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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
S.C. Gupte, J.
Narendra Hirawat And Co. - Plaintiff
Versus
Sholay Media Entertainment Pvt. Ltd. And Another - Defendants
Notice of Motion No. 2591 of 2019, In Commercial IP Suit No.1387 of 2019, Along With Notice of Motion No.2607 of 2019, In Commercial IP Suit No.1469 of 2019
Decided On : 09-03-2020
IP Suit - Film Licence Agreements - Specific Relief Act - Section 14(d) - Interpretation of 'determinable' contracts - Prima facie justification of Plaintiff's case - Interim protection granted
Fact of the Case:
The dispute arose from a film licence agreement between the parties for the distribution and exploitation rights in two films. The Plaintiff paid a total sum of about Rs.6.11 crores against the total consideration of Rs.8.71 crores reserved under the deed of settlement. Defendant No.1 claimed that the payment was not made in time and proceeded to terminate the agreements. The Plaintiff contended that Defendant No.1 wrongfully terminated the agreements and offered to pay the balance amount subject to the issuance of an appropriate invoice.
Finding of the Court:
The court found that the Plaintiff's case of wrongful termination was prima facie justified and granted interim protection in favor of the Plaintiff, restraining the Defendants from dealing with the licensed rights in the films until a specified date.
Issues: The main issue was whether the Plaintiff's case of wrongful termination of the film licence agreements was justified and whether the Plaintiff deserved interim protection pending trial.
Ratio Decidendi: The court interpreted the provisions of the Specific Relief Act, specifically Section 14(d), and held that the contract in question was not 'in its nature determinable' as it was determinable only in the event of the other party committing a breach. The court distinguished relevant cases and concluded that the Plaintiff deserved interim protection.
Final Decision: The court granted interim protection to the Plaintiff, restraining the Defendants from dealing with the licensed rights in the films until a specified date, subject to the Plaintiff depositing the entire balance amount with interest.
Based on the provided legal document, the key legal points are as follows:
Interpretation of 'determinable' contracts under the Specific Relief Act: The court examined whether the film license agreements in question are inherently determinable. It clarified that contracts which can be terminated by either party without cause and without the need for a specific event are considered inherently determinable, thereby affecting the availability of specific performance (!) .
Nature of license agreements: The court observed that license agreements, by their very nature, tend to be determinable. The agreements in this case provided the parties with the right to terminate without assigning reasons, which supports the conclusion that they are inherently determinable contracts (!) .
Conditions for granting interim relief: The court emphasized that the plaintiff is entitled to interim protection if there is a prima facie case, balance of convenience in favor of the plaintiff, and the absence of irreparable harm. It noted that damages would be difficult to quantify for the rights involved, favoring the grant of interim relief (!) .
Payment and invoice procedure: The court found that the contractual requirement was for the licensee to make payments only against proper GST-compliant invoices specifying the license fee and GST separately. The payments made by the plaintiff, after receipt of such invoices, were accepted by the defendant, which supports the plaintiff’s position that the agreement’s modalities were followed (!) (!) .
Justification of termination: The court analyzed whether the defendant’s termination of the agreements was justified, considering the payments made and whether defaults occurred before or after the last invoice. It concluded that the defendant’s reliance on prior defaults was not justified, and the plaintiff’s case for wrongful termination was prima facie valid (!) .
Application of the law regarding determinability: The court distinguished the case at hand from other cases involving contracts that are explicitly terminable by notice, clarifying that the agreements in this case are not inherently determinable by their terms alone but depend on the contractual provisions and the circumstances (!) (!) .
Balance of convenience and third-party considerations: The court considered the potential damages and inconvenience to the defendant, the involvement of third parties, and the contractual stipulations that address such scenarios. It concluded that the plaintiff’s need for interim relief outweighs the potential harm to the defendant and third parties, especially given the deposit conditions imposed (!) (!) .
Conditions for interim protection: The court ordered the plaintiff to deposit the remaining consideration amount with interest, to be held in fixed deposit, as a condition for granting the interim injunction restraining the defendants from dealing with the licensed rights until the final disposal of the case (!) (!) .
