daryaganj, New Delhi.
(iii) Mr. Parameshwar, Advocate (Mob.
09818113824) will visit:
(e) UBS Publishers Distributors Ltd.
148, Cresscent 2nd Floor
Mysore Road, Bengaluru-560026
(f) TBH Publishers and Distributors
Vikram Trinetra House,
81/10, Vatal Lnagaraj Road,
Okalipuram, Rajaji Nagar, Bangalore-
560021.
10. The aforementioned LCs will visit the respective
locations as indicated during working hours on any week
day, within next ten days. Each LC will draw up an
inventory of the books/publications of the titles/books of
the authors in terms of Schedules A and B of the
agreement dated 14th December 2009, as well as the list
appended at page 15 of the documents, and seize the
books that are found to be printed through a publication
house other than Pearson and are stored or being sold by
the Respondents. The seized books will be preserved
separately and kept under a seal to be affixed and signed
by the LC and produced by the Respondents as and when
ordered by the Court. The records kept at each premises
will be inspected and the details of the vendors and the
quantity sold and marketed by the agents of the
Respondents will be noted and copies of the relevant
pages of such records taken. The LCs will sign the
relevant pages of the said records in original after
inspection. Photographs and/or video where necessary
shall be taken. Each LC will be accompanied by one
representative of the Petitioner during the visit. Each LC
is permitted to take the assistance of the local police in
the event that any resistance is offered by anyone to the
execution of the above directions. A report be submitted
by each of the LCs to the Court within a further period of
ten days after the respective visits. The fees of each of
the LCs is fixed at Rs.75,000 which shall be paid by the
Petitioner to each of them within ten days. This will be
independent of the travel, transport and other incidental
expenses which shall be borne by the Petitioner.
11. Copy of this order be given dasti.
Sd/-
Dr. S. Muralidhar
Judge"
2. In terms of the above said order, the Local Commissioners visited the
premises at the different sites of the parties as directed by the Court and they
recovered the books in question and filed their respective reports.
3. Thereafter, the applicant, Reed Elsevier India Pvt. Ltd. filed a review
petition bearing No.676/2012 under Sections 114, 151 & 152 CPC, seeking
review/clarification of the order dated 12th September, 2012. The said
application along with an application for condonation of delay being
I.A.No.20730/2012 was listed before the Court on 19th November, 2012
when notice was issued to the non-applicants for 3rd December, 2012. On
3rd December, 2012 an adjournment was sought by the petitioner for filing
the reply. On the said date, respondent No.4 appeared before the Court and
sought time to file the reply to the main petition and notice was also issued
to the remaining unserved respondent Nos.1 to 3.
4. On 9th January, 2013, after hearing Mr.Saurabh Kirpal, learned
counsel for the applicant, the prayer of review of order was rejected with the
observations that no grounds are made out for review of the order dated 12th
September, 2012. However, for the purpose of remaining prayer made in
the petition, the matter was sent to the roster Bench for 16 th January, 2013
after renumbering the same as an IA. The application for condonation of
delay in filing the review petition was also disposed of.
5. When the matter was taken up on 16th January, 2013, it appears from
the record that no reply in the main petition was filed by the respondents nor
in the application being I.A.No.646/2013. Oral statement made by counsel
appearing that they have no objection if prayer made in I.A. No.646/2013 is
allowed. The petitioner filed its reply to the said application. Mr.Saurabh
Kirpal, learned counsel for the applicant pressed for hearing and disposal of
his application due to hardship addressed by him on behalf of his client
despite of objection of petitioner‟s counsel that reply to the main petition
by the respondents is necessary for the purpose of deciding the I.A.
No.646/2013. In view of above, this Court has heard the I.A.No.646/2013
on merit.
6. In para 16 of the order dated 21st January, 2013, this Court observed
as under:-
"16. This Court has yet to counter the issues raised by
the applicant as to whether the present case is covered in
that category. The respondents are apparently waiting
the decision of this application before filing any reply to
the main petition. No doubt, the issues raised by the
applicant have to be determined and same would be
considered when all the relevant and full disclosure and
details would be provided. Due to such peculiar facts and
circumstances in the present case, I am of the view that
without full disclosure made either in the reply to the
main petition by the respondents to deal with the
allegations made by the petitioner or by the applicant, as
per statement made in para 7 of its application or by the
present application or by filing of proper application, the
prayer made in the application at this stage cannot be
granted as this Court feels that the said details are
necessary to consider the issues raised by the applicant.
The application is hereby dismissed."
7. Against the said order, the applicant M/s Reed Elsevier India Pvt. Ltd.
filed an appeal being FAO(OS) No.122/2013 before the Division Bench of
this Court. The same was disposed of by order dated 27 th February, 2013
which reads as under:-
"Caveat No.181/2013
Since learned counsel for the respondents has
entered appearance, the caveat stands discharged.
CM No.3487/2013
Allowed subject to just exceptions.
CM No.3486/2013 (For Condonation of Delay of 134
days in filing the appeal)
Notice, which is accepted by learned counsel for
the respondents.
In view of the facts set out in the application, the
delay in filing the appeal qua the orders in question is
condoned and the application is allowed.
FAO (OS) No.122/2013
We have heard learned counsel for the parties.
The fact of the matter is that the appellant before
us was not a party to the proceedings initiated by R-1
under Section 9 of the Arbitration and Conciliation Act,
1996. However, the interim orders passed in favour of
R-1 seek to directly affect the appellant. It is in these
circumstances that the appellant moved an application
for clarification/review of the interim order which, in our
view, effectively is seeking vacation of the order. It
appears that the stand of the appellant before the learned
single Judge was that they were independent entities
against whom no interim orders could have been passed.
In the alternative, it was pleaded that even if the
allegation of R-1 is correct that the appellant is a front for
R-4, still no interim orders could have been passed. The
order also seeks to suggest that the arrangement
which the appellant had with third parties from where it
derived its rights was not placed before the Court despite
being called upon to do so. It is in these circumstances
that the learned single Judge has opined vide the
impugned order that the application filed by the appellant
cannot be entertained "at this stage".
Learned counsel for the appellant states that they
have no difficulty in placing the relevant documents
before the Court to show their independent existence and
rights. It is, however, prayed that the disclosure of these
documents would result in commercial and other
terms being disclosed. On the other hand, learned counsel
for the respondents contends that solution could be to
place the documents on record after redaction/blacking
out of the relevant material, which may disclose
commercial terms.
In view of the aforesaid controversy, the following
agreed order is passed:
i) The appellant will at the initial stage place the
relevant records in a sealed cover before the learned
single Judge and it will be for the learned single Judge to
take a call as to whether copies of these documents
should be handed over to the respondents or not.
ii) The question of whether the injunction should
continue to operate and the goods remain sealed qua the
appellant, would be examined thereafter as no opinion
has been formed by the learned single Judge one way or
the other vide the impugned order.
iii) Documents, as aforesaid, will be placed before
the learned single Judge as prayed for by learned counsel
for the appellant within a period of three days.
iv) The aforesaid aspect will be heard and
examined by the learned single Judge on the date fixed of
18.03.2013.
The appeal accordingly stands disposed of."
8. After passing of the order dated 27th February, 2013 by the Division
Bench, the respondent No. 4 filed his response to the petition resisting the
prayers of interim relief by taking the following line of defences:
a) The respondent No. 4 has stated that the said respondent is no longer
the partner in the partnership firm which is the respondent No. 1,
therefore, the dispute qua the respondent No. 4 is not arbitrable. It has
been stated that the main relief is in the form of the mandatory
injunction in a determinable contract which is impermissible in law.
b) It is submitted that the agreement has been terminated by way of the
efflux of the time, therefore the present petition is not maintainable.
The present petition seeks to enforce a restriction after the termination
of the agreement which is legally impermissible in law.
c) The answering respondent contended that the said respondent is the
first owner of the works. The respondent No. 4 entered into an
agreement with the co-authors of the books shown to be authored by
him in the schedule A of the agreement dated 14th December, 2009 by
which the rights in the said title was given to the respondent No. 4 by
the author. The respondent No. 4 thereafter entered into an agreement
dated 15th January, 2007 for the assignment of the copyright in favour
of the respondent No. 1. The said agreement dated 15th January, 2007
does not provide for any term or period for which the assignment
would subsist. Therefore as a matter of law, the assignment would
subsist only for 5 years as per the applicability of the Section 19 (5) of
the Act. Accordingly, on the date of the retirement which was 13th
February, 2012, the respondent No. 4 was the sole owner of the titles
as the rights of the works under the agreement have reverted back to
the respondent No. 4.
d) The respondent No. 4 has stated in the reply that as per the
applicability of Section 14 of the Act, the property of the partnership
remains the individual property of the partner unless there is an
agreement express or implied that the property is to be treated as the
property of the firm. As per the respondent No. 4, there is no contract
which exists in the instant case, therefore, the titles by operation of the
law belongs to the respondent No. 4 in his individual capacity and the
present petition is not maintainable.
e) The respondent No. 4 has averred in the reply that the right to publish
the title was the limited permission given to the respondent No. 1
which was inturn given to the petitioner so long as the respondent No.
