Madras High Court
M/S.Studio Green Films Private ... vs M/S.Krikes Cine Creations on 9 December, 2021
O.A.No.754 of 2021
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATE D : 09.12.2021
CORAM:
The Hon'ble Mr. Justice SENTHILKUMAR RAMAMOORTHY
O.A.No.754 of 2021
M/s.Studio Green Films Private Limited,
Rep. by its Director,
Mr.KE.Gnanavelraja
Having its Office at
No.13/6, Block No.140, 2nd Floor,
Thanikachalam Road,
T.Nagar, Chennai – 600 017. ... Applicant
Vs
M/s.Krikes Cine Creations,
Rep. by its Proprietor
Mr.Sridharan
Having registered office at
No.35/2, Second Main Road,
Kalaimagal Nagar,
Ekkattuthangal, Chennai -600 032. ... Respondent
PRAYER : This Application is filed under Section 9 of the Arbitration and
Conciliation Act, 1996 praying to grant an order of interim injunction
restraining the Respondent by themselves or by their Partners or successors
of business, servants, agents, representatives, assignees and all other
persons from releasing the film ''JAIL'' through direct theatrical release or in
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O.A.No.754 of 2021
any OTT platforms or through any satellite TV, pending disposal of the
Arbitration.
For Petitioner : Mr.Satish Parasaran, S.C.
for M/s.Vijayan Subramanian
For Respondent : Mr.PL.Narayanan
ORDER
In this Application under Section 9 of the Arbitration and
Conciliation Act, 1996(the Arbitration Act), the Applicant seeks to prevent
the Respondent from directly or indirectly releasing the movie ''JAIL''
either through direct theatrical release or through OTT platforms or through
satellite TV pending arbitral proceedings.
2. The Applicant states that an agreement styled as ''JAIL'' - Film
Assignment Deed dated 24.10.2021(the Agreement) was entered into
between the Applicant and the Respondent. According to the Applicant, the
Respondent assigned all the Assigned Rights, as defined in the Agreement,
to the Applicant. The Applicant asserts that the Assigned Rights include the
copyright in the movie and all other intellectual property rights. Indeed, the
Applicant asserts that such rights include the right of theatrical exhibition,
satellite broadcasting rights, direct to home rights, cable television rights,
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O.A.No.754 of 2021
and the like. The Applicant also asserts that Clause 2.2 of the Agreement
confers on the Applicant the sole, exclusive and absolute right to market,
assign or distribute the Assigned Rights over the movie throughout the
world perpetually.
3. Pursuant to the Agreement, the Applicant states that it
approached distributors and other players in the industry in order to market,
distribute and broadcast the movie. An announcement was made through its
official Twitter account named “Studio Green” with regard to the proposed
release of the movie.
4. In the circumstances, the Applicant submits that it was shocked
to come across a communication on the Respondent's official Twitter
account that the movie “JAIL” was scheduled for release on 09.12.2021.
Therefore, the Applicant sent an email of 22.11.2021 to the Respondent and
called attention to the assignment of all Assigned Rights under the
Agreement. Upon gathering that the Respondent is in the process of
releasing the movie in contravention of the Agreement, the present
application is filed.
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5. Oral arguments were advanced on behalf of the Applicant by
Mr.Satish Parasaran, senior counsel, assisted by Mr.Vijayan Subramanian,
learned counsel; and on behalf of the Respondent by Mr.PL.Narayanan,
learned counsel.
6. Learned senior counsel for the Applicant referred extensively
to the Agreement. In particular, he referred to recitals V and VI, Clauses 2.1
to 2.3, 2.5, 4.1, 4.6, 5.8, 5.10.11 and 8.5 of the Agreement. On such basis, he
submitted that the Applicant is the sole and exclusive holder of all the
Assigned Rights, including copyright, over the movie. He also submitted
that the Respondent is prohibited from licensing, assigning or granting any
right, title or interest in the Assigned Rights to any third party. With specific
reference to clause 8.5 of the Agreement, he submitted that the Respondent
is not permitted to terminate the Agreement unless the Applicant fails to
market and distribute the movie within 150 days from the date of execution
of the Agreement. Since the Agreement was executed on 24.10.2021, it was
submitted that the 150 day period expires only in end-February 2022 and,
therefore, the purported termination by letter dated 23.11.2021 is invalid.
