2013 (4) TMI 439 - HC - Companies Law

Arbitration and Conciliation - petitioner seeks to challenge an order passed by the learned arbitrator granting interim measures in favour of the respondents under Section 17 of the Arbitration Act 1996. Some of relevant facts for the purpose of deciding this petition are as under. - The petitioner entered into a Coproduction Agreement for remake of the said film Zanjeer with Flying Turtle Films (FTF) and started working on the script of the remake at the end of December 2011, the respondents learned about the said agreement between the petitioner and M/s FTF. It is the case of the respondents that on 24th January 2012, the respondents finally agreed to license of remake rights to Amit Mehra and entered into an agreement with the petitioner, granting the petitioner the right to remake the film Zanjeer in Hindi and Telugu. The writers of the said film Mr Salim Khan and Mr Javed Akhtar were claiming Copyrights in the said film. The petitioner requested the respondents to provide to the petitioner with the agreements with the said writers with PMP for the original Zanjeer for the petitioner to understand their claims.. The petitioner made it clear that it would not pay next installment till the documents were provided by the respondents. The first question that arises for consideration of this court is whether under the provisions of Copyrights Act 1957, there is a separate copyright for cinematography film and literary work and what is the effect thereof on the subject matter of this dispute. The respondents addressed to the petitioner that due date for third installment to be paid by the petitioner to the respondents was 23rd May 2012, however, the petitioner had issued a letter interalia raising flimsy ground for non payment of third installment and the respondents were to terminate the said agreement. Respondents stated that from the date of the said notice all the rights in the said film stood revered back to PMP including the right to remake the said film and no rights for the said film existed with the petitioner. The said notice was issued by the respondents without prejudice to their other rights and remedies in law. The respondents filed petition under Section 9 of the Arbitration and Conciliation Act 1996 in this Court for temporary injunction and succeeded. The learned sole arbitrator disposed of the said application under Section 17 of the Arbitration and Conciliation Act 1996 and if the petitioner herein is restrained from proceeding with the remake, and ultimately the petitioner succeeds, it can still proceed with the remake and complete it and if it suffers loss because of the interim injunction, the same can be compensated in terms of money. Being aggrieved by the said order passed by the learned arbitrator, petitioner filed this petition under Section 37 of the Arbitration Act 1996. Held that - It is not in dispute that claims made by the writers before the association against the petitioner as well as respondents is pending which is for a large amount. The respondents have not even produced the document of title in respect of copyrights in the literary work till today. In the event of the writers succeeding in their claim against the petitioner and the respondents in respect of their alleged copyright in the screenplay of the original film, that would affect the consideration amount agreed to be paid by the petitioner to the respondents. The consideration thus agreed, would have to be modified and/or appropriate adjustments would have to be made while considering the claims of the parties in arbitration. It is made clear that this Court has not expressed any views on the correctness of the claims made by the writers in respect of alleged copyrights in their favour in this order. It is also made clear that observations made by this Court in this order regarding termination and/or representation of title or regarding merits of the matter are all tentative. The learned arbitrator shall decide the matter on merits and in accordance with law without being influenced by the findings and/or observations made by the learned arbitrator in the impugned order and by this Court in this order. I, accordingly pass the following order. The impugned order passed by the learned arbitrator granting interim measures in favour of the respondents is set aside. Application u/s 17 of Act is rejected. During the pendency of arbitration proceedings, the petitioner would be at liberty to proceed with remaking of the film Zanjeer and to release the said movie on the condition that petitioner deposits the balance installment agreed to be paid in terms of Clause 2.2 within eight weeks from today. It is made clear that release of the said film would be subject to the final outcome of the arbitration proceedings which are pending before the learned arbitrator.

Summary

Issues Involved:
1. Validity of the termination of the agreement by the respondents.
2. The petitioner's obligation to make payments under the agreement.
3. The respondents' obligation to provide clear title and documents regarding the copyright of the underlying works.
4. The impact of the claims made by the original screenplay writers on the petitioner's obligations.
5. The balance of convenience and the appropriateness of interim measures granted by the arbitrator.

Detailed Analysis:

1. Validity of the Termination of the Agreement by the Respondents:
The court examined whether the termination of the agreement by the respondents was lawful. The respondents terminated the agreement due to the petitioner's non-payment of the third installment. However, the petitioner had requested documents proving the respondents' clear title to the screenplay before making the payment. The court found that the respondents' failure to provide these documents justified the petitioner's withholding of the payment. Thus, the termination of the agreement by the respondents was deemed unlawful and improper.

2. The Petitioner's Obligation to Make Payments Under the Agreement:
The petitioner argued that their obligation to make payments was contingent upon the respondents providing clear title to the screenplay. The court agreed, stating that the petitioner's demand for documents was reasonable and within their rights. The agreement included an implied warranty that the respondents had the right to sell the remake rights, and the respondents were obligated to clear any doubts about their title. The court concluded that the petitioner was not in breach of the agreement by withholding the payment until the title issue was resolved.

3. The Respondents' Obligation to Provide Clear Title and Documents Regarding the Copyright of the Underlying Works:
The court emphasized that the respondents were required to provide documents proving their ownership of the screenplay's copyright. The respondents failed to produce any such documents, despite repeated requests from the petitioner. The court noted that the respondents' refusal to provide these documents created doubt about their title, which justified the petitioner's withholding of the payment.

4. The Impact of the Claims Made by the Original Screenplay Writers on the Petitioner's Obligations:
The original screenplay writers, Salim Khan and Javed Akhtar, claimed ownership of the screenplay and stated that they had not assigned their rights to the respondents. The court found that these claims were significant and could not be dismissed as mere assertions. The respondents were obligated to address these claims and provide evidence of their title. The court concluded that the petitioner's demand for documents was justified, and the respondents' failure to address the writers' claims affected the petitioner's obligations under the agreement.

5. The Balance of Convenience and the Appropriateness of Interim Measures Granted by the Arbitrator:
The arbitrator had granted interim measures in favor of the respondents, restraining the petitioner from proceeding with the remake of the film. The court found that the arbitrator's decision was based on an incorrect understanding of the petitioner's obligations and the respondents' failure to provide clear title. The court held that the balance of convenience favored the petitioner, as they had already invested significantly in the film's production. The court set aside the arbitrator's interim measures, allowing the petitioner to proceed with the remake, subject to certain conditions.

Conclusion:
The court set aside the arbitrator's order granting interim measures in favor of the respondents and allowed the petitioner to proceed with the remake of the film, subject to the deposit of the remaining installments in court. The court emphasized that the final outcome of the arbitration proceedings would determine the rights and obligations of the parties.