hc25 Goldmines Telefilms Private … vs Narendra Hirawat And Co And Anr on 26 August, 2021

Bombay High Court

Goldmines Telefilms Private … vs Narendra Hirawat And Co And Anr on 26 August, 2021

Bench: Nitin Jamdar, C.V. Bhadang

skn 1 COMAP(L)-8026.2020–.doc

IN THE HIGH COURT OF JUDICATURE AT BOMBAY

ORDINARY ORIGINAL CIVIL JURISDICTION

COMMERCIAL APPEAL (L) NO. 8026 OF 2020

IN

NOTICE OF MOTION NO. 2591 OF 2019

IN

COMMERCIAL I.P. SUIT NO. 1387 OF 2019

Sholay Media Entertainment Pvt.Ltd.

a company incorporated and registered

under the provisions of Companies Act, 1956

having its office at 3G, Naaz Building,

3rd Floor, Lamington Road,

Mumbai- 400 004 … Appellant.

V/s.

1. Narendra Hirawat and Co.

A sole proprietary concern of

Mr.Narendra Hirawat, having its office

At Office No.1502A, Nariman Midtown,

Next to India Bulls Finance Centre,

S.B.Road, Elphinstone Road (East),

Mumbai 400 053.

2. Goldmines Telefilms Pvt.Ltd.,

a company incorporated under the

provisions of Companies Act, 1956

having its address at Plot No.45,

Ganpati Bhavan, M.G.Road,

Goregaon (West), Mumbai 400 062. … Respondents.

WITH

COMMERCIAL APPEAL (L) NO. 8019 OF 2020

IN

NOTICE OF MOTION NO. 2607 OF 2019

IN

COMMERCIAL I.P. SUIT NO. 1469 OF 2019

skn 2 COMAP(L)-8026.2020–.doc

Generation Three Entertainment Pvt.Ltd.

a company incorporated and registered

under the provisions of Companies Act, 1956

having its office at 3G, Naaz Building,

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3rd Floor, Lamington Road,

Mumbai 400 004. … Appellant.

V/s.

1. Narendra Hirawat and Co.

A sole proprietary concern of

Mr.Narendra Hirawat, having its office

At Office No.1502A, Nariman Midtown,

Next to India Bulls Finance Centre,

S.B.Road, Elphinstone Road (East),

Mumbai 400 053.

2. Goldmines Telefilms Pvt.Ltd.,

a company incorporated under the

provisions of Companies Act, 1956

having its address at Plot No.45,

Ganpati Bhavan, M.G.Road,

Goregaon (West), Mumbai 400 062. … Respondents.

WITH

COMMERCIAL APPEAL (L) NO. 9907 OF 2020

IN

NOTICE OF MOTION NO. 2607 OF 2019

IN

COMMERCIAL I.P. SUIT NO. 1469 OF 2019

Goldmines Telefilms Pvt.Ltd.,

a company incorporated under the

provisions of Companies Act, 1956

having its address at Plot No.45,

Ganpati Bhavan, M.G.Road,

Goregaon (West), Mumbai 400 062. … Appellant.

skn 3 COMAP(L)-8026.2020–.doc

V/s.

1. Narendra Hirawat and Co.

A sole proprietary concern of

Mr.Narendra Hirawat, having its office

At Office No.1502A, Nariman Midtown,

Next to India Bulls Finance Centre,

S.B.Road, Elphinstone Road (East),

Mumbai 400 053.

2. Generation Three Entertainment Pvt.Ltd.

a company incorporated and registered

under the provisions of Companies Act, 1956

having its office at 3G, Naaz Building,

3rd Floor, Lamington Road,

Mumbai 400 004. … Respondents.

WITH

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COMMERCIAL APPEAL (L) NO. 9909 OF 2020

IN

NOTICE OF MOTION NO. 2591 OF 2019

IN

COMMERCIAL I.P. SUIT NO. 1387 OF 2019

Goldmines Telefilms Pvt.Ltd.,

a company incorporated under the

provisions of Companies Act, 1956

having its address at Plot No.45,

Ganpati Bhavan, M.G.Road,

Goregaon (West), Mumbai 400 062. … Appellant.

V/s.

1. Narendra Hirawat and Co.

A sole proprietary concern of

Mr.Narendra Hirawat, having its office

At Office No.1502A, Nariman Midtown,

Next to India Bulls Finance Centre,

S.B.Road, Elphinstone Road (East),

Mumbai 400 053.

skn 4 COMAP(L)-8026.2020–.doc

2. Sholay Media Entertainment Pvt.Ltd.

a company incorporated and registered

under the provisions of Companies Act, 1956

having its office at 3G, Naaz Building,

3rd Floor, Lamington Road,

Mumbai- 400 004. … Respondents.

Dr. Veerendra Tulzapurkar, Senior Advocate with Ms.

Shreya Parikh, Mr.Archit Jayakar, Ms. Bhavika Deora and

Ms.Divya Tyagi i/b. Jayakar & Partners for the Appellant in COMAP(L)No.8026/2020.

Mr.Venkatesh Dhond, Senior Advocate with Mr.Archit

Jayakar, Ms.Bhavika Deora, Ms.Divya Tyagi i/b. Jayakar &

Partners for the Appellant in COMAP(L) No.8019/2020.

Mr.Zal Andhyarujina, Senior Advocate with Mr.Aurup

Dasgupta, Hursh Meghani, Ms.Sonam Ghiya and Jinal Vani

i/b. Jhangiani Narula & Associates for the Appellant in

COMAP(L) Nos.9907/2020 and 9909/2020 and for

Respondent No.2 in COMAP(L) No.8026/2020 and

8019/2020.

Mr.S.U.Kamdar, Senior Advocate with Mr.Yashesh Kamdar,

Mr.Ankoosh K. Mehta, Mr.Srinivas Chatti, Ms.Kirti

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Srivastava and Ms.Janvi Manek i/b. Cyril Amarchand

• angaldas, for Respondent No.1 in COMAP(L)
• os.8026/2020 and 8019/2020.

Mr. Nikhil Sakhardande, Senior Advocate with

Mr.A.Mehta, Mr.Srinivas Chatti, Ms.Kirti Srivastava and

Ms.Janvi Manek i/b Cyril Amarchand Mangaldas for

Respondent No.1 in COMAP(L) Nos.9907/202 and

9909/2020.

skn 5 COMAP(L)-8026.2020–.doc

CORAM : NITIN JAMDAR AND

C. V. BHADANG, JJ.

(Through Video Conferencing) DATE : 26 August 2021.

JUDGMENT : (Per Nitin Jamdar, J.) These four appeals challenge the common judgment and order passed by the learned Single Judge dated 9 March 2020 whereby two notices of motions taken out in the suits filed by the Plaintiff were allowed, and an injunction was granted against the Appellants. Challenging this order, the Defendants have filed these Commercial Appeals.

• Sholay Media Entertainment Private Limited (“Sholay Media”) and Generation Three Entertainment Private Limited (“Generation Three” ) had given license to the Narendra Hirawat & Co. (“Plaintiff) for exploitation of rights in certain films. The licences were terminated on 18 June 2019. Upon termination of the licences, Plaintiff filed the suits on 26 August 2019 praying for specific performance of the license Agreements. Post-termination, Sholay Media and Generation Three created rights in favour of Goldmines Telefilms Private Limited (Goldmines Telefilms) on 24 October 2019. By the impugned order dated 9 March 2020, the Single Judge has by allowing interim application stayed the skn 6 COMAP(L)-8026.2020–.doc termination of the licence agreements and also consequently nullified the rights created in favour of Goldmines Telefilms. Therefore Sholay Media, Generation Three and Goldmines Telefilms are before us with their appeals.

• The facts in the case of Sholay Media, briefly, are as follows: Plaintiff is the sole proprietorship of Mr. Narendra Hirawat. Plaintiff is in the business of films and entertainment media. An agreement was entered into between Sholay Media and Plaintiff on 9 September 2015 (first Agreement) granting a licence to exploit the Hindi feature films- Sholay and Sholay(3D), the Suit films. The consideration for this agreement was Rs.20 crore inclusive of applicable taxes. The duration of the agreement was from 1 April 2016 to 31 March 2022. Another film licence agreement was entered into between the parties on 9 September 2015 (second Agreement) with identical rights in respect of suit films for the period commencing from 1 April 2022 to 31 March 2027 for consideration of Rs.5 crores payable in the manner specified in the Agreement. Plaintiff committed defaults in payment. Sholay Media issued a termination notice on 23 October 2017. Thereafter the parties negotiated and entered into a Memorandum of Settlement on 5 November 2018, and a Deed of Settlement was executed on 3 December 2018. Since there was non-payment by the Plaintiff in payment as per the

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schedule specified in the Deed of Settlement, Sholay Media sent a notice on 18 June 2019 calling u p o n t h e P l a i nti f f t o ma k e p a y m e nt of t h e to t a l o u t s t a n d i n g a m o u n t w i t h i n s k n 7 COMAP(L)-8026.2020–.doc the period stipulated otherwise the licence under the Deed of Settlement would stand revoked. Sholay Media also sent a communication to the sub-licensee of Plaintiff regarding termination of the licence. The termination notices issued by Sholay Media offered to return the amount which was taken. Sholay Media issued a public notice on 17 August 2019. In this situation, Plaintiff approached the court with Commercial IP Suit No.1387/2019 for a declaration that Plaintiff is the sole and exclusive licensee and that Sholay Media be restrained by order of permanent injunction and to quash the termination letter and notices. Plaintiff also sought damages to the tune of Rs.100 crore. Notice of Motion No.2591/2019 was filed in this suit for interim relief.

