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Judgment
S.B. Sinha, C.J.—The writ petitioners are the appellants. They own theatres for exhibition of films. They have been granted licences under the A.P. Cinemas (Regulation) Act, 1955 (for short ''the Act'') and the Rules framed thereunder. The licences to the petitioners have been granted in Form B.
Condition Nos. 41 and 42 of the licences are in the following terms:
The licensee, at each performance, shall also, for five minutes exhibit in such manner the slides supplied by the licensing authority free of cost, as that authority may direct (if it is non-commercial).
The licensee shall comply with such directions as the Government may, by general or special order, give as to the manner in which approved films shall be exhibited in the course of any performance.
For the aforementioned purpose, agreements were used to be entered into by and between the appellants and the Films Division. In terms of the said agreement one percent of weekly collection was to be paid/deposited. Inter alia on the ground that the Delhi High Court in some writ petition has invalidated similar rules, deposit of such amount by the appellants had not been accepted. No further agreement had also been entered into. The A.P. Film Chamber of Commerce issued a circular on 8.12.1995 to all the exhibitors in Andhra Pradesh stating:
The Hon''ble Delhi High Court has pronounced a historical judgment on 31st August, 1995 to the effect that the exhibitors need not pay any amount to the Films Division for screening Indian News Reels. The Central Government has not preferred any appeal to the Supreme Court within the stipulated time of two months i.e., September and October, 1995. Hence in pursuance of above judgment, the Films Division has to supply the news reels for exhibition without collecting any renewal amount from the exhibitors from the month of November, 1995 onwards.
All exhibitors in Andhra Pradesh are requested to keep the payment to the Films Division in abeyance until further orders. The exhibitors whose certificates are required to be renewed from 1st November, 1995 can approach the Films Division authorities for renewal without payment.
As against the aforementioned decision of the Delhi High Court, Union of India preferred an appeal before the Supreme Court.
The Apex Court in Union of India and Others Vs. The Motion Picture Association and Others etc. etc., considering conditions 15 and 22 stipulated for grant of licence under the Delhi Cinematograph Rules, 1981 held that levy is in the nature of fee and not tax. Consequently the Apex Court allowed the appeal on 15th July, 1999. The Films Division thereafter not only directed the owners of the theatres to pay the arrears from 31.8.1995 to 15.7.1999 but also directed the State Government not to renew the licences if such amounts are not paid. The present writ petitions were filed at that juncture.
Before proceeding to deal with the matter we may notice that the A.P. Film Chambers of Commerce in its letter dated 16.3.2000 addressed to the Branch Manager, Films Division, Government of India at Vijayawada stated:
We wish to bring to your notice that a number of exhibitors from your region have reported that they have been directed by your office to execute agreement on or before 17th March, 2000 for continuance of supply of approved films failing which it results in suspension of supplies under intimation to the Licensing Authorities.
In this connection you are aware that a number of theatres in the State have filed writ petitions and obtained interim orders regarding payment of rental - arrears and such other proceedings relevant to it. Since the matter is sub judice, we are of the opinion that initiation of any further action in this regard is not justified. Further it is also not clear whether the action contemplated by you is in conformity with any directives from your principals in which case we fail to understand as to how the other Branch office has not sent such communications to the theatres under their jurisdiction.
In view of the above, we request you not to resort to any kind of action affecting the interest of our exhibitor members till such time as the Hon''ble High Court makes the position clear.
As noticed before, the writ petitions were dismissed. The learned counsel appearing on behalf of the appellants contended: (1) condition No. 42 of the Licence is not mandatory; (2) as no short film has been supplied by the Films Division and the same having not been exhibited, the owners of the cinema theatres could not collect the said amount from the exhibitors and now they cannot go back to the exhibitors therefore; the action by the Films Division amounts to a waiver of rental. (3) Having regard to the difference in phraseology in Delhi Cinematograph Rules and the A.P. Cinematograph Rules as an unguided and unbridled power conferred upon the Films Division the same must be held to be ultra vires Article 14 of the Constitution. Reliance in this connection has been placed on R.M. Seshadri Vs. The District Magistrate, Tanjore and Another, .
It is the case of the State that during the interregnum no short film had been supplied. Mr R. Ravi Kumar, the leaned counsel appearing on behalf of the Films Division of Union of India, however, disputed the aforementioned contention and submitted that short films even during that period had been supplied by the Films Division.
The answer to the question raised is short and simple. Condition No.42 is not mandatory. It is directory. The Supreme Court held that collection of the amount under agreement is a fee and not a tax. A fee can therefore be collected provided an element of quid pro quo is involved therein. In a case of this nature the element of quid pro quo would be fulfilled in the event short films have been supplied to the appellants. The statement of the Films Division in its counter-affidavit in this regard is absolutely vague. No evidence to the said effect has been produced. As seen above, the State also says that no short films were supplied.
A circular letter of the Films Division dated 29.7.1999 makes an interesting revelation.
...In view of the Delhi High Court judgment dated 31st August, 1995 from 1st November, 1995, Films Division has suspended charging 1% of the rental for supply of Approved Films to Cinema Exhibitors.
Subsequently, SLP had been filed in Hon''ble Supreme Court against the judgment of Delhi High Court regarding door to door supply of Approved Films produced by Films Division as well as payment of 1% rental as service charges. However, we have agreed the judgment verdict regarding compulsory exhibition by the cinema exhibitors from 1st November, 1995 onwards. Since 1st November 1995 to July 1999 Films Division produced 141 documentaries and 79 News Magazines and supplied 73,180 prints to all the exhibitors of India for screening.
Also, due to the judgment of the High Court there was no yearly agreement between Films Division and Exhibitors. Even though as per the request of the cinema exhibitors our Distribution Branch Offices issued a letter for renewal of their licenses which itself was a type of agreement between Films Division and Cinema Exhibitors.
The 1% agreed payment was enforced which was decided after discussion with the Film Federation of India, an apex body of the various section to the film industry. It was fixed after considering various requests, suggestions and representations received from number of cinema organisation.
Even though there was no agreement between Films Division and Exhibitors, but Films Division has produced the supplied Approved Films to respect the verdict of High Court. However, the Hon''ble Supreme Court, dismissed the High Court judgment regarding collection of 1% agreed payment. In view of the facts mentioned above, Films Division is going to charge 1% fee (rental) from 1.11.95 onwards. However, we would like to have your legal opinion in the matter before implementing the Hon''ble Supreme Court judgment.
The said letter does not say that films have been supplied to each and every exhibitor.
An agreement can be express or implied. If short films have been supplied to the appellants they would irrespective of the legal position be liable to pay the amount in question to the Films Division. Even if the conditions of the licence as contended by the appellants were found to be invalid, they would still be liable in terms of Sections 65 and 70 of the Indian Contract Act. In fact, on their own showing the appellants had also been paying the said amount after the decision of the Supreme Court. We, therefore, are of the opinion that the liability of the appellants has to be determined on resolution of the dispute as to whether short films had been supplied to them or not. Such dispute has to be determined in an appropriate forum and not in a writ proceeding. It is needless to say that the State cannot refuse to renew the cinematograph licences of the appellants unless conditions precedent therefore are not satisfied.
These writ appeals and writ petitions are disposed of with the aforementioned directions and observations. There shall be no order as to costs.