IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 21-12-2010 CORAM: THE HONOURABLE MR. JUSTICE V. RAMASUBRAMANIAN O.A.No.1225 of 2010 to 1227 of 2010 in C.S.No.956 of 2010 Sree Gokulam Chit and Finance Company (P) Ltd., Represented by its Director, Operations, Mr.V.C.Praveen having its Office at No.66, Arcot Road, Kodambakkam, Chennai-600 024. .. Plaintiff vs. 1.M/s.Johny Sagariga Cinema Square, Proprietary concern, Represented by Mr.Johny Thomas, Having its Office at Rajaji Road, Ernakulam, Kerala. 2.K.I.Siddique 3.Mr.Ramesh Babu, Ekaveera Creations, Mathura Apartments, III Floor, 1/7, Masilamani Street, T.Nagar, Chennai-600 017. (Amended as per order of Court in A.No.6791/2010 dated 1.12.2010) 4.Prasad Film Laboratory, Represented by its Manager, No.58, Arunachalam Road, Saligramam, Chennai-600 093. 5.Gemini Industries and Imaging Private Ltd., Represented by its General Manager, Mr.Ramkumar, No.28, Bangaru Colony, West K.K.Nagar, Chennai-600 078. 6.Sakthi Chidambaram, Cinema Paradise, No.108, Duraiarasan Street, First Floor, Saligramam, Chennai-600 093. (impleaded as per common order of Court in A.Nos.6792 to 6795 of 2010 dated 1.12.2010) .. Defendants For Plaintiff : Mr.T.V.Ramanujun, Senior Counsel for Mr.T.V.Krishnamachari. For First Defendant : Ms.P.Meghana Nair For Second Defendant : Mr.P.S.Raman, Senior Counsel for Mr.S.Elambharathi For Third Defendant : Mr.V.Raghavachari For Fourth Defendant : Mr.R.Sargunaraj COMMON ORDER Pending suit for a declaration that the plaintiff is the absolute owner of the copyrights in the Malayalam Cinematographic Film "Body Guard", under an Agreement dated 22.1.2010 and for consequential reliefs of permanent injunction as well as for recovery of a sum of Rs.1,88,58,187/-, the plaintiff has come up with 3 applications, in O.A. Nos.1225, 1226 and 1227 of 2010, praying inter alia for (i) an interim injunction restraining the defendants 2 and 3 from in any way dealing with the negative and positive prints of the remake Tamil version of the aforesaid Malayalam feature film titled "Kavalan" from the fourth defendant (ii) an interim injunction restraining the fourth defendant from in any way parting with the negative and positive prints of the aforesaid film to defendants 2 and 3 and (iii) an interim injunction restraining the defendants 2 and 3 from in any way releasing or causing to release for exhibition, the Tamil film "Kavalan". 2. I have heard Mr.T.V.Ramanujun, learned Senior Counsel for the plaintiff, Ms.P.Meghana Nair, learned counsel for the first defendant, Mr.P.S.Raman, learned Senior Counsel for the second defendant, Mr.V.Raghavachari, learned counsel for the third defendant and Mr.R.Sargunaraj, learned counsel for the fourth defendant. 3. In brief, the plaint proceeds on the following lines:- (a) The first defendant is the Producer and the second defendant is the Director of the Malayalam feature film titled "Body Guard". As a Producer, the first defendant is the absolute owner of the copyrights in the story, script, sound track and music. The first defendant is also the owner of the literary, dramatical and musical works of the said film. (b) The Malayalam film which was due to be released on 23.1.2010 was stuck due to a financial crisis and hence the first defendant approached the plaintiff for advancing a sum of Rs.4,20,33,700/-, with an offer to assign the copyrights in the film. The plaintiff agreed and an Agreement was entered into on 22.1.2010 and a sum of Rs.3,90,00,000/- was paid to the first defendant, to enable him to release the film in Malayalam, after settling all his financial commitments. (c) The first defendant executed 4 promissory notes, all dated 22.1.2010, with the first 3 pro-notes for a sum of Rs.1 crore each and the 4th pro-note for a sum of Rs.90 lakhs. Under the Agreement, the copyrights including the rights of remaking, dubbing and world satellite rights as well as video rights were assigned by the first defendant in favour of the plaintiff. (d) The first defendant also put the fifth defendant on notice of the assignment of those rights in favour of the plaintiff, by a letter dated 21.1.2010. The fifth defendant claimed that a sum of Rs.30 lakhs was due to them by the first defendant. Therefore, the plaintiff made payment of the said amount to the fifth defendant and the same was acknowledged by them by letter dated 2.4.2010. (e) Towards repayment of the amount borrowed, the first defendant made payments. After adjusting those payments, a sum of Rs.1,88,58,157/- was due and payable as on the date of the plaint. (f) However, the plaintiff came to know that disputes between the first and second defendant had arisen, leading to civil and criminal cases. It was understood that in those