4 were collaborating with the respondent No. 1. There is no
misstatement made by the respondent No. 4 as the statements which
were made on the date of entering of the agreement were correct and
it is only later on, the respondent No. 4 resigned from the respondent
No. 1. As per the respondent No. 4, the petitioner cannot plead
ignorance of the fact that the respondent No. 1 was only to provide the
titles for which it has all rights and authorizations to do so. There was
no representation made to the petitioner that the respondent No. 1 was
the owner of the titles itself. Once, there is a change in circumstances,
the respondent No. 4 cannot be held liable for the said acts.
f) The respondent No. 4 has stated that the liability of the retired partner
arises by estoppels only. The petitioner cannot sue both the
respondent Nos. 2 to 3 as the partners of the firm and respondent No.
4 as erstwhile partner of the firm together. The respondent No. 4 has
averred that even the retiring partner liability can be discharged by the
reconstituted firm as per Section 32 (2) of the Act. In the present case,
there is no intention which has been evinced from the re-constituted
deed dated 13th February, 2012 which seeks to bind the respondent
No. 4 to the liability of the respondent No. 1. Therefore, this court
should not pass any interim order against the respondent No.4
g) The respondent No. 4 has further mentioned that he is the proprietor
of the Fillip learning and has entered into a co-publishing agreement
dated 16th February, 2012 with the Reed Elsevier India Pvt. Ltd., the
applicant, wherein the applicant has been given right to publish the
titles independent to the right of the partnership firm over the said
titles which has already been lapsed after 5 years. Thus, no injunction
order can be passed against the respondent No. 4 or against Elsevier.
9. By raising the aforementioned pleas to resist the interim measures, the
respondent No. 4 prayed that the application under Section 9 of the Act may
be ordered to be dismissed. Likewise, the respondents No. 1 to 3 have filed
their separate response to the application under Section 9 by taking the pleas
which can be summarized in the following manner:
a) It is stated by the respondents that the agreement between the parties
relied upon by the petitioner dated 14th December, 2009 is an
unsigned document. The petitioner has not filed the signed copy of the
agreement as the same was never signed by the respondents.
b) It is averred in the reply that the petitioner has been himself in breach
of the terms of the agreement between the parties. The petitioners
failure to perform the obligations under the agreement between the
parties has caused immense financial loss to the answering respondent
besides loss of reputation and goodwill.
c) The respondents have stated that it is the petitioner who intends to
wriggle out of the agreement between the parties. The present petition
is attempt by the petitioner to excuse himself from performing his part
of the obligations under the agreement.
d) It is stated that the answering respondents are a small partnership firm
based in Bangalore, the present petition has been filed by the
petitioner to harass the respondents at the place which is forum non
convenience. This court should reject the petition on that ground.
e) The present petition has become infructuous in view of the ongoing
arbitration proceedings and the petitioner is entitled for any further
interim protection and conveniently approach the arbitral tribunal for
any such protection.
f) It is the petitioner whose poor performance has actually lead to the
respondent No. 4 resigning from the respondent No.1 firm. The
respondent No. 1 firm has suffered immense loss on account of the
poor revenue generation and foul commitments of the petitioner.
g) It is stated that it is the petitioner who has concocted the story by
involving the third party Reed Elsevier India Pvt Ltd in order to bring
the petition within the jurisdiction of this court. The respondent Nos.
1 to 3 have no relation with Reed Elsevier Ltd. and the allegations
made in the petition are totally baseless.
10. The respondents No.1 to 3 in their reply filed on 14th March, 2012
raised the defence that the alleged agreement dated 14 th December, 2009 is
an unsigned document. The petitioner is not performing its obligations
under the agreement. The respondents are unhappy with the respondent
No.4 also. The respondent had the rights and power to enter into the
agreement with the petitioner. Respondent No.4 withdrew the publication
rights from respondents No.1 to 3. The respondents No.1 to 3 are ready and
willing to perform their obligations under the agreement.
11. By raising the aforesaid pleas, it has been prayed by the respondents
that the petition under Section 9 may be directed to be dismissed. The matter
came up for hearing when Mr. Akhil Sibal, learned counsel appearing on
behalf of the petitioner has made his submissions which can be outlined in
the following manner:
a) Firstly, Mr. Sibal, learned counsel for the petitioner has argued that
the present petition is necessitated as the respondent No. 2 to 4
collectively agreed as partners of the respondent No. 1 firm to the
petitioners that they will continue to provide the titles available with
the firm to the petitioner. Mr. Sibal argued that the alteration of the
status of the titles in the work by way of resignation of the partner
which is respondent No. 3 subsequently is calculated move by the
respondents which have been done knowingly as the respondents
were aware that the respondent No. 1 could not conduct the business
with the third party publisher. It is argued that the respondents
therefore chose this route wherein the co-author or author of the work
which is respondent No. 3 revoked his consent towards the respondent
No. 1 and thereafter prejudicially affected the working of contract
which was to maintain the exclusivity of the petitioner when under the
contract the partners who were the joint tenants of the partnership
were bound to maintain the exclusivity in the form of firm business.
b) Mr. Sibal argued that the respondent No. 1 to 3 are also acting in
collusion with the respondent No. 4 which is evident from their
farfetched stand which the respondent Nos. 1 to 3 are taking while
resisting the present petition that this contract was never signed and
never existed between the parties. Mr. Sibal argued that the conduct
of the respondent No. 1 to 4 was unfair towards the petitioner as they
never informed any such event of the retirement of the respondent No.
4 prior to the resignation. It has been informed suddenly after the
respondent No. 4 has already left the respondent No. 1 firm that the
titles of the works are no longer available with the respondent No. 1.
All this as per Mr. Sibal reflects upon the malafide conduct of the
respondent which is aimed at the frustrating the functioning of the
contract and to create impediments in the fulfillment of the obligation
of the respondent No. 1 under the contract. As per Mr. Sibal, all this
has been done by the respondents in order to gain easy profits or to
earn a lucrative price for the book titles and on the said pretext a
subsisting contract has been breached by the respondent by adopting
this indirect route of the resignation by the partner.
c) Secondly, Mr. Sibal argued that even as a matter of the law the claim
of the petitioner against the retiring partner is maintainable and the
retiring partner cannot absolve himself for the acts done prior to the
retirement towards the third party by merely saying that he is no
longer the part of the partnership firm as per the provisions of the
Section 32 of the Act. For the purposes of the adjustment of the
claims, the retiring partner must have to have an express contract with
the existing partners and the said third party for discharge of the
liability or in the alternative, the said contract must be implied from
the course of the dealings of the firm. As per Mr. Sibal, in the present
case neither the respondent No.4 has taken the petitioner into
confidence either by entering an agreement nor the petitioner
acquiesced to the course of dealings as suggested by the respondent
Nos. 1 to 3 after the resignation of the respondent No.4. Rather, the
petitioner protested that there is a misrepresentation made by the
respondents and they have acted in breach of the contract. Under these
circumstances, the respondent No.4‟s plea that after the resignation
there exists no responsibility or the liability of the respondent No. 4
cannot be acceded to as the law does not absolve him as it is.
In order to substantiate his submission, Mr. Sibal relied upon the
judgment passed by the apex court in the case of Ashutosh v. State of
Rajasthan, (2005) 7 SCC 308 wherein the Supreme Court laid down
the very same proposition of law approving the excerpts from Lindlay
on Partnership.
Therefore, as per Mr. Sibal, this court should not accept the
plea of the respondent No. 4 that the present petition is not
maintainable as the said respondent has left the respondent No. 1 and
therefore the dispute qua him is not arbitrable when on the date of the
signing of the contract he was the consenting party to the agreement.
d) Thirdly, Mr. Sibal argued that the respondents have made
misrepresentation of the facts before this court by contending that the
respondent No. 4 has no direct connection with the entity called Philip
Learning who has in turn has authorized Elsevier to publish the book
titles which are forming the subject matter of the agreement. It has
been argued that actually Respondent No. 4 is the proprietor of the
Philip learning who has given authorization or rights to publish to
Elsevier for such publication. Mr. Sibal argued that this will make it
evident that the respondents have concealed the facts while making an
application for review of the order dated 12th September, 2012 and
thereafter the documents which have filed by the respondent speak to
the contrary. In effect, Mr. Sibal argued that the conduct of the
respondent No. 4 is questionable and the same is aimed at frustrating
the working of the present agreement. This fact that the respondent
No. 4 has authorized the Elsevier to publish the titles also defeats the
argument of the Elsevier that it is a third party and not the agent of the
respondents.
e) Fourthly, Mr. Sibal has argued that the argument of the respondents
that no injunction could be passed against the respondent No. 4 being
non party to the arbitration agreement or any order affecting Elsevier
cannot be passed as the same is independent entity is not correct in as
much as the respondent No. 4 was the partner in the respondent No. 1
firm and thus was consenting party to the agreement and Elsevier is
not third party or independent entity but is an entity claiming title
from the respondent No. 4 who was party to the agreement at the time
of entering of the agreement being a partner of the respondent No. 1
firm. Therefore, as per Mr. Sibal, it can be said that the Elsevier is the
claiming under the party to the agreement and can be retained by way
of interim measures as provided under Section 9 of the Arbitration
and Conciliation Act, 1996.
