Shraddha Entertainment vs Shvedh A. Partnership Firm

Pushpa Sathyanarayana, J

The applicant filed O.A.No.548 of 2019 seeking an order of interim injunction restraining the respondent from encumbering or alienating or exhibiting or causing the exhibition of the next film, i.e., the Tamil Cinematograph, starring Vaibhav, Venkat Prabhu, etc. and directed by SG Charles or any rights in and over such film or part thereof anywhere in the World and in any format, whatsoever, pending disposal of the proposed arbitration.

A.No.3620 of 2019 is filed by the applicant seeking to render true and proper accounts, including all third party contracts entered into with respect to their Tamil Cinematograph film titled "Jaragandi" starring Jai and Reba Mounica.

The applicant is a partnership firm engaged in the business of production of films. A partner of the respondent firm approached the applicant for producing the Tamil film "Jaragandi" under the banner of the respondent and requested the applicant to finance the said film to the tune of Rs.2.75 Crores. It was agreed to complete the movie and release the same by February 2018. However, the said film could not be completed by February 2018 by which time, the applicant claimed to have paid the entire sum of the agreed loan amount. It is further stated that the respondent required an additional loan of Rs.1 Crore to complete the said film and the applicant was also constrained to advance such amount. It is claimed that the respondent assured the applicant to repay such loan and further loan from the proceeds of the said film and in the event of any shortfall, then the same be repaid from their next production.

The said film was finally completed and censor certificate was obtained on 03.08.2018 and the respondent further had taken an additional loan of Rs.1,58,80,454/- for publicity and release expenses on the same conditions. Thus, according to the applicant, a sum of Rs.5,38,15,455/- was given to the respondent on the undertaking by it to repay the same from the sale proceeds of the film. The parties also entered into an agreement on 28.09.2017 as per which, the Tamil Nadu rights of the said film was assigned jointly by the applicant and the respondent to a third party. However, all the other rights were dealt with by the respondent unilaterally without the consent of the applicant. The respondent had paid only Rs.1.22 Crores, including the Tamil Nadu theatrical rights, as against total loan of Rs.5,38,15,455/. Thus, the respondent had not accounted for the revenue generated by the said film.

While so, the respondent had commenced its next production of a Tamil cinematograph film, which is yet to be named. As there are outstanding payable by the respondent, the applicant contended that it has a charge over the next film that is being produced by the respondent. Thus, the applicant is seeking an order of injunction restraining the respondent from entering or otherwise alienating or exhibiting the next film, which is yet to be named, but produced by the respondent and also seeking the rendition of true and proper accounts for the earlier film Jaragandi produced by the applicant and the respondent.

The applications are resisted by the respondent stating that he was a co-producer along with the applicant on an agreed profit ratio of 30:70. Clause 9 of the agreement states that in the event of realization amount is below the investment amount from the sale proceeds of the exploitation of the rights of the film, then the applicant had agreed to forego the interest amount and shall not claim the same from the respondent. It was only agreed that the respondent shall produce the next film to be produced by the applicant on professional terms. As per the terms and conditions in the agreement, the applicant agreed to the respondent to produce the Tamil film Jarugandi upto the censoring of the film. The applicant had agreed to extend finance to the extent of Rs.2.75 Crores for the production of the said film upto the completion of the censoring and the respondent agreed to use the said fund of Rs.2.75 Crores only till censoring.

6.1. Admittedly, the censor certificate was obtained on 03.08.2018. It is also stated that the actual investment made by the applicant is only Rs.3,22,67,141/- and there was repayment of the loan of Rs.75,00,000/-. The applicant had also sold the Theatrical rights of Exhibition and Exploitation rights of the movie through the territory of Tamil Nadu and received a sum of Rs.2.50 Crores. In paragraph 22 of the counter, it is stated by the respondent that the applicant had received a sum of Rs.3.15 Crores towards Tamil Nadu Theatrical rights, Kerala and Karnataka Theatrical rights and the Overseas rights, etc.,. The actual investment made by the applicant is Rs.3,22,67,141/- till the censor certificate is obtained and therefore, the dues is Rs.7,67,141/- (which, the respondent undertakes to pay). Further, the respondent does not have any objection for the sale of the satellite and digital rights for the film, which is to be sold.

6.2. The publicity expenses of Rs.1,58,80,454/- is met only after the censorship was obtained. The claim of the expenses after the censorship certificate goes beyond the agreement dated 28.09.2017. The claim by the applicant as per Clause 9 that the next film produced by the respondent cannot be released is unjust, as what was agreed to is only to work for the applicant on professional terms for the next film.

6.3. Thus, he prayed for dismissal of the applications.

Earlier, this Court had passed an order that the satellite rights of the film Jaragandi, which was not yet sold by the respondent, whenever sold, the same shall be paid to the applicant firm. Further, the rights of the next film will not be sold to the outsiders, when the film is under the process of production.

Learned counsel for the respondent contended that the film has now reached the stage of post-production.

The dispute revolves around Clause 9 of the Assignment Rights in the Agreement dated 28.09.2017.

Learned counsel for the applicant contended that as per the said clause, in the event of the realization amount is below the investment amount from the sale proceeds of the exploitation of the rights of the film, then, the applicant has to forego the interest amount and further agreed not to claim the same from the respondent. However, the respondent shall produce the next film of theirs for the applicant on professional terms in order to recover the losses. It was contended that the respondent is liable to pay the sale proceeds from his next production, till the amount is realized for the Jaragandi.

Admittedly, the film under production or post-production is not yet named and also there is no agreement between the applicant and the respondent regarding production and distribution of the next film. Any outstanding with respect to the film Jaragandi cannot be enforced against the film produced by the respondent. Even assuming for a moment that the respondent is liable to make the loss by adjusting with the proceeds from the sale of the next film, it is only on professional terms, as there is no specific agreement.

Whether the claim of the applicant is only that of financier or purchaser has to be decided only before the Arbitral Tribunal. Though the respondent, in the counter, had given a statement of the investment and the sale details summary upto obtaining censorship certificate, it is also subject to test.

The admitted outstanding amount financed, according to the respondent, is Rs.7,67,141/-, which, the respondent is liable to pay to the applicant without any delay to show his bonafides. As clause 9 cannot be specifically enforced without setting out the professional terms, as agreed, the applicant is not entitled to the injunction as prayed for.

It is not the case of the applicant that he had funded or co-produced the next film in question. If at all the applicant has got any right, it should be on professional terms, which is not available here. Therefore, the applicant has not made out a prima facie case for injuncting or restraining the respondent, as prayed for.

As the balance of convenience is in favour of the respondent and the respondent, admittedly, has liability only to the extent indicated above, i.e., Rs.7,67,141/-, it is open to the respondent to pay to the applicant, without prejudice to their rights in the arbitral proceedings, the said amount.

Though the original interim order was obtained as early as on 16.05.2019, no steps have been taken for initiating the arbitral proceedings till date. Accordingly, the parties are directed to initiate arbitral proceedings within a period of two weeks from the date of receipt of a copy of this order.

In respect of the undertaking given to this Court with respect to the satellite rights of the film Jaragandi, the same shall continue till the parties to workout their remedies before the Arbitral Tribunal.

With these observations, these applications stand dismissed.