cases, the second defendant was claiming rights over the story, screen play and dialogue of the aforesaid film. It was also understood that the second defendant fabricated certain documents and created false evidence against the first defendant. (g) While the first defendant filed a criminal complaint against the second defendant, the second defendant filed a civil suit on the file of the District Munsif Court, Ernakulam on the basis of documents ante dated, created and fabricated. The second defendant has claimed that he has assigned the rights to remake the film in Tamil, to the third defendant. (h) The District Munsif Court, Ernakulam, had no jurisdiction to entertain the suit, since under Section 62 of the Copyright Act, 1957, it is only the District Court, which has jurisdiction. (i) Since the defendants 2 and 3 started producing the remake of the film in Tamil with the title "Kavalan", in violation of the copyrights that the plaintiff has by virtue of the assignment made by the first defendant, the plaintiff had filed the above suit for the reliefs indicated in the first paragraph of this order. 4. The common affidavit filed in support of the applications for injunction, proceeds on the same lines as the plaint. Therefore, it is not necessary to repeat them. 5. The first defendant has filed a common counter affidavit to the applications for injunction. He has stated therein that he produced the Malayalam feature film titled "Body Guard" by engaging the services of the first defendant on a remuneration of Rs.40 lakhs; that the only Agreement entered into between the first and second defendants was a project report dated 4.12.2008, filed with the Kerala Film Producers' Association; that the production commenced on 12.12.2008 and was completed after more than 120 days with an exposure of more than 1 lakh feet of film, as against the Agreement to complete it in 45 days with an exposure of 50,000 feet of film; that due to the delay in the completion of the film and the negligence on the part of the second defendant, a huge financial burden fell upon the first defendant, in spite of which, the second defendant not only collected his entire remuneration of Rs.40 lakhs, but also collected an additional remuneration of Rs.10 lakhs; that therefore the first defendant was forced to borrow Rs.3,90,00,000/- from the plaintiff under an Agreement dated 22.1.2010; that in lieu of the loan, the first defendant assigned the remaking and dubbing rights of the film in all other Indian languages, to the plaintiff, as a security; that it is only after this that the first defendant was able to release the film on 23.1.2010, but the film did not achieve the desired success at the box office; that the second defendant thereafter agreed to help the first defendant and also issued 3 cheques for a total amount of Rs.50 lakhs, on 4.3.2010 after taking the signatures of the first defendant on blank signed non-judicial stamp papers and blank signed letter heads; that those cheques bounced and returned on 5.3.2010; that thereafter, the second defendant merely remitted Rs.1,50,000/- into the bank account of the first defendant on 13.3.2010, but did not return the blank signed non-judicial stamp papers and blank signed letter heads; that due to the failure of the Malayalam film at the box office, the first defendant was not able to repay the loan to the plaintiff; that when the first defendant started looking for parties interested in buying the remaining rights of the film, he came to know from the Tamil Film Industry that the Malayalam film was being remade into Tamil, on the basis of the sale of the rights by the second defendant to the third defendant; that when the first defendant confronted the second defendant, he produced a copy of an alleged letter dated 12.3.2010 written by the first defendant, giving the entire rights for the remake of the film to the second defendant; that the said letter is a forged and fabricated document; that therefore the first defendant filed a criminal complaint and the same was registered in Crime No.370 of 2010, in pursuance of a direction issued by the XI Metropolitan Magistrate, Saidapet; that the first defendant thereafter filed a suit for bare injunction in O.S.No.729 of 2010 on the file of the District Munsif Court, Ernakulam and obtained an interim order of injunction, on the basis of forged documents viz., an Agreement dated 23.6.2009 and the letter of undertaking dated 12.3.2010; that the order of the District Munsif Court, granting an injunction in favour of the second defendant is under challenge by the first defendant in CMA No.92 of 2010 on the file of the District Court, Ernakulam; that once the dues of the plaintiff are settled, the copyrights in the film, including the rights for its remake would revert to the first defendant; that since defendants 2, 3 and 6 are not possessed of sufficient means, the copyrights of the film that the first defendant holds will get defeated if the film is released; that the monetary value of the copyright that the first defendant has over the Tamil remake of the film is estimated at Rs.5 crores; and that therefore, the rights of the first defendant are to be safeguarded. 