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7. In substantiation of the fulfillment of obligations by the
Applicant under the Agreement, the Applicant referred to email
communications and tweets. In particular, an email of 29.10.2021 to Sony
Liv and an email of 29.10.2021 to Mango Mass Media Private Limited were
relied on. A tweet reflecting that the teaser for the movie was marching
towards 2 million views was also relied upon.
8. The Applicant submitted that the Respondent is liable to be
restrained from releasing the movie through any mode pending arbitral
proceedings so as to preserve the rights of parties in terms of the Agreement.
On this issue, the Applicant contends that the revenue sharing arrangement
under the Agreement is such that it cannot receive its share of the revenue
unless the movie generates more than Rs.8.5 crores. If the Respondent is
permitted to release the movie, it is likely that the movie would generate
limited revenue. Consequently, the balance of convenience is in favour of
granting interim relief and irreparable injury would be caused to the
Applicant if such relief is denied.
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9. Learned counsel for the Respondent contended to the contrary.
At the outset, the Respondent contended that the Agreement is
unconscionable and, therefore, void under the Indian Contract Act, 1872
(the Contract Act). On a demurrer the Respondent contended that the
Agreement may use the terms assignment of copyright and other rights,
which are collectively referred to as Assigned Rights; however, in
substance, the Agreement is not an agreement for assignment of copyright or
other Assigned Rights. By referring to several clauses of the Agreement and,
in particular, clause 2.2, 4.6, 5.11 and 6.1 read with Schedule-B of the
Agreement, the Respondent contended that the Agreement envisages
collaboration between the Applicant and the Respondent. Indeed, it is
submitted that the revenues from the exploitation of the Assigned Rights of
the movie would be received in the bank account of the Respondent and not
the Applicant. Upon receipt of such revenues, the Respondent is entitled to
recoup its investment of Rs.8.5 crores from and out of such revenues before
sharing revenues in excess of Rs.8.5 crores in the ratio of 70% to the
Respondent and 30% to the Applicant.
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10. Thus, the Respondent contended that the Agreement is, in
substance, a licence or contract of agency or agreement for payment of
commission to a person who carries out marketing and distribution of the
movie. As regards the termination of the Agreement, the Respondent
submits that such termination was because the Applicant prioritised its own
production of the movie “Thael” and opted to release said movie through
theatres while opting to release the movie “JAIL” only on OTT platforms. In
support of these contentions, the Respondent referred to and relied upon the
following judgments:
(i) Sree Gokulam Chits and Finance Company (P) Limited v.
Johny Sagariga Cinema Square and others 2011 3 CTC 747, wherein this
Court concluded that the deed of assignment of copyright therein was not in
substance a document assigning the copyright and that, therefore, an action
for infringement would not lie;
(ii) Deshmukh and Co. (Publishers) Pvt. Ltd. v. Avinash Vishnu
Khandekar and others MANU/MH/0430/2005, wherein the Bombay High
Court refused to interfere with the judgment of the trial court to the effect
that the contested document is not a deed of assignment of copyright but is
in the nature of a licence; and
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(iii) Best Sellers Retail (India) Pvt. Ltd. v. Aditya Birla Nuvo
Limited and others, (2012) 6 SCC 792, wherein, at paragraphs 35 to 37, the
Hon'ble Supreme Court held that an interim injunction should not be
granted in relation to an action for damages since it cannot be concluded
that the Applicant would suffer irreparable injury if interim relief is refused.
11. By way of a brief rejoinder, the Applicant submitted that
definitive conclusions on the nature of the Agreement cannot be drawn in
proceedings under Section 9 of the Arbitration Act. Secondly, the Applicant
contended that the contention of the Respondent that the Agreement is either
a license or a contract of agency militates against express provisions of the
Agreement. With regard to irreparable injury, the Applicant contended that
the revenue loss which the Applicant may incur if the Respondent is
permitted to release the movie cannot be quantified because the Agreement
envisages that the Applicant would market, distribute and release the
movie.
12. In light of these rival contentions, the limited question that
arises for consideration is whether the Applicant is entitled to interim relief
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and, if so, the nature of such relief. At the outset, it should be noted that it is
neither desirable nor necessary to record definitive conclusions on the
rights, liabilities and obligations of the parties in this proceeding since it is
for the arbitral tribunal to record such conclusions in course of final
disposal. The Agreement should be examined by keeping the aforesaid
limitation in mind. On a prima facie reading, there is little doubt that the
Agreement envisages the transfer of Assigned Rights as defined therein. At
the same time, certain aspects of the Agreement are conspicuous. No
payment was made by the Applicant to the Respondent prior to or at the
time of execution of the Agreement as consideration for the assignment of
Assigned Rights. While it is completely legitimate for a party to agree to
receive consideration subsequent to the execution of an agreement, either in
monetary terms or in the form of receiving the benefit of the fulfilment of
obligations by the counter party, this aspect is material particularly for
interlocutory purposes.
