ANAND THEATRE vs CENTRAL CIRCUIT CINE ASSOCIATION, JAIPUR

THIS is a complaint under Section 10-B of the Monopolies and Restrictive Trade Practices Act, 1969 (hereinafter referred to as the Act) filed by M/s. Anand Theatre, Hanumangarh through its five partners viz., Shri Ram Krishan Bihani, Smt. Nathi Devi, Shri Sushil Kumar Bihani, Shri Jaideep Kumar and Shri Basant Kumar Bihani (hereinafter referred to as the applicants) against the Central Circuit Cine Association, Raisar Plaza Bhawan, Indira Market, Jaipur-302001 (hereinafter referred to as the respondent). In the complaint, it has been primarily alleged the violation of Section 2(i) of the Act and the violation of Article 19(g), 301,305,306 of the Constitution of India. It has been stated in the complaint that the applicant theatre was constituted on 28.5.1977 and registered as a partnership firm and from the year 1978 a licence for exhibiting motion pictures under the provisions of Rajasthan Cinematograph Act was granted. The respondent, which is a non-trading company, was registered under Section 25 of Indian Companies Act, 1956 in the year 1987 and the main functions are to regulate the admission of membership and registration of pictures within different regions. According to the applicants in the film trade producers appoint distributors as exclusive agent for commercial distribution and exhibition of pictures called contracted territory and the said distributors give the film for exhibition in cinema houses, who being the sole or exclusive agent for a specified territory charges unreasonable amount or otherwise by preventing competition, control the supply or distribution of films to the exhibition.

THE applicants have admitted that because of their failure to pay the amount to the various distributors for the films received by them as many as 21 ex parte awards amounting to Rs. 2,49,480/- alongwith two disputed cases were made against them. THE contention of the applicants in this regard is that the inability to make the payment was basically because the applicants did not receive the amount from the hirer of the cinema hall. THEreafter the respondent on 2.7.1992 informed the applicants that the provisional membership granted to them on 9.6.1992 stood cancelled with immediate effect and the respondent also communicated the same to its members directing the members not to supply pictures to or enter with contract with the applicants for supply of pictures else they will be liable to pay contravention penalty at the rate of Rs. 2,500/- per violation. THE applicants for this purpose have relied upon Annexure ''C'' to the complaint which is a letter dated 2.7.1992 of the respondent and which we feel it appropriate to reproduce the extracts of the same: "Sub: Cancellation of Provisional Membership granted to you on 9.6.1992. Dear Sir, In connection to above subject we are to inform you that provisional membership granted to you on 9.6.1992 stands cancelled with immediate effect since you have failed to satisfy awards within stipulated time as per our letter No. 197 dated 12.6.1992 which please note."

The perusal of the aforesaid letter clearly shows that the contents of para 7 of the complaint are not the same and we do not know from where the applicants have reproduced the averments which are not in conformity with the aforesaid letter. The said letter of the respondent clearly stated that the applicants have failed to satisfy the awards within the stipulated period and only on that account the respondent association has cancelled the provisional membership.

The complaint is silent to the effect that what the applicants have done from 2.7.1992 to 11.1.1994 and the inference can only be drawn that the applicants have not taken any concrete steps in between for a period of more than VA. years, otherwise they would have stated so in their complaint. However, the letter dated 11.1.1994 (Annexure ''D'' of the complaint) of the applicants, which is addressed to the respondent, stated that their membership stands ceased U/A 12(f) since 14th August, 1993, and approximately awards of Rs. 2,50,000/- have been adjudicated against them. They intended to satisfy all the pending awards and earnestly request for grant of exemption U/R 67(b) so as to enable to liquidate awards. The applicants informed that they can remit instalments of Rs. 10,000/- per month. The respondent fairly issued an exemption certificate upto 12.2.1994. However, the respondent on 11.2.1994 issued a caution to its members that if any member shall deal with the defaulting members including the applicants and supply them pictures for screening, he will be liable to pay contravention penalty shall be determined by the committee. Further on 11.3.1994 the respondent issued caution and informed about the persons/parties to whom the exemption certificates have been renewed and to whom the exemption certificates have not been granted. The respondent has again reiterated about the penalty clause in terms of their letter dated 11.2.1994.

THE applicants did not take any action from 11.3.1994 till 7th March, 1995, that is, for about one year and only on 7th March, 1995, filed a Civil Suit No. 45 of 1995 before the Session Court, Hanumangarh against the respondent association for grant of temporary injunction under Order XXXIX, Rule 2 with Section 151 of C.P.C. THE applicants in that suit inter alia taken a ground that as a matter of practice the producer of motion picture and a member of the respondent association granted exclusive distribution rights of one territory to one distributor, as a result of which the distributor asked for unreasonable prices and there was a monopolistic trade practice whereby the competition was totally eliminated. THE said suit was stated to be dismissed vide order dated 7.4.1995 and it was observed that the applicants have to approach a proper Tribunal, Commission or Forum if the respondent association had contravened any provision under the M.R.T.P. Act. However, we noticed that the applicants have not annexed a copy of the said order. THEreafter the applicants served a legal notice on 19.5.1995 to the respondent, inter alia, to refrain from continuing unfair, arbitrary, illegal and unconstitutional monopolistic trade practices and compensate the applicants with a sum of Rs. 8,96,000/- which was replied by the respondent association contending that the claim of damages was misconceived, irrelevant and had no legal basis. The applicants have primarily filed the present proceedings before this Commission against the circular dated 11.3.1994 issued by the respondent under Rule 67(b) intimating members to refrain from dealing with the applicants and not to supply them pictures for screening. Alongwith this complaint the applicants have also moved an application under Section 12A of the Act inter alia for grant of temporary injunction restraining the respondent to give effect to the circular dated 11.3.1994.

