Delhi High Court
M/S Phonographic Performance Ltd vs Ministry Of Human Resources ... on 4 September, 2017
$~66
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ W.P.(C) 5829/2013 & CM 12835/2013, 30174/2015
M/S PHONOGRAPHIC PERFORMANCE LTD .....Petitioner
Through Mr Pragyan Pradip Sharma, Mr Rohit
Gandhi, Mr Shikhar Garg, Mr Ganesh Babu,
Mr A.K. Rathore, Advocates.
versus
MINISTRY OF HUMAN RESOURCES
DEVELOPMENT & ORS ..... Respondents
Through Mr Sanjeev Narula, CGSC with
Mr Anumita Chandra, Mr Abhishek Ghai,
Advocates for UOI.
Mr Munish Mehra, Advocate for R3 and R4.
CORAM:
HON'BLE MR. JUSTICE VIBHU BAKHRU
ORDER
% 04.09.2017
VIBHU BAKHRU, J
1. The petitioner (hereafter as „PPL‟) is a company incorporated under
the provisions of the Companies Act, 1956 and is a copyright society
registered under Section 33 of the Copyright Act, 1957 (hereafter „the Act‟).
PPL has filed the present petition, inter alia, impugning two separate notices
(Office Memoranda) - both dated 31.05.2013 - whereby the petitioner was
called upon to file a written statement in respect of the complaints filed by
respondent nos. 3 and 4 respectively.
2. The principal controversy involved in the present petition is whether
the aforementioned notices (hereafter referred to as „the impugned
orders‟)are maintainable in view of Rule 50 of the Copyright Rules, 2013
(hereafter „the Rules‟),which provides for institution of an inquiry, either on
complaint of the Registrar of Copyrights or a member of the copyright
society. The petitioner asserts that since respondent nos. 3 and 4 are not
members of the petitioner society, the Central Government could not act on
the complaints made by respondent nos. 3 and 4. The petitioner also
contends that the impugned orders does not reflect that the Central
Government had formed any belief as required under Rule 50 of the Rules.
3. The petitioner states that another company by the name of Indian
Performing Right Society Limited (hereafter as „IPRS‟) is also registered as
a copyright society for administration of musical and literary works. It is
stated that certain disputes arose in regard to the management and
administration of IPRS and in this context respondent no.3 and 4 lodged
separate complaints for violation of Corporate Governance norms by IPRS.
Respondent nos. 3 and 4, inter alia, alleged that funds of IPRS were
invested in Equity related instrument and in violation of Section 292 of the
Companies Act, 1956. It was also alleged that Section 217 (2A) and 217 (3)
of the Companies Act, 1956 were violated by IPRS.
4. On receipt of the aforesaid complaints, respondent no.1 (Central
Government through its delegate, Special Officer Copyright) issued the
impugned orders forwarding the complaints of respondent nos. 3 and 4
respectively and calling upon the petitioner to file a written statements in
respect of the said complaints in terms of Rule 50 of the Rules.
5. Aggrieved by the same, the petitioner has filed the present petition.
The present petition was moved on 13.09.2013 and this Court passed an ad
interim order to the effect that the petitioner need not participate in the
proceedings, commenced pursuant to the impugned orders. The said interim
order has been continued from time to time and is still subsisting. It is stated
that during the pendency of the present petition, all disputes with respondent
nos. 3 and 4 have been settled and consequently, they have sought
withdrawal of their complaints.
6. Mr Sharma, learned counsel appearing for the petitioner contended
that in view of the overarching settlement arrived at with respondent nos. 3
and 4 and in view of their withdrawal of the complaints, the proceedings
initiated by respondent nos.1 and 2 do not survive. Mr Sanjeev Narula,
learned counsel who appears for respondents nos. 1 and 2, contests the same.
He contended that notwithstanding that the complaints made have been
withdrawn, respondents nos. 2 would, nonetheless, be entitled to continue
with its inquiry and take the necessary action as warranted.
7. Mr Narula referred to Section 34 of the Act in the context of the
controversy, whether the impugned orders could be passed against PPL on
complaints made by persons who are not its members. Mr Narula submitted
that the provisions of Section 34 and 33 of the Act were very wide and the
Central Government could, if it was satisfied that PPL was managed in a
manner detrimental to the interests of the concerned authors and other
owners of rights, cancel the registration of PPL. He submitted that the width
of Section 34 could not be restricted by Rule 50 of the Rules. He also
referred to the decision of the Bombay High Court in The Indian
Performing Rights Society Ltd. v. Union of India and Ors W.P.(C) NO
2384/2017and drew the attention of this Court to paragraph 21 of the said
judgement in support of his contention that prima facie satisfaction, whether
to order an enquiry under Section 33(4) of the Act, enquiry could only be
taken after the PPL had filed its written statement.
