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AIR 2010 Cal 166
IN THE HIGH COURT OF CALCUTTA
J.N. Pate, C.J. and Bhaskar Bhattacharya, J.
Brand Value Communications Ltd. – Appellant
Vs.
Eskay Video Private Ltd. – Respondent
A.P.O.T. No. 387 of 2010, G.A. No. 2185 of 2010 and A.P. No. 115 of 2010
Decided On: 21.07.2010
ARBITRATION - INTERIM MEASURE - DEPOSIT OF MONEY - SECTION 9(II) OF THE ACT - SCOPE AND APPLICABILITY - COURT'S POWER TO PASS INTERIM ORDER - PRINCIPLES TO BE FOLLOWED - ATTACHMENT BEFORE AWARD - CONDITIONS PRECEDENT.
Fact of the Case:
In an arbitration proceeding initiated by the respondent, the appellant was directed to deposit a sum of Rs. 2 crore with the Registrar, Original Side, as a measure of security to the respondent in the event an award was passed in favor of the respondent. The appellant challenged this order, contending that the court erred in passing such a direction without considering the scope of Section 9 of the Arbitration and Conciliation Act (the "Act") and the absence of any allegation that the appellant was transferring its assets to defraud the respondent.
Finding of the Court:
The court held that the learned Single Judge erred in law in passing a direction for deposit of the money on the appellant merely on a prima facie finding on merit in the absence of any finding that the appellant was either transferring or alienating his properties to avoid payment of money that may be awarded against it or that it was threatening or intending to remove or dispose of his properties with a view to defrauding his creditors.
Issues: 1. Whether the court erred in passing a direction for deposit of money under Section 9(ii) of the Act without considering the scope of the provision and the absence of any allegation of fraudulent transfer of assets by the appellant? 2. Whether the principles governing grant of attachment before judgment under Order 38 Rule 5 of the Code of Civil Procedure are applicable to proceedings under Section 9(ii) of the Act?
Ratio Decidendi: 1. The power to pass interim orders under Section 9(ii) of the Act is similar to the power of courts to pass orders under Orders 38-40 of the Code of Civil Procedure. 2. In exercising this power, courts should be guided by the same principles that are required to be followed while disposing of applications under Orders 38-40 of the Code. 3. These principles include the requirement that the plaintiff must show, prima facie, that his claim is bona fide and valid, and that the defendant is about to remove or dispose of the whole or part of his property with the intention of obstructing or delaying the execution of any decree that may be passed against him. 4. In the present case, the court found that the learned Single Judge had failed to consider these principles and had passed the impugned order without any finding that the appellant was transferring or alienating its properties to avoid payment of money that may be awarded against it.
Final Decision: The court set aside the order of the learned Single Judge and disposed of the application under Section 9 of the Act by directing that the appellant should be entitled to telecast the 28 films in terms of the Memorandum of Understanding till the passing of the award and, at the same time, the respondent will also be free to telecast any of the 48 films which it had offered to the appellant subject to the decision of the Arbitrator.
Bhaskar Bhattacharya, J.
1. This appeal is at the instance of a respondent in a proceeding under Section 9 of the Arbitration and Conciliation Act (hereinafter referred to as the Act) and is directed against an order dated 16th June, 2010 passed by a learned Single Judge of this Court by which His Lordship disposed of the said application under Section 9 of the Act initiated by the present respondent by directing the appellant before us to deposit a sum of Rs. 2 crore with the Registrar, Original Side, which would abide by the result of the reference. While passing such direction, His Lordship was of the view that the sum of Rs. 2 crore, which the present appellant had been directed to pay, was assessed at on the tentative assessment of the fact that 75 films were offered under the Memorandum of Understanding. The Registrar, Original Side was directed to invest the amount in a fixed deposit with a nationalized bank and forward the copies of the fixed deposit receipt to the parties.
2. Being dissatisfied, the respondent in the proceeding under Section 9 of the Act has come up with the present appeal.
3. The facts giving rise to filing of the application under Section 9 of the Act may be summed up thus:
(i) On July 25, 2002, the appellant had executed a Memorandum of Understanding with the respondent by which the respondent was supposed to deliver 75 movies to the appellant and the appellant was entitled to exploit or telecast those movies for a period of three years commencing from 1st August, 2009.
(ii) It was agreed by the parties that in respect of movies, which were to be classified as "A", and "A+" category, there should be limited transmission as mentioned in the Memorandum of Understanding but in respect of others, i.e., "B" and "C" categories, there was no limit of transmission. It was also agreed that gradation should be made by the channel considering diverse aspects including quality of film. Each movie was priced at Rs. 39 lakh.
(iii) According to the appellant, notwithstanding the fact that the respondent was obliged to make over 75 movies, the respondent failed and neglected to do so and had only handed over to the appellant 48 movies out of which 20 movies had to be returned by the appellant due to failure on the part of the respondent to give necessary legal clearance to the appellant to exploit those films.
(iv) Over and above, according to the appellant, the respondent did not make over any other movie to the appellant until December 2009. The appellant complained that despite the expiry of more than five months, the respondent having failed to make over all the 75 movies, it was obvious that the appellant was not in a position to effectively exploit those within the period specified in the Memorandum of Understanding. The appellant complained that out of the 48 movies delivered, it was only in a position to commercially exploit 28 movies, and consequently, the respondent made clear breach of the terms of the Memorandum of Understanding.
(v) The appellant had already paid a sum of Rs. 10 crore to the respondent and terminated the said Memorandum of Understanding by letter dated 26th December, 2009. The appellant contended that although in terms of Clause 12.2 of the Memorandum of Understanding, the money so advanced by the appellant was refundable to the appellant on termination, the appellant having already telecast the aforesaid 28 movies and having intention to telecast the said 28 movies for the assigned period offered to pay a further sum of Rs. 92 lakh over and above the sum already paid being the aggregate value of the said 28 movies calculated at the rate of Rs. 39 lakh for each one.
4. On 12th March, 2010, the respondent filed an application under Section 9 of the Act thereby praying for the following relief:
(a) Leave under Clause 12 of the Letters Patent.
(b) An order of injunction restraining the respondent and their servants and agents from in any manner telecasting or deal with in any manner the sai
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