• The facts as regards the agreements in the case of Generation Three are similar and briefly are as follows: The Plaintiff entered into an Agreement with Generation Three on 9 September 2015 (first Agreement) for a licence to exploit 32 Hindi feature films listed in Schedule-4 to the Agreement, the suit films. The consideration for this agreement was Rs.2 crore inclusive of applicable taxes. The duration of the agreement was from 6 October 2015 to 31 December 2021. Another Agreement was entered into on 9 September 2015 (second Agreement) for a licence with identical rights in respect of suit films for the period commencing from 1 January 2022 to 31 December 2026 for consideration o f R s . 2 c r or e a s p a y a b l e i n t h e m a n n e r s p e c i fi e d i n t h e A g r e e m e nt . P l a i n t i f f s k n 8 COMAP(L)-8026.2020–.doc committed defaults in payment leading to the termination of licence by Generation Three on 23 October 2017. Thereafter the parties negotiated and entered into a Memorandum of Settlement on 5 November 2018, and a Deed of Settlement was executed on 3 December 2018. Again since there were defaults in payment contrary to the schedule agreed, Generation Three sent a notice on 18 June 2019 calling upon Plaintiff to make payment of the total outstanding amount within the period stipulated otherwise the licence would be revoked. Generation Three also sent a communication to the sub-licensee of Plaintiff regarding termination of the licence. Generation Three issued a public notice on 17 August 2019. Plaintiff approached the Court for a declaration that Plaintiff is a sole and exclusive licensee and that Generation Three be restrained by order of permanent injunction and to quash the termination letter and notices. Plaintiff also sought damages to the tune of Rs.100 crore. Notice of Motion No.2607/2019 was filed in this suit for interim relief.

• The Notice of Motions were mentioned before the learned Single Judge by the Plaintiff, and the learned Single Judge assigned the date of 7 October 2019. On 16 October 2019, the advocate for Plaintiff stated that Plaintiff is trying to explore the possibility of settlement and that Plaintiff is not pressing for an ad- interim relief, and the notice of motion was adjourned to 14 November 2019. After that, the matter came up on board before skn 9 COMAP(L)-8026.2020–.doc the learned Single Judge on 9 March 2020.

• The learned Single Judge observed that payment was to be made by Plaintiff only against the invoices to be issued as can be seen from the Deed of Settlement, and Sholay Media was not justified in cancelling the license. The learned Single Judge observed that the Plaintiff’s case is that there was a breach on the part of Sholay Media and whether the termination of licence was wrongful was a

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legitimate case that needed to go to trial. With this reasoning, the learned Single Judge considered whether any interim protection is required pending the trial. The learned Single Judge analyzed the legal position under Section 14(1)(d) of the amended Specific Relief Act and observed that the Deeds of Settlement did not confer any right upon Sholay Media to terminate the licence at its sweet will and, thus, the Agreements in question were not in their nature determinable. Thereafter, the learned Single Judge examined the balance of convenience and observed that Plaintiff could not be adequately compensated if the interim relief sought is not granted. The rights claimed under the license are not ordinary property rights available in the market to work out damages. As regards the third party that is Goldmines Telefilms, the learned Single Judge took note of the agreements between Sholay Media and Goldmines Telefilms and the clauses provided therein to hold that no equities arise as Goldmines Telefilms has entered into Agreements with open eyes and the Agreements itself provided for the contingency of injunction and consequential remedial action. Regarding the notice skn 10 COMAP(L)-8026.2020–.doc of motion in respect of Generation Three, the learned Single Judge observed that the submissions made in this Notice of Motion were more or less similar to the Motion allowed, and the only difference was that one invoice was issued post Memorandum of Settlement. It was observed that there was no payment of any tranche, but as in the earlier case, the invoices were not issued. It was observed that the fact that there are some letters of demand, unlike the other case, does not make any material difference.

• The learned Single Judge accordingly disposed of both the notice of motions by order dated 9 March 2020. Till the disposal of the Suits, the Defendants were retrained from disturbing the enjoyment of the licensed rights in the suit films by Plaintiff until 30 December 2028. The Defendants were restrained from acting on the termination letters and public notices. Till the disposal of the Suits, Sholay Media and Generation Three and Goldmine Telefilms were restrained from acting on the agreement entered in October 2019 with till 31 December 2028. Plaintiff was also directed to deposit the balance amounts of Rs.3.25 crores in the case of Sholay Media and Rs.1.25 crores in the case of Generation Three with interest at the rate of 11% per annum in the Court. The deposited amount was directed to be invested. Against this common impugned order, four appeals as stated above have been filed.

• Against the order passed in Notice of Motion No.2591/2019 in Commercial IP Suit No.1387/2019, Defendant skn 11 COMAP(L)-8026.2020–.doc No.1- Sholay Media has filed Commercial Appeal (L) No.8026/2020 and Defendant No.2- Goldmines Telefilms has filed Commercial Appeal (L) No.9909/2020. Against the order passed in Notice of Motion No.2607/2019 in Commercial I.P.Suit No.1469/2019, Defendant No.1- Generation Three has filed Commercial Appeal (L) No.8019/2020 and Defendant No.2- Goldmines Telefilms has filed Commercial Appeal (L) No.9907/2020.

• Appeals are admitted. The Respondents waive service. At the joint request noted earlier, the Appeals are taken up for disposal and are disposed of by this common judgment.

1. Dr.Veerendra Tulzapurkar, Learned Senior Advocate appeared on behalf of Appellant- Sholay Media; Mr.Venkatesh Dhond, Learned Senior Advocate appeared on behalf Appellant- Generation Three; Mr.Zal Andhyarujina, Learned Senior Advocate appeared on behalf Appellant- Goldmines Telefilms; Mr.S.U.Kamdar, Learned Senior Advocate represented Plaintiff in the appeals filed by

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Sholay Media and Generation Three and Mr.Nikhil Sakhardande, Learned Senior Advocate represented the Plaintiff in the appeals filed by Goldmines Telefilms.

1. Foremost, we have to keep in mind the scope of the proceedings. The appeals arise from an interim order granting a mandatory injunction in a suit for specific performance and are not skn 12 COMAP(L)-8026.2020–.doc first appeals from a final decree in the suit. Therefore though out of deference to the efforts taken to advance detailed arguments by the Counsel, more particularly on behalf of the Plaintiff, we have referred to the submissions, most of them are deviations from the core issue. The issue to be decided in these appeals lies in a narrow ambit.

1. Since the suits are filed for specific performance, the core issue is whether Plaintiff was ready and willing to perform its part of the contract before seeking its specific performance. According to the Appellants, Plaintiff has failed to prove the readiness and willingness as per the contract. According to Plaintiff, he has acted as per the contract and was and is ready and willing to perform his part of the contract.

1. The statutory position is clear that unless Plaintiff is ready and willing to perform the essential terms of the contract, he cannot enforce specific performance of the contract. Section 16 of the Specific Relief Act, 1963 deals with personal bars to relief, which reads as under:

16. Personal bars to relief. – Specific performance of a contract cannot be enforced in favour of a person–

• who has obtained substituted performance of contract under section 20; or

• who has become incapable of performing, or violates any essential term of, the contract that on his part remains to be performed, or acts in fraud of the contract, or willfully acts at variance with, or in subversion of, the relation intended to be established by the contract; or skn 13 COMAP(L)-8026.2020–.doc

• who fails to prove that he has performed or has always been ready and willing to

perform the essential terms of the contract which are to be performed by him, other

than terms of the performance of which has been prevented or waived by the defendant.

Explanation.–For the purposes of clause (c),–

(i) where a contract involves the payment of money, it is not essential for the plaintiff

to actually tender to the defendant or to deposit in Court any money except when so directed by the Court;

(ii) the plaintiff must prove performance of, or readiness and willingness to perform,

the contract according to its true construction.