8. Before proceeding further, it would be relevant to refer to sub-
sections (4) and (5) of section 33 of the Act, which are set out below:-
"33 (4) The Central Government may, if it is satisfied that a
copyright society is being managed in a manner detrimental
to the interests of the owners of rights concerned, cancel the
registration of such society after such inquiry as may be
prescribed.
33(5) If the Central Government is of the opinion that in the
interest of the owners of rights concerned, it is necessary so
to do it may, by order, suspend the registration of such
society pending inquiry for such period not exceeding one
year as may be specified in such order under sub-section (4)
and that Government shall appoint an administrator to
discharge the functions of the copyright society."
9. It is apparent from the plain reading of sub-sections (4) and (5) of
Section 33 of the Act that the Central Government is empowered to take
punitive measures in the event it finds that a copyright society is being
managed in a manner detrimental to authors and other owners of rights. The
Central Government is also empowered to suspend the registration of a
copyright society in certain eventualities.
9. Section 78 (2) (b) of the Act empowers the Central Government to
make rules to provide for "the form of complaints and applications to be
made, and the licences to be granted, under this Act".
10. In exercise of the said powers, the Central Government has framed the
Rules (The Copyright Rules, 2013). Thus, whilst the Central Government
has the jurisdiction under section 33 of the Act to suspend and/or cancel the
registration of a copyright society, such power has to be exercised in
conformity with the Rules.
11. Rule 50 of the Rules is relevant and is set out below:-
"50(1) If the Central Government, on a complaint of the
Registrar of Copyrights or a member of the copyright society, has
reason to believe that the copyright society is being managed in a
manner detrimental to the interests of its members concerned or
for non-compliance of requirements under section33A, sub-
section (3) of section 35 and section 36 of the Actor any change
carried out in the instrument by which the copyright society is
established or incorporated and registered by the Central
Government, without prior notice to it shall, provide a copy of
the complaint to the society and require the society to submit a
written statement within fifteen working days."
12. It is apparent from the plain reading of Rule 50(1) of the Rules that
the Central Government is required to call for a written statement in respect
of a complaint; however, such action can only be initiated where the
complaint is made by the Registrar of Copyrights or a member of the
Copyright Society. Concededly, in the present case neither respondent no.3
nor 4 (complainants) are - or were at the material time - members of PPL.
Therefore, the threshold condition for the Central Government to initiate
proceedings, is absent. It is not the legislative intention that the Central
Government moves on complaints received from any person. Notice of the
complaint can only be taken if it is made by member of a society or by the
Registrar of Copyrights. This clearly implies that in the event a complaint is
initiated by a person other than a member, it is required to be examined by
the Registrar and if he is satisfied that the allegations are substantiated he
can make a complaint to the Central Government for initiating proceeding
under Rule 50 of the Rules. This, of course, does not apply where the
complaint is made by a member of the society; in that case, the Central
Government can initiate the proceedings without any input or reference from
Registrar of Copyrights.
13. The next important condition that is necessary for inviting a registered
society to submit a written statement is the formation of belief that the
complaint is merited. Unless, the Central Government has reasons to believe
that the copyright society is being mismanaged or conducted in a manner
detrimental to the interests of its members or owners of rights or that certain
statutory provisions have been violated, the Central Government cannot act
on the complaints received.
14. The expression „reason to believe‟ has been examined in various
decisions in the context of various statutes. In Calcutta Discount Company
v. Income Tax Officer: 1961 SCR (2) 241, the Supreme Court held as
under:-
"The expression "reason to believe" postulates belief and the
existence of reasons for that belief. The belief must be held in
good faith: it cannot be merely a pretence. The expression does
not mean a purely subjective satisfaction of the Income Tax
Officer: the forum of decision as to the existence of reasons and
the belief is not in the mind of the Income Tax Officer. If it be
asserted that the Income Tax Officer had reason to believe that
income had been under assessed by reason of failure to disclose
fully and truly the facts material for assessment, the existence of
the belief and the reasons for the belief, but not the sufficiency of
the reasons, will be justiciable. The expression therefore
predicates that the Income Tax Officer holds the belief induced
by the existence of reasons for holding such belief. It
contemplates existence of reasons on which the belief is founded,
and not merely a belief in the existence of reasons inducing the
belief; in other words, the Income Tax Officer must on
information at his disposal believe that income has been under
assessed by reason of failure fully and truly to disclose all
material facts necessary for assessment. Such a belief, be it said,
may not be based on mere suspicion: it must be founded upon
information"
15. Given the scheme of Rule 50 of the Rules, it is not necessary for the
Central Government to pass a detailed order recording its reasons to believe.