Mr. Sibal in order to buttress his submission relied upon the
judgment passed by the learned Single Judge of this court in the case
of Value Advisory Services vs. ZTE Corporation and Ors., reported
in 2009(3) Arb.L.R. 315 (Delhi), Paras 14 to 21, wherein the learned
Single Judge opined that the question whether the interim measures
order can affect the third party must depend upon case to case basis
and there cannot be any straight jacket formula which can be devised
to say that whether order of interim measures may or may not be
passed in every case.
The judgment passed by the Division Bench of Bombay High
Court in the case of Girish Mulchand Mehta & Anr v. Mahesh S.
Mehta and Anr., 2010 (2) Mhlj 657 wherein the Division Bench has
held that the interim order affecting the third party which is claiming
the right under the party to an agreement can be passed and in order to
resist the said interim measures successfully, the said third party has
to show a right independent to that of the party to an agreement.
In view of the settled proposition of law that interim order can
be passed affecting the third party claiming a right under the party to
an agreement, Mr. Sibal has argued that this court should confirm the
interim order passed by this court on 12th September, 2012 without
any variance and should reject the objections of the respondents.
f) Lastly, Mr. Sibal argued that the plea which the respondent has taken
that the right has come back to the owner as per the Section 19 (5) of
the Copyright is an afterthought and the same was never the intention
of the parties at the time of entering of the agreement between the
parties. It has been argued that the respondents never informed the
petitioner about the five years existence of title from 2007 and rather
entered into an agreement of 48 months in the year 2009 by assuring
that the title is with the respondent No. 1. All this would mean that
either the respondent has done fraud on the petitioner at the time of
the entering of the agreement or in the alternative this 5 years term of
assignment is an afterthought when the intentions of the respondent
No. 4 went wrong. In any case, as per Mr. Sibal, the respondents
should be directed to adhere to the contractual commitments during
the currency of the agreement.
12. By making the aforementioned submissions, Mr. Sibal prayed that
this court should confirm the interim order dated 12th September, 2012
passed by the court and should reject the application filed by the
respondents.
13. Per contra, Mr. Nikhil Rohatgi, learned counsel appearing on behalf
of the Respondent No. 4 and Mr Saurabh Kirpal, learned counsel appearing
on behalf of the applicant and Ms. Nidhi Jain learned counsel for the
Respondent Nos. 1 to 3 have made their submissions, which can be outlined
in the following manner:
a) Firstly, Mr. Rohtagi and Mr. Kirpal argued that the respondent No. 4
is the co-author of the titles which are forming subject matter of
agreement. It has been argued that the respondent No. 4 has assigned
the copyright in the titles to the respondent No. 1 by way of
agreement dated 15th January, 2007 without any mentioning of the
term of the copyright. It has been argued that in such circumstances,
the provisions of Section 19 (5) of the Copyright Act shall be
applicable and by virtue of the said provisions, the copyright shall
vest with the respondent No. 4 with effect from 15th January, 2012 as
per the law. The said right flow from the agreement dated 15th
January, 2007 which was done independent from that of the
agreement dated 14th September, 2012 between the parties and the
said right has now reverted back to the respondent No. 4. The
respondent No. 4 after having resigned from respondent No. 1 firm
has independent right and the same is not flowing from the agreement
dated 14th September, 2012 between the petitioner and the
respondents. Therefore, no injunction order can be passed against the
respondent No. 4‟s right in the said titles.
b) Secondly, Mr. Kirpal argued that the entity Fillip learning has entered
into an agreement with Elsevier in its own right and the said right to
publish is flowing from the said agreement dated 16th February, 2012
between the two entities, therefore, this court cannot pass the interim
order against the third party having independent right over the book
title.
In support of his submission, Mr. Kirpal relied upon the
judgment passed by the Kerala High Court in the case of Shoney
Sanil vs Coastal Foundations (P) Ltd., reported in AIR 2006 Ker
206, wherein the Court has held that no order can be passed against
the non-party under the provisions of Section 9 of the Act.
c) Thirdly, learned counsel for the respondents argued the respondent
No. 4 has resigned from the respondent No. 1 firm and as such the
dispute qua him is not arbitrable in nature. Therefore, this court
cannot entertain the petition under Section 9 of the Act.
d) Fourthly, learned counsel for the respondents argued that the Clause
1.3 of the agreement dated 14th December, 2009 is clear when it says
that the respondent No.1 has got all the rights and authorizations for
the titles for which the contract was entered into. It has been argued
that the said statement was true on the date of the execution of the
agreement but the circumstances may change in the future date due to
the resignation of the respondent No. 4. Thus, this court should not
pass the interim order as the retiring partner can be discharged from
the acts of the firm and the rights owned by the respondent No. 4 are
independent to that of the contract dated 14th December, 2009.
e) Learned counsel has argued that the respondent No. 4 is the sole
owner of the M/s Fillip Learning which had entered into the co-
publishing agreement with the Reed Elsevier India Pvt. Ltd. on 16th
February, 2012. The said agreement has no nexus with the agreement
dated 14th December, 2012 and has been entered into by the
respondent No. 4 after resigning from the respondent No.1 firm.
Therefore, the petitioner cannot seek an interim order when neither
the respondent No. 4 nor the Reed Elsevier is party to the agreement.
The petition under Section 9 is thus not maintainable.
f) Learned counsel for the respondent Nos. 1 to 3 reiterated the
submissions which have been made in her reply in order to resist the
petition.
14. By raising the aforementioned pleas, learned counsel for the
respondents argue that the petition under Section 9 of the Act should be
dismissed.
15. I have gone through the petition along with documents filed by the
petitioner and also perused the replies filed by the respondents with
documents and rejoinder thereof filed by the petitioner. I have also given my
careful consideration to the submissions advanced by the learned counsel for
the parties at the bar. Now, I shall proceed to discuss several aspects arising
in the instant case point wise.
16. The first aspect which is required to be considered is as to whether the
rights which were assigned by the respondent No. 4 to the respondent No. 1
by way of agreement dated 15th January, 2007 could be reverted back to the
respondent No. 4 after the passage of 5 years as the said agreement did not
contain any term as mentioned in the agreement as a deeming fiction of law
as per Section 19 and 30 A of the Copyright Act? Depending upon the
answer to the said question, it is to be looked into as to what shall be the
impact of the same to the rights of the parties. I think that the prima facie
view on the said question is necessary without which, the question of grant
or non grant of injunction cannot be decided. Thus, I am proceeding to form
merely a prima facie view of the matter basing on the analysis of the clauses
to the agreement.
17. For the purposes of the evaluating the prima facie tenability of the
plea of the respondents that the copyrights rights granted by the respondent
No. 4 were intended to be for limited period as the agreement dated 15th
January, 2007 did not contain any term under the agreement and thus the
same should preclude the respondent No. 1 from fulfilling its contractual
obligations as a firm, I deem it appropriate to analyze the clauses of the
agreement dated 15th January, 2007 entered into between the respondent No.
4 and respondent No. 1 and the agreement dated 14th December, 2009
entered between the petitioner and the respondent No. 1 firm collectively
and simultaneously in order to gauge the intention of the parties including
the intention of the respondent No. 4 as a partner of the firm.
18. Before proceeding further towards reading of the clauses of both the
agreements as stated above, it is noteworthy to recall that the respondent No.
4 when entered into an agreement with the respondent No. 1 firm dated 15th
January, 2007 was already a partner of the respondent No. 1 firm as the said
firm was constituted between the respondent No. 4 and respondent No. 3 by
way of deed of partnership dated 12th December, 2002. The respondent No.
4 also remained the partner of the firm while entering of the agreement dated
14th December, 2009 while granting the rights to the petitioner as per the
agreement entered between the petitioner and the respondent No. 1 firm.
Thus, one has necessarily to keep in mind the basic principles underlying the
partnership firm in order to find out the true intent of the parties. The said
basic principles on the basis of which the partnership business governs are
enumerated as under:
a) The partnership is business which is carried on all the persons or any
of them acting for all. (Section 4 of the Partnership Act, 1932)
b) The property of the firm includes s all the property and rights and
interest in property originally brought into the stock of the firm, or
acquired, by purchase or otherwise, by or for the firm for the purposes
and in the course of the business of the firm. This is evident from
Section 14 of the Act. Thus, not merely the property originally
brought into stock of the firm is the property of the firm but also the
rights and interested acquired by purchase or otherwise is also
included in the property of the firm.
c) The Act of the partner of the firm binds the firm which means that the
act of the one of the partner is treated as act of all the partners unless
there is a special agreement to the contrary or in the alternative there
are restrictions imposed on the implied authority of the partner to act
on behalf of the firm. All this is clear from the reading of Section 18 ,
19 and 20 of the Partnership Act, 1932.
19. All the above noted principles are essential characteristics of the
partnership business without which no kind of carrying on of business can
be termed as partnership business as the partner is an agent of firm and the
act of the partner binds the firm. These principles are required to be kept in
mind while considering the stand of the respondent which is that the
respondent No. 4 as a partner of the firm entered into an agreement dated
15th January, 2007 to grant rights to the respondent No.1 which in turn
granted the rights to the petitioner by way of agreement dated
14th December, 2009 but as per respondent No. 4, it was for limited period
for 5 years from 2007 agreement.