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(emphasis supplied) The underlined portion shows that specific performance cannot be enforced in favour of the person who has failed to prove that he is always ready and willing to perform the essential terms of the contract which are to be performed by him other than the terms, the performance of which has been prevented or waived by the Defendants. Secondly, Plaintiff must prove the aspect of readiness or willingness to perform the contract according to its true construction. The second explanation to Section 16 is of importance. The words used are not “as per party’s construction” but “as per true construction”. It is not for the parties to advance any construction as it suits them, but it will be for the Court to decide the true construction of the contract. Therefore, before we proceed to examine the parties’ conduct, we will examine the essential terms of the contract and their true construction.

skn 14 COMAP(L)-8026.2020–.doc

1. According to Plaintiff, as per the Deeds of Settlement, only upon issuance of the invoice, Plaintiff’s liability arose to make payments to Sholay Media and Generation Three. In paragraph-5 of the impugned order, the learned Single Judge upheld this contention and observed that payment to be made by the Plaintiff only against the invoice issued as can be seen from the Deeds of Settlement. According to the Appellants, the interpretation is completely contrary to the plain reading of the clauses of the Deeds of Settlement and a gross error is committed in the impugned order accepting the contention of the Plaintiff.

1. For arriving at the true construction of the relevant clauses of the Deeds of Settlement, the clauses of the earlier set of Agreements of the year 2015 will have to be looked at to appreciate the changes in clauses which will throw light on the interpretation of the Deeds of Settlement.

1. The terms and conditions of the first set of licence Agreements for both the periods and in respect of Sholay Media and Generation Three are identical. Similar is the position for the subsequent Memorandums of Settlement and Deeds of Settlement with a difference regarding quantum payable. For convenience, the set of agreements in the case of Sholay Media are referred to for interpretation.

skn 15 COMAP(L)-8026.2020–.doc

17. The licence fee and payment terms in the first film license Agreement dated 9 September 2015 for the period from 1 April 2016 to 31 March 2022 was provided in Clause-7 as under:

7. License Fee and Payment Terms :

7.1 In Consideration of the Licensed Rights licensed under this Agreement by the

Licensor to the Licensee, the Licensee agrees to pay the Licensor an aggregate sum of

INR 20,00,00,000/- (Indian Rupees Twenty Crores Only) (inclusive of Service Tax

and MVAT). This consideration shall be paid to the Licensors Less TDS as applicable;

however Service Tax and MVAT shall be equally borne by the Parties. Stamp Duty

and foreign tax/duty (if any) shall be exclusively borne by the Licensors (“License

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Fee”).

7.2 The License Fee shall be payable in the following manner :

7.3 Already paid on 16/06/2015, Rs.30,00,000/- (Rupees Thirty Lacs Only).

7.4 Balance INR 19,70,00,000/- (Indian Rupees Nineteen Crore Seventy Lacs Only)

shall be payable on receipt of the Film Materials, and subject to successful technical/ quality clearance of the Masters by the Licensee.

7.5 The License Fee is subject to deduction of tax at source (TDS) as per Income Tax

Act, 1961 and shall be paid subject to receipt of correct and valid invoice from the Licensor.”

(emphasis supplied) For the second Agreement drawn on the same date for the period from 1 April 2022 to 31 March 2027 also contained Clause-7 dealing with payment, which reads thus:

skn 16 COMAP(L)-8026.2020–.doc

7. License Fee and Payment Terms :

7.1 In Consideration of the Licensed Rights licensed under this Agreement by the

Licensor to the Licensee, the Licensee agrees to pay the Licensor an aggregate sum of

INR 500,00,000/- (Indian Rupees Five Crores Only) (inclusive of Service Tax and MVAT). This consideration shall be paid to the Licensors Less TDS as applicable; however Service Tax and MVAT shall be equally borne by the Parties. Stamp Duty and foreign tax/duty (if any) shall be exclusively borne by the Licensors (“License Fee”).

7.2 The License Fee shall be payable in the following manner :

7.3 Rs.10,00,000/- (Rupees Ten Lacs Only) in signing of this agreement.

7.4 Balance INR 4,90,00,000/- (Indian Rupees Four Crores Ninety Lacs Only) shall

be payable on 30/06/2016.

7.5 The License Fee is subject to deduction of tax at source (TDS) as per Income Tax

Act, 1961 and shall be paid subject to receipt of correct and valid invoice from the Licensor.”

(emphasis supplied) In respect of Generation Three, the licence fee and payment terms were included in Clause-7 of both the Agreements executed on 9 September 2015, one for the period from 6 October 2015 to 31 December 2021 and the other

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from 1 January 2022 to 31 December 2026. The clauses of both Agreements are identical to those of Sholay Media, except the amounts, and it is not necessary to reproduce the clauses of these Agreements.

skn 17 COMAP(L)-8026.2020–.doc

18. The four Agreements dated 9 September 2015 in respect of both Sholay Media and Generation Three were terminated, and the parties re-negotiated their position. Thereafter parties entered into first a Memorandum of Settlement and then a Deed of Settlement. The Memorandums of Settlement in respect of Sholay Media and Generation Three were identical except for the sums involved. The two Deeds of Settlement executed on 3 December 2018 provided for the time schedule in respect of both Sholay Media and Generation Three. The clauses of the Memorandums of Settlement were reiterated. The Deeds of Settlement contained clauses different from the first set of Agreements. The clauses of the Deed of Settlement which are relevant for deciding the controversy are as under:

“PRINCIPAL TERMS:-

1. It is agreed that the revised consolidated consideration payable under the “Agreements” and Addendums shall now be Rs.8,71,00,000/- plus GST, as applicable, which shall be paid by NHC to SME as under:

1. Rs.1,25,00,000/- (Rupees One Crore Twenty Five Lakh Only) plus GST, as applicable, already paid on execution of Mos.

• Rs.2,46,00,000/- (Rupees Two Crore Fourty Six Lakh Only) plus GST, as applicable, on execution of this Deed of Settlement (DoS).

• Rs.2,50,00,000/- (Rupees Two Crore Fifty Lakh Only) plus, GST, on or before 31-03-2019.

• Rs.2,50,00,000/- (Rupees Two Crore Fifty Lakh Only) plus, GST, as applicable, on or before 30-04-2019.

• …. ….. ….. ….. ….. …..
• … ….. ….. ….. ….. …..

skn 18 COMAP(L)-8026.2020–.doc

4. SME shall issue the invoices against each tranche of payment stating the amount

and the GST as applicable. SME shall handover the copy of challan to NHC within 14

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days of GST payment as proof of payment of GST collected under the issued invoice.

In case the GST is not paid by SME and or SME fails to hand over the copy of GST

paid challan NHC, NHC shall deduct such GST amount from next payment and

thereafter all payments shall be made by NHC to SME post deduction of GST amount

and the GST amount shall be directly paid by NHC to Govt. Account with the GSTIN

No. of SME for and on behalf of SME and shall provide the challan for the same to SME.”

• …. ….. ….. ….. ….. …..
• …. ….. ….. ….. ….. …..
• …. ….. ….. ….. ….. …..
• … ….. ….. ….. ….. …..
• …. ….. ….. ….. ….. …..
• … ….. ….. ….. ….. …..
• …. ….. ….. ….. ….. …..

12. Timely Payment of Consideration in Clause 1 of the Principal Terms is the essence

of this Deed. In the event any of the above Principal Terms are not fulfilled by NHC to

SME, SME shall have the right to terminate this Deed. Such termination shall result

as if the present Deed along with all the letters executed with this Deed, copies of which are enclosed herewith in Annexure were never executed.”

13 ….. ….. ….. ….. ….. …..

TERMINATION :

“Either party may terminate the Deed only on gross violation/abuse of PRINCIPAL

TERMS by giving the other party 15 days clear notice in writing for the cure. In case

of termination, this Deed shall stand as null and void as if it was never executed and

the parties shall be at stages where they were before the present settlement.”

skn 19 COMAP(L)-8026.2020–.doc

WAIVER :

No term or provision hereof will be deemed waived, and no variation of terms or

provisions hereof shall be deemed consented to, unless such waiver or consent be in writing and signed by the party against whom such waiver or consent is sought to be enforced. Further, waiver by any Party of any default or breach of any term or condition of this Deed at any one instance shall not be deemed or construed to be a continuing waiver of default or breach of such term or condition for the future or any subsequent breach thereof.”

