The main legal point established is that a deadlock notice can effectively terminate joint venture and licence agreements, rendering claims for injunctions and arbitration petitions not maintainable. Additionally, minority shareholders cannot initiate a derivative action through arbitration.

These matters were heard on 27th April, 2008 and the order was reserved. In the meanwhile, the plaintiffs/petitioners moved the vacation Bench by filing Arbitration Petition nos.239 and 240 of 2008 and the papers of these matters were called by the Vacation Bench and the papers are now returned after passing some ad-interim orders. Those arbitration petitions are however not placed on Board. After reopening of the courts I have heard the counsel again. By consent, the matters are heard finally.

2. The plaintiffs in the suit are the petitioners and the defendants in the suit arc the respondents in the arbitration petition nos. 169 and 170 of 2008. Hence, for the sake of convenience the parties are referred to as the plaintiffs and the defendants.

3. In the suits as well as in the arbitration petitions, the plaintiffs seek an order of injunction restraining the defendants, their agents and servants from selling, fe-selling, sublicencing, distributing, exploiting, promoting, marketing any form of content in the films produced or to be produced by the defendant no.1 and covered by the contract (licence agreement dated 23rd April, 2005) between the defendant no. 1 and defendant no.2. The plaintiffs also seek a further order directing the defendant nos. 1 and 3 to return the content of the film “Tashan” and other reliefs.

Basic facts

4. Plaintiff no.1 is a company incorporated and registered under the Companies Act, 1956 and plaintiff nos. 2 to 5 hold the entire share capital of plaintiff no. 1. Plaintiff no. 1 is engaged in the business of producing internet and net enabled solutions and related services. Defendant no.1 is also a company incorporated and registered under the Companies Act and is engaged in the business of production distribution, marketing and sale of cinematographic films. The plaintiffs and the defendant no. 1, after negotiations decided to establish a joint venture to engage in and undertake business of providing mobile and internet content of Bollywood movies and other related businesses. Accordingly, they formed defendant no.2 as a joint venture company incorporated and registered under the Companies Act, 1956. A joint venture agreement was executed between the plaintiffs, the defendant no. I and the defendant no.2 on 23rd April, 2005. The business of the Joint venture interalia was to set up one or more unique Short Codes to offer mobile internet content, to provide online service of mobile phone net works and to secure and obtain mobile and internet rights of the contents of Bollywood movies. On the same day, the defendant no. 1 granted to the defendant no.2 exclusive licence for internet rights and mobile rights in the Bollywood films produced and to be produced by the defendant no. 1 with a right to the defendant no.2 to grant sub-licences to third parties. The licence was to remain in force till the joint venture agreement remained in full force and effect.

5. The defendant no.2 commenced its business immediately after the licence agreement dated 23rd April, 2005. The major and perhaps the only business so far undertaken by the defendant no.2 is to make available mobile content of the films produced by the defendant no.1. According to the plaintiffs, seeing the huge potential in the internet business the defendant no. 1 made various attempts to exclude internet content from the licence agreement, with a view to exploit the internet rights by itself to the exclusion of the defendant no.2. The defendant no.1 firstly attempted to persuade and pressurise the plaintiffs to modify the terms of the licence agreement. On being unable to succeed in its design the defendant no. 1 adopted three pronged approach. Firstly it tried to exploit the internet content in respect of its various film on its own in gross violation of the terms of licence agreement; secondly, it tried to obstruct exploitation of the internet rights by the defendant no.2 by adopting a non operative stand; and thirdly, it attempted to