It is to be sufficient if the complaint is examined by the concerned officer
and on examination of such complaint, he finds reason to believe that the
copyright society is being managed in a manner detrimental to the interests
of the members/owners of rights or is non-compliant with the requirements
of Section 33(a), 35(3) and 36 of the Act or that there is a change in
instrument by which copyright society is established or incorporated without
prior notice.
16. The contention that the concerned officer is not required to record a
prima facie opinion while calling for a written statement to be filed is
merited. However, a copyright society cannot be called upon to respond to a
complaint mechanically and without the concerned officer examining the
complaint. The complaint must bear out that the copyright society is being
managed in a manner detrimental to the interests of its members/owners of
rights and/or there is failure to comply with the specified provisions of the
Act or there is a change in the instrument by which the copyright society is
established or incorporated without prior approval. The concerned officer is
required to form belief on the said basis. Such belief must be clearly
discernable from the order calling for a written statement by the concerned
society or be otherwise available on the records of the Central Government.
However, it is necessary that the records bear out that the Central
Government has the "reasons to believe"that the copyright society is being
managed in a manner detrimental to the interests of its members concerned
or for non-compliance of requirements under the specified provisions of the
Act or any change carried out in the instrument by which the copyright
society is established/incorporated and registered, without prior notice to the
Central Government.
17. Mr Narula‟s contention that the Central Government can call for a
response from the copyright society in respect of any complaint and its
powers are not fettered by Rule 50 of the Rules, is unpersuasive. Rule 50 of
the Rules prescribes the manner in which the Central Government is to
exercise its powers. It is settled law that if a statute provides a manner in
which the jurisdiction is to be exercised, the same is required to be done in
that manner or not at all. In the case of Babu Verghese and others v. Bar
Council of Kerala and Others : (1999) 3 SCC 422, the Supreme Court had
referring to earlier decisions reiterated the principle in the following words:-
"31. It is the basic principle of law long settled that if the
manner of doing a particular act is prescribed under any
Statute, the act must be done in that manner or not at all.
The origin of this rule is traceable to the decision in Taylor
v. Taylor (1875) 1 Ch. D. 426 which was followed by Lord
Roche in Nazir Ahmad v. King Emperor AIR 1927 ALL
579 who stated as under:
Where a power if give to do a certain thing in a certain way,
the thing must be done in that way or not at all."
18. In the present case, the impugned order dated 31.05.2013, in respect
of the complaint received from Mr Milind Srivastava (respondent no. 3)
does not indicate in what manner affairs of PPL have been and are being
managed to the determent of its members. The complaint is mainly with
regard to the affairs of IPRS. There is nothing stated in the said impugned
order (relating to the complaint of Mr Srivastava) which would indicate that
the Central Government had any reason to believe that the affairs of PPL
were being conducted in a manner detrimental to its members. Thus, the
said impugned order cannot be sustained on this ground as well.
19. The impugned order dated 31.05.2013, issued in respect of the
complaint filed by Mr Lalit Pandit (respondent no.4) however, does indicate
that the Central Government had taken note of the complaint that PPL have
been violating the provisions of the Act. This is evident from second
paragraph of the said impugned order, which reads as under:-
"It is also alleged that IPRS still does not collect royalties
for the utilization via broadcast of Indian musical and
literary works. These royalties are being collected by Select
Media Private Limited under its direct arrangement with
PPL and paid by way of "‟Minimum Guarantees‟‟ or "Lump
Sum" amounts to PPL with no royalties reportedly being
paid to IPRS. Further, it is alleged that IPRS still does not
collect or distribute royalties from the utilization of Indian
music in the Mobile or Digital sectors. These royalties are
being collected through PPL (for internet by entities such as
DCI Media) and paid directly and only to Music Company
members of PPL"
20. In view of the above, the said impugned order (pursuant to complaint
filed by respondent no.4) cannot be faulted on the ground that the Central
Government, has no reason to believe -as required in terms of Rule 50 - that
PPL is being managed in a manner detrimental to the interests of its
members/owners of rights or for non-compliance of requirements under the
specified provisions of the Act.
21. In view of the above, the impugned orders are set aside for the reason
that the same have been issued on a complaint, which was neither made by
the members of the PPL nor by the Registrar of Copyrights. The impugned
order dated 31.05.2013, in respect of the complaint made by respondent no.3
is also not sustainable, as it does not indicate that the Central Government
had any reason to believe that the PPL had fallen foul of the Provisions of
sub-sections (4) and/or (5) of section 33 of the Act.
22. It is clarified that nothing stated herein shall preclude the respondents
from initiating enquiry in accordance with law.
23. The petition and pending applications are disposed of.
VIBHU BAKHRU, J
SEPTEMBER 04, 2017
pkv