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For convenience, wherever necessary, the First set of Agreements are referred to as

2015 Agreements and Deeds of Settlement are referred to as 2018 Agreements.

19. First to note the clause of 2015 Agreements. The 2015 Agreements fixed the amount as consideration for license rights. The manner of payment was also provided. TDS was to be deducted by the Plaintiff. The 2015 Agreements specified that the amount would be inclusive of service tax and MVAT and it was also later provided that the parties will equally bear service tax and MVAT. There was some difference in interpretation (in the case of Sholay Media) as to the payment of service tax in the 2015 Agreements. A legal opinion was sought. Clause-7 of 2015 Agreements provided that the licence fee was subject to deduction of TDS and was to be paid subject to correct and valid invoice from the licensor. There is no dispute before us that under the 2015 Agreements, payment was to be made by Plaintiff as against the issuance of invoice.

skn 20 COMAP(L)-8026.2020–.doc

• Now to consider the 2018 Agreements. Under the 2018 Agreements, a specific timetable giving dates on which the payment had to be made was provided in Clause-1(a) as the principal terms. Clause-12 further clarified that the timely payment under Clause-1 of principal terms was the essence of the deed, and in the event of the principal term being not fulfilled, the licensor will have the right to terminate the deed. Another important change was that the mention of Goods and Service Tax and its inclusion in Clause-4 of the 2018 Agreements. It is quite clear, not only from the terms of the 2018 Agreements but also from the events preceding the 2018 Agreements, that the main term of the 2018 Agreements is Clause-1 of the principal terms. Having experienced default on the part of Plaintiff leading to termination of the 2015 Agreements, it was obvious that Sholay Media and Generation Three were keen to incorporate a specific timeline and secure commitment for payment from Plaintiff. In Clause-12 of the 2018 Agreements, the parties reiterated that the timely payment as per Clause-1 of the principal terms was the essence of the contract.

• As rightly argued by the Appellants, the liability for payment arises under Clause-1 of the principal terms of the 2018 Agreements and Clause-4 is only a modality as to how to pay. Clause-4 has nothing to do with the obligation to pay, but it provides for the manner of payment. The obligation arises under Clause-1. There is also logic for the change in the manner of payment and skn 21 COMAP(L)-8026.2020–.doc raising of invoice in Clause-4 in the terms between the 2015 Agreements and the 2018 Agreements. The 2018 Agreements refer to payment of GST. The legal position under the Goods and Service Tax is that when an invoice is raised, liability is fastened on the one who is raising the invoice to pay GST within the stipulated time. GST is payable within 20 days following the month of issuance of the invoice irrespective of receipt of the amount under the invoice. This legal position is not in dispute. Clause-4 of 2018 Agreements stated that the licensor would issue an invoice against every tranche of payment stating the amount and GST applicable. Thereafter GST was to be paid, and the proof was to be produced. If the licensors did not pay GST, Plaintiff was permitted to deduct from the next payment. Considering the statutory liability that arose from the mere issuance of invoice to pay GST, Sholay Media and Generation Three safeguarded their positions by stating that they will issue invoices against each tranche, clearly meaning that upon receipt of payment. This is the plain reading of the clauses of the 2018

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Agreements even looked at from a business point of view. Sholay Media and Generation Three clearly did not want to expose themselves for payment of GST before receipt of any payment, especially when there was a history of Plaintiff defaulting in payment. Plaintiff’s contention of reciprocal promises is based on the assumption that “to issue invoice” is the reciprocal promise to the obligation of Plaintiff “to make payment”. There is no merit in this contention. Issuing invoices is a clerical step and a modality and skn 22 COMAP(L)-8026.2020–.doc cannot be considered a reciprocal promise. In any case, Plaintiff had an obligation to make payments on the date agreed.

22. The fundamental error in the impugned order is that it makes no reference to the change in the language and clauses of payment between the 2015 Agreements and the 2018 Agreements and their implications. The only discussion as regards the interpretation of the Agreements is in paragraph-5 of the impugned order, which reads thus:

“5 Prima facie it is apparent from the deed of settlement that the revised consolidated

consideration payable by the Plaintiff thereunder was to comprise of a total sum of

Rs.8.71 crores plus GST as applicable; this amount was to be paid in installments in

the manner stated in the deed of settlement; Defendant No.1 was required to issue

invoices against each tranche of payment stating separately the amount of licence fee

and GST as applicable; and payment was to be made by the Plaintiff to Defendant

No.1 only against such invoices. These modalities are further supported by what

actually transpired in the course of dealings between the parties. The three tranches

of payment made so far under the deed of settlement by the Plaintiff to Defendant

No.1 were all made after the latter had issued proper GST regulated invoices

indicating components of license fee and GST (both CGST and SGST) separately and

in each instance, payment was duly made by the Plaintiff to Defendant No.1 after

receipt of such invoices. The grievance of the Plaintiff that Defendant No.1 could not

have called upon the Plaintiff to pay any particular tranche from out of the sum

designated under the deed of settlement, except after raising a proper tax invoice,

thus seems to be prima facie justified.”

Considering that it was the core dispute upon which readiness and willingness of the Plaintiff and consequent legal foundation for relief skn 23 COMAP(L)-8026.2020–.doc of specific performance was hinged, the language, object and background of the clauses of the 2018 Agreements ought to have been the main focus of discussion and elaboration in the impugned order, which is missing.

23. Plaintiff then contended that even for the 2018 Agreements, it is clear from the conduct of the parties that invoices were to be issued prior to the payment. Plaintiff contended that Sholay Media issued an invoice for the first tranche on 5 November 2018, the date on which Memorandum of Settlement was executed against which payment of first tranche plus GST of Rs.1,25,00,000/- was made. It was contended that even in the case of Generation Three, an invoice was issued on 5 November 2018 upon execution of the Memorandum of Settlement. In the case of Sholay Media, an invoice for payment of the amount with GST was issued on 3 December 2018 for the second tranche. Generation Three issued no invoice for the second tranche. For the third tranche, Sholay Media issued an invoice only on 3 June 2019 for the amount payable on 31 March 2019. Generation Three

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did not issue any invoices for the two tranches on 31 March 2019 and 30 April 2019. Based on this factual position, it was contended before us by Plaintiff that the parties themselves understood that under the 2018 Agreements, also the invoices were to be issued first and thereafter payment was to be made and that the learned Single Judge has rightly taken note of this conduct.

skn 24 COMAP(L)-8026.2020–.doc

• As regards the invoice and payment as of the first tranches under 2018 Agreements are concerned, nothing much turns on this as, on the date of 2018 Agreements, the amounts were paid, and invoices were issued. In the case of Generation Three, except for the first invoice for the 2018 Agreements, no invoice was issued for the second, third and fourth tranches. No such understanding can be discerned in the case of Generation Three that the invoice had to be issued first, and then payment has to be made by Plaintiff.

• The position in respect of Sholay Media though slightly different, no such inference can be drawn. As regards the first tranche, the payment and invoice were on the date of the 2018 Agreements. As regards the second tranche, the invoice was issued on 3 December 2018; however, the installment was not paid on time. Thereafter for the third installment, which was due on 31 March 2019, the invoice was issued on 3 June 2019 for Rs.1,96,00,000/- for which voucher was issued on 4 June 2019. However, as regards the issuance of this invoice, the matter cannot be seen in isolation. The third installment became due on 31 March 2019, and no amount was paid for the said installment. Payment of the second installment with GST component had become due, which Sholay Media had to incur on 18 April 2019. Sholay Media wrote to Plaintiff pointing out that Plaintiff was in default regarding the balance sum of the second installment due on 3 December 2018. Then the third installment of 31 March 2019 was not being paid, and the fourth installment was to become due on 31 April 2019. Sholay Media has skn 25 COMAP(L)-8026.2020–.doc averred that there were various meetings, yet the amounts were not paid. It is averred that in view of the requests made and assurance was given by Plaintiff that part payment of the third installment will be made, an invoice came to be issued on 3 June 2019. Thereafter for other tranches, invoices were not issued. Therefore the argument of Plaintiff that the conduct of the Sholay Media showed 2018 Agreements was to be interpreted to mean that invoice first and then payment by Plaintiff only thereafter is incorrect and not borne out by the record. The impugned order has only recorded conclusions but without noticing the correspondence on record which we have referred to above. The impugned order also does not make a distinction on this aspect in respect of Generation Three, which is a clear error.

• Argument of the Plaintiff was that there was a dispute and confusion regarding payment of tax and GST. As rightly pointed out by the Counsel for Sholay Media, the invoices issued clearly specified CGST at the rate of 6% and SGST at the rate of 6%, i.e. total GST of 12%, from which it can be clearly understood as to what would be the liability.

• Since Plaintiff seeks to interpret the clauses of the Agreements with reference to the parties’ conduct, Plaintiff’s conduct will have to be seen as to whether it can be deduced that payment was not being made because Plaintiff was waiting for invoices.