20. Once the said basic characteristics of the partnership are kept in mind
more specifically that the partner is the agent of the firm and can bind the
firm, then immediately it follows as a matter of necessary consequence that
for examining the intent of the respondent No. 4 whether it was to grant the
limited rights for 5 years or more, not merely the agreement between the
respondent No. 4 and the respondent No. 1 is relevant but also the agreement
between the respondent No. 1 firm and the petitioner is also relevant which
was entered later on as it reflects the intention of firm or collective intention
of the partners. This is due to the reason that the intention of the respondent
No. 4 as a partner of the firm has to be gathered both from the agreement
which the respondent No. 4 had entered with the respondent No. 1 firm and
thereafter the agreement which the respondent No. 4 has entered further with
the petitioner. The intention of the partner of the firm shall be the intention
of the firm which includes all the partners unless there are impediments on
the authority of the partner to Act in the form of contract to the contrary.
Till, the time, said impediments are absent, it is not safe to assume that the
intention of the single partner was distinct from that of the other for the
purpose of carrying on of the business of the firm. Thus, if the firm has
entered into a contract with the third party to carry on its business through
its partner, the intention of the said partner entering into contract on behalf
of the firm shall bind the firm and the necessary conduct thereafter is
sufficient to infer as to whether there was any contrary intention of any other
partner or not.
21. Let me now proceed to discuss the clauses of the agreement dated 15th
January, 2007 and 14th December, 2009 side by side in the light of what has
been discussed above.
The agreement dated 15th January, 2007 begins with the heading
"Agreement", it does not provide for whether it is an assignment or a
licence, the respondents themselves in their reply use the expression
assignment and licence at different places.
Mr. Ganesh Rao/ respondent No. 4 in the agreement is termed as
author of the work. In the Clause 2 of the agreement, it is provided
that the author is the copyright owner of the works. It is further
provided in the said clause that the author is giving full right to
publish, market and sell the work to the publisher and the publisher
has exclusive right to publish market and distribute title for sale
throughout the world.
22. If one reads the Clause 2 carefully, the said clause uses the expression
"giving of right" and does not use the clear expression assignment or
licence. Further, the reading of the clause 2 would show that the said clause
use the expression "full right to publish, market and sell" and thereafter in
the continuation of the sentence use the expression "throughout the world"
which means that the rights granted are of worldwide basis.
23. Then, what does the expression "full right to publish" denote? I find
on prima facie basis that the full right to publish, market and sell has to have
some nexus with the term of the copyright otherwise there is no occasion for
using the term "full right to publish" in the agreement. I form this prima
facie opinion due to the following reasons:
a) The clause 2 of the agreement defines the rights which said agreement
is "giving" which are right to publish, market and sell. Thus, there
was no occasion to use "full" before the expression "right" in order to
define the rights as the said bundle of rights which are right to
publish, market and sell are themselves a complete package of the
rights which are given under the agreement and the same are
specifically and explicitly defined. Therefore, the expression "full
right" is not really used in the context to confer any completeness of
the rights given in the agreement as the said rights are complete in
themselves what are given in the agreement.
b) The said expression "full right" also does not seemingly have any
nexus with the territorial extent of rights given under the agreement.
The same is evident from the continuation of the sentence which is
that the publisher has the exclusive right to publish, market and
distribute the titles "throughout the world". Therefore, the fullness of
the rights given under the agreement can also not to be said to be
connected with territorial extent of the grant of the rights under the
grant.
c) If the expression "full rights" used in the clause 2 does not seem to
have connection with the completeness or specificity of the rights and
also equally it can be seen that the said expression full rights does not
relate to the territorial extent, then the only thing which is left to be
considered is that the said expression has some relation to that of the
term of the rights which is the full term of the rights given. Any other
interpretation would lead to reducing the expression used in the
agreement as dead letter which is impermissible in law.
d) Thirdly, if the full right is given to publish, market and sell to the
publisher on the world wide basis, It seems illogical that from the said
statement any ambiguity comes out as to the term of the rights which
is offcourse has to be full term when the expression used is full right
for worldwide basis. Therefore, it is difficult to draw an inference
from the said statement of grant of rights as contained in clause 2 to
state that there was any intention which was emerging of the parties to
have any reverting back of the rights when the rights given are full
and that too on worldwide basis. Sometimes, the parties do not choose
the correct words to form the accurate language in the agreement, but
that does not preclude the court from reading the said agreement
carefully in order to deduce the intention for the purpose of
interpretation of clauses.
e) Fourthly, the reason of mine to come to this interpretation is that just
like the expression "giving" is loosely used for the purposes of grant
which may be assignment or license depending upon the spirit of the
agreement when it is read holistically clause by clause and till that
time the said expression is ambiguous, similarly, I find the placement
of expression "full rights" by defining the rights thereafter and also
giving the rights on worldwide basis is indicator of the intent of the
respondent No. 4 as an author to grant the full right in the sense of full
term of right. Any other interpretation would not give any meaning to
the expression "full rights" which would lead to ambiguities.
f) Lastly, it is well settled principle of law that the agreements are
required to be read clause by clause and each and every word used in
the clause is accorded meaning in order to find out the true intent of
the parties. The term of the agreement is also a question of fact which
has to be first seen by fair reading of the agreement whether there is
any slight indication in the agreement towards the term of the
agreement and if not only then the conclusion as to absence of the
term is arrived at. This fact finding enquiry has to be done by fair and
the contextual reading of the clauses in order to find out as to whether
there is any indication towards the term and the nature of the
arrangement which will also imply towards the term of the agreement.
It is only thereafter the legal consequences which are applied in the
case where there exists no indication towards the term of the
agreement. Therefore, this question of finding out of term in the
agreement is a mixed question of fact and law and not merely a
question of law.
24. Upon the fair reading of clause 2 which talks about full rights which
are given in the agreement on the world wide basis along with the other
clauses of the agreement like clause 4 which talks about annual royalty on
per year basis, clause 5 which talks about annual report of sale on
December of every year, publisher‟s right to print the sign of copyright, it is
evident, the agreement is leaning towards a permanent arrangement which
fortifies the view that the said grant is seemingly a grant of rights for full
term as it uses the expression full rights than the limited term. Consequently,
once there is a indication of the term in the agreement by using of
expression full rights under the agreement dated 15th January, 2007, the only
conclusion which follows is that the Section 19 and Section 30 of the Act
would not be applicable which is clear from their express wordings.
25. I am also of the view that the finding out the true indication of the
term of the agreement after reading the agreement clause by clause is not an
unusual exercise when it comes to the agreement relating to grant of the
copyright rights. This is due to the reason that the copyright grants are often
misused by the owners of the copyright by selling the copyright time and
again in the market by creating the multiple rights affecting the commercial
transaction. This is more than often seen in the cases of copyright
agreements involving films and rights relating to films where this exercise is
done in order to reap maximum profits not realizing that one agreement after
another sometimes affects the commercial transactions which were done
earlier under the belief that the same were done for limited period. Thus, I
am of the view that the enquiry as to presence or absence of the term under
the agreement relating to the copyright grant cannot be merely an exercise
which can be done by not finding the clause relating to term under the
agreement and straightaway arriving at the conclusion that there is no term
and thus the agreement was aimed for 5 years. The fair and meaningful
reading of the agreement is essential in order to find out what the parties
actually intended and whether they intended to assign the rights in perpetuity
or for limited period and what is the indication of the term under the
agreement. Thus, the judicious approach should be adopted while
interpreting the agreement. Ultimately, the grant of the copyright is also an
agreement so much shall be dependent upon on the intention of the parties.
If the straightforward conclusion as to absence of term is arrived at such
cases without judiciously analyzing the agreement by giving meaningful
reading and finding out the indication as to term of the rights, then the said
reversion of rights will disturb several important commercial arrangements
without the parties really intending to do so.
26. In a similar case where the question was whether rights granted in the
film were reverted back to producer due to lack of express mention of the
term in the copyright assignment was dealt with by Division Bench of this
court in the case of Shemaroo Entertainment Ltd. vs. Amrit Sharma And
Ors. on 20 July, 2012 in FAO(OS) No.292/2012 wherein the Division
Bench of this court also did the similar enquiry as to the interpreting the
terms of the agreement in order to find out any indication of the term under
the agreement. In the said case also the expressions used were all the
rights", "worldwide", "absolutely" and these terms were interpreted to mean
that the rights were given for the full term of the copyright and not reverted
back to that of the owner. In the words of the Division Bench, it was
observed thus:
"Thus, the right assigned in the "producer‟s film" which is defined to
include all cinematograph films made during the period of the
agreement include three rights which are literary, dramatic and
musical works. The said clause 3A further uses the expression "All
other right, title and interest", likewise it also uses the expression "All
rights of publication, sound, television, public performance".