6. The story scripted in the counter affidavit filed by the second defendant proceeds on the following lines:- (a) that he conceived and developed a theme for the Malayalam movie titled "Body Guard" and wrote the story, screen play and dialogue and also directed the film, on terms and conditions mutually agreed, orally; (b) that the terms and conditions were later reduced into writing in the form of an Agreement dated 23.6.2009, under which the right of exploitation of the story, screen play and dialogues of the film in any other language was conferred on him; (c) that by a letter dated 12.12.2009, the first defendant himself expressed a desire to remake the film in Tamil along with the second defendant, but the second defendant did not agree to the same; (d) that even when the film was being made in Malayalam, there were reports in the press that it will be made in Tamil by the second defendant; (e) that on 10.7.2009, the second defendant entered into an Agreement with the third defendant, indicating that the copyright vested in the second defendant and a sum of Rs.5 lakhs was received under the Agreement as advance; (f) that in March 2010, the first defendant sought a loan of Rs.50 lakhs from the second defendant and hence the second defendant issued 3 cheques; (g) that since the funds in the bank were insufficient, the second defendant paid Rs.25 lakhs by way of cash on 6.3.2010, a sum of Rs.9,50,000/- by way of cash cheque on 6.3.2010, Rs.14 lakhs by way of cash on 12.3.2010 and Rs.1,50,000/- by way of RTGS transfer; (h) that the above payments were acknowledged by a letter dated 13.3.2010 by the first defendant; (i) that by a letter of undertaking dated 12.3.2010, the first defendant confirmed that the second defendant had the right to sell and the right to remake the film into Tamil or any other language; (j) that the shooting of the Tamil film commenced in April 2010; (k) that at that time, the first defendant threatened to obstruct the production of the film and hence a suit in O.S.No.729 of 2010 was filed on the file of the District Munsif Court, Ernakulam; (l) that by an order dated 30.10.2010, the Munsif Court made the injunction earlier granted, absolute and the Appellate Court did not grant stay of the order of injunction; (m) that the plaintiff ought to have done due diligence before allegedly advancing money to the first defendant, especially when a news item was published in the leading Malayalam Daily "Malayala Manorama" on 20.1.2010 itself that the second defendant was to make the film in Tamil; (n) that having recovered part of the money advanced, the plaintiff cannot lay his claim on copyright; and (o) that the plaintiff could only be taken to be a financier who lent money for the production of the Malayalam film and hence cannot claim any right other than those in the Malayalam feature film. 7. The third defendant has filed a counter, mostly on the same lines as found in the counter affidavit of the second defendant. In addition, the third defendant has relied upon Section 18(2) of the Copyright Act. He has also claimed that he had so far spent more than Rs.30 crores for the production and Rs.2 crores towards publicity. The main thrust of the third defendant in his counter is that the Agreement between the plaintiff and the first defendant is only that of an Agreement relating to a loan transaction and not relating to assignment of copyrights. 8. The plaintiff has filed a set of about 9 documents. The first defendant has filed a set of 15 documents, the second defendant has filed a set of 12 documents and the third defendant has filed 3 documents. 9. As seen from the reliefs sought for in the suit, the plaintiff has not only sought for injunctive reliefs on the ground that he holds assignment of the copyrights, but has also sought for a money decree. The money decree sought for by the plaintiff is not towards damages for infringement of copyright. But it is for recovery of money advanced under an Agreement dated 22.1.2010. This is why a fundamental issue is raised as to whether the Agreement dated 22.1.2010 entered into between the plaintiff and the first defendant, could be construed as an Agreement of assignment of copyright or could be taken only as a mere document evidencing a loan transaction and creating a charge on the property rights of the first defendant. 