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skn 26 COMAP(L)-8026.2020–.doc

28. In the case of Sholay Media, communications were issued to Plaintiff on 18 April 2019 and 22 August 2019, calling upon it to make payment, and the last reminder was sent on 31 May 2019. Plaintiff did not respond to any of the emails stating that the payments were not being made because invoices were not issued. Even when Generation Three sent emails on 18 April 2019, 22 May 2019, 31 May 2019 and 18 June 2019, no such theory of Invoice First Payment Later was raised. It was only on 24 July 2019 that this theory was taken after the sub-licensee was informed regarding termination. If it was so simple that Plaintiff was always ready and willing to pay the installments and all that stopped it from making the payment was the issuance of invoices, then there would have been an immediate response from Plaintiff asking for an invoice. The theory regarding payment against an invoice in the case of Sholay Media was raised by Plaintiff the first time in the email dated 17 July 2019 when the termination notice was issued, and the sub- licensee was informed. The Appellants are right in contending that this stand taken by Plaintiff first time in July 2019 since December 2018 is an afterthought. Further in the last reminder of Sholay Media dated 31 May 2019, interest was sought for delayed payment. If the issuance of the invoice was the only impediment, there would have been an immediate response that no interest is payable. The Appellants also argued that it would be against the business reality that an entity, licensed the films for getting monetary returns would not want the money and neglect to issue invoices.

skn 27 COMAP(L)-8026.2020–.doc

• The 2018 Agreements are pure and simple commercial contracts. For section 16(c) of the Specific Relief Act read with second explanation thereto, the true construction of the 2018 Agreements between the parties is that under Clause-1 of the principal terms wherein a time-schedule is provided is the one which creates a primary liability to pay, and Clause-4 thereof is only a modality. Clause-4 was not an essential term of the contract. The payment had to be made as per the time schedule, and payment was not dependent on the issue of an invoice. Thus, neither the terms of the Agreements nor the correspondence between the parties and conduct of the parties, even remotely, suggest that the parties had agreed that invoice for the amount plus GST as applicable would be issued first, then only liability will arise for the licensee to pay the amounts. Therefore, the conclusion in the impugned order is ex facie contrary to the terms of the 2018 Agreements and the documents on record. Neither the 2018 Agreements nor the conduct of the parties indicates so.

• Now, it will have to be seen whether, in fact, Plaintiff adhered to the time schedule as per Clause-1 of the principal terms regarding Sholay Media and Generation Three.

• As regards defaults, the observations in the impugned order are found in paragraph-7as under:

“7 So far as the second tranche of payment is concerned, namely, the sum of Rs.2.46,

though it is a matter of fact that this payment was made, despite raising of an invoice,

in a skn 28 COMAP(L)-8026.2020–.doc staggered manner and over a period of time,

i.e. between 4 December 2018 and 20 April 2019, it is equally true that these

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payments were duly accepted by Defendant No.1. It is only after accepting all these payments, that Defendant No.1 raised its third invoice, namely, the invoice of Rs.1.75 crores (plus GST) on 3 June 2019. If that is so, surely, Defendant No.1 cannot fall back on defaults made earlier by the Plaintiff in payment of the second tranche. Coming now to the third tranche of payment, it is a matter of fact that whilst the third tranche was to cover a sum of Rs.2.50 crores, Defendant No.1 in fact raised an invoice only for a sum of Rs.1.75 crores (plus GST) and it is nobody’s case that this amount was not paid by the Plaintiff. (In realty, as a matter of fact, this payment was made immediately on the following date, i.e. on 4 June 2019.) Now the question to be considered is whether, in these facts, Defendant No.1 was justified in terminating the suit licence agreements within a fortnight of this last payment of Rs.1.75 crores (plus GST), and that too by relying on defaults purportedly made by the Plaintiff prior in point of time, that is to say, prior to the payment of the last duly raised invoice, namely, the invoice of 3 June 2019 for Rs.1.75 crores (plus GST). The most obvious answer, which commends itself, at least at this prima facie stage, to this court is that Defendant No.1 was not justified. The Plaintiff’s case that there was a breach on the part of Defendant No.1 in wrongfully terminating the suit licence agreements, in the facts noted above, is, thus, a legitimate case, which needs to go to trial.”

The Appellants contend that these observations are contrary to the record and are rendered omitting various crucial facts from considerations.

• In the case of Sholay Media, as per the principal terms reproduced above, Rs.1,25,00,000/- plus GST was to be paid on the skn 29 COMAP(L)-8026.2020–.doc date of the Agreement. The second installment was to be paid on the date of the Memorandum of Settlement. Rs.2,46,00,000/- plus GST was to be paid on 3 December 2018, the date of execution of the Deed of Settlement. Rs.2,50,00,000/- plus GST was to be paid on 31 March 2019. The fourth installment of Rs.2,50,00,000/- plus GST was to be paid on or before 30 April 2019. The amounts of installments being the licence fees payable, the liability was also for deduction and payment of TDS. The TDS was to be deducted by the Plaintiff to be deposited with the Government. If TDS was not deducted, the liability would be on Sholay Media to pay the same to the Government.

• First to consider the aspect of TDS. In the case of Sholay Media, the first installment was of Rs.1,25,00,000/- which had a TDS component of Rs.12,50,000/- which was deducted. For the second installment, the TDS was Rs.24,60,000 payable on 3 December 2018 but was paid in part up to April 2019. For the third installment payable on 31 March 2019, an amount of Rs.17,50,000 was paid on 4 June 2019, and on total payment made by the Plaintiff, the TDS amount of Rs.54,60,000/- was deducted by the Plaintiff, however, not deposited and, therefore, it is not credited on behalf of the Appellants. There is no explanation or response by the plaintiff in respect of this breach.

• As regards the payments by the plaintiff in the case of Sholay Media, the second installment was due on 3 December 2018 skn 30 COMAP(L)-8026.2020–.doc for Rs.2,75,52,000/- inclusive of GST. The same was not paid on time. Rs.46,00,000/- were paid on 4 December 2018;

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Rs.29,52,000/- were paid on 6 December 2018; Rs.1,00,00,000/- were paid on 13 December 2018; Rs.25,00,000/- were paid on 20 December 2018; Rs.23,00,000/- were paid on 4 January 2019; Rs.20,00,000/- were paid on 5 February 2019; and Rs.32,00,000/- were paid on 28 April 2019. Therefore, the last payment was 138 days overdue. As regards the third installment, it was payable on 31 March 2019. As the amount was not paid, emails were sent on 18 April 2019. After that, on 3 June 2019, an amount of Rs.1,75,00,000/- was paid. Therefore, when the suit was filed, and the impugned order was passed, the balance amount of Rs.3,25,00,000/-, was directed to be deposited by the learned Single Judge. It is clear from the documents on record that in the case of Sholay Media, there were defaults on the part of Plaintiff to adhere to the time schedule under the essential terms. Apart from non- adherence to the time schedule and defaults, the amounts of TDS were deducted and not deposited with the Government to the credit of Sholay Media. Not only the payments were not made on time, but there were serious shortfalls and defaults in payment by Plaintiff. As regards the contention of the Plaintiff that Sholay Media asked it to pay the amount to other parties, Sholay Media pointed out that since the obligation arose to Sholay Media from third parties as the Plaintiff did not pay the amounts under the Agreements, the Plaintiff was asked to pay directly to the third parties. Nothing much turns skn 31 COMAP(L)-8026.2020–.doc on this aspect.

35. As regards Generation Three, the conduct of Plaintiff is even worse. On 5 November 2018, the first installment of Rs.75,00,000/- plus Rs.9,00,000/- as GST was paid. Ten per cent TDS was deducted by Plaintiff but not deposited in the treasury to the credit of Generation Three. The second installment of Rs.62,50,000/- plus GST was to be paid on 31 March 2019. This amount was not paid. Generation Three sent an email on 18 April 2019 to Plaintiff reminding to pay the outstanding amount of Rs.62,50,000/- plus GST along with 18% interest. No steps were taken. The third installment of Rs.62,50,000/- plus GST was payable on 30 April 2019, which Plaintiff did not pay. On 22 May 2019, Generation Three again sent an email to Plaintiff to clear the outstanding amount of both the installments, but there was no reply to the emails. Ultimately, on 18 June 2019, termination-cum-cure- notice was given. On the date of the suit, except for the payment made on the date of Deed of Settlement, no further payment whatsoever as per the principal terms of the Agreement was made by Plaintiff. Generation Three makes a grievance that the learned Single Judge was not right in observing that there is no difference between Sholay Media’s case and Generation Three regarding this aspect. The grievance is justified since, in the case of Generation Three, there is no payment by the plaintiff at all after the payment of the first installment.

skn 32 COMAP(L)-8026.2020–.doc

• It was then strenuously contended by the Counsel for the Plaintiff that the Appellant- licensors, by their conduct, have waived their right to insist upon time as the essence of the contract and could not have terminated the 2018 Agreements on the ground of delayed payments. According to the Counsel, the third part of section 55 of the Contract Act came into play by accepting payment beyond the stipulated time, and the first part of section 55 of the Contract Act was not applicable.