Furthermore, the said clause 3A while assigning the rights uses the
expression "absolutely" and "worldwide". All these wordings
used in clause 3A are prima facie indicators of the intent of the
parties to the agreement which is to assign the rights absolutely
and worldwide and all the rights available with the
producers. (Emphasis Supplied)
10. The said clause 3A when read with clause 1 which relates to term
of the agreement alongside with the definition of the producer‟s film
under the definition clause which means all cinematograph films
made during the said period of the agreement, the same may
construed to mean that though the term of the agreement dated 29th
September, 1983 was intended to operate for 3 years, the said
agreement assigned all the rights in the cinematograph films made
during the said periods which is called Producer‟s films absolutely
and on worldwide basis. Thus, the said agreement may be
construed to mean that term of the operation of the agreement
may be distinct from the term of the assignment of the
copyright which uses the distinct wordings in assignment clause in
clause 3A which reads " all the rights" , "worldwide",
"absolutely". (Emphasis Supplied)
11. The parties do not dispute that the said cinematograph film
NAMAK HALAL was released during the said period of 3 years as
defined under the agreement. It is only the term of copyright which
has been disputed by the appellant. The said term according to us
upon reading of the clauses of the agreement would be governed
by clause 3 A which reflects the intention to assign the copyright
absolutely and worldwide. Thus, the said agreement prima facie
appears to assign the copyright absolutely for the cinematograph
film or producer‟s film made during the term of 3 years in the
agreement." (Emphasis Supplied)
27. I find that the factual situation in the present case is no different from
that of what existed in the case of Shemaroo (supra) as in the instant case
too, the clause 2 is aiming to give the full rights on worldwide basis by
defining what rights the said agreement is aiming to give with the year by
year royalty, annual reports and all other arrangement. Thus, in that case of
Shemaroo (supra) it was the wordings absolute rights were interpreted
alongside worldwide basis in order to form an opinion as to term, likewise,
in the instant full rights can be interpreted in similar manner while
considering the accompanying terms of the agreement and also the kind of
the arrangement entered between the parties. The case of the Shemaroo
(supra) is clearly applicable to the instant case.
28. In view of my above discussion, it can be easily said that the intention
of the respondent No. 4 in the agreement dated 15th January, 2007 was to
grant the full rights on worldwide basis to the respondent No. 1 and not for
the limited term. Thus, on prima facie basis, it can be said that the rights
granted under the agreement do not seem to have reverted back to the
respondent No. 4.
29. I also find the view which I have taken in relation to the grant of the
copyright under the agreement dated 15th January, 2007 is in consonance
with the events that had happened subsequent to the said agreement in the
backdrop facts of the instant case. Pursuant to the agreement dated 15th
January, 2007, the rights were granted to the respondent No. 1 as a
partnership firm. Thereafter, the respondent No. 1 on 14th December, 2009
entered an agreement of co-branding with that of petitioner for the period of
48 months which means 4 years extendible uptil 60 months. Thus, the expiry
of the agreement dated 14th December, 2009 is going to be either in 2013 or
2014. In the said agreement dated 14th December, 2009, the schedule A and
Schedule B appended to the agreement clearly provides for present titles and
future titles which contain the titles which are authored by the respondent
No. 4 which form the subject matter of the grant by the earlier agreement
dated 15th January, 2007 between the respondent No. 4 and 1.
30. The agreement dated 14th December, 2009 was entered into by one of
the partner namely Mr. Lal M. Prasad on behalf of the firm wherein the
respondent No. 1 as a firm gave assurances of many kinds to the petitioner
including that the respondent has got all the rights and authorization of the
present and future titles and also that the respondent No. 1 shall ensure that
it will maintain the exclusivity of the petitioner to market and publish such
titles during the term of the agreement. The said assurances by the
respondent No. 1 firm through one partner in the agreement dated 14th
December, 2009 could not have been possible unless the respondent No. 4
intended to give the rights to the full term of copyright to the respondent
No.1.
31. The respondent No. 1 as firm could not have entered into an
agreement for the period 4 to 5 years with the petitioner to maintain the
exclusive rights of the petitioner to publish and market the titles of the book
till the time the respondent No. 1 firm itself had the rights to enter into such
arrangement by way of agreement. All these happenings and execution of
the agreement dated 14th December, 2009 itself is evident of the fact that the
respondent No. 1 firm was granted the said rights of which either the firm
was a assignee or the licensee for the ample term which enabled the firm to
enter into such agreement dated 14th December, 2009 for 4 years and 5
years.
32. Let me now examine the submissions on the learned counsel for the
respondent on this aspect. I do not agree to the submission made by learned
counsel Mr. Kirpal and Mr. Rohatgi that the respondent No. 1 could have
made the representation to the petitioner that the respondent No. 1 had got
the rights on the date of entering of the agreement which was 14th
December, 2009 which was true at the relevant time but later on it might be
discovered the rights were withdrawn and reverted back to the real owner. I
find that such representation is prima facie unacceptable due to the simple
reason if the respondent No. 1 firm would enter into 4 years contract to
provide the clean titles and continue to provide the same in future as well,
then the said respondent No. 1 firm is bound to provide the said titles under
the contract for the term of the contract. Otherwise, the representations
which were made on the date of entering the contract if allowed to be
different from the time of fulfilling the same during the term of the contract,
the agreement would be vitiated by either fraud or misrepresentation.
Therefore, the respondent No. 1 firm could not have agreed to provide the
titles which it has and authorizations to do so and shall refrain from
submitting any titles which would infringe the copyright of the third party in
the form of schedule A and schedule B as the present titles and future titles
by entering into the agreement for 4 years unless the respondent itself has
got such rights to do so. This is the only logical way one can accord legality
to the agreement dated 14th December, 2009 and also supports the view
which I have taken, that the agreement dated 15th January, 2007 was not for
the limited period of 5 years but were intended to be given for the full term.
33. I also to some extent agree to the submission of the Mr. Kirpal and
Mr. Rohatgi that the clause 1.3 of the agreement dated 14th December, 2009
uses the expression "rights and authorizations" which somehow means that
the respondent No. 1 on the date of the entering of the agreement could be
either the owner or the licensee. But that itself does not contemplate a
situation that the respondent No. 1 can be a owner for a limited period or
licensee for a limited period lesser than 4 years which may lead to the
respondent No. 1 giving false representations to the petitioner. It only means
that the respondent No. 1 may have all the rights and authorization to fulfil
the obligation to submit to the petitioner all the necessary titles which form
the subject matter of the agreement. Thus, the said submission also does not
convince me to take a different view to what I am proceeding to take.
34. Another reason for disbelieving the submission of Mr. Kirpal and Mr.
Rohatgi is that the respondent No. 4 was part and parcel of the respondent
No. 1 partnership firm. On the date of 14th December, 2009, when the
respondent No. 1 entered into a contract with the petitioner for supplying the
present titles and future titles which it had and would continue to possess or
own for publication for 4 years, the respondent No. 4 was the participant in
the said partnership firm/ respondent No.1 as a partner. There is no material
on the record to suggest that the respondent No. 4 informed the respondent
No. 1 during the relevant period in the year 2009 about the fact that it should
desist from entering such an agreement as it is limited licensee and the rights
of the respondent No. 1 to further authorize the titles would expire in the
year 2012 during the existence of the contract. Nor, there is any document
which has been surfaced into light from which it can be said that the
respondent No. 4 (either independently or as a partner of the firm) informed
the petitioner about the limited period of licence given to respondent No. 1
and thus the same may come in the way of the contractual obligations of the
respondent No. 1 as a firm. In the absence of any such documents on record,
it cannot be said that there was any intention on the part of the respondent
No. 4 to confer limited period rights on the respondent No. 1 firm which
inturn granted the rights to the petitioner for four years from 2009 longer
than the said period and further, the respondent No. 4 never intended to treat
this grant of rights to the respondent No. 1 as a limited period right else
could have in ordinary course of business ought to have informed the
petitioner at the time of entering of the contract dated 14th December, 2009.
Having not done so, the respondent No. 4 clearly acquiesced to the grant of
the rights by the respondent No. 1 firm being a partner by not objecting at
the relevant time nor giving the representation to the petitioner about the
said fact. In short, the respondent at the relevant time never intended to treat
this grant of titles for limited even when the conduct of the respondent No. 4
is seen at the relevant time period.
35. On the contrary, the submissions of the respondent No. 4 in the
counter affidavit and the oral submission made at the bar is that the
petitioner ought to have discovered the said fact on its own as the ignorance
of law is no excuse and the petitioner being a commercial entity ought to
have been aware of such limited conferring of title as per the terms of
agreement dated 14th December, 2009. I am of the view that the said
submission of the respondent is equally misplaced and cannot be acceded to.
This is due to the following reasons:
Firstly, the respondents saying that the petitioner ought to have
discovered the said fact in the ordinary course of the business at the
time of entering of the contract or ought to have been aware about the
said fact is not correct and is self contradictory to the respondent no.
4‟s argument that the agreement dated 15th January, 2007 was
confidential in nature and could not be divulged. It is a matter of
record of this court that by way of order dated 21st January, 2013, this
court directed the respondents to place all the material on record to
which the respondent‟s objected that the said agreements are
confidential in nature and could not be divulged. Thereafter, the
Division Bench vide its order dated 27th February, 2013 directed these
documents to be placed on record with certain limited conditions.
Thereafter on 13th March, 2013, the documents were filed by the
respondent no. 4, from which one of the document is the agreement
dated 15th January, 2007 which contained the confidentiality clause.
There is no material on record to suggest that either respondent No. 4
or respondent No. 1 had shown or informed the petitioner about the
existence of the agreement dated 15th January, 2007. Once, the
respondent never informed the petitioner about the existence of the
agreement 15th January, 2007, it is beyond comprehension as to how
the petitioner could have known about the existence of the agreement
dated 15th January, 2007.