Rejection of stay applications: The court rejected the defendants’ requests for stay of the interim relief, emphasizing that the conditions for granting such stay were not satisfied and that the balance of convenience favored maintaining the order (!) (!) .
Similar considerations applied in related proceedings: The court applied the same principles and conditions in a companion suit involving different films, reinforcing the consistency of the legal approach regarding the nature of the contracts and the grant of interim relief (!) (!) .
These points collectively highlight the court’s approach to interpreting license agreements, the importance of contractual procedures such as invoicing, and the criteria for granting interim relief in cases involving potentially determinable contracts.
JUDGMENT :
This notice of motion (Notice of Motion No.2591 of 2019) has been taken out in a commercial IP Suit in respect of distribution and exploitation rights in two suit films, by the names of Sholay and Sholay-3D.
2. The rights are claimed by virtue of a film licence agreement executed between the parties thereto on 9 September 2015 for the period between 1 April 2016 to 31 March 2022 (“first agreement”) and a further agreement entered into between the parties on the same date, i.e. 9 September 2015, for the period between 1 April 2022 and 31 March 2027 (“second agreement”). The first agreement was for a total consideration of Rs.20 crores, whereas the second was for a total consideration of Rs.5 crores. The agreements covered exploitation rights, such as electronic media rights, television rights, satellite broadcasting rights, etc. on a sole and exclusive basis by the Plaintiff herein (described in the agreements as ‘licensee’, Defendant No.1 herein, the owner of copyright in the two suit films, being described as ‘licensor’). It is not in dispute that consideration payable under the first agreement has been more or less paid. The dispute really pertains to payment of consideration under the second agreement. The agreements were followed by an addendum. Disputes arose between the parties and these were finally resolved by the parties entering into a deed of settlement on 3 December 2018. (This deed of settlement was preceded by a memorandum of settlement between the parties, the deed of settlement being a formal execution of the settlement.) Under this deed of settlement, the Plaintiff was to pay an aggregate sum of Rs.8.71 crores, along with GST, for the suit films for the second term, namely, the term commencing on 1 April 2022 and ending on 31 March 2027, and which was extended upto 30 September 2028. In pursuance of the settlement, Defendant No.1 raised its first invoice for a sum of Rs.1.25 crores on 5 November 2018, which, along with applicable GST (both CGST and SGST), worked out to Rs.1.40 crores. This amount was to be paid to the credit of Defendant No.1 partly to one HRVS Financial Consultants Private Limited and partly to Defendant No.1 itself. It is not in dispute that this amount was duly paid by the Plaintiff. This was followed by a second invoice raised by Defendant No.1 on the Plaintiff on 3 December 2018 for licence fees of Rs.2.46 crores, which, together with GST, worked out to about Rs.2.75 crores. It is also not in dispute that this amount was duly paid by the Plaintiff to Defendant No.1 or to its credit. Defendant No.1 then raised its third invoice for a sum of Rs.1.75 crores on 3 June 2019, which, together with applicable GST, worked out to Rs.1.96 crores. This amount was also paid by the Plaintiff to, or to the account of, Defendant No.1, albeit with a delay. The Plaintiff thus paid a total sum of about Rs.6.11 crores as against the total consideration of Rs.8.71 crores reserved under the deed of settlement. The dispute between the parties pertains to the balance amount.
3. According to Defendant No.1, the payment was not made in time, time being of essence, and Defendant No.1, accordingly, proceeded to terminate the films licence agreements between the parties by its letter dated 18 June 2019. Defendant No.1 claims to have entered into a separate film licence agreement with Defendant No.2 herein, creating same distribution rights in favour of the latter. (That is how Defendant No.2 has been arraigned as a party to the present suit.) On the other hand, it is the Plaintiff’s case that Defendant No.1 was expected to issue invoice/s separately for licence fees to be charged from out of the total consideration reserved under the deed of settlement (i.e. Rs.8.71 crores) and applicable GST on that amount, and the Plaintiff was to make payment only according to such invoice/s. It is submitted that without raising such invoice/s, the Plaintiff could not have straightaway proceeded to terminate the suit film
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