• This argument of Plaintiff based on section 55 of the Contract Act and the concept of waiver does not apply to the case of Generation Three as after the payment of the first tranche, no payments have been made at all by Plaintiff to Generation Three.

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• Regarding Sholay Media’s case, Plaintiff contends that Sholay Media erroneously relied on the first part of section 55 of the Contract Act for termination of the contract contending that time is the essence of the contract. Plaintiff contended that even if the contract so provides, it is always open to the parties to accept performance, and once the performance is accepted after the time stipulated in the contract has elapsed, then the scheme of section 55 of the Contract Act third part read with sections 62, 63, 64 and 66 of the Contract Act comes in to play. It was contended that section 62 deals with substitution of a new contract, section 63 deals with acceptance of part performance of the promise, section 64 speaks of rescission of voidable contracts, and section 66 prescribes the mode skn 33 COMAP(L)-8026.2020–.doc to rescind the voidable contract. Plaintiff contended that revocation or rescission of voidable contract has to be communicated in the same manner subject to same rules as applicable to the communication or revocation of the proposals. Reliance is placed on the decisions in the cases of General Manager, North Railways v. Sarvesh Chopra1; P.D’Souza v. Shondrilo Naidu2; KSL & Industries Ltd. National Textiles Corporation Ltd. 3; Jagad Bandhu Chatterjee v. Smt. Nilima Rani4; and Rashik Lal v. Shah Gokuldas5. The Counsel for Sholay Media submitted that the short answer is that none of these decisions is applicable as the payment is not made fully, and in no manner it can be inferred that Sholay Media has waived its rights.

• The 2018 Agreements has a Waiver clause, which is reproduced above. It states that no term or provision will be deemed waived, and no variation of term shall be deemed to be consented to unless such waiver or consent is in writing by the party against whom such waiver or consent is sought to be enforced. It is also provided that waiver by any party at one instance shall not be deemed to be construed as a waiver. This is what the parties have agreed upon amongst themselves. The Principal Terms of 2018 Agreements mandate Plaintiff to make the payments on time. Even though this aspect was argued elaborately by the Counsel for the 1 (2002) 4 SCC 45 2 (2004) 6 SCC 649 3 2012 SCC OnLine Del. 4189 4 1969 (3) SCC 445 5 (1989) 1 SCC 54 skn 34 COMAP(L)-8026.2020–.doc Plaintiff relying upon the aforementioned decisions, it does not need an elaborate answer. Plaintiff’s argument proceeds on an erroneous assumption that the installments paid beyond the stipulated time were complete and accepted without demur. As enumerated above, Plaintiff paid none of the delayed payments in full as the TDS deducted of a total Rs.54,60,000/- was not credited to the account of Sholay Media. Them, the third installment was partly paid, and the fourth installment is not paid at all. There is no assertion anywhere that all installments have been paid fully.

• The argument based on waiver and the time not being the essence of the contract is now argued by the plaintiff before us extensively, but the basic finding in the impugned order is that there was no liability on the Plaintiff to pay till the invoice was raised. The impugned order only takes note of the event of 3 June 2020 in respect of part payment of the third installment; however, it does not refer to the fact that despite reminders sent by Sholay Media, the payment for March was seventy-one days due, and payment for April was forty one 41 days due, and not paid at all. We have examined the correspondence and record. Sholay Media sent reminders to Plaintiff, and nowhere from the correspondence, we can observe that any of the contingencies under section 62 or 63 of the Contract Act had arisen. In this case, there was neither any novation, rescission or alteration of the contract nor any dispensing with remitting wholly or in part performance of the promise. Nor the contin g e n c i e s u n d e r s e c t i o n s 6 4 a n d 6 5 o f t h e C o n t r a c t A c t h a d a r i s e n f o r s k n 3 5 COMAP(L)-8026.2020–.doc invocation of the third part of section 55 of the Contract Act. Though

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the principles laid down in the decisions cited and referred to above are salutary, they do not apply to the facts of the case. The case at hand is a case of chronic defaults at every stage by Plaintiff. In no circumstances was there any waiver of Sholay Media’s right to receive the amount on the dates stipulated. None of the amounts which are stated to be accepted are full amounts. The assertion that in the case of both Sholay Media and Generation Three, the TDS was not deposited at all has gone uncontroverted. The argument does not address the fourth installment, which was due to Sholay Media in April 2019 and was not paid at all. The argument of the plaintiff based on waiver by Sholay Media has no merit. As stated earlier, it does not arise in the case of Generation Three.

• Therefore, it is clear that no prima facie case is established by Plaintiff regarding readiness and willingness to perform the contract contemplated under Section 16(c) of the Act of 1963 and second explanation thereto.

• The Counsel for the Plaintiff pointed out that in the appeal memo, Sholay Media and Generation Three have taken grounds based on SMS and Whatsapp messages between 21 November 2018 to 17 June 2019 which do not form part of the record. The Counsel for Sholay Media and Generation accepted this position and submitted that these grounds would not be pressed in the appeals and be considered deleted.

skn 36 COMAP(L)-8026.2020–.doc

• The learned Single Judge, by issuing the impugned direction on 9 March 2020, has restored the position which was before the filing of the suits on 29 August 2019 in effect grating stay to the termination effected on 18 June 2019 and permitting the Plaintiff to exploit the licensed rights till 31 December 2028. This, as contended by Sholay Media and Generation Three, is a grant of specific performance at an interim stage virtually decreeing the suit.

• That the Court has the power to grant mandatory interim relief cannot be disputed, but the parameters are strict. Guidance can be found in the decisions of the Supreme Court in the case of Adhunik Steels Ltd. v. Orissa Manganese and Minerals (P) Ltd.6 and in the case of Deoraj v. State of Maharashtra. 7. There could arise cases where the grant of interim relief would be tantamount to granting of final relief, is justified, and withholding of interim relief would be tantamount to dismissal of the main petition. However, a very strong prima facie case must exist to grant such interim relief akin to final relief.

• Therefore, the question is whether any such very strong prima facie case exists in the matter at hand. The answer is ‘No’. In fact, even to constitute an ‘ordinary’ prima facie case, Plaintiff could not have been considered as ready and willing to perform his part of the contract. Section 16 of the Act of 1 9 63 i s c o u c h e d in n e ga t i v e 6 ( 2007 ) 7 S C C 125 7 ( 2 0 04 ) 4 S C C 697 skn 3 7 COMAP(L)-8026.2020–.doc terms and bars relief to those who are not ready and willing to perform the contract as stipulated. Readiness and willingness is the foundation for the final relief of specific performance, and if there is no prima facie case of readiness and willingness, the core of test for the grant of interim injunction is absent, much less for any mandatory interim injunction.

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• On behalf of Plaintiff, it was sought to be argued and as referred by the learned Single Judge, regarding the nature of the contract as to whether it can be said to be as falling under section 14(d) (as amended) of the Act of 1963. The learned Single Judge referred to the legal position under Section of 14(d) of the amended Act of 1963 first by referring to the decision of Indian Oil Corporation Ltd. v. Amritsar Gas Service 8 distinguished it, and after that relying on the decision of Kerala High Court in the case of T.O.Abraham v. Jose Thomas9, the learned Single Judge observed that the 2018 Agreements did not confer any right upon the Licensors to terminate the Agreement at their sweet will and, thus, the Agreements were not in their nature determinable. The learned Judge thus concluded that since the 2018 Agreements did not contain a clause that termination of the Agreement will be at the sweet will of the licensor, the case does not fall under section 14(d) of the Act of 1963.

• Counsel for Plaintiff made an elaborate argument on 8 (1991) 1 SCC 533 9 (2018) 1 KLJ 128 skn 38 COMAP(L)-8026.2020–.doc section 14(d) of the Act as to how the Agreement in its nature is not determinable. Counsel submitted that the real test to ascertain whether the contract in its nature is determinable is whether, even after granting specific performance, nothing stops the licensor to terminate the agreement again, and it will be futile to grant specific performance. The learned Counsel for Sholay Media and Generation Three clarify that adjudication on this issue does not make any difference to their case. The Counsel submitted that this is nothing but an attempt by Plaintiff is to divert the issue, and this entire line of argument is a red herring. The Counsel for Goldmines Telefilms submitted that even as a legal position, the impugned order is incorrect as the decision of Kerala High Court in the case of T.O.Abraham does not lay down the proposition referred to in the impugned order, and the decision of the Kerala High Court is to the contrary. The learned Counsel contended that the grant of a license by its very nature is determinable.