Secondly, it was also not feasible for the respondents to divulge the
agreement dated 15th January, 2007 at the time of entering of the
agreement dated 14th December, 2009 even upon the petitioner‟s
insistence. This is due to the respondents own saying that the
agreement dated 15th January, 2007 was a confidential document and
contained the confidentiality clause. Rather, the petitioner
immediately upon receipt of the letter on 13th February, 2012 at the
time when the respondent No. 1 informed the fact of resignation of
respondent No. 4 did ask for the relevant agreement entered into
between the respondent no. 1 and respondent no. 4. However, the
respondent No. 1 denied divulging the said document by its reply
dated 1st March, 2012 stating that the document is confidential in
nature. Under these circumstances, the petitioner could not have in
ordinary course of business learnt about the existence of the
agreement dated 15th January, 2007 unless the respondents inform the
petitioner at the time of entering of the contract. Therefore, the
submission that the petitioner is guilty of not asking for the document
in the instant case cannot be accepted.
Thirdly, once the petitioner could not have learnt about the existence
of the agreement dated 15th January, 2007 but for the respondents
informing about the same to the petitioner, the petitioner could not be
held responsible for ignorance of the law. If the petitioner has not
seen the agreement containing the alleged limited period rights, there
was no occasion for the petitioner assuming about of the legal
consequences if any arising out of the unseen agreement. Thus, the
petitioner is not informed the material fact which is the agreement
dated 15th January, 2007 at the time of entering of the agreement
dated 14th December, 2009. It is altogether different matter that the
there is no such legal consequences which flow from the agreement
dated 15th January, 2007 as discussed above in view of the fair
reading of the agreement and intention of the parties derived from the
agreement which was to confer the rights not for limited period which
is a prima facie view, I have formed. But to say that the petitioner
ought to have been aware of the alleged arrangement between the
respondent No. 4 and the respondent No.1 when during ordinary
course of business, it was not feasible for the petitioner to discover
this fact is the submission which cannot be accepted and the petitioner
on that count cannot be held guilty of ignorance of law when no such
consequences follow from the agreement.
Fourthly, the terms of the agreement dated 14th December, 2009 also
nowhere inform that the respondent No. 1 is possessing the rights for
a limited period or there may be any eventuality wherein the
respondent No. 1‟s authorization may lapse for after certain period.
On the otherhand, the clause 1.3 speaks to the contrary that the
respondent No.1/ Sanguine has all the rights and authorization and
shall continue to provide the titles which shall not infringe any
copyright of the third party. Therefore, it cannot be said that from the
reading of the clauses 1.3 of the agreement dated 14th December,
2009, it is self-evident that the said agreement provides for
authorization which would have persuaded the petitioner‟s to assume
that the said rights were for limited period. The respondents by
contending so intend the petitioner to go too much presumptuous
about the existence and the fate of titles depending the kind of the
rights and duration without showing the actual arrangement. I find
neither does the clause 1.3 imply this meaning as contended by the
respondent nor such presumptions can be drawn by the party to the
agreement when it is entering into a commercial contract like this for
the specific rights granted for specific period without any ambiguity
in the terms of the agreement dated 14th December, 2009. Therefore,
on the said ground also, the submission of the learned counsel for the
respondents cannot be accepted.
36. For all these reasons stated above, I do not find merit in the contention
of the learned counsel for the respondent that the petitioner is guilty of any
ignorance of law or ought to have been aware of existence of the agreement
dated 15th January, 2007 or the arrangement between the respondent No. 1
and respondent No. 4 for a limited period when neither the respondent No. 1
nor the respondent No. 4 ever informed the petitioner about the said
arrangement at the time of entering of the co-branding agreement dated 14th
December, 2009 and rather chose the route of confidential nature of
document which made the petitioner incapable of discovering these facts in
ordinary course of the business. All these stands which the respondents had
taken at the time of entering of the contract dated 14th December, 2009 are
clearly pointers towards the intention of the respondent No. 4 which is that
the respondent No. 4 at the entering of the contract never intended to treat
his grant of rights to the partnership firm/ respondent No.1 for the limited
period.
37. Let me now examine the conduct of the respondent No. 4 and the
respondent No. 1 post the entering of the agreement dated 14th December,
2009 which is again leaning towards the view I have taken which is that the
respondents acquiesced to the grant of the rights under the agreement dated
14th December, 2009 and not intended to treat the said grant of titles for a
limited period of time lesser than the terms of the agreement 14th December,
2009. This can be seen from following discernible position emerging from
the facts of the instant case:
a) Firstly, that the respondent No. 4 being a partner of the respondent
No. 1 firm never protested against the entering of the contract dated
14th December, 2009 by the another partner namely Lal M Prasad on
behalf of the respondent No. 1 which binds the firm for the period of
4 years when as per the respondent No. 4 the rights were to be expire
on 5 years from the date of 15th January, 2007. The said non protest
by the respondent No. 4 and continuing to proceed to enter into the
agreement clearly binds the firm including the respondent No. 4 to
continue with the agreement.
The said act of no protest by the respondent No. 4 also indicates
the intention which was not to treat the rights for a limited period.
This fact is also crucial even if is assumed that the agreement dated
15th January, 2007 granted rights for limited period. This is due to
reason that even if the respondents stand that the agreement dated 15th
January, 2007 is to be believed that it granted the limited period rights
for 5 years, still the respondent No. 4 by proceeding to enter into the
contract for the grant of the rights for a larger period of time as a
partner of the respondent No. 1 firm by neither protesting against the
said grant of rights to the petitioner nor informing the petitioner about
the limited rights consented to enter into a new agreement for a larger
period and gave his permission to the petitioner to publish the said
titles for a larger period on behalf of the firm by agreeing not to
prevent the respondent no.1 firm from entering into such agreement
dated 14th December, 2009.
This is the only way the conduct of the respondent No. 4 can be
reconciled which is either the respondent No. 4 never intended to
grant the limited period rights to the respondent No. 1 as seen above
from the fair and meaningful reading of the terms of agreement dated
15th January, 2007 or in the alternative if so granted by the respondent
No. 4 for such limited period, later on, the respondent No. 4
consented to the grant for further period by not protesting against or
preventing the respondent No. 1 entering into agreement dated 14th
December, 2009 for a larger period containing the assurances to
provide the titles in the form clause 1.3 and the schedules A and B
containing the titles of the respondent No. 4and participating in the
said agreement by becoming beneficiary to the agreement. That is
why, the act of another partner namely Mr. Prasad binds the firm as
he carries on business for the firm which include all the partners and
the contrary intention should appear either by the express covenant in
the form of partnership deed or by an act and conduct which is
missing in the instant case. Consequently, the conduct of the
respondent No. 1 and respondent No. 4 at the time of entering of the
contract dated 14th December, 2009 and later on indicates that there
was no such intention of the parties more specifically the respondents
to treat the rights granted under 14th December, 2009 so far as relates
to the respondent No. 4 for a limited period lesser than the term of the
agreement dated 14th December, 2009.
b) The respondent No. 1 and the respondent No. 4 did not even inform
the petitioner later on, after entering the agreement dated 14th
December, 2009 and continued to proceed the dealings with the
petitioner till the year 2012. It is only on 13th February, 2012, the
respondent No. 1 informed the petitioner that the respondent No. 4
resigned from the respondent No. 1 firm and is no longer a partner
and therefore the titles owned by him shall no longer be available to
the petitioner. In the said communication dated 13th February, 2012
addressed by the respondent No. 1 to the petitioner, there is no
information about the limited period of rights arrangement between
the respondent No. 4 and the respondent No.1. The said letter merely
informs the factum of resignation of the respondent No. 4 and the non
availability of the titles. The most important part is that the
respondent No. 4 even after the resignation never informed the
petitioner about the lapse of the rights during the relevant period of
resignation and the reversion of the said rights to the respondent No.
4. This again indicates towards the intention and conduct of the
parties which was not to treat the grant of rights as for limited period.
c) The conduct of the respondent no. 1 was also indifferent towards the
petitioner even after the resignation of the respondent No. 4 from the
respondent no. 1 when the petitioner called upon the respondent No. 1
to disclose the arrangement between the respondent No. 1 and the
respondent No. 4 and also asked for the documents towards the same.
The respondent No. 1 response to the said communication in its reply
dated 1st March, 2012 was evasive which was that the said document
could not be disclosed to the petitioner being confidential in nature
and also in the said reply, the fact that the rights were available to the
respondent No. 1 for a limited period was not informed.
38. All the above said factual position clearly reveal that it is only when
the respondent approached the court after analyzing the documents, the
theory of availability of the limited rights with the respondent no. 1 was
developed by the respondent in order to wriggle out of the contractual
obligation. This is apparent on prima facie basis on perusing through the
material and documents which are available on the record. All throughout
the business dealings, the respondents were neither themselves intended to
give such rights to the petitioner for a limited period lesser than the term of
the agreement dated 14th December, 2009 nor did they informed the
petitioner about the same explicitly about such arrangement between the
respondent No. 1 and the respondent No. 4. Resultantly, the argument of the
respondents that the rights were reverted back to the respondent No. 4 in the
year 2012 as a matter of law is primafacie untenable in view of what has
been discussed above which include the terms of the agreement dated 15th
January, 2007 which are giving indication towards full rights on worldwide
basis and the conduct of the respondent at the time of entering the contract
and the later on which reveal about the contrary intentions by way of act and
conduct and acquiescing towards the grant of the rights under the agreement
dated 14th December, 2009 or in the alternative the respondent No. 4 giving
its consent to extend the permission to the petitioner to use the titles as being
a part of the partnership entering into a contract with the petitioner.