10. The issue raised is of great significance, since the consequences that would flow out of my finding on the above issue one way, would be different from those flowing out of my finding the other way. If I find that the Agreement dated 22.1.2010 filed as plaint document No.1 is an Agreement of assignment of copyrights, the plaintiff would be entitled to protection in terms of the provisions of the Copyright Act, 1957. On the other hand, if I find that the said Agreement merely relates to a loan transaction, the question of infringement of copyright may not arise. Therefore, my first endeavour is to find out what that Agreement stands for. 11. The preamble to the said Agreement states that the first defendant is the Producer and the exclusive copyright holder of the film and that the first defendant approached the plaintiff for a loan of Rs.3.90 crores. Clause 2 of the Agreement states that the plaintiff agreed to finance a sum of Rs.3.90 crores to enable the first defendant to settle the account of the financiers and others in order to facilitate the release of the film and that the first defendant agreed to repay the amount with interest at 36% per annum on demand. 12. Clause 3 of the Agreement which forms the lifeline of the contract, reads as follows:- "In order to facilitate the repayment and secure the interest of the Party of the SECOND PART, the Party of the FIRST PART agree that: (i) The entire collection from the theatres, in Kerala, other part of India and Abroad will be paid to the Party of the SECOND PART directly, for which necessary instruction will be given by the Party of the FIRST PART to the concerned party. (ii) The remake, dubbing rights of the aforesaid movie in all Indian languages is exclusively assigned to the Party of the SECOND PART. (iii) Whole world satellite right, negative right and Video rights of the film exclusively assigned to the Party of the SECOND PART. (iv) The assignor grants the sole, absolute, exclusive and irrevocable negative rights, and all other rights of exploitation of the here in above captioned film for the territory of Entire World for a perpetual period. 13. Clause 4 of the Agreement reads as follows:- "The Party of the FIRST PART hereby declare and confirm that the above rights assigned in favour of the Party of the SECOND PART shall be Operative immediately on signing this agreement and it will continue till the entire amount is repaid by the Party of the FIRST PART." 14. From the extracted portions of Clause 3 and 4, it is clear (i) that the assignment of the copyrights, if it could be called an assignment, was made to facilitate the repayment and secure the interest of the plaintiff and (ii) that the rights so created would continue only till the repayment of the entire amount by the first defendant to the plaintiff. Therefore, prima facie, the transaction between the plaintiff and the first defendant appears only to be a loan agreement, backed by the security of the right to remake the film and a charge on the right of remake. 15. The above view is also strengthened by (i) the 4 promissory notes executed by the first defendant in favour of the plaintiff and filed as plaint document No.2 series (ii) the repayment of a part of the principal and interest, by the first defendant to the plaintiff, resulting in the claim of the plaintiff upon the first defendant getting reduced to Rs.1,88,58,157/- (iii) the statement of accounts sent by the plaintiff to the first defendant on 29.6.2010 filed as plaint document No.6, demanding a sum of Rs.1,69,76,272/- towards the balance due under the loan transaction and (iv) the statement of accounts as on 30.11.2010 filed as plaint document No.9, indicating the balance due. 16. The fact that the transaction between the plaintiff and the first defendant was only a loan transaction, backed up by a security, is further strengthened by the statement made by the first defendant in para-5 of his common counter affidavit. It reads as follows:- "I humbly submit the first defendant burdened with such a heavy financial exposure was forced to borrow a sum of Rs.3,90,00,000/- from the plaintiff under an agreement dated 22.1.2010. In lieu of the loan, the first defendant had assigned the remaking and dubbing rights of the film "Body Guard" into all other Indian languages to the plaintiff, as a security." 17. Now let us have a look at what constitutes "assignment" and the mode of assignment. Under Section 18(1) of the Copyright Act, 1957, the owner of the copyright in an existing work may assign the copyright either wholly or partially and either generally or subject to limitations, to any person. Under sub section (2) of Section 18, such assignee should be treated as "the owner of the copyright" for the purposes of the Act, in respect of the rights so assigned. 