• According to us, the arguments based on section 14(d) is not relevant as there is no prima facie case at all in respect of readiness and willingness and even assuming that the present a falls outside the purview of section 14(d); still, basic principles in section 16 of the Act of 1963 regarding readiness and willingness apply. All that we observe is that the impugned order has proceeded as if the only test to determine whether the contract falls under section 14(d) is whether the contract contains a clause of termination at the will of a party. The of the learned Single Judge of Delhi High Court in the skn 39 COMAP(L)-8026.2020–.doc case of Tarun Sawhney v. Uma Lal and others10 referred to section 14(c) (unamended) and stated that the nature of the agreement for this purpose would have to be asserted from the special characters or from special stipulations. Learned Single Judge of Gujarat High Court in the case of Intercontinental Hotels Group-India Private Limited v. Shiva Satya Hotels Private Limited11 observed and referred to the facts and circumstances of the case, mainly the terms of the Agreement. Therefore, it appears that there could be parameters apart from the termination at the will of the party to decide whether the contract falls under section 14(d). We also note that in the decision in the case of Spice Digital Ltd. v. Vistaas Digital Media Pvt. Ltd.12, the learned Single Judge of this Court had interpreted the agreement before the court in the facts of that case which would indicate a different test to be applied than the one in the impugned order. As stated earlier, we don’t need to decide on this position in law because of our earlier findings. Plaintiff sought to urge another position of law as to whether the amendment to section 14 of the Act on 1 December 2018 was retrospective or otherwise. Again this is a line of enquiry wholly

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unnecessary for the determination of the appeals. The suits were filed in August 2019, and none of the Appellants argued that the amendment is not retrospective.

• It is clear that the attempt of Plaintiff creating an edifice based on various sections of the Specific Relief Act and the Contract 10 2011 (125) DRJ 527 11 2013 SCC OnLine Guj 8678 : (2014) 1 GLH 357 12 2012 SCC OnLine Bom 1356 : (2012) 114 (6) Bom LR 3696 skn 40 COMAP(L)-8026.2020–.doc Act is only to shift focus from the basic issue that the Plaintiff had admittedly did not pay the consideration of exploitation of licences to its true owner neither in full nor in time, and whose Agreements were, therefore, terminated as per the causes of the Agreements and the Plaintiff was not ready and willing to perform its part of the contract.

• We now turn to the observations in the impugned order on the balance of convenience. In paragraph-11 of the impugned order deals with this aspect as follows:

“11 Coming now to the questions of balance of convenience and irreparable damage,

it needs to be noted at the outset that whereas, the suits were to be dismissed, Defendant No.1 would very much be capable of being compensated for the damage occurred to it as a result of the temporary injunction claimed herein; such damage would even be clearly measurable, the measure being what Defendant No.1 would have gained if its rival licence agreement with Defendant No.2 were allowed to be performed; on the other hand, so far as the licensee’s (i.e. the Plaintiff’s) rights are concerned, by their very nature, it is difficult to formulate what would be appropriate damages if the temporary injunction sought herein were refused. Performance of distribution and exploitation rights involves various elements bearing on the expertise of an individual party to monetize these rights. It is doubtful, if the Plaintiff can, in such circumstances, be adequately compensated, if the interim relief sought for is not granted. The rights claimed under the licence agreements are not ordinary property available in the market, in which case it would have been imminently possible to work out damages.”

The learned Single Judge has proceeded on the basis that the Defendants can compute the loss of business if an injunction is skn 41 COMAP(L)-8026.2020–.doc granted, but the Plaintiff will not be able to formulate appropriate damages if the injunction is refused. This was in response to the argument that the injunction need not be granted if the claim is computable in terms of money. The learned Judge observed that it is because distribution and exploitation of rights involve various elements bearing on the expertise of individual parties to monetize the rights. The Appellants contend that since there is no prima facie case, the question of balance of convenience will not arise. The Appellants then contend that there can be no such distinction between the case of the Plaintiff and the case of the Defendants as regards computation of monetary loss.

51. According to us, the Appellants are right in contending that no such distinction as is made in paragraph-11 of the impugned order can be made. Both the Plaintiff and the Defendants are in the same line of business. Plaintiff is not using any individual expertise to monetize the rights but has created a sub-licence. Plaintiff had taken the rights of the films from Sholay Media and Generation

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Three and has merely given them to a sub-licensee. The amounts under the 2018 Agreements are known. The amounts earned under sub-licence are known, and, therefore, the calculation of the monetary loss to Plaintiff is not impossible. The impugned order does not consider this aspect at all. Plaintiff had granted the sub- licence to Goldmines Telefilms before the termination of the 2018 A g r ee m e n t s . A f t e r t h e te r m i n a t i o n o f t h e 2 0 1 8 A g r e e m e nt s , S h o l a y s k n 4 2 COMAP(L)-8026.2020–.doc Media and Generation Three have executed agreements in favour of Goldmines Telefilms. This peculiar feature of the case reflects not only on the points at hand regarding the assessment of monetary claims but also on other aspects that will have to be elaborated on later. Thus, we find that the distinction made in paragraph-11 in the impugned order is without reference to the facts of the case.

52. Plaintiff contended that if the injunction is refused, the loss caused to Plaintiff cannot be remedied in view of the amendments of the Specific Relief Act in the year 2018. It was sought to be pointed out by Plaintiff that the damages of Rs.100 crore sought by Plaintiff are punitive damages for loss of reputation and breach of confidentiality and not for the loss of business. Plaintiff then sought to contend that section 20 of the Specific Relief Act is deleted by the amendment of 2018, and the words of section 21(1) “either in addition to, or in substitution of” are removed, and section 21(1) now reads thus:

“21. Power to award compensation in certain cases.- (1) In a suit for specific performance of a contract the plaintiff may also claim compensation for its breach in

addition to such performance…..”

On this aspect, the Plaintiff relied upon the judgment of the Supreme Court in B.Santosh Amma v. D.Sarala13 and the judgment of Allahabad High Court in the case of Mukesh Singh v. Saurabh Choudhary14. Plaintiff contends that compensation can now be an 13 2020 SCC OnLine 756 14 First Appeal No.594/2018 decided on 3 May 2019.

skn 43 COMAP(L)-8026.2020–.doc additional remedy in a suit for specific performance and no longer can be granted in substitution. It was contended that section 14(d) of the Act, where a contract for non-compliance can be compensated in terms of money, is also deleted by the amendment to the Act. The Counsel for the Plaintiff relied on the statement of the object of the Specific Relief Act to stress that the legislative policy is to take away discretion in the enforcement of the contract. Counsel submitted that Plaintiff could not be compensated in terms of money and, therefore, grant of injunction was necessary, and the learned Single Judge rightly granted it. The Counsel for Sholay Media and Generation Three submitted that again this is a complete diversion, and the Court is not considering an appeal from final decree but against the order of injunction and different parameters would apply.

53. The nature of order under challenge before us needs to be highlighted to consider this question of law raised by Plaintiff. Firstly, that injunction should not be issued because the claim is computable in terms of money is not a primary argument of the Appellants before us but is in the context of readiness and willingness. Learned Single Judge has not referred to amendments to Act of 1963 as argued before us by the Plaintiff. The Learned Single Judge only observed that because of

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the situation Plaintiff was in, it will be difficult for Plaintiff to calculate the damages and, therefore, Plaintiff’s loss was not computable in terms of money. Plaintiff has argued the aspect of damages before us as if we are considering the grant of decree for specific performance. The plaintiff is mixing up skn 44 COMAP(L)-8026.2020–.doc the concept of discretion to grant specific performance with parameters for grant of injunction. For the grant of an injunction, different parameters apply. If the case so made out, the court can grant compensation in addition to specific performance at the time of passing the decree.

• Now, we note the events after the filing of the suit and how the matter proceeded before the impugned order was passed. This is relevant in the context of two appeals filed by Goldmines Telefilms. The termination notice was issued on 18 June 2019. Plaintiff filed the suits and notices of motion on 26 August 2019. Plaintiff mentioned the notices of motion, and finding no urgency circulation was granted on 7 October 2019 by the learned Single Judge. The notices of motion were again mentioned for an early date. The learned Single Judge declined the request and stated that the matter would come on the assigned date. The notices of motion were heard on 7 October 2019 and were adjourned. Meetings were held between Plaintiff and the Appellants on 14 October 2019 and 16 October 2019. On 16 October 2019, when the matter came up on board, it was adjourned, recording the statement of the Plaintiff that ad-interim relief was not being pressed and the parties were negotiating. On 21 October 2019, the advocates for the Appellants wrote to the advocate for the Plaintiff that the offers of the Plaintiff were not matching and that they were no constraints on the Appellants to deal with the rights in the suit films. Again on 23 October 2019, the Appellants reiterated the stand. On 24 October skn 45 COMAP(L)-8026.2020–.doc 2019, film licences were executed by Sholay Media and Generation Three in favour of Goldmines Telefilms. Parties filed their replies and rejoinder. On 26 November 2019, Sholay Media and Generation Three filed their affidavits in reply. Goldmines Telefilms was joined as a party defendant. On 10 January 2020, Goldmines Telefilms filed its reply. Therefore, when the matter came up before the Court on 9 March 2020, the third-party rights were already created as of 24 October 2019, i.e. almost five months prior, and that the termination had occurred in June 2019, almost eight months before.