39. It appears from the understanding the facts and circumstances of the
case that the respondent No. 1 could not do the business of publishing the
titles of the respondent No. 4 in direct conflict with the petitioner due to the
contractual obligation as contained in the agreement dated 14th December,
2009 which provides that the respondent No. 1 will not do competing
business to the detriment of the petitioner and will maintain the exclusivity
of the petitioner. Realizing this fact, the respondent No. 4 and 1 in an
attempt to circumvent the contractual obligations as mentioned in the
agreement dated 14th December, 2009 and to earn more profits have made a
conscious decision where by the a person which is respondent No. 4 is
allowed to resign from the firm and thereafter he can do business under the
guise that the there was a limited arrangement between the respondent Nos.
1 and 4 which was never disclosed to public at large. By doing this, the
respondents were of the belief that respondent No. 4 could do the business
as he was the ex-partner and being an independent person in his own right
and this will also not breach the contractual obligation of the respondent no.
1 with that of the petitioner. But this is actually no so, by doing this act, the
respondent No. 4 are attempting to indirectly breach the contractual
obligation which the respondent No. 4 could not have done so being a
partner of the respondent No. 1 firm. This is evident from the fact that on
11th February, 2012, the respondent No. 4 retired from the firm and the
respondent No. 1 informed the petitioner on 13th February, 2012 and
thereafter on 16th February, 2012, the respondent No. 4 enters into a fresh
contract with Reed Elsevier, clearly the said actions seem to be indicating
towards intentions of the respondents which prima facie appears to be to
wriggle out of the contractual obligations indirectly in order to make more
profitable business. The petitioner informed that the respondents were
persuaded to do all due to the common employees of the petitioner and Reed
Elsevier who had left the company of the petitioner and thereafter asked the
respondents to indulge into such mischief. All these facts clearly speak of
inequitable conduct of the respondent No. 4. I therefore agree with the
submission of the Mr. Sibal that prima facie, it appears that this is calculated
move by the respondents in order to come out of the contractual obligations.
40. However, I have already observed that the rights in the titles did not
revert back to the respondent No. 4 after his resignation and thus the
respondent No. 4‟s rights are to be treated as per the provisions of the
partnership Act, 1932.
41. It is well settled principle of law that the retired partner shall not be
discharged from the liability any third party for the acts of firm done before
his retirement unless there is an agreement which has been made by him
with the third party and the partners of the reconstituted firm and such
agreement may be implied in the course of dealings of the firm after the
third party has the knowledge about the retirement. This is evident from the
provisions of Section 32 of the Partnership Act, 1932.
42. The Supreme Court of India has approved this principle of liability of
the retired partner towards the third party for the acts of the firm done before
the retirement of the partner by way of the applicability of Section 32 in the
case of Syndicate Bank Vs. R.S. R Engineering Works and Others, (2003)
6 SCC 265 wherein the Supreme Court observed thus:
"Respondent Nos. 2 and 3 have contended that the appellant was
aware of the dissolution of the partnership but that by itself will not
absolve the liability of the retiring partners. Section 32 of the Indian
Partnership Act, 1932, reads as follow:-
"32 Retirement of a partner. (1) A partner may retire:-
(a) with the consent off all the other partners.
(b) in accordance with the express agreement by the partners, or
(c) where the partnership is at will, by giving notice in writing to all
the other partners of his intention to retire.
(2) A retiring partner may be discharged from any liability to any
third party for acts of the firm done before his retirement by an
agreement made by him with such third party and the partners of the
reconstituted firm, and such agreement may be implied by a course of
dealing between such third party and the reconstituted firm after he
had knowledge of the retirement.
(3) Notwithstanding the retirement of a partner from a firm, he and
the partners continue to be liable as partners to third parties for any
act done by any of them which would have been an act of the firm if
done before the retirement, until public notice is given of the
retirement;
Provided that a retired partner is not liable to any third party who deal
with the firm without knowing that he was a partner.
(4) Notices under Sub-section (3) may be given by the retired partner
or by any partner of the reconstituted firm"
6. Under Sub-Section (2) of Section 32, the liability of he retiring
partner as against third party would be discharged only if there is
an agreement made by the retiring partner, with the third party,
and the partners of the reconstituted firm. Of course, an
agreement could be implied by the course of dealing between such
third party and the reconstituted firm, after retirement of a
partner. In the instant case, there was no agreement between the
appellant bank and respondent Nos. 2 and 3 as regards their liability
in respect of the dissolved firm. There is also no evidence to show that
there was an implied contract between the appellant and
respondent No. 4 who allegedly agreed to discharged the liabilities
of respondent Nos. 2 and 3. It is also pertinent to note that there
was no public notice under Sub-section (3) of Section 32 of the
Indian Partnership Act by respondent Nos. 2 and 3. Even if there
was a public notice, it may not alter the position as the alleged
liabilities of respondent Nos. 2 and 3 were incurred by them prior
to the so called dissolution of the firm." (Emphasis Supplied)
43. Applying the said proposition to law to the instant case, it can be said
that in the instant case, neither there is any express agreement of petitioner
with that of the respondent No. 4 and nor such an agreement can be implied
as the petitioner always protested against the acts of the respondent no. 4
after learning about his retirement from the business. The provisions of
Section 32 (3) would not be applicable as no public notice of retirement is
given and even if the public notice is given, the liability of the retired partner
will continue uptil the date of the giving of the public notice. In the instant
case, the obligation to maintain exclusivity and to supply the titles to the
petitioner arises of the agreement dated 14th December, 2009 which was
entered by the respondent No. 1 firm prior to the retirement of the
respondent No. 4. Therefore, the respondent No. 4 would continue to supply
the title and facilitate the respondent No. 1 in order to enable it to fulfill its
contractual obligations with the petitioner during the currency of the
agreement dated 14th December, 2009.
44. The matter can be looked from another angle also which is that even
if the stand of the respondent is believed that there existed some internal
agreement between the respondent No. 1 and respondent No. 4 for the rights
relating to title which could not have been disclosed to the petitioner at the
time of entering the contract dated 14th December, 2009. I have already
observed that the petitioner could not have discovered the existence of the
agreement as the respondents maintain the said agreement was confidential.
Even if this factual backdrop is taken into consideration, then the agreement
dated 14th December, 2009 is vitiated by the misrepresentation or fraud on
prima facie basis due to misrepresentations made by the respondent No. 1 on
the date of the entering of the contract. The legal implication of such
agreements vitiated misrepresentation are provided under the provisions of
Section 19 of the Contract Act, 1872 wherein it is the party on whose the
representation is made has choice either to avoid the contract or insist the
performance and seek restitution. So, still, the conclusion is same which is
that the petitioner can seek insistence of the performance of the contract
from the respondent‟s end by operation of the provisions of the contract.
This is independent to the finding that the conduct of the respondents was
throughout such which clearly indicative of the intention of the parties or
respondents to permit the petitioner to be exclusive licensee or assignee of
the rights of publication for the term of the agreement dated 14th December,
2009.
45. Now, the question which is required to be answered is that whether
the injunction order which has been passed in the matter can affect the third
party M/s Elsevier, when the said is passed under the provisions of Section 9
of the Act.
46. The learned counsel for the intervenors has argued that the M/s
Elsevier is a third party and the right provided to the said entity is flowing
from distinct agreement which the said entity had with the respondent No. 4
and thus the injunction order under the provisions of Section 9 of the Act
cannot be passed as the said entity is the non party to the agreement.
47. On the other hand, Mr. Sibal argued that the said entity Elsevier is
deriving title from the rights of the respondent No. 1 of which the
respondent No. 4 was a partner, thus the said entity cannot be said to be a
third party in a strict sense of term. Rather, the said entity is deriving a title
from the respondent No. 4 in order frustrate the contractual obligations of
respondent No. 1 which was to maintain the exclusivity of the petitioner in
the market.
Mr. Sibal submits that the respondents initially chose not to file any
reply to the present petition. However, the respondents got a review petition
filed by the applicant. The sole purpose of this exercise was to frustrate the
injunction/restrain order dated 12th September, 2012 by seeking relief for a
purported innocent third party - i.e. the applicant. The respondents and the
applicant did not inform the Court about the arrangement entered into
between the applicant and Fillip Learning dated 16th February, 2012 which
has now been filed. The constitution of Fillip Learning was also not
disclosed. It was not disclosed to this Court that Fillip Learning is owned by
respondent No.4 who is its proprietor. It has also been pointed out by
Mr.Sibal that Mr.J.Sarvanan, a former employee of the petitioner, was
responsible for the negotiations on behalf of the petitioner with the
respondents when the agreement dated 14th December, 2009 was entered
into. He is a witness to the said agreement on behalf of the petitioner.