13. It is also pertinent to notice that the Agreement records that
the Respondent incurred an expenditure of Rs.7 crores towards the
production of the movie. As pointed out by the Respondent, the Agreement
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is atypical of an agreement for assignment of copyright inasmuch as several
clauses provide for the continued collaboration of the Applicant and
Respondent. Indeed, it is evident from Clause 2.4 that all revenues
generated from the exploitation of the Assigned Rights of the movie are
required to be received in the bank account of the Respondent. Schedule-B
sets out the manner in which such revenues should be distributed. Such
Schedule expressly recognises the right of the Respondent to appropriate
such revenues to first recoup the expenditure incurred by the Respondent on
the movie. Thereafter, revenue sharing in the ratio of 70% to the Respondent
and 30% to the Applicant is prescribed. From the above, it appears prima
facie that the consideration for the Respondent is in the efforts to be taken
by the Applicant after execution of the Agreement to market, distribute and
otherwise exploit the Assigned Rights so as to garner higher revenue than
the Respondent may have generated without the involvement of the
Applicant. The Agreement, by implication, appears to grant the Applicant
about 150 days to market and distribute the movie before a right of
termination is triggered in favour of the Respondent. As regards marketing
efforts by the Applicant, the documents on record prima facie evidence
some marketing efforts by the Applicant, but no binding commitments by
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third parties in such regard are on record.
14. Although it would be a near Sisyphean task for the
Respondent, in light of Clause 11.6 of the Agreement, to establish that it is a
contract of agency; as indicated earlier, definitive conclusions as to whether
the Agreement is an agreement for assignment of intellectual property rights
or a licence or a contract of agency should await arbitral proceedings. For
interlocutory purposes, it is sufficient to record that the Agreement prima
facie partakes of some elements of a contract for marketing and distribution
by providing for a 30 % share in the surplus revenue to the Applicant.
15. The Respondent has stated that the theatrical release of the
movie is scheduled for 09.12.2021. At this juncture, the Applicant has not
filed its statement of claim and, therefore, no conclusions can be drawn as to
whether its claims can be compensated monetarily. Keeping in mind the fact
that the Respondent has expended at least Rs.7,00,00,000/- on the movie, as
mutually agreed and recorded in the Agreement, and that the parties are
eventually required to share the revenues in the ratio of 70% to the
Respondent and 30% to the Applicant, this is not a fit case to restrain the
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Respondent from releasing the movie in theatres pending arbitral
proceedings. Instead, in order to balance the equities pending arbitral
proceedings, conditions precedent should apply in such regard by way of
restrictions on the manner of appropriation of revenue generated from the
theatrical release of the movie. For such purpose, the Respondent should
establish an escrow account in a scheduled bank pursuant to an escrow
agreement. By such escrow agreement, a bank should be made the escrow
agent. A copy of such escrow agreement shall be provided to the Applicant
as soon as the such account is established, and before the movie is released.
All revenues generated from the theatrical release of the movie should be
remitted only into the said escrow account by the Respondent. The escrow
agreement may enable the Respondent to receive up to Rs.7,00,00,000/-
from the revenues remitted into such account so as to recoup its investment.
No disbursements beyond the said sum of Rs.7,00,00,000/- should be made
by the escrow agent without the express consent of the arbitral tribunal or
this Court, if the arbitral tribunal is not in place. Until the above conditions
precedent are satisfied, the movie cannot be released in theatres.
16. As regards the release of the movie on OTT platforms and
through satellite TV, the Respondent does not appear to have made concrete
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progress. In such factual context, keeping in mind the nature of the
Agreement, the Respondent is restrained from taking any steps in such
regard without obtaining orders from the arbitral tribunal or this Court if the
arbitral tribunal is not in place.
17. The Applicant is directed to initiate steps for the constitution
of the Arbitral Tribunal within 30 days from the date of receipt of a copy of
this order. O.A.No.754 of 2021 is disposed of in the above terms without
any order as to costs.
09.12.2021
Index :Yes
Internet :Yes
rrg
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O.A.No.754 of 2021
SENTHILKUMAR RAMAMOORTHY J.,
rrg
O.A.No.754 of 2021
09.12.2021
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