18. Section 19 which prescribes the mode of assignment, lays down the following:- (a) that the assignment, to be valid, should be in writing, signed by the assignor or his duly authorised agent; (b) that the assignment should identify (i) the work (ii) the rights assigned (iii) the duration of assignment and (iv) the territorial extent of the assignment; (c) that the assignment should also specify the amount of royalty payable to the author during the currency of the assignment; (d) that if the assignee does not exercise the rights assigned to him under any of the other sub sections of Section 9, within one year, the assignment would be deemed to lapse after the expiry of the period; (e) that if the period of assignment is not specified, it shall be 5 years; and (f) that if the territorial extent of assignment is not specified, it should be presumed to extend within India. 19. A careful reading of Sections 18 and 19 would show that the purpose of assignment is actually to enable the assignee to exploit the rights that the owner of the copyright has in (i) the literary, dramatic or musical work (ii) the computer programme (iii) the artistic work (iv) the cinematograph film or (v) the sound recording. An assignment serves two purposes. For the assignee, it confers the right of exploitation for a specified period in a specified territory. For the assignor, it confers the right to receive royalty. An agreement, the sole purpose of which was just to prevent others from exploiting the copyrights of the owner and to enable the assignee to get back his loan, cannot be an agreement of assignment. In an agreement of assignment, the only right that the assignee has is the right of exploitation. The only right that the assignor has is to receive royalty. If the assignor does not exploit his rights during the period of assignment, not only would the assignment lapse on the expiry of the term, but also the money paid to the assignor would never get repaid. In other words, the rights conferred by an agreement of assignment on the assignee flow only one way. While after the expiry of the period of assignment, the copyrights flow back to the assignor, the royalty paid to the assignor never gets repaid to the assignee. 20. If we analyse the pleadings and the documents on the basis of the above principles, it would be clear that plaint document No.1 cannot be construed as a deed of assignment, inasmuch as the amount of Rs.3.90 crores paid by the plaintiff to the first defendant, if construed as royalty, would never be liable to be refunded to the plaintiff, irrespective of whether they exploit such rights during the currency of the agreement of assignment or not. The date of plaint document No.1 is 22.1.2010. Therefore, if the agreement is construed as an assignment, the plaintiff would be entitled to exercise the copyrights, till 21.1.2011, by virtue of sub section (4) of Section 19. Alternatively, the right of exploitation would be available for 5 years (until 21.1.2015) in terms of sub section (5) of Section 19. But the availability of such rights depend solely upon the question whether the amount paid under the Agreement was refundable or not. Since the amount of Rs.3.90 crores paid under plaint document No.1, has been made refundable and also since part of the said amount has already been refunded by the first defendant to the plaintiff and the plaintiff has chosen to claim the balance amount, the document cannot at all be construed as a deed of assignment of copyright. 21. Once plaint document No.1 is construed to be not a deed of assignment of copyright, no action for infringement would lie at the instance of the plaintiff. If there was no assignment of copyright, the copyright would continue to vest with its owner. Therefore, the next question is as to who is the owner of the copyright. 22. Section 17 declares that the author of a work shall be the first owner of the copyright therein. The expression "author", in relation to a cinematograph film or sound recording, is defined under Section 2(d)(v) to mean the producer. Therefore, as the Producer of the Malayalam feature film "Body Guard", the first defendant claims to be its "author" within the meaning of Section 2(d)(v) of the Act. Consequently, he claims to be the first owner in respect thereof, in terms of Section 17. 23. But proviso (b) under Section 17 carves out an exception. It reads as follows:- "subject to the provisions of clause (a), in the case of a photograph taken, or a painting or portrait drawn, or an engraving or a cinematograph