However, Mr. J. Sarvanan subsequently joined the applicant and thereafter
evidently played an instrumental role in negotiating the co-publishing
agreement dated 16th February 2012 between the applicant and the
respondents. He is a signatory to the co-publishing agreement representing
the applicant. Mr. J. Saravanan has misused the confidential information
secured by him while in employment of the petitioner and that the co-
publishing agreement is the product of the connivance between the
respondents and the applicant through the efforts of Mr. J. Saravanan.
Mr.Sibal also pointed out that the co-publishing agreement dated 16th
February, 2012 filed before this Court is a false document. The Exhibits to
the co-publishing agreement appear to have been made in haste to defeat the
order dated 12th September, 2012 and as there are many discrepancies and
conflicting facts have crept into the agreement, the details of which are
mentioned in the rejoinder, has also been referred by him.
He argues that in a way, the entire exercise done by the respondents
and the applicant is in order to defeat the interim order passed and the
applicant has played a major role with his full knowledge about all activities
of the parties at least on the date of execution of agreement dated 16 th
February, 2012. Therefore, in such cases interim order can be passed under
the provisions of Section 9 of the Act as per the well settled law.
48. I have examined the submissions advanced by the learned counsel for
the parties on the question of passing of the interim order under section 9 of
the Act against the third party. I have also gone through the judgments
passed by the learned single judges of this court in the case of Value
Advisory Services v. ZTE Corporation, (2009) 3 Arb L R 315 (Del),
Vikram Bakshi v. Mrs. Sonia Khosla decided in OMP 613/2010 on 16th
November, 2010 and the judgments passed by the Full Bench of Bombay
High Court in the case of Girish Mulchand Mehta v. Manish S. Mehta
2010 (1) Bom C. R. 31 and the ones following Girish Mulchand (supra), I
find that the law is pretty well settled which is that there cannot be any
absolute proposition that the court is powerless to pass the interim order
affecting the third party under the provisions of the Section 9 of the Act.
There may arise various situations wherein the court may have to pass the
order which may affect the third parties. One of such situation is where the
order is passed against the party who is claiming or deriving title through the
party to an agreement. In such cases, if the endeavor is made by the party to
the agreement to frustrate the contract or to come out of the contractual
obligations, the court may pass an interim order framed in such a manner
which may prevent the abuse and effect the third party right.
49. In this context, the judgment passed by the learned Full Bench of
Bombay High Court in the case of Girish Mulchand Mehta & Anr v.
Mahesh S. Mehta and Anr, 2010 (2) Mhlj 657 is noteworthy wherein it
was observed thus:
"The next question is whether order of formulating the interim
measures can be passed by the Court in exercise of powers under
Section 9 of the Act only against a party to an Arbitration Agreement
or Arbitration Proceedings. As is noticed earlier, the jurisdiction
under Section 9 can be invoked only by a party to the Arbitration
Agreement. Section 9, however, does not limit the jurisdiction of
the Court to pass order of interim measures only against party to
an Arbitration Agreement or Arbitration Proceedings; whereas
the Court is free to exercise same power for making appropriate
order against the party to the Petition under Section 9 of the Act
as any proceedings before it. The fact that the order would affect
the person who is not party to the Arbitration Agreement or
Arbitration Proceedings does not affect the jurisdiction of the
Court under Section 9 of the Act which is intended to pass interim
measures of protection or preservation of the subject matter of
the Arbitration Agreement. (Emphasis Supplied)
13. The Appellants, however, place reliance on the decision of the
Kerala High Court in the case of Shoney Sanil v/s. M/s. Coastal
Foundations (P) Ltd. & Ors. reported in AIR 2006 Kerala (206). In
that case the question considered was whether the writ-petitioner,
admittedly, a third party to an alleged Arbitral Agreement between the
Respondents inter se, and who had in his favour a confirmed Court
sale and certificate of such sale and delivery of possession, following
and arising under an independent decree, could be dispossessed,
injuncted or subjected to other Court proceedings under Section 9 of
the Act? The Kerala High Court held that orders under Section 9
(ii)(c) can be passed only in relation to subject matter of dispute in
arbitration which may be in possession of any party since it is not the
intention of the Act or any arbitration proceedings as conceived by the
law of Arbitration to interfere with or interpolate third party rights. It
concluded that on a plain reading of Section 9 of the Act and going by
the Scheme of the said Act, there is no room to hold that by an interim
measure under Section 9, the rights of third party holding possession
on the basis of Court sale could be interfered with, injuncted or
subjected to proceedings under Section 9 of the Act. Instead, it held
that Section 9 of the Act contemplates issuance of interim measures
by the Court only at the instance of party to Arbitration Agreement
with regard to the subject matter of the Arbitration Agreement. The
Court has, however, noted that such order can be only against the
party to an Arbitration Agreement or at best against any person
claiming under him. The Principle expounded in this decision is
that if a third party has independent right in the subject matter of
the Arbitration Agreement, Section 9 cannot be invoked to affect
his rights. At the same time, the Kerala High Court has plainly
opined that it is possible to pass orders under Section 9 against a
third party if such person is claiming under the party to the
Arbitration Agreement. Thus understood, Section 9 can be
invoked even against a third party who is not party to an
arbitration agreement or arbitration proceedings, if he were to be
person claiming under the party to the arbitration agreement and
likely to be affected by the interim measures. The Appellants
herein will have to substantiate that they were claiming independent
right in respect of any portion of the subject matter of the Arbitration
Agreement on their own and not claiming under the Respondent No. 2
Society who is party to the Arbitration Agreement. In absence
thereof, the Court would certainly have jurisdiction to pass
appropriate order by way of interim measures even against the
Appellants herein, irrespective of the fact that they are not party
to the Arbitration Agreement or the Arbitration
Proceedings." (Emphasis Supplied)
50. From the reading of the afore quoted observations of the full Bench of
Bombay High Court in the case of Girish Mulchand (Supra), it is can be
safely said that the powers under Section 9 of the Act has to be invoked by
the party to the arbitration agreement but the Section 9 no where limits on
the court‟s power or jurisdiction to pass the order. Rather, the section 9
provides that the court shall have same powers to pass the interim order as it
has for any other proceedings. Thus, it cannot be said that Section 9 puts
any impediments on the jurisdiction of the court passing the interim
measures or orders affecting third parties. Secondly, the court can
conveniently proceed to pass the interim orders which may affect the third
party who is deriving title from the party to the agreement unlike the third
party having the independent right.
51. Applying the ratio of the Girish Mulchand's case (supra) to the
instant case, it can be seen that the rights which Elsevier is claiming to be
independently flowing the from the contract entered with the Respondent
No. 4 having a proprietorship Fillip learning are in actuality not the
independent rights but are the rights which are being derived from the
respondent No. 4 who was the partner of the respondent No. 1. I have
already observed as per my above discussion that the rights in copyright
titles did not revert back to respondent No. 4 as it has been understood by
him after his resignation from the partnership on 11th February, 2012. The
said respondent No. 4 is not discharged for his liabilities towards the
previous acts of the firm done before his resignation and the said respondent
No. 4 is thus bound by the contractual obligations. Reed Elsevier as an entity
is deriving a title for publishing the works from the respondent No. 4 under
the impression that the said rights were as an operation of law reverted to the
said respondent, which in fact they have not so reverted by operation of law.
Thus, the legal effect of the contract if any entered by the Reed Elsevier with
the respondent no. 4 is inconsequential to the extent it grants the rights to the
titles: "The 8051 & MSP430 Microcontrollers", "Digital Logic Design -
With HDL Practice", "Field Theory, 2ed", "Network Analysis - A
Simplified Approach, 2ed" and "Electronic Circuits - Principles &
Application Data Communications and Computer Networks" which are
forming the subject matter of the agreement dated 14th December, 2009.
The respondent No. 4 as a matter of law did not have the rights when the
said respondent No. 4 was bound by the previous contractual obligation for
giving the permission for publishing the same titles to petitioner for the
same subject matter. Therefore, the rights which Reed Elsevier is claiming
are the rights of the respondent No. 1 firm of which the respondent No. 4
was the partner who gave the rights under the mistaken impression of the
operation of law. Thus, the alleged Rights are actually the rights claimed
through the respondent No. 1 or respondent No. 4 who are parties to the
agreement with the petitioner. Therefore the interim order of the nature
affecting the rights of Reed Elsevier can be passed as prima facie the said
rights are not independent rights but are claiming under the rights of the
respondent No. 1 firm.
52. In the end, it has been suggested by Mr. Sibal, learned counsel for the
petitioner that the petitioner is agreeable to purchase the books/ titles which
are left with M/s Reed Elsevier India Pvt. Ltd. In case, the said suggestion
is agreeable to the applicant, he is granted liberty to move proper application
for passing such directions.
53. Arbitration proceedings between the petitioner and respondents are
pending.
54. Accordingly, this Court is of the view that the prayer made in I.A No.
No.646/2013 filed by Reed Elsevier India Pvt. Ltd. is required to be
rejected. Interim order passed on 12th September, 2012 shall operate uptil
14th December, 2013 on which date the period of 48 months from the date of
execution of the agreement i.e. 14th December, 2009 shall expire.
55. The main petition as well as pending applications are also disposed of.
(MANMOHAN SINGH)
JUDGE
JULY 01, 2013