• It was vehemently urged by Goldmines Telefilms that not only that it had entered into an agreement when there was no ad- interim relief by paying an amount of Rs.9 crore to Sholay Media and Generation Three, but it had paid Rs.11 crore to the Plaintiff as sub-licensee and it was out of pocket Rs.20 crore, yet it is not able to exploit the rights. It was urged on behalf of Plaintiff, which is also taken note in the impugned order, that Clause-7 of the Agreement dated 24 October 2019 in favour of Goldmines Telefilms provides for various clauses fully cognizant of the pending suits and the likelihood of grant of injunction. The Plaintiff contended that these clauses provide for the consequences in case the suits are settled or there is an order of injunction and, thus, Goldmines Telefilms, with open eyes, has entered into the contract pending suits and no equities arise in its favour as rightly taken note by the learned Single Judge.

skn 46 COMAP(L)-8026.2020–.doc

56. The termination was 2018 Agreements was effected on 18 July 2019. When the proceedings came before the learned Single Judge for hearing as to ad-interim relief on 7 October 2019 and 16

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October 2019, Plaintiff did not press for ad-interim relief, and the notices of motion were adjourned. Thereafter meetings were held between the parties wherein no settlement took place. Sholay Media and Generation Three offered Plaintiff that if a particular amount is paid, the rights can be still assigned; however, the offer was not taken further by Plaintiff. This assertion is not disputed. It is in this context that an Agreement was entered into with Goldmines Telefilms. Even after that, the matter proceeded on its own pace with replies and rejoinders.

• Plaintiff contended that ad-interim relief was not pressed because periods of 2018 Agreements were yet to commence. This is far too simplistic a submission. The licences were given by Sholay Media and Generation Three for monetizing their ownership rights. Once the agreement with one party is terminated, the owner of the rights is bound to look for another to put them to use. No business entity will keep its rights with monetary potential idle, and there is every likelihood that if there is no restraint by any Court, it will proceed to monetize the same. Plaintiff being a businessman in the same trade, would be fully aware of this and would also be aware that there would be an imminent likelihood that third party rights would be created, and it has not come as a surprise, nor it was done skn 47 COMAP(L)-8026.2020–.doc surreptitiously.

• Peculiar feature of the case is that Plaintiff, during the existence of the 2018 Agreement, had sub-licensed the rights to Goldmines Telefilms, and after the termination of the 2018 Agreement, Sholay Media and Generation Three have granted the rights to Goldmines Telefilms itself. Therefore, Goldmines Telefilms had an agreement with both parties. This position is not referred to at all in the impugned order while determining the implications of the injunction on the rights of Goldmines Telefilms. We are informed that Goldmines Telefilms and Plaintiff are in an arbitration proceeding in respect of their disputes. In that context, it was asserted by Goldmines Telefilms that the stand of the Plaintiff in the arbitration proceeding is that the Agreement is not terminated while it is asserted on behalf of the Plaintiff that contrary is the position. We don’t need to enter into that arena. Suffice it to say that these peculiar facts, apart from the creation of third-party rights when ad-interim relief was not pressed during the pendency of the suits, ought to have been viewed differently. Merely because a business agreement (with Goldmines Telefilms) provides for safety clauses, the business reality and how the businessman would arrange the affairs cannot be lost sight of. The assertion of Goldmines Telefilms that it has paid consideration to all three, i.e. Plaintiff, Sholay Media and Generation Three, has not been repelled. Goldmines Telefilms, therefore, is right in making a serious grievance that the injunction has created an unjust situation for it.

skn 48 COMAP(L)-8026.2020–.doc

59. As an alternate submission, Plaintiff argued that the licences granted under 2018 Agreements are exclusive licences under the Copyright Act, 1957, and it has a special status. It was contended that an exclusive licence is akin to an assignment for a particular duration and is not like a mere licence. The exclusive licence can also be used to create further sub-licence. Reliance is placed on Sections 2(j), 30 and 54 of the Copyright Act. It was stated the schedule of 2018 Agreements, parts-1, 2 and Clause-6, will show that the licences are exclusive. Reliance is placed on the decisions in the cases of Euro-Excellence Inc. v. Kraft Canada Inc., Kraft Foods Schweiz AG and Kraft Foods Belgium SA15; T.O.Abraham v. Jose Thomas and Upma Khanna v. Tarun Sawhney16. Again this

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point will not take Plaintiff’s case further. Section 2(j) of the Copyright Act defines exclusive licence as the one which confers rights on the licensee to exclude all other persons, including the owner of the copyright, any right comprised in the copyrighted work. Section 54 speaks of civil remedies, and for the remedies owner of copyright will include an exclusive licensee. However, nothing has been shown to us from the provisions of the Copyright Act that an exclusive licence, if given on certain terms and conditions, which are breached, cannot be terminated by the owner. In case of such termination, the enforcement will be like any other Agreement. It is not necessary for us to analyze t h e de c i s i o n 1 5 2 0 0 7 S C C O n L i n e C a n S C 3 7 1 6 2 0 1 2 S C C O n L i n e D e l 2 7 1 6 s k n 4 9 COMAP(L)-8026.2020–.doc rendered by the Canadian Court as the law is codified under the Copyright Act in India. Therefore there is no merit in this contention.

• Plaintiff contended that Sholay Media and Generation Three have filed counterclaims and have prayed for damages and, therefore, they can be compensated in terms of money. Since specific performance is sought, the owners of the licences are seeking monetary damages by way of counterclaims. From this, it cannot be contended that they cannot resist the prayer for mandatory injunction.

• Plaintiff lastly contended that Plaintiff has created various further rights pursuant to 2018 Agreements and termination will expose it to claims of various parties and, therefore, the injunction was necessary. The answer is that if Plaintiff wanted to avoid this situation, Plaintiff should have paid the amounts under the 2018 Agreements. Sholay Media and Generation Three contend that Plaintiff was receiving money under the sub-licence but was not passing the same to them. Goldmines Telefilms had entered into an agreement with Plaintiff for Rs.11 crore, and even after receiving this money, the rights are not passed on it.

• The impugned order has brought about a highly inequitable situation. A Plaintiff, who was not ready and willing having consistently breached essential terms of the Agreements, who skn 50 COMAP(L)-8026.2020–.doc was admittedly in arrears on the date of the suit, who is yet to establish its rights at the final trial; is permitted by through a mandatory interim injunction to exploit all rights under the terminated Agreement. The true owners of the licensed material are prevented from monetizing their property rights. The Goldmines Telefilms, which has paid money to both, Plaintiff and Licensor Appellants, is deprived of exploiting the licenses. No extraordinary situation existed for such a drastic interim order.

• Therefore, to recapitulate, as per the true construction of the contract between parties, Plaintiff has failed to establish that Plaintiff was and has always been ready and willing to perform an essential part of the terms of the contract. No prima facie case, much less a high prima facie case, is established by Plaintiff. No extraordinary circumstances exist to grant a mandatory injunction again akin to the stay of the termination six months after the termination was effected and third party rights were created. Since the basic essential terms of the contract and documents on the record itself have been overlooked while passing the impugned order, the grant of an injunction will have to be set aside, even though these appeals are appeals on principle.

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• As a result, these four Commercial Appeals are allowed. The common impugned order 9 March 2020 passed by the learned Single Judge in Notice of Motion No.2591/2019 in Commercial IP Suit No.1387/2019 and Notice of Motion No.2607/2019 in skn 51 COMAP(L)-8026.2020–.doc Commercial IP Suit No.1469/2019 is set aside. Considering the facts and circumstances, no order as to costs.

• If the parties request taking up the suits early, the learned Single Judge may consider the same sympathetically depending, of course, on the time schedule available and earlier time-bound matters.

(C.V. BHADANG, J.) (NITIN JAMDAR, J.)

Digitally

signed by

SANJAY

SANJAY KASHINATH

KASHINATH NANOSKAR

NANOSKAR Date:

2021.08.27

15:24:20

+0530

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