THE Commission after hearing the applicants on 7.8.1995 issued notices on both the complaint and injunction application returnable on 6.10.1995, on that date the Counsel for the respondent fairly undertakes not to implement the circular dated 11.3.1994 against the applicants, which undertaking is still continuing. After completion of the pleadings, the arguments were heard on 26.3.1997 on the question of issuance of Notice of Enquiry and passing necessary orders on the injunction application. THE parties have also filed their synopsis. The respondent has filed its detailed reply stating therein that the association is an apex body of film distributors and exhibitors functioning in the Rajasthan, Madhya Pradesh, Vidharwa and Khandesh Regions of Maharashtra and is formed for promoting and advancing the cause of the film trade in general and of distribution and exhibition sector in particular. The association is a non-trading, non-capital and non-profit making companies registered under Section 25 of the Companies Act and the association''s main function is to regularise as a supervisory body to the entire exclusion of the Courts. Besides, the respondent association has also taken certain preliminary objections. According to the respondent the finding in the Civil Suit No. 45/95 passed by the Civil Court would operate as res judicata as the Civil Court has upheld the sanctity of the rules and regulations of the respondent association. It has been stated to be held that the applicants are the defaulters in making payments to the other members/ distributors and has a liability towards the other members to the tune of Rs. 2,50,000/- and the Civil Court has accepted the applicants as a judgment-debtor and the respondent association being well in its right to make the applicants as a non-member so long as the applicants do not pay off their liability. The respondent has also explained about the business of film making and its distribution and exhibition and according to the respondent the said business is a very speculative one, as a result no Government and/ or financial institution provide finance for this business except private finance. The nature of speculation is clear from the fact that out of 100 films 95 films are flopped at the box office and only 5% give good business. The respondent has stated that in order to facilitate the recovery from the applicants of the award amount, the association granted exemption under Rule 67(b) under which the monthly instalments are payable to rehabilitate the defaulting member. The applicants failed to remit monthly instalments and also did not renew their exemption certificates under Rule 67(b) and is trying to take advantage of their own wrongs. Making a person non-member, who is a defaulter, or cautioning the other members to deal with the non-member by way of penal provision, is in the interest of the members of the respondent association and is as such a regulatory measure. According to the respondent association the impugned circular is by way of caution. To determine whether the respondent association is indulging in any prohibited trade practices viz. monopolistic, restrictive or unfair trade practice under the provisions of the Act, the following questions are framed: (i) Whether the respondent association has a right to cancel the membership granted to any member in case that member failed to make the payment due to other member and/or to satisfy the payment of arbitration award ? (ii) Whether the respondent association can direct its members not to deal with a member, who is in default of payment and/or to direct its member, if any member shall deal and supply the pictures for screening to a defaulting member, then that member shall be liable to pay contravention penalty of Rs. 10.000/- per violation?

ACCORDING to the respondent the procedure is being adopted for the last about 45 years to the entire exclusion of the Courts and Courts are also putting their hands off in interfering the internal management especially of the companies registered under Section 25 of the Companies Act so that the members who are voluntarily the members of the association and are bound by its rules and regulations are not have to run to the Courts of Law to get their money disputes settled. Admittedly in this case the applicants owe more than 2.50 lakhs since 1992 as per the awards and also approach the Civil Courts in this regard. We are of the view that the matter requires a thorough investigation to find out prima facie whether the responded association indulging in any prohibited trade practices under the provisions of the MRTP Act. We, therefore, order the preliminary investigation and direct the D.G. (I & R) to investigate into the matter and submit his P.I.R. within 60 days. The Director General may also give its report whether the system, which the respondent association has alleged, is working for the last so many decades, has any adverse impact on competition and also whether the respondent association has ever enforced the contravention penalty clause against any of its members in case he was found dealing with the member, who was defaulter in making the payment of other members. As soon as the P.I.R. is submitted by the D.G., the same shall be put up before the Commission for consideration and taking appropriate action under the provisions of the Act. In case Director General is unable to submit its report within the stipulated period, he shall request for extension of time by stating the cogent reasons for not submitting the P.I.R. within the time. In view of the above observation, we do not consider it necessary to pass any order on the application under Section 12A of the MRTP Act and the same is dismissed. Application dismissed. ______________